South Africa has taken a big step towards abolishing property rights

By: Anthea Jeffrey
Date: March 11th 2016
Source: Rand Daily Mail

In pushing ahead with the bill, the ANC is determined not to allow black farmers to obtain ownership of land acquired for redistribution

In recent weeks, President Jacob Zuma and other ANC leaders have repeatedly identified rural "land hunger" as the major cause of poverty, inequality and unemployment.

However, this makes little sense when the agricultural sector contributes only 2.4% to GDP and about 5% to employment. Rural land ownership is also not the key to wealth, as Hong Kong, Singapore and Taiwan show.

In addition, SA is already 65% urbanised, 8.6 million black people own their own homes, and most people want jobs in urban areas, not the toil of ploughing land to grow food. The ANC's romanticised view of smallholder farming as the key to food security and economic growth is absurd, and does not resonate with most South Africans.

The real barriers to upward mobility for the poor lie in bad education (among the worst in the world); a growth rate of 1.3% of GDP (far below that in many other African countries); a jobless rate of 24%; and a struggling small business sector, beset by poor skills, high crime and stultifying red tape.

Having set up the straw man of land hunger as the main reason for unemployment and poverty, the ANC is now seeking, via the Expropriation Bill, to give the state the capacity to acquire not only rural land, but also a host of other assets. These range from mines and factories to houses and customary homesteads.

In pushing ahead with the bill, the ANC has no real interest in redress. Far from wanting to build a new class of independent black commercial farmers, it is determined not to allow black farmers to obtain ownership of land acquired for redistribution.

The State Land Lease and Disposal Policy of 2013 makes it clear that land acquired for redistribution must be leased, not sold, to black farmers. Small black farmers will never gain ownership, while medium-and large-scale farmers must be content with leasehold tenure for 50 years before they may (perhaps) be allowed to buy.

Black farmers have objected, saying they want ownership instead, as leasehold tenure makes them too dependent on the state. The policy also means many black people are still being barred from buying rural land — and that the ANC’s land-reform programme is a recipe for creeping land nationalisation rather than black empowerment.

The main author of the Expropriation Bill, Deputy Public Works Minister Jeremy Cronin, is careful to brush over this reality. He also makes much of the fact that "just and equitable" compensation will be paid whenever property is expropriated. But this overlooks the fact that many state takings will not count as expropriations and so, will not warrant any compensation at all.

Cronin has achieved this sleight of hand under a definition of expropriation that was inserted into the bill in the final stages of the parliamentary process. Hence, it was never discussed at the National Economic Development and Labour Council (Nedlac), or opened up to public consultation.

To most people, the new definition probably looks harmless, for it describes expropriation as the compulsory "acquisition" of property by the state. The significance of this wording can be understood only in light of the Constitutional Court judgment in the AgriSA case in 2013.

This case began when a company, Sebenza, found it lacked the funds needed to convert an unused old-order mining right it had bought for R1-million into a new-order mining right under the Mineral and Petroleum Resources Development Act of 2002.

This act, which took effect in 2004, vested all mineral resources in the "custodianship" of the state. It also required unused old-order rights to be converted within a year, failing which they would "cease to exist".

Sebenza’s mining right duly came to an end, prompting it to sue for compensation. Commercial farmer lobby group Agri SA took over the claim and brought it before the High Court in Pretoria.

The court found that Sebenza had lost all the competencies of ownership it had previously enjoyed, while the act had given the mining minister similar rights. The state had thus acquired "the substance of the property rights" Sebenza had previously owned, and it made no difference that the state’s competencies were termed "custodianship" rather than "ownership".

Expropriation had indeed occurred and compensation of R750 000 was payable.

The Constitutional Court then overturned this common-sense ruling. In a majority judgment penned by Chief Justice Mogoeng Mogoeng, it agreed that Sebenza had suffered a "compulsory deprivation" of its mining right and that the "custodianship" of this resource was now vested in the state. However, said Mogoeng, "the assumption of custodianship" did not mean the state had acquired ownership.

This, in turn, meant no expropriation had occurred and no compensation was payable. (The Constitution requires compensation solely for expropriations and not for other deprivations at state hands.)

What the high court had seen as a meaningless distinction between the state’s powers as "owner" or "custodian" was thus made an issue of enormous legal and monetary importance.

Two Constitutional Court judges warned against Mogoeng’s approach, saying it could lead to "the abolition of the private ownership of … all property".

"Any legislative transfer of property from existing property holders" would no longer be "recognised as expropriation if it was done by the state as custodian of the country’s resources", they cautioned.

Mogoeng’s judgment was, of course, based on its own particular facts and was not necessarily binding in all situations. Now, however, Cronin is using the Expropriation Bill to turn his judgment into a statutory rule that will trump all existing legislation.

In addition, under the Preservation and Development of Agricultural Land Framework Bill of 2014, the ANC is already seeking to vest all farming land in the "custodianship" of the state. Since the state will not acquire ownership, the new definition in the Expropriation Bill is likely to bar farmers from obtaining any compensation for this "assumption of custodianship" (to use Mogoeng’s words).

Once the state has custodianship, farmers will also find their "right to farm" becomes subject to ministerial regulation. Such regulation could require them to obtain leases from the government and so turn them, like their emergent counterparts, into perpetual tenants of the state.

The new definition in the Expropriation Bill is a major threat to property rights. Should it indeed be used by hundreds of organs of state to take custodianship of property without compensation, the economic damage is likely to be severe.

The poor, as ever, will suffer the most. Some might become desperate enough to turn to subsistence farming as their only means of survival, but South Africans deserve better options than that.

Dr Jeffery is head of policy research at the Institute of Race Relations

This article first appeared in Business Day

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Photo source: Christopher Griner via Flickr/Creative Commons (CC By-NC-ND 2.0). Photo: © Christopher Griner