Property & Wealth

Is the land reform dog barking up the wrong tree?

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Black South Africans still account for very little of the real ownership of both residential and commercial property in the country. Something is drastically wrong on this front.

A recent report by the Property Sector Charter Council revealed that, while South African Real Estate Investment Trusts (REIT’s), are valued at about R5.8 Trillion Rand, only 10% of these listed Investment Holdings have originated "around black people."

This racially skewed picture was further ‘coloured-in’ by Vuyiswa Muthekwane, CEO of the aspiring SA Institute of Black Property Practitioners (SAIBPP) who, in an interview with MoneyWeb, stressed that ownership of both commercial and private residential property still lacks meaningful black participation on scale.

The latest state of transformation report also highlights the skewed real estate ownership patterns, particularly in the commercial property sector. This is due in main to the applicable financial model which is highly geared toward the wealthy players.

Muthekwane argues that SAIBPP’s predicament is that they are not attracting new black entrants to the sector as transformation is not taking place at the top level where black ownership is in effect, stagnant.

This in turn impacts downstream and is also stifling job creation. Less than 10% of the commercial properties are black owned and, when you consider the control of residential estate agencies you find that only 3% of agencies are black owned.

Her conclusion is that transformation in the property sector has stalled and is quite blunt in pointing out that Developmental Finance Institutions (DFI's) like the Industrial Development Corporation (IDC) have failed to promote and underwrite black ownership. As a result, it is safe to say that, from the point of view of SAIBP, the main bar to progress within all corners of the property industry by the black population - is the lack of access to finance.

Problem lies deeper

However, at least part of the problem is probably deeper and more fundamental, than is generally realised.

There are structural and legal blockages preventing large portions of the black community of establishing individual ownership and title over the property they occupy – something that is probably, with the financial security that comes with it – their most important entry point to the formal economy.

On this front, a spate of violent protest in erstwhile apartheid townships in recent times by people waiting for formal ownership of homes they have been renting for many years from local authorities, is but one example. Both the rent they pay every month and improvements made to those properties is wasted money.

The painfully slow transfer of so-called reconstruction and development (RDP) houses to those it has been allocated to , effectively leave them financially speaking in pretty much the same situation as those in ‘council houses’ from apartheid times. 

If you turn your attention to rural South Africa, and the traditional areas in particular, non-less than the President of the land, Mr. Jacob Zuma, is an example of another structural problem. He could not personally finance the upgrades on his Nkandla residence, even if he wanted to because, lacking title to the land, he could not - in order to’pay back the money’- raise the financing of it through a bond!

Like literally millions of other South Africans residing, and often farming, in traditional or tribal areas, he cannot get legal title over the land where they reside and/or toil, and the security that comes with it. Ownership sits with the Government and control with the traditional leaders.

Agriculture’s success

Vuyiswa concludes that transformation in the property sector has stalled and that there are clearly structural problems that go beyond the various sector codes.

The authorities are simply enabling black property ownership and are not developing meaningful participation by black professional in the sector- whether it be commercial, industrial, or residential.

Agriculture on the other hand is full of success stories when it comes to the real-time transformation of a sector in which blacks can clearly participate and compete.

An example is the Moletele community in Hoedspruit, Limpopo which recently won a hard-fought victory for black communities seeking to reclaim land. It has become a model for wider racial co-operation.

It took a 10-year legal battle for the community to get back land from which they were evicted over a century ago. Hezekiel Nkosi, chairman of the Moletele Communal Property Association, which proceeded with the claim is grateful that the dignity of the community has been restored and that they can now look forward to a more prosperous future.

The project came close to failure after the 1 615 families took over the 70 000 ha of land in 2007. They lacked the necessary competencies and most of all, lacked the hard cash needed to underwrite large scale agriculture.

They advertised for people who could assist in running their massive enterprise, and in a breakthrough for race relations, white farmers answered their call. The upshot was they agreed to pay a percentage of the land's revenues over 20 years to established local farmers in return for the necessary expertise and support.

Following the deal the former landowners became the workers and the former labourers became the owners in a highly successful arrangement. The key to profitability being the access to existing knowledge, processing facilities, distribution networks and, working finance!

The Land and Agricultural Development Bank of South Africa, recently reported that in the year to March it had made R2billion available through its developmental arm. Black emerging farmers were the main beneficiaries, and 5 000 new jobs have been created despite the sector contracting by 7% last year.


It is clear that land reform policies and programmes, with a fixation on redistribution of land mass, are barking up the wrong tree.

The time has come to focus on real value add by way of a holistic approach effecting some important structural changes.

The comparison between the two clearly different scenarios for upcoming property professionals versus emerging farmers, probably illustrates that the Real Estate Sector and market requires the services of a specialised and dedicated state owned financial institution, like Land Bank in agriculture.

This will go a long way toward transforming a sector that requires widespread financial support to enable the development of black real estate owners, and professionals.

With the correct approach this is a sector with massive potential to make a real contribution to the economic upliftment of the majority of the population.

by Eve van Basten

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