South Africa—still—doesn’t Understand Why Expropriation Without Compensation is Bad

The entire land confiscation project is a disaster that will not help the people it is meant to help. It is based on a world that does not exist any longer. No prosperous nation today relies on a large percentage of the population owning agricultural land.

The ANC wants to redistribute 30 percent of all land. That sort of goal forces them to look at either farms or game reserves, land that will not help the typical black South African find prosperity. The land that will help most is not rural but urban—it is homes and trading stalls for street vendors.

The land smoke and mirror show started last year at the ANC’s December conference when the party indicated that they support expropriation without compensation.

The World Bank’s report An Incomplete Transition: Overcoming the Legacy of Exclusion in South Africa, makes clear that black South Africans, when free to do so, improve their economic lot by moving to where the jobs are—urban areas.

“Overall, the right to free movement has set powerful market forces in motion, as South Africans moved from where they were mandated to be to where they had the highest chance of earning a good wage, mostly cities and towns.”

The Bank says property rights “are critical for all South Africans to leverage their assets in support of economic growth, household incomes, and jobs” but the “weak titling of property, especially in poor and informal areas, limits its value, including as collateral to access finance. Security of tenure in the former homelands is fragile. As a result, even where the poor hold land, the value of these assets is limited. Calls for land expropriation without compensation and aspects of the third Mining Charter fuel concern over property rights.”

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The ANC government had over two decades to resolve the tenure problem but in that time they made insufficient progress. Before land is confiscated without compensation,  the government must make a serious effort to clear the backlog of title deeds held in limbo.[/perfectpullquote]

If the goal is property rights for black South Africans—a laudable goal indeed—the solution is not an attack on property rights. Once property can be taken, without compensation, all property rights are in doubt, including those of people other than whites.

Millions of homes, which ought to belong to the occupants, remain either government property or without residents holding the clear title. As market advocate Hernando de Soto noted, this sort of legal limbo destroys billions in the capital that must be made available to the occupants.

Paul Noumba Um, the World Bank’s country director for South Africa, warned: “Many poor South Africans are still trapped in informal settlements and there is a huge backlog in issuing title deeds to households who were denied ownership during the apartheid era. Tenure security in the former homelands needs to be addressed. Addressing these tenure issues will unlock economic value for many households as they can make effective use of their assets, be it land for more productive agriculture or their homes for backyard rentals or starting a small business.”

Unclear land tenure remains a massive problem. Even in rural areas farmers, such as Solomon Mosoeu, are leasing land from the government instead of being given the title. Mosoeu leases 640 hectares and has a cattle herd of 160. Reuters reported:
“He would like to diversify into crops, but cannot access the required finance because he does not own the farm. ‘I would be happy if I had title deeds. I don’t have collateral. In farming, there is nothing you do without capital.'”

The ANC government had over two decades to resolve the tenure problem but in that time they made insufficient progress. Before land is confiscated without compensation,  the government must make a serious effort to clear the backlog of title deeds held in limbo. Farmers such as Mr. Mosoeu ought to be given titles, not leases!

As of 2018,  some 1 million homes were occupied by individuals without title to the property. It could well be more. The government does not even know how many are in the queue for a deed. The Citizen reported, “The exact number of individuals without title deeds is not known—even the Department of Human Settlements doesn’t have ways to determine the number. Minister of Human Settlements Nomaindia Mfeketo admitted, ‘I don’t have a database or dashboard where I can know for sure that a person who is supposed to be in a house is the person who was given a house’.”

But The Citizen noted Mfeketo might have trouble doing her job “given that her department’s budget has been cut by R10 billion for the next three years.” If the government is serious about land reform it should stop throwing billions down the SAA toilet and get serious about transferring title of government-owned housing and land to occupants.

This is not the only urban property that ought to be privatized. As the World Bank noted, “City regulations continue to discriminate against poor South Africans, for example, those who would like to seize opportunities from informal trading in urban centers.”

In market economies, many of the greatest businesses started out as the humble work of street vendors. Every town and city has such vendors yet their stalls do not belong to them. They are considered public property—a fancy way of saying the government owns them.

These vendors have no security, no collateral, and make little investment. If you do not own a property you are not going to invest in improvements.

Where larger plots of government land are available entire markets, similar to Warwick Junction in Durban, can be created. Warwick has over 7,000 vendors and some 450,000 shoppers and commuters pass through the trading area daily—yet only a few years ago the government was prepared to destroy it for a mall during the 2010 World Cup.

In any city of size, there are certain streets with high pedestrian traffic that can be closed to vehicular traffic and thousands of stalls can be created for street vendors. Vendors can be given title deeds and use their property as security to start their business. These are small pieces of land—but it is not the size of that matters, it is what you do with it.

James Peron is the president of the Moorfield Storey Institute and author of several books including Exploding Population Myths and The Liberal Tide.