A Gordian knot

President Cyril Ramaphosa. Picture: Nhlanhla Phillips/African News Agency (ANA)

Why is it that ideology blinds otherwise perfectly rational people to reality?

President Cyril Ramaphosa has been fighting a rearguard action since the last minute adoption at the ANC’s 54th elective conference in December last year, of the resolution to proceed with expropriation of land without compensation, but his most recent statement in this regard makes it clear that he has given up the fight.

Mr Ramaphosa is a businessman, which leads us to believe that he understands the economic theory which underpins the engine which drives economic growth, the economic growth which we so desperately need in this country, to overcome the triple evils of unemployment, poverty and inequality which have bedevilled our society for eons.

It follows therefore, that he understands the connection between policy certainty, foreign and domestic fixed investment, and job creation through economic growth. He has demonstrated this understanding by being at pains to point out that in pursuing expropriation without compensation, the ANC is mindful that it must not negatively impact food production will disrupt economic growth.

One would also assume therefore, he understands that the correlation between land redistribution and economic prosperity is tenuous at best, but strangely enough, this appears to not be the case. Or perhaps he does understand this assertion, but finds it politically expedient to pretend that he does not. He is on public record, on numerous platforms in the recent past, soulfully extolling the causal fallacy that the possession of land automatically translates into economic prosperity.

But that aside, there’s also the matter of what happens between the expropriation of land from one and the giving of that land to another. Once more, on political platforms, a simplistic fallacy is propagated, that these are two contiguous steps, when nothing could be further from the truth.

Although the last two decades of land reform have resulted in a shockingly low number of settled claims, one thing is clear: the criteria used for settling each land claim are explicit. A critical component of the land restitution process has been the verification that a claimant – or their ancestors – had been dispossessed in the past.

If we assume that the same process will be followed once the envisaged change to the constitution is made to facilitate expropriation without compensation, considering the enormous backlog at the various land claims offices around the country, where does the perception come from, that the restitution process will proceed any more efficiently once the impediment of establishing compensation is no longer required?

But is it safe to assume that the same process will be followed particularly considering recent statements by the ANC to the effect that it has already identified a number of properties which it plans to expropriate. This raises the tantalising question of whether or not we are about to embark on the same road followed by Zimbabwe in 2000, when then President Robert Mugabe, if not actively encouraged violent land grabs of white-owned farms, at the very least turned a blind eye. Almost two decades later, Zimbabwe remains an economic basket case, and the incoming Zanu-PF government of President Emmerson Mnangagwa has its work cut out.

But the niceties of due process aside, what about land that is currently bonded, which is the case with probably the greater proportion of land which is likely to be expropriated without compensation? Once the land is expropriated, what happens to the debt owed to the financial institution?

The ideologues will tell you that since expropriation without compensation is now a matter of law, there is no need for the debt to be repaid by the government if it chooses to expropriate that land. Which begs the question: will the former landowner be held liable for the outstanding balance on the mortgage bond, or will the financial institution be expected to bear the loss?

Inasmuch as an amendment to the constitution to provide for expropriation without compensation will need to pass constitutional muster, so too must any legal provision which deals with the unfortunate reality of mortgage debt associated with an expropriated property. Whether or not a legal provision is formulated which makes the outstanding mortgage debt the financial institution’s problem, is beside the point. Expecting the financial sector to absorb a loss of such magnitude – estimated to be over R1 trillion in extent – is beyond ridiculous, as it will cripple the very economy which President Ramaphosa knows he must rely on to ensure the oft promised better life for all.

And then there is the matter of sufficiency of land. As the American economist, Professor Thomas Sowell, puts it, “The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

Even if every vestige of land currently owned by white people – and the anecdotal evidence emerging from the constitutional review committee hearings on expropriation of land without compensation which have taken place nationwide makes it clear that all white-owned land must be expropriated – agricultural and urban, it will be woefully inadequate to cater for the perceived demand for land.

But let’s assume that the planned amendments to the constitution pass muster, and the redistribution process proceeds apace. Whereas much expropriated land will have been developed, probably the greater proportion will be undeveloped land. This begs the question: from whence will come the required development capital?

Financial institutions will likely be gun-shy when it comes to advancing loans to neophyte landowners for the development of said land, unless they satisfy lending requirements, and since the overwhelming majority of recipients of expropriated land are likely to be unemployed, their chances of being granted a mortgage bond are zero.

Clearly, expropriation without compensation is no silver bullet.