Land reform is an absolute necessity
Land reform in South Africa is an absolute necessity given the unequal distribution of ownership patterns in South Africa. However, it is an extremely difficult issue to resolve and is proving to be a major headache for the government.
The ANC has dragged their heels since 1994 with slow official processes and poor co-operation between departments, resulting in very little land redistribution to date. This has been frustrating for the many claimants and is being exacerbated by the very weak general service delivery and low economic growth over the last 10 years.
The ANC has made little headway to date
Land reform has always been an ANC policy priority but when the constitution was drafted in the early 90s, agreements could not be reached resulting in intentionally vague wording in the draft. This has contributed to the slow process.
The ANC government started an ambitious land reform programme in 1994 but it was slow to materialise and by 1999, less than 1% of private farm land had been transferred under pilot schemes aimed at funding groups of people to enable commercial operations.
From 1999 to 2009 (the Mbeki era) the pace accelerated, but the official processes continued to be slow and little material traction was gathered. Most claims were settled in urban areas.
From 2009, land reform was perceived to be in deep trouble and little subsequent progress has been made. At the December 2017 ANC conference, the ANC adopted land reform without compensation as a resolution. But this will be in the ambit of not affecting food security or economic growth.
Changing the Constitution
In February, the National Assembly passed a motion to review the constitution for the expropriation of land without compensation. The review committee has until end of August to report its findings and make a recommendation to parliament.
To change the constitution, a two-thirds majority is needed, and this will require support from the EFF. However, the two parties have a very different view on the policy, with the EFF being far more radical and unlikely to support a more moderate amendment.
Currently, an in-depth audit of all government owned land is underway, which may comprise +50% of the country. Redistributing government land may be a far more feasible route and may have more broad-based support.
Poor communication and political rhetoric
The subject of land reform has been communicated poorly by the ANC. This is partly due to the ANC using the subject as political leverage and hence manipulating South Africans to further their own political agenda.
Given the ANC’s fragile structure, land reform is a subject that needs to be treated very delicately as it has major ramifications if not given the priority as demanded by the disenfranchised.
Cyril Ramphosa is going through a delicate exercise of restructuring the ANC and he is very aware of the enormity and sensitivity of Land Reform. Hence, he has different factions to please as he addresses this issue in a balancing act of politics.
Land reform is a “pawn” that will be played until the election in May 2019 to suit the ANC and Ramaphosa’s personal standing within the ANC. This means pandering to ANC supporters and potential supporters to appease their demands.
The reality is Mr Ramaphosa knows land reform must take place, but not in a form that will harm the economy. He has this agreement from the ANC and therefore it is highly unlikely private land will be taken or redistributed without compensation.
Conclusion – Investors are overreacting
As this is a very sensitive subject and is being dramatized in the media, investors believe the worst for the country. We believe this is an overreaction, and If Ramaphosa remains as ANC president, it is highly unlikely private land will be redistributed without compensation.
Kevin Lings at Stanlib says, “We believe the discussion within the ANC about Section 25 of the Constitution to allow for expropriation without compensation is unlikely to result in any rush to change the Constitution. The Constitution already allows for expropriation at fair compensation, which the courts have decided is a market-related price. The ANC is likely to seek a more precise definition of that price. What is not being considered is indiscriminate expropriation without compensation or that land ownership should revert to the state.”
Land reform in South Africa is an imperative. However, the bigger risk is how to implement it responsibly, which remains a problem for the ANC. Major human and financial resources are needed to be successful. We believe Mr Ramaphosa understands this.