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Expropriation without compensation is unnecessary, and will lead to tears

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

There are numerous reasons why expropriation without compensation is neither justified, nor likely to lead to good outcomes for ordinary South Africans, black and white. Amending the Constitution will set a perilous precedent and grant government a monstrous new power.

Before 1994, South Africa did not have a Bill of Rights. The Progressive Federal Party proposed adding such a bill to the Constitution of 1983 that was adopted under former president PW Botha. The proposed Bill of Rights was designed not to protect us from each other, but to protect our individual freedoms from state abuse.

It included provisions to guarantee all citizens freedom from discrimination on the ground of race, colour, sex or creed, freedom of conscience and religion, freedom of thought, belief, opinion and expression, including freedom of the press, freedom of association, peaceful assembly and movement, and freedom to pursue the gaining of a livelihood. It would also guarantee equality before the law, and freedom from deprivation of life, liberty, security and property, except in accordance with the principles of fundamental justice.

The motion was swiftly defeated, largely because it would require scrapping repressive security measures and apartheid legislation. The government of the time argued that South Africa was made up of racial and ethnic communities, not individuals, so individual rights were a nonsense.

The abuses of apartheid could not have happened if citizens had been protected by a Bill of Rights. Without the constraints of a Bill of Rights, the apartheid government was able to commit many evils, including sweeping up black people to move them to townships and “homelands”, to free up residential and agricultural land for white people. If black people had had guaranteed property rights, Group Areas and Bantustans could not have happened.

An absence of property rights was also a major reason why township properties and rural land under black occupation were rarely developed. What sense is there in investing in property upgrades if the property doesn’t belong to you, and worse, the state is able to steal it at will? Even today, compare the state of rented properties to owned properties: owners have far more incentive to maintain and improve their properties than tenants do.

More broadly speaking, society needs production in order to prosper and thrive, and production requires capital investments. But what sense is there in investing, if there is no guarantee that capital will not be expropriated or stolen? Why produce more than you need to survive, if that surplus can be taken away from you with impunity?

The emergence of secure property rights laid the foundation for the rapid rise in prosperity – and population – that the world has experienced since the 18th century. Economists now widely view property rights and the institutions that secure them as vital to the development of a stable, sustainable, and prosperous economy.

For this reason, undermining property rights is a very dangerous thing to do. At present, expropriation is limited to laws of general application, and subject to fair market compensation. When expropriation can be conducted arbitrarily, and without compensation, the entire edifice of property rights collapses, and with it, the economy that is built on it.

Of course, politicians will tell you that they only intend to use their new free expropriation power for good. They will use it with restraint, in cases where just land restitution claims cannot otherwise be settled. But power corrupts. This is not a power that should be entrusted to any government, under any circumstances, because it can and will be abused.

When granting government a particular power, you should always consider whether you would be happy for your political opponents to have and use this power. Would you want a white racist to be able to expropriate property without compensation? We have historical examples of what happened under the likes of John Vorster and PW Botha. Would you want a radical communist to be able to expropriate property without compensation? Well, we have quite a few of those in Cabinet right now, and quite a few more in Parliament.

Once the power exists, why would it be limited to disputed land claims? Why not – as Julius Malema proposes – use it to confiscate all land, agricultural, industrial, commercial and residential, to vest it in government and lease it back to citizens to use according to government diktat?

Why not extend it to financial property, to mete out so-called “justice” to those who make so-called “excess profits”? Why not grant this power to the police, to compel co-operation in criminal cases? Why not use it to reward Cabinet ministers and other cadres for their loyalty? Gutting the constitutional property rights clause is the grease that makes this slope so slippery.

There certainly is a case for restorative justice in land cases. The apartheid government did move people off their land, and those people ought to be compensated, either monetarily, or by having the land returned, if possible. Most landowners will gladly acknowledge this fact.

The majority of the 80,000 claims made during the original land claims window were resolved, with claimants either being settled on the land or being paid compensation. The claims that were not settled were for the most part held up by lack of administrative capacity, not by any fundamental inability to reach settlements.

Parliament is still reconsidering a bill that would reopen land claims, after the Constitutional Court ruled that a 2014 law to that effect had to be overturned for lack of public consultation. Inasmuch as there are many people who have not lodged claims over land of which they were dispossessed during the apartheid years, there’s nothing wrong with reopening land claims, either.

All these claim settlements were completed within the confines of the existing Bill of Rights, which is to say, without resorting to expropriation without compensation. In fact, the Bill of Rights explicitly grants those who were dispossessed after the 1913 Land Act the right to restitution or redress. So there is no legitimate need for expropriation without compensation, and no need to take rights away from the people of South Africa.

The people agitating for expropriation without compensation, which now includes His Excellency the President, Cyril Ramaphosa, flatly ignore a lot of other facts about land reform.

One is that there are only 181,000 private owners of farms and agricultural holdings in South Africa. Of those, almost half are not white. Secure property rights matter a great deal to that half, too. When it comes to erven (mostly residential properties), whites own almost half by area, but make up only 26% of the total number of individual property owners. There are 4.4-million non-white landowners to whom property rights matter just as much as to the 1.5-million white landowners.

As Mosiuoa Lekota pointed out in Parliament, who is “our people”? The Constitution does not mention “our people”. It says that South Africa belongs to all who live in it, “united in our diversity”. The instigators behind expropriation without compensation are quite explicitly sowing racial division in our country. They’re not even subtle about it. They ought to realise, however, that expropriation without compensation also threatens millions of black landowners.

In our cities and towns, a great many people currently live on land to which they have no title, because the land is owned by the government. Millions of people can be turned into landowners at the stroke of a pen, if government were prepared to cede them the land on which they have lived all their lives. These people don’t want to farm. They want to live in the city, where there is work. If they could own their land, they would have incentives to improve their properties, to sell them to upgrade to a bigger, better house, or to raise capital to start businesses of their own.

As long as they don’t own their land, they have no way to pull themselves out of poverty. The same is true for RDP housing, which is owned under such restrictive conditions – no right to sell, for example – that they cannot be called capital assets at all. But land owned or restricted by national, provincial or local government is hardly ever up for discussion.

In many of our rural areas, land ownership is “customary”, which means it is owned by chiefs and kings, supposedly on behalf of the community. This feudal system nakedly exploits peasants to work the land, and leaves the distribution of any benefits – such as royalties from mining – up to the generosity of the traditional leaders. If the people living in such conditions were to be given individual ownership of the land, we could create millions of landowners at the stroke of a pen. But land owned by traditional leaders is hardly ever up for discussion.

The title of land expropriated with compensation is often not even transferred to the supposed new owners. It goes to community trusts, or tribal councils, or the state itself, to be controlled “on behalf of the people”. There’s not much effort to establish individual private property rights for land claimants.

So, we do have a mechanism to resolve claims against privately owned land. We do not, however, have a mechanism to claim against the government, or against traditional leaders, which could dramatically accelerate land reform.

The rights of individuals – be they black or white – are not the reason behind calls for expropriation. The reason is also not that a significant number of South Africans actually want farmland, because very few actually do. The vast majority of those dispossessed during apartheid would rather have a cash settlement. They want jobs in the city, not lives toiling away as hard-scrabble farmers. Farming is hard.

There’s a reason why most land transferred to new owners has become unprofitable. It has nothing to do with the race of either the former or present owners, of course. It has to do with the fact that farming is a tough and precarious business. It is an extremely difficult and risky occupation. An experienced farmer is more likely to run such a business successfully than someone who has never farmed before. If you gave me a farm, I’d run it into the ground before the first harvest.

It’s not about land restitution, which has nominally been fairly successful, and is expressly permitted – and even encouraged – by the Bill of Rights. No new tools are needed to settle new land claims.

There’s also no appreciable “land hunger”. A developing country should aspire to develop beyond an agrarian society, into commerce and industry.

So what is expropriation without compensation really about?

Well, it is great if you want to start a race war. Recent rhetoric on both sides of the political spectrum makes it clear that racial hatred is not dead. On one extreme, the desire for violent revenge instead of peaceful reconciliation is still very much alive. On the other, thousands of farmers with guns, military training and nothing left to lose is a disaster waiting to happen. Expropriation without compensation would set a spark to that tinder.

It’s also great if you’re a socialist who one day hopes to see all property vested in the state, to be used according to the central plans of politburos and bureaucrats. The record of such programmes is dismal, of course. It has never worked, in a century of trying.

Sure, sure, it never was Real Socialism™, but then, real socialism would require that everyone be perfectly altruistic. People aren’t, which is why capitalism has been so extraordinarily successful in lifting people out of poverty and improving their quality of life. When you hope to improve an economy, it helps to understand human nature and use it to your advantage, rather than trying to suppress it by force.

Expropriation without compensation would make a mockery of the claim that the country hopes to attract investors, both foreign and domestic. What fool would invest if they have no guarantee that their property rights are secure? What bank would lend them the money to invest, if they have no guarantee that their collateral is secure? And without property investors, where would South Africans found businesses and employ people?

Do the majority of South Africans, who aren’t in the news shouting inflammatory rhetoric, really want to keep sliding down the rankings of free and prosperous countries in pursuit of an ideal that has only ever led to misery and starvation? I don’t believe so.

Curtailing the hard-won property rights of South Africa’s citizens would also concede a major point to the oppressive regimes of our past: basic human rights are an obstacle to total political power. And that is what socialists are really after.

Amending the Bill of Rights is a Pandora’s jar we really do not want to open. DM


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