What EWC means for real estate
MAIN IMAGE: Terrence Corrigan, project manager Institute for Race Relations
Since at least the end of 2017, when the African National Congress (ANC) decided that land reform would be pursued through a policy of expropriation without compensation (EWC), there has been an odd belief that this is about farmland, something for farmers to worry about, since there was – in the memorable phrasing of one financier – ‘no reason to believe that residential properties will be affected.’
This was always a doubtful idea. South Africa’s land reform programme has always had an urban element, rightly so, given that many of the abuses of black people’s property rights happened in the cities.
Government, from the president down, has pledged that EWC is a firm policy position and that it will happen. So what does this mean for urban homeowners and the urban property industry?
What is underway is a multi-faceted process that will systematically degrade the protections property holders enjoy, while simultaneously expanding the latitude of government to dispossess people and businesses.
At the same time, it has tried to send out a reassuring message that everything will be done constitutionally and within the law, that everyone’s interests will be appropriately considered, that this will not compromise the economy and even that ‘these changes will broaden the property rights of all South Africans.’
No need to panic. In this, the government has received a remarkable degree of support from commentators and businesspeople.
But while panic is seldom an option, it is difficult to see grounds for optimism in the existing course of events. Promises that the Constitution and the law will guide the process are hardly reassuring when the stated intention is to alter the Constitution (the present formulation expressly allows for the seizing of ‘improvements’, which cannot be reassuring to homeowners) and to introduce a new expropriation law (the provisions of which are unknown). Indeed, the position of the ANC is to alter the Constitution so as to exclude the courts from expropriation decisions – removing a major protection currently available.
The ‘just and equitable’ formulation currently present in the Constitution is unlikely to remain actionable if the courts are marginalised.
Likewise, assurances about maintaining the investment environment – hardly a robust one at the moment – are hard to believe. If nothing else, the uncertainty around how this will play out is already adversely affecting the property market and farming economy.
We are often asked how to respond to this. It is an enormously difficult question. It’s impossible to say whether ANY given property will come under threat. What we at the Institute of Race Relations have long warned about is rather that what is at stake is the security of ALL property. There is simply no guarantee that anyone’s farm, or home or business will not be affected.
We have warned that the country can expect incremental policy creep – something with plentiful precedent in South Africa. In other words, what may start out as small-scale, perhaps insignificant seizures of worthless property might establish the pattern over time for ever more brazen and intrusive actions.
Bear in mind too that much of the state – particularly at local level – is barely functional and sometimes corrupt. The report of the Presidential Advisory Panel on Land Reform and Agriculture envisages expropriation being used by municipalities to meet their land needs. Says the report in this respect: ‘Individual owners of properties that meet the criteria of land required for redistribution, or for tenure upgrades for farm dwellers, may offer their land as donations, or enter into negotiations with the state, failing which the state may proceed to expropriate.’
One possibility is that the end goal is a mass custodial taking of land, along the lines of water and mineral rights. This is not the stated position of the government or ANC, but enjoys considerable support within the latter. Under such a regime, ownership of land would be impossible, with rights to use and occupy conferred through state-issued permits. Where commercial or agricultural property is concerned, these could be linked to escalating empowerment demands.
None of this is fearmongering. It is an assessment of what could lie ahead. There is relatively little that an individual home- or business owner or real estate agent can do to future-proof him or herself.
EWC is a policy and political question driven in large degree by ideology. It needs to be understood and countered as such. Concerted, vocal objection to the policy offers a decent starting point. We have called upon individuals and institutions to do so since the beginning of 2018. Attempting to ‘manage the risk’ by offering suggestions for how EWC might ‘successfully’ be undertaken misses the point.
So does the apparent approach of the banking industry, to suggest that bondholders who have their property taken will need to continue repayments or that the government should accept responsibility for paying off any outstanding amounts.
Further reading on lending institutions and EWC: ‘EWC and the banks: Throwing the little guy under the bus’
Leaving aside the practicalities (and morality) of these positions, they leave the fundamental assumption intact – that the state should have the ability to take the property of those subject to its authority.
We predict that once this is accepted, periodic encroachments on property will be inevitable. And that ‘certainty’ that so many long for will be elusive.
It is late in the day, now. Comment on the proposed amendment to Section 25 closes on 29 February. As a first step, we encourage everyone with a stake in property – whether an owner, someone with aspirations to own, or a dealer – to register an objection. This can be done via our website.
And we appeal to businesses and professional associations to stand strong against this – the dilution of property rights for any of us will ultimately become a crisis for us all.
About the author: Terence Corrigan is a project manager at the Institute of Race Relations.