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Land expropriation – here’s what’s happening next
Firstly – I need to say that government has now established a committee that needs to investigate the changes required in our constitution and how these should be made.
This committee will report back by March 2020.
So – far from expropriation without compensation happening tomorrow – the uncertainty of how it will work precisely will fester for at least the next 8 months.
Under the present system the constitution only allows for just and equitable compensation for handing land to dispossessed communities. This some believe would allow for “zero payments in certain circumstances if courts deemed that just.” Researchers have investigated other issues that restricted handing land back to communities which included “abuses by traditional leaders who have influence over title to land in rural areas”, corruption and a lack of money.
The panel also called for an audit of land ownership and wants government to look at unused state land saying that information of who owns what land in South Africa is incomplete 25 years into democratic rule.
So – before any expropriation can even happen there’s a lot of groundwork that will be done first.
To say the very least – even amidst calls for speedy expropriation – government is at least taking time to work things through and not respond over hastily.
What will happen once expropriation is legalised?
Now there’s a lot of fearmongering – saying that government is coming for our property, for our business for all our assets.
And while there are many indications that these things are risks – government policy isn’t to target these things (yet) anyways.
In fact, the constitutional review committee’s report on expropriation has highlighted the ‘Targets’ of expropriation.
The ANC initially spoke of several expropriation targets. In the latest report not, much has changed. So at least we know what will be the ‘initial’ expropriation targets:
o Abandoned Land
o Hopelessly indebted land
o Land held purely for speculative purposes
o Unutilised state-owned land
o Land obtained through criminal activity
o Land occupied by labour tenants
o Informal settlement areas
o Inner city buildings with absentee landlords
So, all in all – these aren’t shocking, scary or worrisome targets. And it won’t keep me up at night.
In fact – expropriating land that was obtained through criminal activity is completely fair.
Things such as abandoned land, unutilised state land and land with absentee landlords are also things that I can accept.
Questionable items are land on which informal settlements are (in the case where the settlements were illegally formed on private land) and expropriation of land held for speculation.
Expropriation of such property, in my opinion, speaks of a complete disregard of property rights.
Any form of expropriation without compensation for land that is legitimately owned, paid for and serviced amounts to the erosion of property rights and should be morally and ethically wrong.
Opposition from key ANC support base could pose a problem
One of the recommendations of the constitutional review committee is for the restructuring or expropriation and redistribution of land that falls within the Ingonyama Trust. The Ingonyama trust holds around 2.8 million hectares of land on behalf of the Zulu nation.
Ramaphosa has previously backed away from suggestions that the trust’s land would be affected and King Goodwill Zwelithini has warned of clashes if it should happen.
Considering that KZN, and the Zulu nation, has been an ANC stronghold – this recommendation which hasn’t gone down well with King Zwelithini could pose a massive problem for the ANC…
I expect this could cause further delays in the roll-out process of new legislation. King Zwelithini has already joined civil rights groups in lobbying against this change.
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Further recommendations from the committee also aren’t sitting well
The committee has also recommended other avenues other than expropriation.
These suggestions are:
• A proposed cap on the total land an individual or company can own – this is a completely ridiculous suggestion. SA doesn’t have a shortage of land. There are literally thousands of farms and properties for sale. We have a shortage of funds – people don’t have money to afford land and this is because we have an unemployment rate of nearly 30%.
• Possible land taxes to disincentivise people form holding land unproductively – I cannot fault this. Residential estates often have ‘penalty levies’ on people holding land without building houses on them. In the same way I could find it acceptable if a higher tax is levied on land that isn’t being used at all.
• Appointing a land rights protector to combat corruption related to land reform – I’m sure we can all agree this is a positive!
• Encouraging churches, mines and other entities to give up land voluntarily;
• Taking land reform out of the current ministry and putting it within the presidency to better centralise the process – I am not in favour of this. Imagine the effect this would’ve had under Zuma… Simply put – SA requires more accountability by politicians. Not less.
With all of this said I will sum it up as follows:
• Expropriation without compensation is likely still 2 years away from realising in any form.
• The policy creates uncertainty affecting investment decisions – and unfortunately this is here to stay for some time longer. If you have a big risk appetite this could create opportunities especially in the bearish property sector.
• A big worry for me is impatience at ground level causing land grabs and violence – and it doesn’t seem like our police have the will or ability to do much about civil unrest…
• ALL South African citizens need to SPEAK UP. We all have a responsibility to hold our government accountable. Being members of civil rights organisations – or even political parties allow us to do this.
Whilst there are worrying trends – I don’t believe SA’s going the way Zimbabwe did. The property sector specifically is taking a lot of strain due to this uncertainty – and I believe in the next six months there’ll be great bargains to pick up for astute investors.
Here’s to unleashing real value,
Editor, Red Hot Penny Shares