Property rights: a building block for South African’s future

The move towards a regime of Expropriation without Compensation (EWC) represents a pivotal moment in South Africa’s post-apartheid history. Not only does it challenge the Constitution, but it threatens the country’s prospects for prosperity and freedom. South Africa accepts this at its peril.

To understand the danger, it is important to grasp that this is a measure that is ultimately directed at property rights. While the conversation has revolved around the question of land reform, this is but one part of it – and possibly not the most important one. The parliamentary resolution calling for the matter to be investigated cites Section 25 of the Constitution. This clause deals with property as a whole, and explicitly does not limit itself to land. Any alteration is virtually guaranteed to have ramifications on other forms of property. Even if it should be confined narrowly to land, the precedent it would establish could be invoked elsewhere.

This is not theoretical. The Institute of Race Relations (IRR) has tracked more than two dozen measures over the past decade which have sought to abridge property rights in one way another. Not all of these – such as the Draft Intellectual Property Policy of South Africa – were directed at land, and some were explicitly aimed elsewhere.

This is a measure that will do great damage to South Africa’s already uninspiring economic prospects.

Property rights are fundamental to a healthy, robust and inclusive economy. They signify that investments can be made and contracts concluded, and their integrity respected. They provide the essential security that makes long-term planning possible.

This has been apparent in the IRR’s dealings with businesspeople, both South African and foreign. The same message has been given to government, but little beyond rhetorical assurances has been offered to assuage these concerns. The possibility that they may see their investments confiscated is of great concern – and a prime disincentive to sink their money into the country.

The security that property rights provide is equally vital for ordinary people. Secure ownership is a major incentive to invest in and to upgrade one’s holdings, whether in the form of a home, or perhaps in some type of income-generating operation. They provide collateral for taking out loans. More importantly, property rights shield their holders from arbitrary deprivation, such as when a government agency wishes to acquire land, or any other asset. Too often – perhaps when a road or sports stadium is being built – people who cannot prove their ownership in a legal sense may be stripped of things they or their families have held for years.

There is even research (conducted in Peru) that suggests that secure rights over a home can affect people’s ability to seek and accept employment, since they have the freedom to investigate opportunities far away without the threat of losing it.

Indeed, the need to confer greater security on people’s property is an increasingly important theme across Africa, as a means to encourage both societal and household prosperity. The stakes are high.

As one review by the International Growth Centre, a body promoting economic development in developing countries, put it: ‘Weak property rights in African cities are likely linked to reduced investment, inefficient labour allocation, and lower tax revenues, thus lowering both the living standards and productivity of millions of African households.’

The impact of some such schemes – as in Rwanda’s land titling programme – have been very positive in terms of investment and welfare.

But it is not only for economic reasons that the IRR believes that property rights are important. They help to anchor other civil liberties. People whose hold on their homes and goods is secure and protected are not dependent on the state. The risks they run in standing up to government abuses, although not absent, are nevertheless reduced.

The observations of Dr Ruth Meinzen-Dick of the International Food Policy Research Institute in the United States are informative: ‘Property rights do play a fundamental role, not only in increasing economic productivity, but also in raising the social standing and dignity of those who have them. Strengthening the property rights of poor people can therefore make important contributions to poverty reduction.’

Central to the narrative behind the push for EWC is the notion that the protection of property rights – via the requirement that compensation be paid when government seizes private property – has compromised South Africa’s land reform efforts. This is untrue.

The disappointing state of land reform has been researched in depth, not least by government itself. The High-Level Panel on the Assessment of Key Legislation and the Acceleration of Fundamental Change, appointed by Parliament and under the direction of former president, Kgalema Motlanthe, is clear that requirements for compensation have not been a significant brake on land reform. Rather, a lack of political commitment, poor support, and various governance pathologies have been what has held land reform back.

The IRR is of the opinion that degrading property rights through EWC will do nothing to address this. If anything, by becoming the focus of public attention, it will aggravate existing problems.

Perhaps most frustratingly, this move will serve to confirm one of the great failings of post-apartheid society: the failure, against promises made in 1994, to extend property rights to so many South Africans who were denied them. It is not always recognised that over the past decade a steady shift has taken place in land reform initiatives from granting beneficiaries ownership to making them mere tenants. It is to all intents and purposes impossible for all but the largest land reform beneficiaries to own their land – and even those who manage to farm at a level deemed suitable for ownership can only qualify to purchase after fifty years. (Those leaving their allotments will also lose ownership of any improvements they make – an interesting case of Expropriation without Compensation in existence right now.)

The High-Level Panel criticised the current approach in harsh but accurate terms: ‘It is of great concern to the Panel that recent policy shifts appear to default to some of the key repertoires that were used to justify the denial of political and property rights for black people during colonialism and apartheid.’

Fortunately, this need not be the future. The committee has invited public comment by 15 June. You, along with millions of other South Africans, can join the IRR in taking a stand against the false promises of Expropriation without Compensation and help choose a route that promises prosperity and inclusion.

The IRR has put its perspectives into a submission to the committee. It explains the risks that this policy will introduce and why the arguments in favour of it are misleading. It also offers alternatives: these promise a future driven by economic growth, but that is sensitive to the historical context and helps hitherto excluded South Africans to gain assets and extends to them the ownership and the opportunities and personal pride that go with it. If this issue matters to you, and if a prosperous, opportunity-rich future is what you seek, we ask you to endorse our submission and become a friend of the IRR.

Terence Corrigan is a project manager at the Institute of Race Relations (IRR). The Institute’s Submission to the Constitutional Review Committee can be accessed here.