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Post-Covid-19 recovery will elude SA if EWC is not scrapped

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Post-Covid-19 recovery will elude SA if EWC is not scrapped

Post-Covid-19 recovery will elude SA if EWC is not scrapped

5th May 2020

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Before the Covid-19 pandemic knocked South Africa’s economy on its back, it was on its knees. Think back to the beginning of March: a ’technical recession’, catastrophic unemployment, a parlous fiscal position, and imminent credit downgrade – the latter coming on the day the country was locked down.

However brave the face the government tried to put on it, a crises had arrived, and it had nothing to do with a virus.

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Perhaps we live in a ‘present tense’ culture, and so this is obscured now, but the perilous trajectory had been in motion for years. It owes much to decisions taken by government, in how it chose to manage the country, and how it chose to orient policy.

Nothing exemplifies this better than the position of ‘land reform’ and property rights – the determination by the ruling party and the government it leads to embark on a policy of Expropriation without Compensation (EWC).

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As respected economist Azar Jammine told Stephen Grootes in an article in the Financial Mail in early 2019, this policy push destroyed the possibility of a windfall from Cyril Ramaphosa’s accession to the presidency. (The article itself was headlined ‘How land expropriation could work in SA without destroying the economy’ – a phrase that inadvertently captures the looming disaster that would likely be in store.)

As the pandemic was approaching, the issue was accelerating, with changes to the Constitution in sight. Not the least of these was the proposal by the African National Congress (ANC) to reject the text of the draft amendment by insisting that the executive, rather than the courts, would have the power to decide on matters relating to compensation when property is seized.

The move on property rights, with its predictably chilling effect on the attractiveness of the country for future investment, showed a deep indifference on the part of government to the country’s economic fortunes.

Moody’s decision was influenced by this, and it gave as one of its reasons that the ‘uncertainty over property rights generated by the planned land reform remains unaddressed.’

More than mere ‘uncertainty’, the ANC’s attempt to fundamentally change the terms under which EWC would take place showed that, if anything, the dangers it posed were escalating. Indeed, seeking such amendments made nonsense of previous (non-specific and non-binding) assurances that EWC would take place within the constitution and the law, that the amendment would merely clarify what was already ‘implicit’, and that EWC would be confined to marginal and valueless properties.

None of which, incidentally, would do anything to address the problems besetting land reform.

South Africa will emerge from the Covid-19 pandemic with its economy severely battered. The prospect of a GDP contraction in the order or 10% looms. The post-pandemic world beyond our borders will be a tough place.

Unfortunately, the passing of the pandemic will merely present an opportunity to begin with a painful process of rehabilitation – we are probably beyond the point of speaking of ‘recovery’. If South Africa is to do this, it needs more than just the absence of the virus.

It will be utterly delusional to imagine that South Africa will be able to get its economy onto a path of growth and development if it is to simply revert to the same set of policies and practises that produced the malaise in the first place.

Little will be as reckless and self-defeating as maintaining the EWC drive. It condemns us to the low-growth path that prevailed before the pandemic, and magnified by the damage we are now living through. It must be renounced. In its place, sensible policy reforms to address the failings of land reform can be introduced: releasing state-held land, affirming property rights, especially of those who have historically been denied them, professionalising and upskilling the land reform bureaucracy, and so on.

Otherwise, South Africa’s economy may not get on its feet for many years to come.

Written by Terence Corrigan, project manager, Institute of Race Relations

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