Friday, July 25, 2014

Taking land from wealthy white South Africans without negotiation or compensation would most hurt the poor.

Taking land from wealthy white South Africans without negotiation or compensation would most hurt poor, demographically often black, South Africans.



There is a strange irony when the actual implementation of government policy designed to aid the poor, in reality would hurt the poor deeply. When South Africa introduced its constitution, it enshrined amongst other things the right to land, including the rights of people to have the government restore the land which was taken from them or their community during Apartheid. Our neighbouring countries do not have such rights to land as we do in South Africa. In large parts of Africa, the government sells already occupied land to large corporations who promised investment. The investment often does not occur but yet the land is utilised for massive agricultural farms or factories. Whether the occupants of the land are merely people who for many years have rested upon it and gained their livelihood from it, or prior to that were true owners is often irrelevant. The government, with or without compensation removes the land from them, in sales in which they had no say, to foreign corporations of the type which have no care for them. This is what happens when there is no right to land.

Zimbabwe has an even stranger system of land tenure. White Zimbabweans were chased from their farming estates in a violent version of no negotiation and no compensation policies being put forward in South Africa. What happened next however is very different than one might have expected. The war veterans as they called themselves wanted land ownership. This is one thing they still lack in every way. Yes, they are permitted to farm on the land they took from the dead and fleeing. The government however does not permit them to own the land. Some were given certificates originally, and have now been given a different type of document: in both cases these land usurpers are not given ownership. Their property can be taken back at any time by the government should it find that they are not utilising it profitably. This might seem reasonable at first glance, a determination to ensure that agricultural land is profitable. Unfortunately, because the farmers do not own the land in the case that they are not profitable: the land is worthless as far as real security is concerned. Banks will not loan money to farmers without security. If things go wrong the bank have nothing to sell to regain their money. Perhaps the Zimbabwean government might decide to force banks to loan the money. Unfortunately that would create an even worse predicament. Would the loans be unlimited, would they be based upon creditworthiness? How would banks get their money back? Surely also interest rates would have to increase radically to do away with the high risk of default. Perhaps the Zimbabwean government could again prevent these high interest rates? In that case the banks would likely have to cut back on staff, leave the country, or shut down.

Let us however look at what is the likely implementation of a no negotiation or a no compensation policy involving South African land in white hands. Would this only involve land from which black South Africans had been removed? Could the land only be taken from white owners, or from anyone who bought the land from those who gained it from the government? Would such a policy take into account the massive population growth South Africa has encountered since land was taken? Would only those who were pushed off a certain plot of land gain land, and would this land actually be worth anything given how much the population has grown?

South Africa’s customary land system itself has been much criticised in the way it leaves ownership of the land either with the chief or with a corporation under his control. The problem again lies with real security of tenure. Land is so useful because it can be sold by a bank if the loan defaults. The American property bubble which caused the recent Great Depression was caused by unscrupulous lending without adequate real security. It was a dangerous economic move which damaged the world economy and South Africa deeply!

Currently, the slow but steady path has been for the government to negotiate for and buy the land in question from the current owners. There has been suggestion that negotiations should be removed and that mere court process be followed to retake such land. In the past I have argued that this would be unconstitutional, as a court rendered value is not the equivalent of free market value nor to the triple value often given out in expropriation, and endangers the financial system and property ownership in South Africa. What is even more dangerous is the punitive system suggested by certain factions of Parliament: the taking of land from the new owners without compensation. Any property which was taken from black South Africans under Apartheid would become worthless overnight. No one would want to buy property which can gain junk value the moment a government official so desires. People often have mortgages over their properties. If these people were to default on their loans, the banks would not be able to sell their properties. Banks would become reluctant to give mortgages over such properties. The question then would be which properties are targeted: those of any white South African? Those specific properties which were taken when the population was much smaller and property values were much less? Who would be given the property? What if the property is now agricultural land? It takes about eight years for a person to learn to farm properly if they ever do. The type of confusion which would emerge in the market would be dangerous in the least.

A white person who cannot take out a loan on their property is less likely to spend what money they do have on goods and services, on entrepreneurship, on hiring more staff. Banks would be less likely to loan out as much as they do, and employees would suffer. The real effect just on this superficial first stage level would be devastating to the economy of the country.

The second part of such a process however would be far worse. If the courts declare that it is acceptable to take the land of white South Africans for the sake of retribution for Apartheid, with or without compensation and based on the non-market value valuation of a court official if any value at all: it does not just disrupt the financial markets. It weakens the right to property that black South Africans benefit from as well. Righting the wrongs of Apartheid is certainly a part of the constitution, but if this part of the constitution is permitted to destroy altogether the right of land of one part of the population, it weakens the right of land altogether in an incremental snaking of bad legal jurisprudence. Black South Africans have been protected from large corporations, and their seemingly beneficial deals with the countries around us, which have hurt the average man. They have been protected by their tenure to land. The more this right is weakened for the sake of policy, the more policy will permit the weakening of the right! That which has been a great protector of South Africans against the might and deep influence of corporations could well disappear forever. Because of uncertainty involving E-Tolling, the government was permitted to make a massive deal with a foreign company against the will of those impacted if statistics are correct. This is a policy decision of the government. It resembles in many ways the policy decisions of South Africa’s neighbours, except that in South Africa we have a right to land. A right to mortgage our land is just as important as the right to possession or temporary possession. In the end the entire item of clothing that we call our constitution and legal system could unravel due to shortsighted opportunism, the same type of opportunism that saw the evil system of Apartheid begin.

Nothing in this article constitutes legal advice. Mention of the laws of South Africa is merely made for argument’s sake.

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