Over the past couple of days, we’ve heard what political leaders think about the ‘expropriation without compensation’ policy approach that the African National Congress (ANC) announced at its 54th National Conference in December 2017.
However, it is still unclear exactly what such a policy approach would look like and what the implications thereof will be as the ANC hasn’t released any detailed documents on the subject. One encouraging thing that ANC leaders have been consistent in emphasizing that ‘expropriation without compensation’ will only happen in a manner that is sustainable and does not harm the agricultural sector or the economy.
Against this backdrop, we have drafted a discussion paper which attempts to unpack the ‘expropriation without compensation’ decision, as well as the economic and legal consequences of the various forms that the decision may take.
From a legal point of view, there is great uncertainty about what compensation is payable in select circumstances under the current constitutional provisions. Likewise, it is still unclear exactly what the scope and extent will be of the mooted amendments. As such, it should be understood that our paper is not based on settled law, but rather explores alternative legal theory regarding expropriation and compensation.
From an economic point of view, a key point to highlight is that property rights are inherently required to establish capital investment across the entire economy. If one set of property rights is to be affected by ‘expropriation without compensation’, the expectation will be that other forms of property might also be affected.
Therefore, a programme of mass expropriation will result in a protracted period in which there is no net new investment in agriculture, which means no growth in agricultural output as well as no growth in the agribusiness sector. This is because commercial farmers, regardless of race, who have not (yet) been expropriated, are hardly likely to start new investments with the threat of expropriation without compensation looming and because the new farmers would not have the necessary means to invest as financial institutions may adopt a more cautious approach to lending.
Overall, we have crafted four possible scenarios based on specific policy decisions that may be taken to give effect to the decision of the ANC. The paper sketches various policy trajectories that the ruling party could follow to give effect to its decision, and from these four potential scenarios are envisaged.
The first scenario is a self-help scenario in which the rule of law has collapsed; the second scenario involves one of gradual economic decline; the third scenario is the economic sustainability (business-as-usual) scenario; and the fourth scenario involves a hybrid approach.
You can access the full paper here. More importantly, this paper is intended to give rise to a robust discussion on the topic with the intention of finding a common solution that benefits all. So, we welcome any thoughts or comments.
*Theo, Wandile and Sifiso (Researchers at the Agricultural Business Chamber (Agbiz))
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