Research and Policy Brief: Property Rights: New Threats, Lost Opportunities, and New Challenges - 31st March 2011.

Mar 31, 2011
Speech by John Kane-Berman, chief executive of the South African Institute of Race Relations, at the launch of the 2011 edition of the International Property Rights Index by the Free Market Foundation, 30th March 2011.

A few years ago a member of my staff, walking along in Braamfontein, witnessed a police raid on a couple of hawkers selling things on the pavement. She tried to prevent the confiscation of their goods, only to be bundled with them into a police van and carted off to the Hillbrow police station. Seizing goods from hawkers is hardly unusual in South Africa. It has no consequences for anyone other than the people who have lost what they were trying to sell. But next time we read about such confiscations we should remember Mohamed Bouazizi. He is the man credited with having sparked off the revolutions in Tunisia and elsewhere earlier this year. He did so by setting himself alight on 17th December last year when police and municipal inspectors seized the apples and other fruit and vegetables he was selling from his barrow. Evidently he had no permit or perhaps he didn't pay the necessary bribe to get one.

One lesson from this story is that anyone can ignite a revolution when there is enough combustible material around. Another is that the protection of property from illegal seizure is something that benefits everyone from the mightiest to the humblest. And a third is the link between property rights and the rule of law. That of course requires a state able to enforce the law but which regards itself also as subject to the law.   

On the last point, there are reasons for concern in South Africa. These go beyond the fact that we have slipped down all the tables in the international property rights index being launched this evening. Recently my Institute and other organisations published reports listing numerous incidents of violent behaviour by the police, including rape, murder, and torture. Policemen who do not respect persons are unlikely to respect property. Confiscation of hawkers’ goods is one example of lawless behaviour. Another is the destruction of shacks that occurs from time to time. Even if shacks are erected on property belonging to someone else, this cannot excuse lawless evictions.     

Nor, on the other hand, should the government be incentivizing land invasions. That, however, is the effect of draft land tenure legislation recently approved by the Cabinet. Two new policy documents on land reform and rural development are in the pipeline. But the draft legislation proposes to augment the rights of people living on "white" farms. It thus entitles the extended families of farm workers to graze livestock, plant crops, and do commercial farming. This will entice people to move on to farms without permission, while six months of occupation will be give them "deemed" consent to stay there.

The draft legislation also entitles farm residents to education, clean water, electricity, and development. What is not clear is where the obligation to provide these things lies. But they are part of the package of socio-economic rights contained in Sections 26 and 27 of the Constitution, rights which in terms of Section 8 (2) seem to be enforceable not only against the State but also “horizontally” against third parties, who in this case could be the farmers themselves. So far horizontal rights have come into play chiefly in affirmative action and empowerment laws. However, as the State confronts more of its own failures, it may seek more power to coerce the private sector.

There is of course plenty such coercion in South Africa already, especially in the form of codes and charters requiring companies to divest themselves of equity. This may not be the same as nationalisation, but to the extent that companies feel arm-twisted into disposing of some of their share capital, often at below market prices, it is a kind of nationalisation, not on behalf of the public but often for the benefit of favoured people.  

It was George Orwell who said that who owns the past owns the future. Conventional wisdom in South Africa has it that whites own 87% of the land and blacks only 13%. From this it supposedly follows that justice requires massive restitution and redistribution. But are the figures correct?

No. Africans probably now own close to 20% if one adds in 2 million hectares purchased on the open market and 6 million transferred by the State. Don't forget, however, that the State owns possibly 25% of this country. That slice was previously part of the white 87%. It should now be subtracted from the white share and added to the black share, which pushes the latter up to about 45%. Add in coloured and Indian ownership, which some people estimate at a high 10%, and the total black slice rises to about 55%.  

Who owns the past owns the future. But perhaps we are also prisoners of the past. To want to reverse the greed and selfishness of the 1913 and 1936 Land Acts is understandable. But it is too late to restore the status quo ante. The black population is urbanizing, and there is little evidence that many black people want to go farming.  

In fact, land reform is not about farming. It is about transformation. Success will be measured not by the agricultural output of new farmers but by the amount of land transferred from white ones. We thus risk embarking on another form of social and racial engineering heedless of the key lesson from the past: how hard it is to reverse the results of such projects.

As the new process unfolds, who will stand up for white farmers? Is “kill the boer” not part of the liberation struggle? Do we not often hear of how farmers inflate land prices and abuse their workers? Have we not often read that they have already evicted a couple of million people from their farms?

Yet the highest figure given by the Government for actual evictions is not the millions it and some NGOs claim, but altogether 2 100 people in 12 years. As for abuse, the minister of labour recently reported on an audit which found that the main form of non-compliance was technical breaches such as failure of employment contracts to specify different hours of work in particular seasons. Precisely 1.6% of the farmers surveyed paid below the prescribed minimum.   

Unfortunately, in this context the facts don't matter. The tale of continuing evictions and abuse is part of folklore. It also serves the purpose of stigmatization. This weapon was used to great effect between 1990 and 1994 to weaken the ANC's opponents and strengthen its hand at the constitutional bargaining table. If you want to soften up public opinion for an attack on a particular community, stigmatisation is the way to go.

Property rights, like freedom, are indivisible. Nobody should think their own rights will be secure if those of white farmers can be invaded, or those of mining companies can be eroded. Each successful invasion of course creates a precedent: if mineral rights or water rights can be nationalised, farm land may be next. If the Government has the power to tamper with intellectual property rights by fixing drug prices or doctors’ fees, why should its price-fixing powers not be extended into other realms?

One of the ironies in the draft land reform legislation is the property rights being contemplated for black people who move off farms into "agri-villages". They will not own land but will be expected to farm plots subject to permits. So the new class of black peasant farmers will be tenants of the State just as their forebears in the townships were – until Prime Minister John Vorster started restoring home ownership rights to Africans in 1975. These new African farmers will be subject to eviction if, in the eyes of government officials, they don't farm well enough. As the minister of rural development and land reform, Mr Gugile Nkwinti, said last year, "If they don't use the land, we’ll take it.” Some of the beneficiaries of land reform have in fact already been evicted, sometimes illegally.

If aspirant farmers in agri-villages are to be tenants of the State rather than landowners in their own right, they will join the ranks of people in former homelands who also have no individual ownership because of the Government’s failure to introduce land reform in communal areas – perhaps the biggest lost opportunity of the post-apartheid era.

Ownership of so-called RDP houses is similarly attenuated, as the Government opposes the sale or letting of such houses by their owners. Last year the MEC in North West province in charge of human settlements threw a man out of the house he was renting and using as a tuck shop. The MEC stated, "These houses belong to the needy. We will not allow people to use them for personal profit.” The needy, it would seem, must stay needy. Earlier this year President Jacob Zuma urged ANC branches to "assist in eradicating the problem of people who receive new houses and then rent them out” and move back to informal settlements. Since only about a third of state-subsidised houses are occupied by their legal beneficiaries, Mr Zuma might have a lot of evicting to do.

Shackdwellers are also vulnerable. More than 1.1 million families live in informal dwellings in informal settlements across the country, and their number is increasing.  Some of these settlements violate the rights of landowners, which the State has sometimes failed to uphold. But the courts have also found many evictions and demolitions of shacks to have been illegal. Unfortunately, the ANC government -- like its predecessor -- still fantasises from time to time about eradicating what the human settlements minister, Mr Tokyo Sexwale, stigmatises as "ugly little pondokkies". But these pondoks belong to people and also represent affordable housing for the poor. Many of them are probably of no worse quality or greater ugliness than the 2.6 million RDP houses (87% of the total) that were so badly constructed that the cost of repairing them has been put at R59 billion. Shacks in fact need to be seen as part of the solution to the country's housing shortage. Upholding property rights, resolving conflicts about such rights, and applying the rule of law is more bedevilled by the situation on the ground here than anywhere else. But we need to be as vigilant about the rights of shackdwellers as we are about those of landowners.

Could it be that in its pursuit of equality of outcomes the ANC will level down rather than level up? In other words, instead of the property rights of blacks being elevated to the level previously enjoyed by whites, everyone's property rights will be at a lower level. To nationalise all land and then lease some of it back to farmers, as some officials have suggested, would be consistent with such an approach.

The ANC is committed to what it calls a "national democratic revolution" (NDR). The details can be found in decisions dating back to 1962 and thereafter reaffirmed from time to time, most recently at the conference in Polokwane in 2007. The documents talk about the need for efficient markets, faster growth, and maintaining macro-economic discipline. But they also stress the need for the ruling party to use state power to obtain what are essentially revolutionary goals. ‘Critical’ to the NDR is the elimination of apartheid property relations, the deracialisation of ownership and control of land and equity, redistribution of wealth and income, consolidation of social and institutional capital in the hands of the ‘motive forces’ of the revolution, and affirmative action. The NDR necessitates “continuing struggle” which could intensify over time. "Because property relations are at the core of all social systems, the tensions that the decisive application of this objective will generate will require dexterity in tact and firmness in principle."

What are we to make of this? Part of it no doubt is driven by the desire for redress. Narrowly construed, it might contemplate little more than a necessary rectification of imbalances. Such a narrow construction would help explain why so many people have bought into "transformation". The Press plays little attention to the NDR, whether through ignorance or political correctness I do not know. Perhaps they don't take it seriously.   

In my view, however, to forget the ideological provenance of these ideas is to indulge in wishful thinking. Those who endorse "transformation" may find they have written a blank cheque for something much bigger. The property clause in the Constitution – Section 25 - has long been a sore point. Repeatedly there is talk of getting rid of the "willing seller/willing buyer” principle. 

The practical question is, Can the NDR be implemented? With the fall of communism the global context is different from that in which the ANC and its allies grew up. We have a constitution which contains various guarantees and also protects the independence of the Judiciary. The country must attract foreign capital to plug the deficit on the current account of the balance of payments. We are party to international treaties. We have a new capitalist class and a new middle class. We have independent newspapers, radio, and television stations. We have a few vigilant NGOs. We even have a Communist Party boss, Mr Blade Nzimande, who comes to the defence of capitalists – provided their name is Gupta. Mr Jeremy Cronin, another top communist, has opposed nationalisation, though perhaps mainly to put Mr Julius Malema in his place.

In other words, we have plenty of checks and balances, countervailing forces if you like, some of them even in the ruling alliance. There are no doubt people in the South African Reserve Bank and the National Treasury, and perhaps a few in the Cabinet, who could be counted on to modify or even resist implementation of the NDR. Business is another countervailing force. On the other hand, the thrust of much policy and practice is evidence that people who believe in the NDR are alive and well and occupying influential positions in government, parliament, and the machinery of the State. These are not ad hoc policies to be viewed in isolation, but part of a larger design. Couple that with the steady extension of the hand of the State, the deployment of party apparatchiks all over the show, the incremental establishment of our own licence raj, and the fact that judicial appointments are ultimately in the hands of the ruling party's majority on the Judicial Service Commission, and it would be foolish simply to assume that property rights in South Africa are safe. The Government, after all, is even brazen enough to be planning to nationalise the assets of the representative bodies of the legal profession.

It would be imprudent to underestimate the willingness of those driven by ideology to implement their ideas regardless of what might be destroyed, who might be damaged, what investment might be lost, or how much money might be squandered in the process. The destruction caused by land reform shows this. South Africa has been down this path before. There is a big difference: the National Party’s grand design was subjected to far more critical scrutiny both at home and abroad than is the case with the NDR. Therefore at least as much vigilance is called for now as was required in the past. In fact, given limited public awareness of NDR policies, there is a particular responsibility on a handful of liberal organisations, the Free Market Foundation and the South African Institute of Race Relations prominent among them, to be wide awake around the clock.

Nor should we forget the paradox of government. The protection of life, liberty, and property is its primary function. But the lesson of history, and of the 20th century in particular, is that government can also be the greatest threat to life, liberty, and property.

Among those in this country whose well-being and freedom are denied are the millions of people who own no fixed property and have no intellectual capital in the form of education or experience either. They have nothing to call their own - except their own dignity and their own persons. Yet our labour legislation stops them from exploiting the only thing they can - their willingness to work for whatever wage somebody is willing to pay them. Worse, we are planning to tighten up this legislation - to make it even more difficult for them to get jobs. This is insane as well as unfair.

Our constitution promises just about every right under the sun except the right to work. It needs to be amended to provide something along the following lines: "Everyone shall have the right to seek, obtain, or offer employment without the interference of third parties”. This would then render unconstitutional the activities of bargaining councils in Newcastle and elsewhere hell-bent on closing down clothing factories and throwing people out of work.     

This country actually needs a crusade to remove the legislated and other protectionist barriers that confront workseekers. 

Mr Malema is the least of our worries. In fact he probably performs a public service in making his demands so loudly. This is a useful warning against complacency. The real threats to property rights as well as to the rule of law in this country are less frontal attacks than incremental erosions. These can take the form of statutes that go through the Cabinet without public attention, subordinate legislation which nobody notices, administrative decisions that are not reported, malfeasance in the use of delegated power, or orders of court that officials fail to carry out. The problem with such incremental erosions is not only that they can often occur largely unnoticed but also that they elicit protest only from those directly affected.

Who will come to the defence of white farmers and their land and water rights other than white farmers? The mining minister, Ms Susan Shabangu, said last year that companies failing to achieve the required black ownership targets would see their mining rights rescinded. Who'll come to the defence of the mining industry other than themselves?

Well, we need to recognise that damage to, or destruction of, mining and agriculture threatens not only owners and managers, but also present and prospective employees. Mining companies can often go elsewhere, but their workers can’t. Nor can the jobless. We also need to remember that a government which can ride roughshod over the rights of farmers and multinational mining companies can also ride roughshod over the rights of hawkers, peasants, shackdwellers, and owners of RDP houses. Nor should we forget that some of the biggest losers in BEE deals are people whose savings in pension funds have been redistributed to the "usual suspects". Property rights and the rule of law are as precious to the poor as they are to the rich, and as important to black as to white. 

As for the vital importance to commerce of adherence by government to the rule of law, let us remember Shakespeare's warning when it was suggested that the Duke of Venice might bend the law to allow Antonio the merchant to escape having the agreed pound of his flesh cut off when he couldn't redeem his bond to Shylock:

"The Duke cannot deny the course of law:

For the commodity that strangers have

With us in Venice, if it be denied,

Will much impeach the justice of the State,

Since that the trade and profit of the city

Consisteth of all nations."

 30th March 2011


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