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SPEECH: THE CENTRALITY OF PROPERTY RIGHTS FOR THE ECONOMY, FOR AGRICULTURE AND FOR THE NATIONAL ACCORD

FWDK 4 JULY 2018

We have convened this Conference at a critical time in the history of our young democracy.  

The ANC and Parliament have adopted resolutions calling for expropriation without compensation (EWC).  By so doing they have posed a fundamental threat to investment, economic growth, agriculture, food security and to the national accord on which our new nonracial democracy was founded.

The ANC has, it is true, qualified its support for EWC with the caveat that it should not “undermine future investment in the economy, or damage agricultural production and food security…or cause harm to other sectors of the economy”.

But this is a contradiction in terms.

It has been shown time and again that property rights are essential for sustained economic and social development.  The top 20% of countries that best respect property rights have average per capita incomes of more than $50 000 - compared with less than $7 500 for the bottom 20%.

There will always be much higher levels of investment in countries with secure property rights than in countries where property can be arbitrarily expropriated or nationalised.  This is not just a theoretical question - it is a demonstrable fact:  

  • A hugely disproportionate share of total agricultural production in the Soviet Union came from tiny plots on which people were allowed to grow their own produce for the market;
  • Satellite images of the Korean peninsula at night show the enormous difference in development between the free-market property-owning south and the communist north;
  • The dilution of property rights in Zimbabwe and Venezuela - countries that are viewed as role models by the EFF - has led to economic collapse and misery;
  • On the other hand, Deng Xiao-Peng’s economic reforms in China - that included recognition of property rights - have resulted in the greatest enrichment of the largest number of people in the shortest period in human history.In 1980 GDP per capita in China was less than $350 - now it exceeds $15 000.   

Expropriation without compensation would inevitably further erode international confidence in South Africa as an investment destination - particularly in the wake of the government’s inexplicable decision three years ago to terminate South Africa’s bilateral investment treaties with key EU countries.   

There is also a disturbing possibility that if the principle of EWC is conceded with respect to agricultural land, it might in future be extended to other property, including residential homes, intellectual property and shares.  

Section 25(4)(b) of the Constitution explicitly states that “property is not limited to land”.  This becomes all the more ominous against the backdrop of the continuing commitment of the ANC’s Alliance partners, the SACP and COSATU, to communism - and the ANC’s own commitment to “Radical Economic Transformation”. Expropriation without compensation might be needed to achieve the “fundamental change in the …. patterns of ownership, management and control of the economy...” that is the core goal of Radical Economic Transformation.  

Expropriation without compensation would also have a devastating impact on agriculture and food security.

South Africa is not a rich agricultural country.  Only 12% of its territory is suitable for arable farming.  Grazing can be pursued in another 69% of the country.  Agriculture contributes only 2.5% of GDP - which is less than half the contribution of the automobile industry.  According to the World Wide Fund for Nature (WWF) just 3% of South Africa’s farmers produce 95% of the country’s food. 

Uncertainty regarding land reform is already having a very negative impact on agriculture.  Farmers require certainty of property ownership to raise loans to plant their crops.  Banks, already owed R170 billion by farmers, will be reluctant to extend further credit if there is no certainty regarding the collateral value of land.  Because of the high level of indebtedness, banks might be the main victims of EWC - with very negative implications for the entire financial system.

The average age of farmers is now over 60.  Since 1994 the number of commercial farms has fallen by more than half to fewer than 35 000.   20 000 farms are now for sale, double the number in 2015. Many farmers are leaving - or want to leave - the land because of the uncertainty caused by land reform and because of the terrible toll of farm murders. Some of our best young farmers have gone to farm in other African countries - or overseas - where their skills are appreciated.  The real challenge will be to retain farmers - of any race - with the proven ability to produce food.

Finally, expropriation without compensation would be a serious blow to the 1994 constitutional accord. The property clause was one of the most tightly negotiated compromises in the final constitution. Non-ANC parties conceded the principle of expropriation in the national interest - which included land reform.  In return, the ANC accepted that just and equitable compensation would have to be paid for expropriated property. 

Speech by former President FW de Klerk 
4 July 2018

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