The hard choice ahead - continuing on a self-defeating trajectory, or abandoning it - News24

4 January 2019 - For now, the new year has dawned. Whether prudence and reality will follow, only the months ahead will reveal.

Terence Corrigan

The turn of the year invites imagery of the dawning of a new day – the start of something fresh, promising revitalisation and boundless possibilities. In a society desperate for glimpses of hope, this is all the more so.

This is familiar territory for South Africa. Last year, the accession of Cyril Ramaphosa to the presidency was hailed as a "new dawn" for the country. And in his New Year's message, he alluded to this. The coming year, he said, would build on the work done in 2018 to achieve the economic dynamism that would ensure a sunlit future for the country.

But he warned that this would not be easy.

"In 2019," he said, "we will be called upon to work with greater focus and determination to confront our problems and create new opportunities for all South Africans. We will need a huge national effort to build on the progress made this year in restoring our country to a path of growth and progress. We will need to take extraordinary measures and work together to take some difficult decisions given the challenges that lie ahead."

The scale of the challenges confronting South Africa is vast. If the country is to have any hope in turning this around, it will need to recast itself as a country that can support growth and sustain prosperity. Above all, it will have to become an attractive place for businesspeople and entrepreneurs to sink their money. This issue has hung over South Africa for decades.

Yet the past year has provided meagre grounds for optimism. Missing from the president's reflections was any mention of what has been the dominant story in 2018 – the push, supported by the ruling party and the president himself, to introduce a policy of land expropriation without compensation (EWC). It consumed a great deal of political capital. Indeed, the year closed with Parliament having approved (following a deeply compromised consultation process) an undefined amendment to the Constitution to enhance the State's right to do so, and with the publication of a new expropriation bill to write these powers into law.

This stands in contradiction to government plans to encourage investment. Yes, there may be "interest" on the part of investors – and no small amount of goodwill, as we at the Institute of Race Relations (IRR) can attest – but few things will dissuade them from doing so as forcefully as a threat to their property rights.

There is already ample evidence that EWC is gnawing at South Africa's prospects. President Ramaphosa's investment envoys have noted that it is making their work difficult, and the World Bank has cautioned that EWC is having a negative effect on investment. This matches the IRR's experience from our own interactions with business, both foreign and domestic.

Further warnings of what of EWC stands to do has been offered by Roelof Botha of the Gordon Institute of Business Science and Ilse Botha of the University of Johannesburg. Their work indicates that the prospect of such a policy turn has led to a decline in investment. With EWC as a policy – in light of experience elsewhere – the country can expect a debilitating recession, with billions of rand forfeited. Over a two and a half year period, job losses could reach 2.28 million.

The authors comment: "This study confirms imminent socio-economic disaster for SA in the event of expropriation without compensation being pursued. It is clear from international evidence that a strategy aimed at land reform should be based on market principles and pragmatism, with a detailed and comprehensive land audit as starting point."

This comment encapsulates the kernel of the issue. EWC has nothing of value to offer – it is certainly not the dramatic game-changing intervention that some of its proponents have claimed. (Who can forget the president's enthusiastic claims that it would turn South Africa into a "Garden of Eden"?)

Land reform certainly has some benefits to bestow on South Africa, and it is common cause that the land reform programme has foundered. But compensation requirements have never been shown to have been a factor in this. Rather – as the High Level Panel on the Assessment of Key Legislation and the Acceleration of Fundamental Change under former president Kgalema Motlanthe found – this had to do with a lack of political commitment, incapacitated bureaucracies, corruption, elite capture and so on. EWC would do nothing to address this. It would in truth only compound these deficiencies by extending the powers of the very institutions that have thus far failed in their duties.

All of which raises disturbing questions about the path that the first light of 2019 is revealing. And it points to some very hard choices – whether to continue on this self-defeating trajectory, or to abandon it, along with the fondly held ideological assumptions that drove it and the populism that attended it. 

For now, the new year has dawned. Whether prudence and reality will follow, only the months ahead will reveal. 

- Terence Corrigan is a project manager at the Institute of Race Relations.