Economic growth – Taking the “long view”

Structural reform and political agreement

Firstly, Landman explored current discussions around land expropriation, which is being pursued through two distinct processes: an amendment of Section 25 of the Constitution, and the introduction of the new Expropriation Bill. The latter has been in the making for a few years and is to replace Expropriation Act 63 of 1975.

“My view is that we can put the issue of expropriation without compensation to one side,”

According to Landman, the amendment of Section 25 of the Constitution is no small matter. “It requires a two-thirds majority in parliament; some even argue a 75% majority. Be that as it may, it involves changing the wording of Section 25.”

But this process is deadlocked, because the ANC and the EFF cannot agree on the wording for the amendment. The EFF wants all land in the country to be owned by the state (under the concept of “custodianship”). In contrast, the ANC supports the status quo of a range of private land titles, from freehold to communal land. The two parties are unlikely to bridge this gap, Landman said.

“EFF leader Julius Malema also made it clear in parliament on 3 June that the party will ‘never vote’ for an amendment that does not provide for state ownership,” Landman said. “By taking this strong stance, Malema may unwittingly have played right into President Ramaphosa’s hand.

“Over the next 10 years or so, almost 50% of investment in South Africa will be in energy. And the beauty is it’ll all come from the private sector.”

“Given the difference between the EFF and the ANC, it looks highly unlikely that the required two-thirds majority will be mustered to change the Constitution.”

The second process relates to the introduction of the Expropriation Bill, which has now been before parliament for more than a year. “The difference between these processes is simply that the bill has to meet the standards; it has to meet the requirements of Section 25 of the Constitution,” Landman said.

Landman does not foresee that Section 25 will be changed to deal with expropriation, since both the DA and the EFF will vote against this amendment. He reckons the focus will rather be on the Expropriation Bill.

Who’s the boss in the ANC?

Landman says it is clear that Ramaphosa’s leadership style has been vindicated over the last few years.

“He seeks consensus, involves everybody, moves when ready, and considers all constituencies. He follows an approach of ‘logical incrementalism’ and his position in the party is unassailable.

“Ramaphosa was elected nearly four years ago by a margin of 52% to 48%. Is there anybody who wants to argue that this is still the case? I mean, clearly not. We can have a conversation about whether the support for him in the ANC is 80/20 or 70/30.

“If you look at all the things that have happened, both in government policy and in ANC actions and decisions, the man is certainly in control of the party and the government. No question about that.”

Expropriation of land

The Constitution allows for expropriation if it is in the public interest, and the process and the price are “just and equitable”. If the parties cannot agree on what is just and equitable, the court must decide. The Expropriation Bill, now winding its way through parliament, follows these prescriptions. Clause 12(3) of the bill lists circumstances under which the “just and equitable” price for a piece of land could be nil rand.

“As it now stands, the bill is substantially and procedurally in line with the current version of Section 25,” Landman said. The overall test of being “just and equitable” still applies, and any expropriating authority will be bound by it. Over the last few years, jurisprudence has developed in terms of what is deemed to constitute “just and equitable” expropriation, thereby clarifying the concept and its application.

For nil rand compensation to be paid, expropriation must be in the public interest, having regard for all relevant circumstances (including but not limited to when expropriated land is not being used). In such cases, the owner’s main goal with the land must be merely to benefit from the depreciation of market value, not to develop the land or use it to generate an income.

Landman emphasised: “We are not talking about farmers who are farming the land, who are using the land, and who are generating an income from it.”

According to Landman, this is a neat way of “maintaining Section 25, the structure of property rights as we know it and property law as it stands, but at the same time dealing with political pressures that came from the Nasrec 2017 (ANC policy) conference”.

“Shortly after the bill was published in October 2020, (then ANC secretary-general) Ace Magashule said it fulfils the ANC’s resolution on the matter. Magashule may change his tune now that he is on his way out (of the ANC), but he is unambiguously on record, and his remark clears an important political hurdle.

“My view is that we can put the issue of expropriation without compensation to one side,” Landman said.

Growing the economy

Landman identified key pillars that can drive economic growth, including a supportive macroeconomic framework, and energy and infrastructure investments.

“Structural reform is a very, very big part of the story. And there’s a very strong political will behind it.”

“It is important to appreciate that the government is not going to abandon the macroeconomic framework (…) I think that’s a very, very important principle.”

Landman said the commitment of Ramaphosa’s government to reignite growth through structural reform coincides with ongoing private sector investment in energy, and soon also infrastructure.

“Economic growth is being pursued through structural reform, not through easy monetary and fiscal policies,” he said. “Structural reform is a very, very big part of the story. And there’s a very strong political will behind it.”

Landman expects energy investment to become a game-changer for the economy. “Since the government’s long-term plans with both Eskom and the energy market were announced in 2019, it has been clear where we are going. The recent announcements regarding the private generation of 100 MW have also given huge traction to these plans.”

“Energy is going to be the big, big game-changer,” he said. “Over the next 10 years or so, almost 50% of investment in South Africa will be in energy. And the beauty is it’ll all come from the private sector.”

In the process, SA will also make the transition from a fossil fuel economy to a greener economy. “We’re going to see a massive change, including in the way the electricity industry is organised.”

Going forward, the challenge of building a capable state will remain a tough one to overcome, Landman conceded.