Commentary from Berry Everitt, Group CEO, Chas Everitt on land expropriation without compensation.
When I wrote before about the proposal to change the Constitution to provide for land expropriation without compensation (LEWC), I said the real problem with it was the uncertainty about what policy really lay behind it – and how the expropriation process would be implemented if the amendment was made.
However, things are happily becoming clearer – and accordingly less worrisome for the real estate sector.
It is now pretty evident, for example, that the government does not intend to use LEWC to nationalise all the land in SA, because if it were, President Ramaphosa’s much-vaunted “financial envoys” would not be meeting with such success in attracting large-scale foreign investments. That is not the sort of tough question that is likely to go unasked in discussions at that level.
In addition, there seems to be renewed respect at senior government level for the benefits of home ownership, as indicated by the current big drive by the Dept of Human Settlements, the provincial authorities and even city councils to ensure that the rightful owners of some 2,3m of the RDP houses built since 1994 are given proper title deeds. The idea here is to formalise ownership of these properties so that they can be used as security for home loans and wealth creation.
This resonates with earlier comments made by President Ramaphosa that he was not intending to let the LEWC process pose any threat to SA’s financial institutions – which currently have billions invested in both residential and agricultural property.
Agricultural production and food security are also known to be a concern if farmers become the subject of LEWC that is not very carefully managed, and in this regard the President and several Ministers have repeatedly said recently that illegal land invasions will not be tolerated.
Meanwhile I suspect that government is also becoming increasingly aware of the extent to which both urban and rural home ownership has grown among previously disadvantaged individuals over the past 24 years – and what a disaster it would be to place their hard-won gains in jeopardy.
Mike Schussler of economists.co.za recently noted, for example, that black South Africans now own about 10 times more homes than whites, compared to four times as many in 2001. What is more, some 57% of black households now own their own home or are paying it off, compared to just 45% of white households. In addition, the second home ownership rate among black households has climbed from 24% in 2001 to more than 33% of households now, with most of those properties being in rural areas.
Previously, I also said that I did not think that the change, if it did occur, was imminent, and that is also evident now. The Constitutional Review Committee tasked with investigating the possibility of changing Section 25 to allow LEWC has decided to first hold a set of public participation hearings on the issue, starting next month. It is not expected to finalise these much before the end of the year and it is thus highly unlikely that there will be any motion drafted or decision taken before the General Election next year. And who knows what may happen after that…
Warm property regards,