Get ready for a race for land

As a journalist, there is one thing you learn the hard way: answers depend a lot on the question. Say you said to someone: “Would you like this bag of oranges free?” Most people would probably say yes. What’s to lose?

Change the question, and the answer will be different. “Would you like a one in a 100 chance to get this bag of oranges free, but the moment you accept the oranges they will be worthless?” Who’s going to agree to that?

In essence, the land reform “debates” taking place around the country have been this kind of exercise in duplicity. By implicitly asking “do you want land for free?” the answer is obvious. Who is going to say no?

Yet, there is a mathematical problem here. SA’s land mass covers 1.2-million square kilometres. But it is mostly semi-desert. We have only 12-million hectares of arable land, about the same as Spain, a little less than Tanzania and less than half that of Turkey.

Furthermore, SA’s level of arable land per person is declining as the population rises. In 1960 it was three times what it is now. It’s on the low side by international standards — three times less than it is in the US, and about the same as Spain. In addition, arable land in SA has been more or less static at about 12million hectares for 60 years.

According to the UN’s Food and Agriculture Organisation, SA has 0.23ha of arable land per person. That is less land than is recommended for a single free-range chicken. The notion that SA will see a boost to economic growth on the back of land expropriation is just kinda stupid.

Of course, the idea of land means different things to different people. To many the concept is not economic, it’s about historical injustice, dignity and correcting imbalances. There is no way to gainsay this argument. One of the worst aspects of apartheid was it prevented the vast majority of the population from capitalising themselves.

Black South Africans were excluded from owning land in areas where title deeds meant something. And in the small area where they did have access to land, they were excluded from the capitalisation process because these were notionally “traditional areas” in the benighted view of the apartheid apparatchiks.

In other words, they were subject to the whims of the chiefs, a divide-and-rule design that had nothing to do with respecting traditional values but was imposed to ensure the political survival of the colonial and apartheid regimes. So now we are in a tricky situation that requires wisdom and thoughtfulness, not a strong point of your average politician, local or foreign.

President Cyril Ramaphosa’s announcement that the ANC will change the Constitution to allow expropriation without compensation was read as a victory for the common man. Trust me, it is not. It marks the start of a race not between black and white South Africans, but between black South Africans for some of the very limited bounty.

If you need an example of how this will pan out, look to the mining industry. The result there was not the immediate collapse of the industry, as the pessimists suggested, but nor did it result in the mining boom the optimists hoped for.

Why is that? My theory is that implementing black economic empowerment was hard but doable for the existing mining industry which agreed to its terms. For existing mines with producing assets, what they were being asked to give up was a slice of the action, about 20% on average. With assets depreciating and all the exploration and infrastructure done, the existing industry was willing to take the hit.

But what nobody appreciated was the effect it would have on new entrants.

It was assumed that as soon as patriotic black South Africans got hold of some assets, they would miraculously turn into the new Anglo American.

But in reality, giving up 20% of an existing asset where you own the resource is very different from giving up 20% of a start-up where you don’t own the resource. Mining is a constant process of regeneration through exploration. Without new mines, the industry melts.

We now know the result. The industry has deflated from about 16% of GDP at democracy to about 8%. There has not been a mining initial public offering in SA in over a decade, at least not one that wasn’t an existing company splitting to avoid “SA risk”.

A few people have got very rich, notably the president himself. But I wonder whether the 100,000 or so former miners who are eking out an existence in the Eastern Cape and elsewhere after losing their jobs think the exercise was worth it.

IF YOU NEED AN EXAMPLE OF HOW THIS WILL PAN OUT, LOOK TO THE MINING INDUSTRY

Cohen is Business Day senior editor