South African lawmakers in February voted 241-93 on a proposal to amend the country’s constitution to enable the government to expropriate land without paying for it. The proposed changes to section 25 of the constitution are undergoing review and will be submitted to lawmakers by August 30th.
Land ownership is a sensitive issue in South Africa, as roughly 72% of farmland is owned by whites – which make up about 9% of the population.
The imbalance is leftover from South Africa’s colonial era, when European colonists stripped most black people of their right to own property. Decades later, those purchases and seizures were enshrined into law by the National Party and its system of apartheid.
“We must ensure that we restore the dignity of our people without compensating the criminals who stole our land,” argues Julius Malema, leader of the radical left Economic Freedom Fighters Party.
The redistribution of land has been a fundamental principle of the African National Congress (ANC) in its struggle to overcome white-minority rule. Since taking power in 1994, the ANC has been successful in redistributing about 10% of white-owned lands to black owners using a willing-buyer/wiling-seller model.
But that isn’t fast enough for South African President Cyril Ramaphosa, who has referred to the inequality in land ownership as a “festering wound” left over from apartheid.
“We are going to address this and make sure that we come up with resolutions that resolve this once and for all. This original sin that was committed when our country was colonized must be resolved in a way that will take South Africa forward,” said Ramaphosa in February.
This month, he suggested the plan could move forward even without a change to the constitution. “Black people want their land back.”
As reported by The Washington Post, the South African government has already filed paperwork to seize two white-owned farms for $20 million. The farms are valued at about $200 million.
Amid growing media coverage of the land reform program, the Trump Administration is facing pressure to suspend South Africa’s status in the African Growth and Opportunity Act – a law which provides the country with access to vital US markets.
President Trump responded to the issue Wednesday by directing Secretary of State Mike Pompeo to look into “the South Africa land and farm seizures and expropriations and the large scale killing of farmers.”
South Africa’s government lashed back against accusations that it was persecuting white farmers and criticized Trump as “misinformed.”
Mr. Malema says it is “absolute rubbish to say there’s white genocide [in South Africa]. There’s black genocide in the USA. They’re killing black people in the USA.”
According to police figures, at least 74 farmers were killed in South Africa during 2016 and 2017.
Critics of expropriation without compensation have pointed to Zimbabwe, which in 2000 moved to seize white-owned farmland. The move, which cost the country more than $20 billion, produced food shortages, inflation, and racial violence. The country succumbed to economic chaos and was forced to suspend its own currency.
South African analysts and US observers have warned that the land redistribution program will call property rights into question and weaken trust in the South African government while doing nothing to help those living in poverty. Analysts on Tuesday said the plan could cost the government up to $2.8 billion in payouts and erode trust in the government.
“It’s challenging because there are no models – in the 21st century – that show taking one group’s property away and giving it to another without compensation has not ended in populist armageddons – look to Zimbabwe and Venezuela,” says financing consultant Garsen Subramoney.
“The 28 million black people living in poverty won’t get wealthier. Banks might end up holding billions in debt on land that has been expropriated, and they won’t be forthcoming with business development or home loans. All [the program] will do is choke out the country. It’ll shatter the trust the world has in South Africa’s aspirations to be a modernizing state.”
Editor’s note: If this passes and the government of South Africa takes advantage, millions in South Africa will begin to starve within the next five years. The government does not know how to run these farms, they will likely be taken over by subsistence farmers who will not produce enough food to feed the South African population. This is a classic case where a socialist policy will lead to the downfall of a country.
If you are an investor with holdings in South Africa, you will want to watch this closely. There will be a tipping point, easily calculated, after which the country will descent into chaos.