Property & Wealth

Land issue South Africa’s Brexit or US election?

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In South Africa the latest political sloganeering around land ownership and distribution should be seen as a clear call for some drastic socio-economic changes.

The times certainly are a-changing when Bob Dylan, a 60s troubadour and pop poet, wins the Nobel prize for literature, when the UK voters turn their back on the world’s most mature and rich marketplace and the US voters bet on the competence and skills of a real estate magnate to run the government of the world’s largest economy for the next four years.

And closer to home, direct calls for change are also swirling in the air when the leader of parliament’s most defiant party warns “... that's why I say occupy the (vacant) land because they (the government) have failed to give you the land ...The country is still (22 years later) in the hands of colonial masters. The country is still in the hands of white people ...”

Even a senior cabinet minister, Home Affair’s Malusi Gigaba, in defending President Jacob Zuma, went back the end of the Anglo-Boer War (1899-1902) to accuse the opposition of defending whites’ “monopoly of political power and property ownership …”

Change upon us

The era of change is also upon us all, telling us to take urgent heed of the seeds of widespread discontent and to put processes in place to deal with and resolve these direct calls for urgent change in South Africa’s skewed home ownership market.

Also read: Soweto man’s house sold behind his back for R100

                   SA society in crisis – not only government to blame

On this southern tip of Africa, we must never forget that the land issue is as emotive as Brexit is in the UK and as crucial as the American electorate’s clear mandate for massive change ... they need a wake-up call to realise how they failed to heed the call for change –  by several prominent black American leaders – by voting for Donald Trump!

Role for affordable housing market

With that in mind it is not difficult to find the hook on which to hang one’s jacket. According to local property developer Calgro M3, listed on the JSE, the state is sitting with a housing backlog of about 2.5 million homes of which two million are rental units.

A project of that magnitude will warrant the government teaming up with players in the housing sector to get going with catch-up. This level of infrastructure spend should lead to several public-private partnerships and should give preference to B-BBEE qualifying enterprises.

The challenge will then be to convince the developers, contractors and banks to place their bets on the future of the high-demand affordable housing market. This the government can initiate as a stimulus to local, regional and the national economies, which are presently struggling with minimal growth.

Along with Julius Malema we can adopt such an initiative as the new frontier of land reform.

Agriculture

And to make it a success, we must first consider what caused land reform in agriculture to fail, generally speaking.

According to the Financial and Fiscal Commission, the government has pumped over R60bn into agricultural land reform since 1994. And here’s the thing, notwithstanding this massive investment, it has failed to stimulate real economic growth in the relevant rural areas.

The Commission Report indicates that the potential of land reform as a mechanism for, in that instance, agricultural development and job creation, has largely gone unrealised. Their survey in the Eastern Cape, KZN and Limpopo found that most land reform farms showed little or no agricultural activity.

Even the on-farm intended beneficiaries earn little or no income and most of these  beneficiaries still seek work on surrounding commercial farms instead of actively farming their own land.

And even where the land reform farms are active, they usually operate below their full commercial potential and have a bias towards subsistence agriculture. More tellingly, across the sampled sites, it was found that crop production had decreased by nearly 80% since conversion to land reform units.

What, may you ask, has agricultural land reform got to do with tackling the primarily urban housing backlog?

The answer lies in the survey’s findings and recommendations to explain and overcome the overall poor performance of the agricultural land reform programmes.

Main lessons learned

  • Land reform farmers lacked ready access to credit funding mechanisms and finance, which often resulted in underinvestment;
  • Poorly timed and inadequate post-development support by government agencies and departments often led to neglect and deterioration;  
  • There must be a single body responsible for the management of the project, as one can otherwise expect funding overlaps and a lack of accountability; and
  • The state needs to enthuse the private lending institutions to issue loans to tenants who are happy to bind themselves to investing in the land as their tenure is guaranteed and secure.

This then is the crucial understanding: By empowering and equipping the intended beneficiaries to take their own initiatives in building wealth, the involvement of the state should become more supportive in nature and a whole lot less costly.

by Eve van Basten

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