Why land expropriation without compensation is the wrong medicine for South Africa's economic ills

Land reform proposals are merely President Ramaphosa’s attempt at winning the favour of ANC party populists ahead of the 2019 election. But it’ll cause more inequality than it could ever hope to solve

I wonder what goes through the mind of South African president Cyril Ramaphosa each morning. I imagine him sipping coffee, planning how he’s going to get the country back to work. He must shake his head, marvelling in revulsion, at the scale of the plundering that his predecessor wreaked on us. The level of their depravity, the stuff of myth and legend.

The president knows all indicators show the country is facing an uphill path to recovery.

In the continent’s most developed country, unemployment is at 27.2 per cent, the highest in the world. The average family, across racial lines, is feeling the hurt of currency falling 20 per cent against the US dollar in the past five months. Filling the family car or taking public transport is painful. The increases in VAT and luxury goods duties strip the joy from family time.

State-owned entities such as Eskom, drained by state capture and maladministration, reach further into the family purse. The poorest families, 55 per cent of the population, are being punished by a decrease in government spending of some R86bn over the next three years, this also a result of state capture. Parents with children in state schools worry that it might be their child that makes up the three in four who are considered illiterate.

Ramaphosa set himself a target of raising $100bn in foreign and local direct investment to help rebuild the nation. In a short time, he has already secured $30bn worth of commitment from investors. These investments give confidence that South Africa is still business and is looking to grow. This is not unwarranted confidence.

Yet, while Ramaphosa is busy with this, he is watching his back.

He had to cut deals and make peace with those who abandoned Jacob Zuma and supported his run for the presidency. These people are compromised, but wield the political influence he needs to be in leadership. Politics, as they say, makes strange bedfellows.

Land expropriation without compensation (EWC) is the issue that restrains his ambitions. It’s an issue, which no matter how it gets spun, Ramaphosa had to take away from the red-clad populists. They were scoring political points from EWC. In late February, he took ownership. If he hadn’t, the ANC would have been further weakened come the next elections. Nothing balms the pained poor like populist promises.

The causal link between the timing of the new decline in the rand and when he took ownership of EWC cannot escape him. Has EWC stained the allure of “Ramaphoria” or is this just a mild sign of displeasure on the part of investors?

Each time he doesn’t rebuke EWC, investors panic, despite his assurances that EWC can be implemented without damage. His investment envoy, Trevor Manuel, confesses that these assurances don’t always win: “Communicating this [EWC], I think, is a bigger challenge than we thought.”

It’s challenging because there are no models, in the 21st century, that show taking one group’s property away and giving it to another without compensation has not ended in populist armageddons – look to Zimbabwe and Venezuela.

Furthermore, there are no guidelines for the EWC implementation. I think this is deliberate.

There are principles aplenty in the constitution and in legacy ANC documents, but no how-to guides. Without this, there are only past attempts of other countries to be studied and the utterances by those close to him to translate. The powerful ANC chairperson this past week had this to say about how much land people would be allowed to retain: “You shouldn’t own more than 12,000 hectares of land and therefore if you own more, it should be taken without compensation.”

Why should the world trust South Africa when it can’t guarantee the protection of its own citizens’ property rights, whether they be private landowners or traditional leaders? Once you start with land, what next will you expropriate? It’s easy, but lazy, to draw parallels with Zimbabwe.

The 28 million black people living in poverty won’t get wealthier through EWC. The capital and training they need will have taken flight. Banks might end up holding billions in debt on land that has been expropriated, and they won’t be forthcoming with business development or home loans. And the state still has a way to go to fix its weak institutions and root out corruption.

All EWC will do is choke out the country. It’ll shatter the trust the world has in South Africa’s aspirations to be a modernising state.

The president needs a strong mandate from the 2019 election in order to make use of the investment commitments he has secured to get South Africans back to work. Promising EWC, and then dragging out its implementation, is, unfortunately, the low-hanging fruit for him to get this mandate, and it’ll cost all South Africans.