Property & Wealth

Dual economy – the unfinished business of 1994

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South Africa’s transition to a constitutional democracy was a sociopolitical victory, but on the economic front there remains important unfinished business.

The success of the 1994 transition to a constitutional democracy was a marvellous sociopolitical victory which, deservedly, catapulted Nelson Mandela into the presidency.

Sadly, however, in its structure the economic landscape remained largely unchanged and some policy initiatives and the lack of addressing some structural problems have rather deepened or broadened than softened inequalities on the socio-economic front.

This has happened to such an extent that celebrated futurist and commentator Clem Sunter on several occasions has strongly recommended that the leadership of the country sit down to thrash out the framework within which to negotiate an agenda for the, in his view, long overdue economic CODESA.

What has happened, is that South Africa presently, some 21 years after the transition to democracy, continues to operate in a dual economy. First and Third World economic zones are running parallel to and often across the road from each other.

Nowhere is the economic mismatch of this troubled reality more evident than in the ownership of land and immovable property.

The property sector of the advanced economy is vibrant and and presently soaring to record heights, rewarding the private ownership of land. It is managed within a sophisticated system of property ownership where individual title deeds are recorded in the relevant Deeds Registry.

At the same time, some 20 million South Africans are living in mostly rural areas under the authority of traditional kings and leaders, recognized in our constitution. Among other things, these leaders are regarded as the custodians of the land belonging to their tribes and individuals are unable to register individual titles over land allocated to them to live on or to work.

It keeps in place a semi-feudal system characterised by elements of nepotism and a root hierarchy of entitlement. These mainly rural tracts of land are subject to customary law and managed by the traditional leaders, who by their office carry the local political clout.

The problem remains that, to participate in this First World property market one must be able to follow the rules, which are dictated by many different pieces of legislation, regulations issued by the relevant government departments and the precedents set by the courts.

For instance, unless you have cash for the full purchase price, together with costs of transfer, you will most likely be reliant on a mortgage loan, which will require strict adherence to the tough criteria set by the banks and mortgage lenders.

As a result of this complex and highly regulated environment, a large percentage of the country’s population are, besides the arrangements under traditional land ownership, simply excluded from participating, due to a lack of means.

For instance, those who are unemployed are effectively disbarred from participating as they simply are not able to meet those same stringent lending requirements.

There is an ongoing debate about the actual nature of the ownership of communal land as, under apartheid, the homelands were transferred to the state. Much has been done since 1994 to redress the injustices perpetrated by the colonial rulers and roughly 50 years of apartheid.

Yet, while much of the dispossessed land has been restored to their rightful owners, most of the land of the former homelands is still registered in the Deeds Office in the name of the government as representatives of the people who live on it.

The upshot is that the holders of the homeland property rights are not able to freely dispose of their prime asset. As a result, and understandably so, these same property right holders are demanding that the government provide them with housing when they migrate to the urban areas and dormitories of the First World economy in search of work.  

In this regard the way in which the so-called Black Economic Empowerment policy, with its emphasis on equity shares for the ‘previously disadvantaged’, has been structured, proved to be counterproductive.

In a recent article on this site it was pointed out that if only 10% of what was spent on equity deals by the JSE top 100 and of the deals Standard Bank facilitated went towards direct socio-economic projects, it would have meant an injection on that front of R31.8 billion.

“Just imagine how many ordinary working people at the bottom end of the scale could have been properly housed and/or helped to acquire home ownership for the first time, putting them on the first step of economic upward mobility (into the First World economy”), we wrote.

In a statement last week the business rights watchdog, AfriBusiness, also warned that the latest version of BEE codes “could well be the last nail in the coffin for the South African economy”.

The time has come for the unfinished business of the 1994 settlement to be addressed by the leadership of the land from all its political, business and civil society formations.

                                                                                                                                                                                   by Eve van Basten

(Eve van Basten is the pseudonym of a former lawyer who, after spending some time in the publishing world, is now involved in the property market.)

Also read: South African BEE policy a massive flop

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