In December 2018, South Africa’s National Assembly approved a motion to amend Section 25 of the constitution, making more explicit the possibility of expropriating land without compensation (EWC). Since President Cyril Ramaphosa took office in February 2018, land has assumed a prominent role in the political agenda. While Mr. Ramaphosa has repeatedly tried to reassure investors on the topic, the truth is that the push toward expropriation has entered an uncertain, perhaps irreversible, path.
South Africa’s constitution already recognizes the government’s power to expropriate land, provided that it is for a “public purpose” or “in the public interest” and subject to compensation, which must be “just and equitable” and determined either according to the “willing buyer, willing seller principle,” or defined by a duly authorized court. Given these already wide prerogatives, any amendment of Section 25 will be seen by markets and investors as an attack on property rights, with direct and negative impacts on the country’s banking and financial systems.
The EWC debate can only be fully understood through two distinct but intertwined perspectives. The first is historical and political: as a difficult legacy of settler colonialism, “the land question” is an easy subject of political manipulation. Twenty-five years after South African independence, the promise of a prosperous “rainbow nation” is perceived as increasingly out of reach, while politics and the economy are becoming more, not less, racialized. As has already been seen in Zimbabwe, politicizing and racializing the land question can have disastrous effects. Politically motivated land reform in South Africa’s northern neighbor ended up leading the country’s economy to a total collapse.
The second perspective is economic. Following the troubled presidency of Jacob Zuma (2009-2018), which fostered the process of “state capture” by the ruling elite and caused national output to shrink, the country’s economy has yet to recover. Growth remains weak, competitiveness is declining, and inequality and high unemployment (estimated at 27 percent) persist. The quality and efficiency of basic services have deteriorated and the country’s murder rate, among the 10 highest in the world, has increased for six consecutive years. In this context of frustrated expectations, many South Africans see land redistribution as the only means left to empower the country’s black majority.
The growing disenchantment of South Africans with politics in general and with the ruling African National Congress (ANC) in particular suggests that uncompensated land seizure and the slogan of “radical economic transformation” are – like the land question itself – an emotional appeal born of political desperation, which in turn was caused by economic failure.
Although the ANC won the May 2019 general election, its share of the vote has declined over the past decade (from 65.9 percent in 2009 to 62.2 percent in 2014 and 57.5 percent in 2019). While the main opposition party remains the center-right Democratic Alliance (with 20.8 percent of the vote), the ANC has been losing ground to the Economic Freedom Fighters (EFF), the populist, radical left-wing formation of Julius Malema, which nearly doubled its result to 10.8 percent of the vote.
Mr. Malema – who declares that the time for reconciliation has passed and the hour of justice has struck – is the man chiefly responsible for politicizing the land question. It was his March 2018 motion for a constitutional amendment that forced the ANC to assume a position, albeit a less radical one than the EFF. Mr. Malema’s party calls for the complete abolition of foreign land ownership and the nationalization of all land, with half of it reserved for women and young people.
Although many South Africans still see land in light of the colonial regime and the apartheid system, the truth is that South African society has changed over the past 25 years, as has land tenure. According to a 2017 Government land audit report, 72 percent of the country’s arable land is owned by whites, who account for approximately 8 percent of the population. However, another report released by AgriSA, an organization representing white commercial farmers, questions these figures and states that patterns of land ownership are shifting faster than the government admits.
The original target of transferring 30 percent of the arable land has been almost realized, according to AgriSA, not only through land redistribution schemes (under the willing buyer, willing seller principle) but also through market operations, as ordinary black South Africans buy property. Sales of farmland (white/white or white/black) have increased dramatically since the end of apartheid, with the rise in turnover transcending the settler/native divide.
At the same time, South Africa has urbanized: the share of its population living in cities has increased from 54 percent in 1994 to 65.5 percent in 2017. This means that the country’s most pressing economic and social challenges – rising poverty, inadequate infrastructure and services, unemployment – are found in urban areas, and will not be solved by land redistribution.
The “land question” has taken different forms in Africa’s southern regions. In Zimbabwe, a chaotic land reform process kicked off in 2000, a year marked by a deep economic crisis and the emergence of the Movement for Democratic Change (MDC) as a direct challenge to President Robert Mugabe and the ruling ZANU-PF. The effects of Mr. Mugabe’s so-called Fast-Track Land Reform (FTLR) were long-lasting and disastrous. Violence and absolute disregard for property rights scared investors off, while insecurity over land tenure, a lack of skills and shortages of inputs deterred the new occupants from market production. According to the World Food Programme, between 2002 and 2003, 7.18 million Zimbabweans needed food assistance in a country that had once been a regional breadbasket.
The Zimbabwean experience – albeit extreme – demonstrates the impossibility of having one’s cake and eating it, too. The process of expropriation without compensation inevitably erodes the fundamental principles of a market economy.
Almost two decades later, Zimbabwe’s President Emmerson Mnangagwa – moved by the imperatives of economic realism – is trying to undo some of the FTLR’s damage. The government has announced its commitment to compensate owners for infrastructure and improvements made on the land (an estimated $17 million has been earmarked for this in the 2019 budget) and has offered 99-year leases to white farmers.
In Namibia, where land redistribution was based on the willing seller, willing buyer principle, the debate is following the South African path. Facing an economic contraction and general elections in November, President Hage Geingob has put land redistribution at the top of the agenda, stating that “careful consideration should be given to expropriation.” For now, the plan is to expropriate only underutilized farmland and farms owned by absentee landlords. However, this hypothesis has generated much criticism. While opponents of EWC fear the collapse of property rights, many of its defenders fear the process could end up enriching the country’s ruling elite.
Recent events in South Africa suggest that the reason why former settler colonies should address – and close – the matter of land redistribution is primarily political. The issue is bound to resurface in times of economic hardship, rising inequality or whenever leaders feel their popularity threatened. Given its emotional resonance, it is almost certain to be exploited for political ends.
In contrast to Namibia, Zimbabwe’s exposure to the South African land question is mainly economic, since a protracted recession in South Africa would adversely impact an already disrupted Zimbabwean economy. President Mnangagwa will likely continue his efforts to reengage with Western donors, and symbolic compensation of white farmers is an important step in that direction. While there is internal resistance to this policy, it is not expected to be officially challenged, since the MDC leader has been stressing the need to compensate expropriated commercial farmers since the 2018 presidential campaign.
What may happen, however, is that Mr. Mnangagwa’s conciliatory attitude will spur the formation of a more radical, nationalist, left-wing party along the lines of the EFF in South Africa.
South African scenarios
As for South Africa, three scenarios must be considered. None is particularly promising in economic terms, but some are clearly worse than others.
Under this first, highly likely scenario, the economy would be held hostage to protracted political and legal haggling over the land question during the current parliamentary term. Uncertainty will be compounded by the fact that while the ANC and the EFF agree on the need for land redistribution, they disagree on almost everything else.
Assuming events take this course, President Ramaphosa, fearing an economic collapse, would push for a process that would extend the property rights of new landowners and provide them with title deeds. This would collide with the Marxism-Leninism of the EFF, which insists that all land should be state-owned and leased to individuals and companies for limited periods. Prolonged uncertainty – in a context of growing racialization and emotional politics – would deter prospective investment in the agricultural and mining sectors. It could also scare away existing investors, striking a severe blow to the economy and depriving the government of significant revenue.
Under this second and less likely scenario, the land question would be tackled pragmatically. Reforms would be designed with the knowledge that land redistribution in itself will not empower black Africans. For living conditions to improve for South Africa’s black majority, the priority must be to grow the pie rather than share it.
If President Ramaphosa decides on this course – perhaps prompted by the warning signal of the ANC’s disappointing election results in 2019 – he would reach out to the private sector, the banking system and the Democratic Alliance, involving them in the land debate and adopting some of their suggestions. EWC would be replaced – or at least mitigated – by prioritizing efficiency in land redistribution, focusing on underutilized tracts (including state land) and preferring market-based solutions. State resources would be channeled to stimulate job creation and improve housing and services in overcrowded urban areas.
Finding a sensible compromise that addresses the land question without harming the market economy would be a challenging exercise. Even so, its long-term effects would be extremely positive, because land hunger would no longer be exploited for political purposes.
The third and least likely scenario – land reform based on the EWC’s vision – would pave the way for a deep economic crisis. Disregard for constitutionally enshrined property rights and plunging land values would have a disruptive domino effect in a country where several other vital economic sectors depend on commercial farming.
This worst-case scenario becomes more likely as popular dissatisfaction grows in both urban and rural areas, with an increase in the number of unregistered or illegal workers. Uncertain property rights, misguided policies, low budgets, the alienation of the private sector and questionable criteria for land allocation would discourage investment in commercial farming. The inevitable result would be a decline in agricultural output and the loss of export income.
Economic recession and higher unemployment would set off a social and political crisis, with an immediate impact on South Africa’s security outlook. The continent’s second-largest economy would enter a free fall, transforming the geopolitical balance of the entire sub-Saharan region.
However, it is essential to note that despite some superficial similarities, South Africa is not Zimbabwe and Cyril Ramaphosa is not Robert Mugabe. In South Africa, the political system’s checks and balances are more resistant to populist pressures. This makes for a stark contrast with Zimbabwe, where the judiciary was rendered powerless in the FTLR’s initial stages.