Alarm over new proposal to ‘nationalise’ land in South Africa

The proposal to amend South Africa’s Constitution to allow for land expropriation without compensation has stalled as the ruling African National Congress has failed to come to an agreement with the opposition EFF on the exact changes that need to be made.

The ANC requires support from the EFF to change the Constitution. However, the EFF is pushing for more radical changes – including full state custodianship, which would effectively amount to nationalisation.

The main opposition, the Democratic Alliance and other smaller parties oppose any constitutional changes, which require the backing of two-thirds of lawmakers – a majority the ruling ANC currently lacks.

In an effort to find some common ground, the ANC has re-tabled some of its proposals, including that state custodianship be applicable to ‘certain land’ within the context of expropriation, BusinessDay reports.

While the EFF has continued to reject the proposals in favour of full nationalisation, the shift from the ANC has alarmed critics who warned that custodianship would be highly destructive for property rights in South Africa.

“In its blind rush to ensure the passing of the amendment at all costs, the ANC has thrown out all reason and is now openly pandering to the EFF,” the Democratic Alliance said in a statement on Sunday (20 June).

“State custodianship is nothing but just another byword for nationalisation of land under the administrative control of the ANC – a party that has proved itself time and again that it destroys everything that it purports to administer.”

The party said that almost every current example of state custodianship of land shows that it ruins agricultural productivity and keeps people trapped in poverty.

“Even with state ownership of land since its independence in 1975, the Mozambican economy has broadly been ineffective and inefficient at reducing poverty and providing a broader social and economic basis for development.”

“Every bit of evidence demonstrates that state custodianship does not work, yet the ANC is barrelling on, following a ruinous ideology rather than evidence.”

Uncertainty causing damage

The issue of land expropriation remains a controversial topic in South Africa, and the Banking Association of South Africa (Basa) has warned that the policy could pose a significant risk to the banking sector.

In a submission to parliament in March, the association said that a marked decrease in the value of land-based property, caused by either an amendment to legislation, and the resultant reduced appetite from property buyers, could destabilise the banking sector.

The continued uncertainty around land expropriation has also caused its own problems, says finance minister Tito Mboweni.

Mboweni said that the National Treasury has not conducted formal research on the impacts of land expropriation without compensation or undertaken a risk assessment of the impact on the economy.

“However, to the extent that land expropriation without compensation were to generate policy uncertainty, it would have harmful effects on the economy,” he said.

“Several studies have looked at the impact of policy uncertainty on the South African economy. For example, policy uncertainty diminishes the responsiveness of exports to changes in the real exchange rate, as well as introducing harmful short- and long-run level effects on export performance.”

Mboweni cited other research which found that unanticipated increases in uncertainty are linked to declines in investment, private sector employment, output and industrial production, while resulting in an inflationary shock.

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