F W DE KLERK SPEAKS ON THE IMPORTANCE OF PROPERTY RIGHTS FOR SOUTH AFRICA

In a speech to the Annual Congress of the South Africa Property Owners Association in Durban on 31 May 2012, F W de Klerk warned that property rights are under threat and that the next 12 months could be crucial in determining their future.

De Klerk said that if private property was undermined it would "kill much of the economic activity that we currently see in our streets and in our cities."

De Klerk warned that the policy discussion papers that the ANC released in March include threats to property rights.

The ANC was evidently intent on implementing controversial land reform policies which would seriously undermine the property rights of farmers. The ‘Agrarian Transformation' that is postulated in its Green Paper on Land Reform would require ‘a rapid and fundamental change in the systems and patterns of ownership and control of land, livestock, cropping and community.' Privately owned land would be freehold but with ‘limited extent' - which meant that a cap might be placed on the size of farms or the number of farms that a person may own.

De Klerk was also concerned that the ANC might be thinking of targeting pensions and life assurance savings. He pointed to state plans "to regulate a substantial part of public and private retirement and life assurance funds so that these funds can be invested in the financial instruments of State Owned Enterprises and/or Development Finance Institutions." He warned that "any attempt to interfere with the ability of pension and life assurance funds to achieve the maximum secure benefits for their investors could seriously undermine the property rights of those involved".

All of this was part of plans to increase the government's role in the economy through the establishment of a "developmental state". According to the policy discussion papers, the envisaged developmental state would include "a mix of private, state, co-operative and other forms of social ownership." The "balance between social and private ownership of investment resources" would "be determined by the balance of evidence in relation to national developmental needs and the concrete tasks of the National Democratic Revolution at any time."

A central goal of the NDR was "the de-racialisation of ownership and control of wealth, including land, equity and affirmative action in the provision of skills and access to positions of management." 

De Klerk warned that any attempt to erode the property rights of South Africans on the basis of their race have would have "very serious implications for the national consensus on which we have operated since 1994".

De Klerk questioned ANC claims that property relations are still the same as they were before 1994. He pointed out that 

• at least 35% of the country's land is owned either by black South Africans or by the government; 
• between 1993 and 2008 the white share of income had dropped from 54% to below 40%;
• between 1995 and 2009 the white share of the top 20% of income earners dropped from 47% to 32%. 
• black South Africans own 28% of the shares in the top 100 companies that are available to South Africans. 
• black, Coloured and Indian South Africans owned 56.2% of South Africa's primary residential market - which is worth more than 2.3 trillion rand." 
• the black controlled government accounts for some 32% of the annual GDP. To this must be added 6% of GDP represented by state owned enterprises - and up to 10% of GDP that the informal sector is estimated to contribute. 

De Klerk observed that "if one then considers that the government controls economic and fiscal policy, the claim that little has changed in economic relationships since 1994, is clearly wrong." He conceded that the white share of the economy is still disproportionally large. "However, it is clear that it is declining significantly - and that it would have declined even faster if economic, labour and education policies had enabled more black South Africans to participate in the economy."

De Klerk said that the central question for policy makers was which system could promote general prosperity and reduce poverty most effectively?

He pointed out that according to the latest Economic Freedom in the World survey 

• countries in the top quartile of free economies had per capita incomes of $ 31 500 in 2009 compared with only $ 4 545 in the least economically free quartile.
• they had an average growth between 1990 and 2009 of 3.07% compared to 1.18% in the least free economies;
• the average per capita income of the poorest 10% of people in the freest economies was greater than the total average income in the least free economies;
• life expectancy was 79.4 years in free economies compared with only 40.7 years in the bottom quartile;
• in the freest economies only 2.7% of the people lived in poverty compared with 41.5% in the least free economies. 

De Klerk warned that if government adopted the anti-private property measures there would be seriously negative consequences for all South Africans: foreign and domestic investment would dry up; the most productive individuals from all our communities would no longer be able or willing to contribute to economic growth; and government would receive less tax. 

He added that South Africa's problems would not be solved by greater government involvement in the economy. The bigger the public sector became, the smaller the private sector would be. This would mean lower growth and lower revenues for the state. He pointed to government mismanagement of SOEs and noted that government enterprises are sheltered from competition and from the discipline of the market. "They do not go out of business if they fail to satisfy their customers."

The Government should instead address the challenges identified in its own National Diagnostic Report - and most notably the problems of unemployment and education.

De Klerk concluded by reaffirming South Africa's immense potential. "We all need to work together to achieve that potential - but the private sector will not be able to play its indispensible role if property rights are undermined and if the State continues to expand its intervention in the economy".

Issued by the FW de Klerk Foundation, May 31 2012

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