south african land expropriation

In my opinion, the Land Question in South Africa raises a broader issue. It is the question of retribution for the crimes of colonialism and Apartheid. The Black Economic Empowerment policies attempted to address these issues but these have fallen short of meaningful empowerment of the previously disenfranchised. It has also had unintended consequences – fronting, favouring those close to the ruling elite, a laager mentality amongst many whites, etc. Add high levels of poverty and inequality, little access for many people to be able to earn a meaningful living; and this creates a ripe environment for a major social backlash. This backlash can take many different forms, from widespread civil unrest to xenophobic attacks, tribalism, racism, land seizures, etc.

What can government, citizens, activists, businesses, organised labour and the person in the street do to address this issue for an outcome that is likely not going to be satisfactory for most?

The ANC December Congress passed a resolution to adopt a policy of land expropriation without compensation. The Economic Freedom Fighters (EFF) is ensuring that this issue stays at the forefront of the national agenda. Rightfully so. It is unfortunate that since the dawn of democracy in the country, not much has been done by the elite (political and economic) to address this issue in a more wide-reaching and meaningful way. Having access to power and the ability to influence decisions, allowed these elites and their cronies to benefit greatly. It is not in their interest to rock the boat too much.

Now however, it is too difficult to sweep this issue under the carpet or pay mere lip service to how it will be addressed.

Irrespective of what the outcome/s will be and how it is addressed, it can be guaranteed that there will not be a satisfactory outcome for all. In fact, many may get little satisfaction. So, it is imperative that this issue is dealt with the utmost care and with an execution strategy that ensures that in fact as a whole we are better off as a country.

Perhaps, the starting point would be to develop a set of principles that cover the following key questions, amongst others:

1. Is it about Land reform or more broadly about economic reform?
2. Do we deal with the broader issue of reparation for the evils of Apartheid and colonialism or only about restoring rights where there is clear evidence ofdispossession and forced removal?
3. Under what conditions will expropriation without compensation take place?
4. What should be done about other policies (BEE for example) that haveattempted to redress past issues? Should these continue, be scrapped or changed

   to get better outcomes?

5. How will potential beneficiaries be assisted to lay claims and how can they beset up to get the best for themselves and the country?
6. How will we deal with potential capital flight and its cousin, lack of newinvestments?

These are complex issues to solve, so setting up a set of principles upfront with the right set of stakeholders will be an essential and critical first step. It should also guide how trade-off decisions will be made.

Our clients at Lunar Capital ask us what the impact on one’s investments is, in this scenario?

At this stage, it is very difficult to predict exactly what will happen and who would be the winners and losers. It depends on what kinds of redress will be sought, and how it could be affected. To what extent will government first redistribute the land/properties in its own portfolio? Are there some cut-and-dried cases that could be resolved quickly, and what are these? If properties that are expropriated without compensation are bonded by banks, will the banks have to carry costs of the default? If not the banks, then whom?

We would be cautious of companies that own large tracts of land in rural, peri-urban and possibly even urban environments. Largely for now, we would not panic. The state has many options to address the issue of land reform before it needs to use the “expropriation without compensation” tool. We are also of the view that the current administration will deal with this issue sensibly, but it will likely face lots of criticism from both the left and right. The country has sufficient intellectual capacity to execute on this properly. It is up to government to ensure that it resources this task team appropriately.

A very good outcome can come from this for the long-term benefit of the country if dealt with from a point of principle and executed with an intention of properly empowering those who have been marginalised in the past and continue to be impeded by a lack of access to earn a decent living. This will be good for the country and for long-term investors.