The debate about landownership in South Africa is heating up again. With the local elections around the corner, President Thabo Mbeki used his recent State of the Nation address to revisit the “willing-buyer willing-seller” principle for land redistribution. As early as next month, the government is expected to start expropriating farm land at government-determined, not market, prices.
Such a weakening of private property rights could have a regrettable effect on the South African economy. The government should consider other means, including the transfer of state assets, to compensate victims of apartheid.
The land problem in South Africa goes back to the earliest colonial times, when native lands were expropriated from their rightful owners - often without compensation. The 1913 Natives’ Land Act codified those injustices by preserving some 87 percent of the country’s land for the exclusive use of the white minority. However, only 13 percent of South Africa’s land, much of it in the hands of white farmers, is deemed suitable for crop production.
Following liberalization in the mid-1990s, productivity in the agricultural sector rose substantially. Though primary agriculture contributed only 2.6 percent to South Africa’s gross domestic product in 2005, it accounted for 8 percent of South Africa’s exports and employed 9 percent of the country’s formal employees. The government’s apparent willingness to sacrifice property rights in land on the altar of populism, however, could seriously undermine confidence in its commitment to predictable and sound public policies, especially to property rights generally.
In Zimbabwe, for example, forced expropriation of the white farmers led to the collapse of the country’s banking sector, which used farmland as collateral. Similarly, the manufacturing sector, which relied on processing agricultural goods, went into a tailspin. It is true agriculture was a far more important part of the Zimbabwean economy than is the case in South Africa, but as Professor Craig Richardson of Salem College argued in his book “The Collapse of Zimbabwe in the Wake of the 2000-2003 Land Reforms,” the violation of private property rights in one sector of the economy produced ripple effects throughout the economy. That could also happen in South Africa.
Yet the South African government is in a privileged position to address past injustices without compromising the country’s economic future. Upon coming to power, the African National Congress (ANC) government inherited immense wealth locked in the form of parastatals. Those state-owned companies were built, at great expense, by the apartheid government in its drive for economic self-sufficiency. Many of those industrial dinosaurs are badly managed and operate at a loss. Like in the days of apartheid, they continue to be used to provide sinecures to government supporters.
Privatization of state-owned companies, as first proposed by the Southern African Free Market Foundation in Johannesburg, would make the South African manufacturing sector more efficient and raise substantial revenue the government could use to compensate the victims of apartheid.
For example, the assets of the Electricity Supply Commission (ESKOM) and Transport Network (TRANSNET) were valued at $18 billion and $11.5 billion respectively in 2005 and their sale could net $842 per every black man, woman and child - including those born long after apartheid ended.
That would not be enough to fully compensate those harmed by apartheid. But the sale of other parastatals, such as the Southern Oil Exploration Corp. (SOEKOR), Phosphate Development Corp. (FOSKOR), South African Postal Service, telephone services provider (TELKOM), South African Broadcasting Corp. (SABC) and the armaments manufacturer (Denel) would enable the government to raise much more.
The South African government continues to insist land distribution is of crucial importance to black South Africans, but the evidence is lacking. Black South Africans, like their Zimbabwean cousins, rightly perceive life in the countryside as immensely difficult. Most do not aspire to be farmers.
According to the Center for Development and Enterprise in Johannesburg, 60 percent of all black South Africans wish to live in the towns and cities and work in the manufacturing and service sectors. That is partly why South Africa’s urban centers, home to 65 percent of the population in 2005, are expected to hold 73 percent of the country’s citizens by 2010. Moreover, those few South Africans who wish to continue living in the countryside could be given some of the land currently owned by the government. Surely at least some of those 60 million acres - a territory 8 times the size of Belgium - could be used for resettlement.
The South African government has the land and money it needs to at least partially address the injustices of the past. Then again, having a perpetually aggrieved population may be in the African National Congress’ interest. That way, the ANC can use the landownership issue in the elections and divert public attention from the government’s failure to fulfill many promises made during the last go-round.