The Institute of Race Relations (IRR) notes that the Statement unambiguously commits the party to pursuing land Expropriation without Compensation. However, it also promises that there will be no disruption to South Africa’s agricultural output, to its food security or to the economy in general. It even pledges to build on the ‘enormous potential of agriculture to promote industrialisation, create employment and transform our economy.’ Indeed, it promises an economy open for business and investment.
“These goals are incompatible with one another,” say the IRR in a statement. “They cannot be achieved simultaneously. Expropriation without Compensation would require a fundamental undermining of property rights in South Africa. It has already been made clear that the constitution will need to be changed to enable it. Stripping away the protections afforded to citizens and businesses in respect of their property –with the avowed intention of allowing the state to seize assets – will have a damaging impact on investor confidence. We believe that this is already manifesting itself, given the concerns that we have heard from businesses at the passage of the ANC’s resolution.”
The think tank says embarking on a campaign of Expropriation without Compensation will inflict even greater damage. “South Africa’s agricultural sector depends heavily on the secure ownership of its assets to leverage the funding it requires for its operations – in excess of R160 billion rand annually, of which roughly two thirds is raised from commercial banks. It is difficult to imagine that they would have any appetite for providing loans against collateral that might vanish following a government proclamation. Government certainly has no ability to step into this funding gap, and the inevitable outcome would be a rapid drop in production. This would be the case for both established and emerging farmers. There is no way to avoid this reality.
“Irrespective of government’s intentions, Expropriation without Compensation would deal a massive if not fatal blow to South Africa’s agricultural sector. The elevated risk profile would to all intents and purposes destroy its capital value. Meanwhile, failures in agriculture would be followed in short order by contractions in upstream and downstream industries that feed and feed off the agricultural sector. The loss of foreign exchange earnings, and the need to import greater volumes of foodstuffs would drive inflation and batter the currency.
“In addition, as we have previously indicated, any abridgement of property rights would not be confined to land and agriculture. Rather, it would open the way for extensive state intrusion into any number of other industries. The heightened sense of risk and vulnerability would be inimical to the investment and growth orientation that South Africa desperately needs.”
The IRR warns that there is “simply no credible scenario in which embarking on this course would produce the positive outcomes laid out in the Statement”.
It is a recipe for policy confusion, deeply damaging to the imperative of finding solutions to South Africa’s long-term economic malaise. If enacted, a policy based on Expropriation without Compensation would produce the polar opposite of what the Statement promises.
The Institute says policy makers in the government and the ruling party should rather opt for real, durable solutions to get South Africa’s stalled land reform endeavours back on track. Doing so demands respecting the importance of property rights for all, and extending them to those who were deprived of them in the past. They are a condition for South Africa’s growth and prosperity.