Why Land Seizure Is Back in the News in South Africa: QuickTake

(Bloomberg) -- More than two decades after white-minority rule ended in South Africa, most of its profitable farms and estates are still owned by white people. The ruling African National Congress has vowed to step up wealth distribution, including constitutional changes to make it easier to allow the government to expropriate land without paying for it. A parliamentary committee resolved Nov. 15 that the constitution must be changed and that a panel must be set up to draft the wording. The state hasn’t taken any property yet, but the nation’s biggest banks are wading into the debate since they have the most to lose because of the billions of rand lent to farmers and real estate owners.

1. Why is land ownership an issue?

Because about 95 percent of the country’s wealth is in the hands of 10 percent of the population. Under the rule of European colonists, South Africa’s Natives Land Act of 1913 stripped most black people of their right to own property, a policy reinforced decades later by the National Party and its system of racial segregation, known as apartheid, or apartness. A 2017 state-commissioned audit shows that a third of the country’s rural land is owned by individuals and 72 percent of that is in white hands. Companies and trusts hold 43 percent of rural land; the race of their beneficiaries and owners is difficult to determine. This compares with the results of a separate audit released Nov. 1, 2017, by Agri Development Solutions and farm-lobby group Agri SA, which found blacks, Indians and so-called coloreds own 27 percent of the nation’s farmland compared with 14 percent in 1994.

2. What’s been done until now?

Since 1994, when the ANC became the nation’s dominant post-apartheid party, the state has acquired 8.4 million hectares — about 8 percent of the country’s total territory — for land redistribution and restitution. Those who didn’t want the land allocated to them opted for money instead, with 11.6 billion rand ($814 million) paid out from 1994 until January 2017. A separate initiative begun in 2016, known as the 50-50 program, meant to encourage joint black-white land management, uses government funds to buy half a farmer’s land and give it to laborers working there.

3. How did we get here?

Parliament had proposed legislation in 2016 that would allow the government to pay “just and equitable” compensation for land it expropriates. The bill was withdrawn after Former President Jacob Zuma said it wouldn’t pass constitutional muster. On Dec. 20, the ANC, under newly elected party President Cyril Ramaphosa, said expropriating land without compensation should be among mechanisms to effect land reform, as long as it doesn’t undermine the economy, agricultural production and food security. In February, lawmakers agreed to the principle of land expropriation without compensation and tasked Parliament’s Constitutional Review Committee to consider whether it was necessary to amend section 25 of the constitution. After nationwide public hearings and written input, the committee that land seizures should be explicitly permitted. Civil-rights and lobby groups plan to contest the decision in court. On July 31, the ANC shifted and said it would push for a proposed amendment to the constitution to make it clearer under which conditions land can be seized without pay.

4. Why are banks worried?

Because they have 1.6 trillion rand in mortgages, 150 billion rand of which has been extended to farmers. If lawmakers are persuaded to change the constitution and property rights come under threat, the impact could cut real estate values, weaken investor confidence and thwart economic development. In a worst-case scenario, banks and the economy wouldn’t be able to absorb the shock, the the Banking Association of South Africa said at the end of August.

5. What are they proposing?

Commercial lenders have recommended that expropriation without compensation be undertaken within the confines of existing laws and urged the government to clarify its reform policy to stimulate investment. Banks have also called for a land audit to track the status of transfers to black owners, merging two government departments that address land reform, and creating an ombudsman to expedite grievance resolution. They also propose a blended finance model in which banks and the state fund initiatives together.

6. Is taking land without compensation legal?

Not according to Agri SA, the biggest organization representing the country’s farmers, which argues that the constitution doesn’t provide for expropriation without “just and equitable” compensation. Ramaphosa says the constitution already allows the state to take land, but more clarity is needed on the circumstances under which this can be done. Seizing land could result in South Africa violating conditions needed to retain its preferential access to U.S. markets under the African Growth & Opportunity Act. The act grants 1,800 products from sub-Saharan Africa duty-free entry into the U.S. and the list of eligible countries is reviewed annually.

7. Why is the ANC doing this now?

The party was initially reticent to allow expropriation without paying. Under Zuma, it came under pressure as economic growth stagnated, and there were calls for his resignation from the opposition, civic leaders and senior officials in his own party, following a series of scandals and an unpopular cabinet reshuffle. He was forced to quit as the nation’s president in February and was replaced by Ramaphosa. The ANC lost support in 2016 local elections and Zuma’s reputation eroded the party’s standing to such an extent that it is at risk of losing its national majority in 2019 elections, with a recent poll by the Institute of Race Relations indicating its support has dropped to a record low. The party needs policies that will gain traction among the nation’s poor, who make up the majority of the electorate.

8. What’s the outlook in parliament?

Two-thirds of lawmakers would have to assent to change the constitution. The ANC holds 62 percent of the seats. The Economic Freedom Fighters, South Africa’s third-biggest political party which supports land seizures, has 6.4 percent.

The Reference Shelf

  • Agri SA’s take on the constitutionality of expropriation without compensation.
  • The Department of Rural Development and Land Reform’s 2017 land audit, released in February 2018, and its 2013 land audit.
  • The University of the Western Cape’s Institute for Poverty, Land and Agrarian Studies overview of the distribution of land.
  • Ramaphosa’s take on how expropriation should work.
  • A Bloomberg QuickTake tracing South Africa recent history.

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