Africa’s Looming Venezuela

The South African government’s planned land grab from farmers, known as Expropriation Without Compensation (EWC), sets a damning precedent for the country by threatening both fundamental property rights as well as South Africa’s economic prosperity.

Earlier this year, the parliament of South Africa supported the EWC resolution to amend section 25 of their Constitution. Currently, S25 mandates that the government must pay just and equitable compensation when it expropriates land. South African president, Ramaphosa claims that EWC Is necessary for restoring land stolen during apartheid, redistributing land so that home ownership correlates with racial demographics in order to appease the electorate which he argues, has been clamouring for land reform. He believes that the country’s economy will not be adversely impacted, yet the evidence suggests otherwise.

The EWC will weaken fundamental property rights and causing destitution and strife. The International Property Rights Alliance (IPRA), an international coalition of property rights advocacy groups of which the Australian Taxpayers’ Alliance is the local affiliate, have cautioned the South African government against continuing with its proposed policy of expropriating private property, arguing that the proposed policy will undermine constitutional democracy. The proposed amendments would apply to both physical and intellectual property, from trademarks and patents to houses, vehicles and even heirlooms. The government may be tempted to abuse the new powers in order to undermine their political opponents. Land could be arbitrarily expropriated, as well as other forms of property such as pensions to fund government programmes.

South Africa’s economic growth and investment in the country will also suffer if the government has their way. South Africa’s presently high crime rates and corruption have already made it a higher-risk location for investment. The enforcement of EWC would coincide with a loss of trust among local and foreign investors and business owners who will be discouraged from devoting time, effort and money to build businesses and develop properties. Many would be dissuaded by the lack of secure property right protections and fears that the government could seize their property at any given time. They would be less likely to take entrepreneurial risks in business, thereby hurting South Africa’s economy.

Mark Oppenheimer, a South African advocate and member of the Johannesburg bar, argues that it is misleading to believe land has not been returned to its rightful owner or that home ownership is skewed along racial lines. While South Africa’s apartheid history reveals a denial of property rights for black Africans, the post-apartheid constitution has recognised private property rights for all South Africans regardless of race through legislative enactments like the Land Tenure Rights Act. Over the past twenty-three years, the government has resolved over ninety-five percent of land dispossession claims. Home Ownership data also shows that racial groups own homes in almost perfect proportion to their numbers. A 2015 General Household survey found that 84.1% of the population that had paid off their property were Black South Africans. The government’s claim that people are crying out for land is also deceiving. Ninety-two percent of individuals who won their land claim cases opted to be compensated with money rather than land.

The South African government should look to Venezuela’s catastrophic socialist project, where land was expropriated from the rich to be redistributed to the poor, before making drastic changes. The Venezuelan government’s policy left that country’s economy crippled and its people in strife and destitution. Instead of yielding prosperity and well-being, the policy has resulted in 87% of its people living below the poverty line despite Venezuela’s vast oil wealth. Venezuelan economist, Sary Levy-Cariente notes that since Venezuela’s land reform policies, property rights have been weakened and the country is now “suffering from an extreme case of scarcity and hyperinflation.” Venezuela is a lesson for other governments around the world.

The warning signs are already present in South Africa. The country’s own Land and Agricultural Development Bank has warned that the EWC would force it to default. The Bank has a standard clause attached to its loans totalling about $2.8 billion. If the government started expropriating without compensation, the bank would have to repay the whole amount.

The World Bank has also advised that weakened property rights and institutions have increased capital flight, social fragility, and pervasive corruption.  The defence of private property rights is vital to civil liberties and the UDHR even states that no one shall be arbitrarily deprived of his property. There are better ways for the South African government to bring about substantive land reforms to empower the poor. Vast swathes of South African land are owned by government and are not utilised or are underutilised. Much of this land could easily be transferred to deserving poor families and communities.

Amending the Constitution to permit EWC is a fundamental assault on individual rights. South Africa needs to learn from the experiences of other countries. Otherwise, they risk their own ruin.

Anjali Nadaradjane is a research associate with the Australian Taxpayers’ Alliance.