5 Things President Ramaphosa Needs To Know About Expropriation Without Compensation - HuffPost

2 July 2018 - The government must get out of the business of running businesses, and get into the business of building the country.

Sara Gon
 
Expropriation without Compensation (EWC) has gripped South Africa like very few issues before. Despite the fact that we know very little about what EWC will look like, how it will be implemented, and how we'll prevent the economy from imploding should it go ahead, it seems that the government and President Cyril Ramaphosa are working to push it through.

The president has even claimed that the expropriation of land without compensation will turn South Africa into a Garden of Eden. If what he means is that we'll all be naked and taking instructions from snakes, perhaps he's right.

But here are five things the Institute of Race Relations (IRR) thinks the president needs to know before he implements EWC:

1. Agriculture won't give us the growth and jobs we need

Agriculture only accounts for about two percent of South Africa's total economic output, and this is a figure that has been on a steady downward trend for many years. At the beginning of the century, agriculture's contribution to the South African economy was almost twice that. Our economy is increasingly a tertiary one, rather than a primary one, and agriculture will simply not be able to give South Africa the growth or jobs it needs.

Eroding property rights and implementing EWC will not result in the structural change this economy needs to tackle unemployment and poverty. Two-thirds of South Africans are now urban (and this will only increase) — and focusing on land will not solve the serious problems we face.

2. The government's priorities are skewed

Research from the IRR has shown that land reform is fairly low on the list of priorities of things that people want. Our latest report on opinions among South Africans found that most people thought the top two priorities of the government should be employment and education. Some 35 percent of South Africans felt that "creating more jobs" should be a government priority, and 27 percent felt that "improving education" should be the primary government focus.

Only one percent thought "speeding up land reform" should be what government concentrates on. Looking at only black South Africans, the numbers were broadly the same. Some 38 percent of black South Africans thought employment should be the government's main focus, 26 percent said education, and one percent thought land reform should be the government's top priority.

EWC will simply lead to less (or even no) investment, and any hope of reaching the high levels of economic growth that we need will be lost.
3. The government has not allocated adequate resources to the land question

The budget for land reform and restitution in South Africa is very small, and it raises the question of whether the government has ever given the issue the attention it deserves. In the most recent spending cycle, the department of rural development and land reform's budget was less than one percent of total government spending, at about R10-billion (with R2.7-billion set aside for land reform and R3.7-billion set aside for land restitution).

And this money isn't only for land reform and restitution, but salaries and administrative costs. VIP protection alone comes to nearly R3-billion, which means our government thinks protecting the political elite is pretty much on par with providing support to emerging farmers or addressing cases of land dispossession.

4. The money exists to build a new class of emerging black farmers

The IRR estimates that with the money that's been used to bail out South African Airways (SAA) and other bloated state-owned enterprises (SOEs), a large number of emerging farmers could have been established on a sound commercial footing. Last year, SAA received a R10-billion bailout and has asked for another R5-billion.

We estimate that with that money at least 750 emerging black farmers could have been funded (and, considering there are only about 30,000 commercial farmers in South Africa, this is a fairly big number). At R20-million per emerging farmer, each could have been provided with a 1,000 hectare farm, 200 pregnant cows, a bakkie and other tools and equipment necessary, and be left with R3.5-million in working capital. The government must get out of the business of running businesses, and get into the business of building the country. This is one way they could do it.

5. The investment we need will not be forthcoming

Although some people in South Africa consider investors (whether domestic or foreign) undesirable, the truth is our economy is simply too small to function without foreign investment. Foreign investment is necessary to help create the economic growth we need to really fight poverty and unemployment. Unfortunately, it is clear that the uncertainty around EWC and similar policies in other sectors (such as the Mining Charter) are leading to an outflow of investment. This year has seen a net outflow from the JSE, and this is likely to continue.

In addition, the feedback the IRR has received during its tour abroad from investors and South Africa watchers is that the uncertainty created by EWC has dampened investor enthusiasm in the United States and heightened anxieties in Europe. Informed investors acknowledge the need for land reform, but EWC will simply lead to less (or even no) investment, and any hope of reaching the high levels of economic growth that we need will be lost.

Sara Gon is a policy fellow at the Institute of Race Relations (IRR), a think tank that promotes political and economic freedom. If you agree with what you have just read, then click here or SMS your name to 32823.

 

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