Robust property rights essential for SA’s future prosperity - BizNews, 16 October 2017

A key issue here is property rights. The protection of private property has long been a sticking point in South Africa’s politics. Prior to 1994, the liberation movements envisaged a post-apartheid government seizing large parts of the economy, and wielding them for the common good. Land would ‘be shared among those who work it’, and large industry would be transferred to ‘the people as a whole’ – in a word, nationalised. ‘Property rights’ represented a capricious mechanism to retain an unjust status quo.
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Robust property rights essential for SA’s future prosperity - BizNews, 16 October 2017

A key issue here is property rights. The protection of private property has long been a sticking point in South Africa’s politics. Prior to 1994, the liberation movements envisaged a post-apartheid government seizing large parts of the economy, and wielding them for the common good. Land would ‘be shared among those who work it’, and large industry would be transferred to ‘the people as a whole’ – in a word, nationalised. ‘Property rights’ represented a capricious mechanism to retain an unjust status quo.

 

By Terence Corrigan

The dark narrative emerging in South Africa’s political conversation is that the transition to democracy in 1994 represented not a moment of liberation, but an indefinite postponement of it – a ‘fatal compromise’, as minister Ngoako Ramatlhodi once memorably termed it. Poverty and deprivation remain the grinding reality for millions of South Africans, compounded by some of the most extreme inequalities on earth. That something has to be done is common cause. But the stakes are high, and failing to get this right could well make things worse.

A key issue here is property rights. The protection of private property has long been a sticking point in South Africa’s politics. Prior to 1994, the liberation movements envisaged a post-apartheid government seizing large parts of the economy, and wielding them for the common good. Land would ‘be shared among those who work it’, and large industry would be transferred to ‘the people as a whole’ – in a word, nationalised. ‘Property rights’ represented a capricious mechanism to retain an unjust status quo.

To its credit – and prompted in part by the malaise its erstwhile communist patrons found themselves in – the African National Congress entered government with a much-moderated view on this. It pledged that ‘a new system of just and secure property rights must be created, one which is regarded as legitimate by the whole population’. This formulation was a fairly accurate rendering of the challenge before the country.

Property implies more than mere assets, possessions or ownership. It is all of those things, enhanced and legitimated by impartial law and the assent of society at large. Property rights are a recognition of these relationships, and specifically vest in individuals the right to own and dispose of their assets.

The right to own, use and dispose of property is a valuable catalyst for economic development. The Peruvian economist, Hernando De Soto, has famously argued that it is the lack of property rights that prevents millions of people across the world – especially in the world’s poorer societies – from leveraging their assets to create wealth. Only when they are legally recognised (‘titled’), can assets be used as collateral. They add tangible economic value to the tools and amenities of daily existence: a house is not merely a form of accommodation, but a building block of prosperity.

Property rights also enhance the quality of democratic citizenship. They give individuals control over their lives. Where people can hold property freely and securely, an important element of security is afforded against encroachment into people’s’ lives by an intrusive state.

As Dr Ruth Meinzen-Dick of the International Food Policy Research Institute in the United States succinctly put it: ‘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.’

These are important considerations for understanding South Africa and charting a course forward. For much of South Africa’s history, black people were dispossessed of both their property and the right to own it, and – more seriously, perhaps – prevented from acquiring either. Turning this around logically demands addressing both aspects: making assets (land, housing and so on) available to those who had been deprived of it, and making them secure in their right to hold it as their own.

Yet, despite substantial and costly efforts, the material imprint of that history and the deprivation it spawned remains. As a starting point, Stats SA’s recent Poverty Trends in South Africa points out that close to 56% of South Africans, or in excess of 30 million people, live under the so-called upper-bound poverty line, equivalent to a paltry R992 per person per month (2015 figures). Some 64% of Africans fall below this line, as do 41% of Coloured people – as opposed to 6% of Indians and 1% of whites.

These figures evoke concern, as well they should. They are concerning in themselves and they are driving disturbing populist thinking. Abolishing the protection of private property is part of this. President Jacob Zuma has suggested that the constitution may be amended to allow for ‘expropriation without compensation’. The Economic Freedom Fighters have made this a central plank of their policy package. And the argument has been floated that property protections were never, in any event, intended to be lasting. Leftist Wits academic Professor Christopher Malikane, for example, described it as a ‘sunset clause’: ‘By sunset clauses we mean the package of compromises that were entered into pre-1994, at the centre of which is the protection of private property rights, which limits the democratic state from decisively dealing with the legacy of colonialism in terms of property ownership.’

In all of this, the evident logic is that private property is a hindrance to development and the greater good, and that power should be vested in a benevolent state. This has been evident in much policy, both actual and proposed. Hence, while millions of South Africans can be grateful for having received low-cost housing from the state, many of them have yet to receive proper title for their properties. And recipients are forbidden from selling them for years. In essence, they have received shelter, not property. So – legally – these assets cannot be used as security to build wealth or opportunities. 

Indeed, some years ago, concerns were expressed by government that beneficiaries of its housing programme were renting out the structures they had received, rather than living in them. But they were merely addressing their own needs – prioritising an income over accommodation – with the resources they had. True enough, this was a sad choice, but as free citizens it should have been theirs to make.

It’s similar in respect of agrarian and land reform, a particularly sensitive matter. Current policy stresses acquisition by the state, with leasehold granted in exchange for rent to those who will use it – in theory. This would make for precarious landholdings at best. In reality, recently published research by academics Ruth Hall and Thembela Kepe on land reform projects in the Eastern Cape has shown how this has had sharply negative consequences for their intended ‘beneficiaries’. It has granted neither title nor secure tenure. State officials are often reluctant to sign leases, assuming that the rent will not be paid. Without security, improvements or maintenance is well-nigh impossible – sometimes actively forbidden by the state. Farm workers, no longer employed, become ‘undocumented occupiers of state-owned land’. Those who stand to benefit, paradoxically, are large agribusinesses which can cut deals with those in power.

‘Our findings’, they argue, ‘indicate a contorted reform governed by state officials, consultants and agribusiness “strategic partners” concerned with surveillance and control of “beneficiaries” in “projects” with precarious tenure on un-subdivided commercial farms now owned by the state.’

There’s a sense of policy deja vu here. The same rights denied under the old regime are denied under the new. Each restricted the options available to many of the country’s people to advance economically and to function as citizens. Perhaps Brian Pottinger said it best in The Mbeki Legacy: the apartheid postulate was ‘do not worry about your future, you don’t have one’; the democratic state often responds with ‘do not worry about your future, we will give it to you’.

Yes, something has to change. It must be acknowledged squarely that it is less the availability of resources or the (qualified) constitutional protection of private property that has hindered South Africa’s progress. Rather, the overall approach has been flawed.

The SA Institute of Race Relations (IRR) has long been advocating a fundamental change in direction – recently through its comprehensive framework, Economic Empowerment for the Disadvantaged (EED). Central to this is recognising that robust property rights are an essential for the country and its future. This is not – to borrow a thought from former IRR president Themba Sono – because the affluent may want them, but because the poor need them.

Restitution and redistribution of assets will be meaningful when it enhances the lives of beneficiaries. This is not to say that it is an uncomplicated idea: there are many real and potential pitfalls associated with titling, not least the need for a competent bureaucracy to implement it and an efficient court system to adjudicate it. Across the developing world, there have been numerous interesting experiments in confirming individuals’ property rights aside from legal titling, such as the certification of informally recognised rights in Ethiopia and Zambia. But the broad trajectory needs to move decisively, if prudently, towards robust, formal rights to the property held or acquired by ordinary people.

This may not be an easy or simple process. But if South Africa is to experience the promise of its liberation – an industrious, prosperous community of free citizens – there is little option.

*Terence Corrigan is a policy fellow at the SA Institute of Race Relations, a think-tank that promotes political and economic freedom.

Read article on BizNews here

IRR TV

 

By Terence Corrigan

The dark narrative emerging in South Africa’s political conversation is that the transition to democracy in 1994 represented not a moment of liberation, but an indefinite postponement of it – a ‘fatal compromise’, as minister Ngoako Ramatlhodi once memorably termed it. Poverty and deprivation remain the grinding reality for millions of South Africans, compounded by some of the most extreme inequalities on earth. That something has to be done is common cause. But the stakes are high, and failing to get this right could well make things worse.

A key issue here is property rights. The protection of private property has long been a sticking point in South Africa’s politics. Prior to 1994, the liberation movements envisaged a post-apartheid government seizing large parts of the economy, and wielding them for the common good. Land would ‘be shared among those who work it’, and large industry would be transferred to ‘the people as a whole’ – in a word, nationalised. ‘Property rights’ represented a capricious mechanism to retain an unjust status quo.

To its credit – and prompted in part by the malaise its erstwhile communist patrons found themselves in – the African National Congress entered government with a much-moderated view on this. It pledged that ‘a new system of just and secure property rights must be created, one which is regarded as legitimate by the whole population’. This formulation was a fairly accurate rendering of the challenge before the country.

Property implies more than mere assets, possessions or ownership. It is all of those things, enhanced and legitimated by impartial law and the assent of society at large. Property rights are a recognition of these relationships, and specifically vest in individuals the right to own and dispose of their assets.

The right to own, use and dispose of property is a valuable catalyst for economic development. The Peruvian economist, Hernando De Soto, has famously argued that it is the lack of property rights that prevents millions of people across the world – especially in the world’s poorer societies – from leveraging their assets to create wealth. Only when they are legally recognised (‘titled’), can assets be used as collateral. They add tangible economic value to the tools and amenities of daily existence: a house is not merely a form of accommodation, but a building block of prosperity.

Property rights also enhance the quality of democratic citizenship. They give individuals control over their lives. Where people can hold property freely and securely, an important element of security is afforded against encroachment into people’s’ lives by an intrusive state.

As Dr Ruth Meinzen-Dick of the International Food Policy Research Institute in the United States succinctly put it: ‘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.’

These are important considerations for understanding South Africa and charting a course forward. For much of South Africa’s history, black people were dispossessed of both their property and the right to own it, and – more seriously, perhaps – prevented from acquiring either. Turning this around logically demands addressing both aspects: making assets (land, housing and so on) available to those who had been deprived of it, and making them secure in their right to hold it as their own.

Yet, despite substantial and costly efforts, the material imprint of that history and the deprivation it spawned remains. As a starting point, Stats SA’s recent Poverty Trends in South Africa points out that close to 56% of South Africans, or in excess of 30 million people, live under the so-called upper-bound poverty line, equivalent to a paltry R992 per person per month (2015 figures). Some 64% of Africans fall below this line, as do 41% of Coloured people – as opposed to 6% of Indians and 1% of whites.

These figures evoke concern, as well they should. They are concerning in themselves and they are driving disturbing populist thinking. Abolishing the protection of private property is part of this. President Jacob Zuma has suggested that the constitution may be amended to allow for ‘expropriation without compensation’. The Economic Freedom Fighters have made this a central plank of their policy package. And the argument has been floated that property protections were never, in any event, intended to be lasting. Leftist Wits academic Professor Christopher Malikane, for example, described it as a ‘sunset clause’: ‘By sunset clauses we mean the package of compromises that were entered into pre-1994, at the centre of which is the protection of private property rights, which limits the democratic state from decisively dealing with the legacy of colonialism in terms of property ownership.’

In all of this, the evident logic is that private property is a hindrance to development and the greater good, and that power should be vested in a benevolent state. This has been evident in much policy, both actual and proposed. Hence, while millions of South Africans can be grateful for having received low-cost housing from the state, many of them have yet to receive proper title for their properties. And recipients are forbidden from selling them for years. In essence, they have received shelter, not property. So – legally – these assets cannot be used as security to build wealth or opportunities. 

Indeed, some years ago, concerns were expressed by government that beneficiaries of its housing programme were renting out the structures they had received, rather than living in them. But they were merely addressing their own needs – prioritising an income over accommodation – with the resources they had. True enough, this was a sad choice, but as free citizens it should have been theirs to make.

It’s similar in respect of agrarian and land reform, a particularly sensitive matter. Current policy stresses acquisition by the state, with leasehold granted in exchange for rent to those who will use it – in theory. This would make for precarious landholdings at best. In reality, recently published research by academics Ruth Hall and Thembela Kepe on land reform projects in the Eastern Cape has shown how this has had sharply negative consequences for their intended ‘beneficiaries’. It has granted neither title nor secure tenure. State officials are often reluctant to sign leases, assuming that the rent will not be paid. Without security, improvements or maintenance is well-nigh impossible – sometimes actively forbidden by the state. Farm workers, no longer employed, become ‘undocumented occupiers of state-owned land’. Those who stand to benefit, paradoxically, are large agribusinesses which can cut deals with those in power.

‘Our findings’, they argue, ‘indicate a contorted reform governed by state officials, consultants and agribusiness “strategic partners” concerned with surveillance and control of “beneficiaries” in “projects” with precarious tenure on un-subdivided commercial farms now owned by the state.’

There’s a sense of policy deja vu here. The same rights denied under the old regime are denied under the new. Each restricted the options available to many of the country’s people to advance economically and to function as citizens. Perhaps Brian Pottinger said it best in The Mbeki Legacy: the apartheid postulate was ‘do not worry about your future, you don’t have one’; the democratic state often responds with ‘do not worry about your future, we will give it to you’.

Yes, something has to change. It must be acknowledged squarely that it is less the availability of resources or the (qualified) constitutional protection of private property that has hindered South Africa’s progress. Rather, the overall approach has been flawed.

The SA Institute of Race Relations (IRR) has long been advocating a fundamental change in direction – recently through its comprehensive framework, Economic Empowerment for the Disadvantaged (EED). Central to this is recognising that robust property rights are an essential for the country and its future. This is not – to borrow a thought from former IRR president Themba Sono – because the affluent may want them, but because the poor need them.

Restitution and redistribution of assets will be meaningful when it enhances the lives of beneficiaries. This is not to say that it is an uncomplicated idea: there are many real and potential pitfalls associated with titling, not least the need for a competent bureaucracy to implement it and an efficient court system to adjudicate it. Across the developing world, there have been numerous interesting experiments in confirming individuals’ property rights aside from legal titling, such as the certification of informally recognised rights in Ethiopia and Zambia. But the broad trajectory needs to move decisively, if prudently, towards robust, formal rights to the property held or acquired by ordinary people.

This may not be an easy or simple process. But if South Africa is to experience the promise of its liberation – an industrious, prosperous community of free citizens – there is little option.

*Terence Corrigan is a policy fellow at the SA Institute of Race Relations, a think-tank that promotes political and economic freedom.

Read article on BizNews here

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