Ramaphosa’s land reform gamble

Ramaphosa’s land reform gamble

On December 20th 2017, South Africa’s ruling African National Congress (ANC) voted to lay the groundwork for the expropriation of land without compensation, marking a departure from the ‘willing buyer willing seller’ model of land reform. This was the easy part – actual implementation will be decisive for South Africa.

Understanding what is one of South Africa’s most polarising issues requires looking back at the country’s complex past. The acquisition of land by force goes back to the arrival of European settlers from the late 1400s onward when white interests trumped those of the black peoples they encountered. Apartheid-era laws only compounded this problem, and still cast a long shadow. In 1913, the Apartheid government passed the Natives Land Act, severely restricting property ownership for blacks. The devastating effects of the Act on productivity and economic influence among blacks were compounded by the Urban Areas Act (1923), Natives and Land Trust Act (1936) and the Group Areas Act (1950).

Today, 24 years on from the election of Nelson Mandela, land ownership, and ability to access land remains concentrated in the hands of a white minority. Various attempts to address the inequality have been tried, initially focusing on small-scale state-backed land purchases before shifting towards the promotion of large black agribusinesses under President Thabo Mbeki.

From 2006 attention turned to the Proactive Land Acquisition Strategy (PLAS) and the subsequent State Land Lease and Disposal Policy (2013). This was a dramatic shift in policy – instead of the state assisting small farmers with land purchases and title transfers, the state began buying land to lease to farmers without transfer of ownership. Indeed, with the 2013 policy, small-scale farmers must remain tenants, with only large scale farmers able to purchase land from the state. However, the latter can only do so after leasing the land for 30 – 50 years.

In its November report, South African lobby group AGRI SA found that just 27% of arable land was owned by non-whites, up from 14% in 1994. As discussed below, reliable land ownership figures do not exist in South Africa, but the reality of unequal land distribution on the ground are hard to ignore. For this reason the ANC wants to fast-track the process of land reform, allaying anxiety among black South Africans that nothing has changed.

Having rocketed from his appointment to the ANC Presidency in December to the highest office in the land following former-President Zuma’s Valentine’s Day resignation, Cyril Ramaphosa has his work cut out for him.

Constitution MKII

While the ANC has greenlighted the expropriation of land in theory, Parliament will be the key battleground for realising the policy. Whilst the legal necessity is still debated, it is widely-held that any move in this direction would require an adjustment to Section 25 of South Africa’s constitution. Although advocating for redistribution of land, the nine principles contained therein appear to rule out seizure of property without compensation except for in particular circumstances. Whether this could be one such circumstance then relies on a limitation clause spelled out in Section 36.

The precise limitations of the constitution are no longer a concern, largely due to the ANC’s large parliamentary majority (62%). Combined with the delegates of the Economic Freedom Fighters (EFF) – who pledged to support the motion to alter the constitution – the ANC was able to meet the two-thirds majority required threshold to make a constitutional amendment. Parliament took the first step towards a constitutional amendment on February 27th, when it passed a motion requiring a rewrite of this section.

The EFF is clearly interested in accelerating decisionmaking around the issue, but is unlikely to boycott a similar ANC motion even if Ramaphosa seeks to maintain investor confidence by moderating the motion. After all, land reform is at the core of the EFF’s mission statement.

Complexities of implementation

Reliable data on land ownership is notoriously hard to come by in South Africa, where no comprehensive land audit has been completed in recent times. This is unsurprising – surveying land ownership is prohibitively complex.

First of all, determining the legacy of a property’s ownership (previous owners, how it came into the hands of existing owners, etc.) is rarely straightforward as documentation is scant in many cases. Modern ownership remains complicated too: how should jointly owned property by white and black South Africans be treated? If a company owns the land, how does one determine whether it is controlled by white or black interests?

Ramaphosa recently singled out derelict land as a low-hanging fruit for redistribution – why not confiscate unused land and put it to good use? This proposal certainly holds some promise, but determining whether land is derelict in the first place is a minefield. Questions surrounding the quality of that land are also likely to arise – i.e. is this land derelict because it is not good to farm?

More challenging will be the government’s management of capital and debts attached to any confiscated land. Land itself constitutes around just 10% of its value, and immobile assets such as farm infrastructure were generally not acquired through the mechanisms of Apartheid. Will the government compensate owners for them? Similarly, it makes little sense to dissolve ownership of the land, but bind a farmer to the liabilities associated with it (farmers are among the most indebted), nor does it make sense to distribute debt-heavy assets to those looking to get a foot on the land market.

Furthermore, ANC spokespeople have referred to returning land to “our people” in land reform discourse. This taps into a politically-charged question of who exactly “our people” are. The leader of opposition party Congress of the People, Mosiuoa Lekota, has for example repeatedly talked down land reform on grounds that any land policy should equitably serve South Africa’s diverse population. Members of the ethnic Khoisan have also pushed back against black empowerment policies, asserting their place as the ‘true’ indigenous population of South Africa and the primary victims of the country’s history. Navigating this will be no walk in the park.

Investor aspirin

Ramaphosa’s ascent to Presidency of both the ANC and the Republic has emboldened investors with a sentiment that South Africa is back on the map following the Zuma presidency’s mismanagement of the country. Any indication of maladministration in the land process would work to undermine this. For many investors the policy conjures nightmares of Zimbabwe’s land seizures which, whether or not they have ultimately been a success, bode badly for anyone looking to put out capital.

As such, Ramaphosa has proposed a summit to be held in concert with a nationwide land audit to discuss and chart out the best steps forward. He hopes this will reassure markets that rationality will prevail in laying out the parameters of the policy, with an official line that nothing will be done that would undercut the economy or food security. Nonetheless, a cocktail of skittish investors and the reality that someone will directly/indirectly lose out is sure to give markets a headache. Damage control will prove as important as the policy itself.

While some doubt that the action will materialize at all, the mere fact that land expropriation is on the table of mainstream politics means the proposal needs to be taken seriously and the road-map for getting there even more so.

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