LETTER: Expropriation’s true intent - Business Day

16 March 2018 - Your report mischaracterises President Cyril Ramaphosa’s plan for property rights (Ratings agencies are happy with Nene, March 14). You write of "his plan to change the Constitution to allow white-owned property to be taken without payment for redistribution to landless blacks". This is not so.

Section 25 of the Constitution relates to all property — not just land. Land is simply the thin end of a political wedge, which can be used to dilute property rights more broadly. Nor is it the case that only "white-owned property" will be taken. Before backtracking this weekend, the ruling party’s ideological allies in the assault on property rights, the EFF, made it quite clear that black people would likewise lose their property rights. This will inevitably be the case, as the Constitution cannot easily sustain a clause limiting property rights to blacks only.

Nor is it the case that expropriated property will be handed to "landless blacks". Property will be held by the state – and used by it as a patronage tool. What is happening here is not a sincere attempt at land reform. Rather, the ANC wants to change the Constitution so that the state can in future take custodianship of property and/or embark on regulatory expropriations without having to pay compensation.

Regulatory expropriations occur where the state itself does not take ownership, but its regulations deprive existing owners of many of the normal powers and benefits of ownership. Mooted price and export controls on "designated" minerals under the 2013 mining bill provide an example. Yet in our experience very few investors have any awareness of the concept or the potential for its broad application across the economy.

Once the Constitution has been amended to exclude compensation for expropriation, the government will have free rein to take custodianship of all land, as the EFF demands. But it could even more damagingly embark on a host of regulatory expropriations – not only under the mining bill, but also by requiring 51% BEE ownership for most firms, introducing 51% "indigenisation" rules for all foreign-owned enterprises operating here (not only those in the security industry), and subjecting private hospitals to comprehensive price controls under the NHI scheme. Giving the state these powers over the private sector is, in our judgment, the true intent behind the demand for expropriation without compensation.

Where Ramaphosa stands on property rights remains unclear. A generous interpretation is that he feels he can manage the risks around the motion his MPs have endorsed. But a perhaps more realistic interpretation is that if he could not even prevent the passing of the motion, then what chance does he have to control the manner in which his colleagues will employ the power that will, in time, flow from it?

Frans Cronje CEO
Institute of Race Relations