The great concern with social and economic transformation in South Africa has made land reform a deeply contested issue in the national debate. Just how important land reform is was officially acknowledged by the formation of a constitutional review committee in February, which established as a principle objective whether section 25 of the Constitution should be amended to allow expropriation of land without compensation.
The widespread acknowledgement of the importance of land reform has not led, though, to general agreement on the consequences of legal amendments for the process of economic development.
In February the ANC supported a parliamentary resolution that would make expropriation without compensation justifiable on a case-by-case basis and on condition the expropriation would be “just and equitable” [and did not undermine the property rights enshrined in the Constitution].
Earlier this month, in what appeared to be a departure from this position, President Cyril Ramaphosa announced that the ANC would initiate a constitutional amendment for expropriation without compensation, saying it would clarify the conditions under which expropriation would take place.
Fair, as with all political parties, the ANC should not be denied a right to state its position.
It would thus seem appropriate to re-examine the implications of the debate for economic development. A preliminary comment is in order on the semantics of the problem.
It is understood all too rarely that the failure of the departments of rural development and land reform and of agriculture to remedy landlessness or other land claims has not resulted from barriers in the Constitution. The Constitution does not demand that market value is paid for property in every case. The phrase “willing buyer, willing seller” has been the policy framework adopted by government, not required by the Constitution.
The problem is that even if government got the big picture right, it got the details wrong. And it’s increasingly clear that, when it comes to development, the devil really is in the details. A country’s history, institutions and power structures have a profound effect on whether reform can work. We believe the state’s available powers have not been tested. Section 25 of the Constitution specifies that compensation for expropriation of property should be “just and equitable” and it has been suggested that the way it has been framed could allow compensation under equitable circumstances to be set at zero.
Cheated and angry
We nevertheless recognise that the immense gap between what reforms promised and the legacy of property ownership has inevitably left people feeling cheated and angry. South Africa’s unique history of dispossession and the current challenges of structural inequality and unemployment require a strengthening and spreading of ownership of property, including land, to adequately address the triple challenges facing the country.
To that end, Business Leadership SA (BLSA) with Business Unity SA and other interested and affected business bodies analysed what was going wrong in restitution, redistribution and tenure and prepared a high-level proposal for meaningful land reform for consideration by the joint constitutional review committee to support the view of business that constitutional amendments are not necessary.
First, although the potential economic shock associated with expropriation without compensation is difficult to predict with precision, by all accounts such a programme would have devastating economic and social consequences with second-round effects including a sovereign ratings downgrade, a falling currency, higher inflation and interest rates, reduced investment, lower economic growth and increased unemployment.
Second, realising that a lack of progress would ultimately undermine the sustainability and viability of the agricultural (and forestry) sector, several blended partnership finance models were proposed. These financing models are premised on a voluntary commitment by commercial farmers to partner their farm workers/communities to achieve the transfer of an additional 20% of commercial farms to black beneficiaries by 2030.
It is important to note that the proposed funding models will not only result in more land being transferred, but also provide a much greater chance of beneficiaries being successful. As part of the model, the banks, agribusiness and the established commercial farmers will all have a vested financial interest in the success of the beneficiary.
Third, given the urban housing backlog, we are of the view that land reform should not (and cannot) be confined to only rural land.
We believe the state needs to review urgently its urban human settlements policy and legislative frameworks should it seek to eradicate housing backlogs in the next decade or so.
To achieve this, consideration should be given to establishing a presidential coordinating committee to work with the human settlements, rural development and land reform, cooperative governance and traditional affairs departments and provincial governments and municipalities to prioritise integrated and proactive spatial planning to effect urban land reform.
Fourth, business largely endorses the findings of the high-level panel on assessment of key legislation and acceleration of fundamental change, headed by former president Kgalema Motlanthe. Ultimately, the last thing a country like ours needs is a one-size-fits-all approach to expropriations, because that fosters the illusion that prosperity is easy to achieve. This is not just another policy issue in which government capacity is unequal to a difficult task. This issue affects our constitutional clause on property rights.
Moreover, an often overlooked aspect of the debate is that beneficiaries of land reform have the legitimate expectation to receive restoration of something with value and something with income-earning potential. If the value of the asset is destroyed or severely reduced in the process of redistribution, then beneficiaries would conceivably be disadvantaged by a transaction that resulted in a transfer of ownership which inherently involves value-destruction.
In short, a market economy cannot prosper without legally enforceable property rights, which is incompatible with the notion of a blanket expropriation without compensation. Land reform, acknowledged by business to be a policy imperative, therefore needs to take place in a manner least disruptive, and ideally supportive of economic growth.
Both the ANC and government have some potentially useful ideas on land reform, most notably unlocking value through land transfers, which was instrumental in the development of Japan, South Korea and Taiwan – countries where tenant farms owned by absentee landlords were gradually replaced by independent farms.
But a lack of attention to the concrete realities of reform will make it harder for even sensible ideas to work. South Africans have been promised too many big victories. What they need now are some significant ones.
Maximum consensus involving multiple stakeholders is imperative to implement workable and sustainable land reform in a manner that benefits, rather than undermines, economic growth and human development.
The BLSA recognises that land reform is a fulcrum to the human dignity and socioeconomic development. The soul of the discussion is to pursue land reform in an orderly and value-creating manner. Rhetoric achieves the opposite.
To that end, the BLSA encourages constructive dialogues. This is the only country we have. We should make it work. It is commendable to see businesses and landowners who are already willing to share, either excess land and or put in funding.
* Mohale is CEO of BLSA
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER