On banks and land
IT HAS been reported that President Ramaphosa has rejected the idea of state ownership of land, saying it would “rob” people who have a long-held yearning to own their own property and make it difficult for them to raise capital.
With the greatest respect to Cyril, he is perpetuating the erroneous notion that we must continue to allow the banks to demand the land as security against private loans.
Real estate comprises firstly the land, and secondly the man-made improvements to it. We must treat the two separately. By all means let us welcome the banking institutions in the development of land but not in the financing of the purchase of land itself.
More generally, it’s time the banks got down to their proper business of lending against risk, backing themselves to distinguish between good and bad risk.
So let them lend against the buildings and improvements but not against the unimproved value of the land. The land instead should generate perpetual and rising income to the general populace in the form of rent paid by the owner of the land, who will no longer be required to expend capital to obtain ownership, but will simply commit contractually to pay the rent in return for his title deed which will continue to assure legal security of tenure.
His ownership of the land being secure, he will be confident to invest in improvements using his own capital or through a bank loan.
Effectively the land will have no value except to the general populace, the receiver of the associated rental. The amount of annual rental initially to be paid should be uncontroversial and based on the hitherto market price of the land. The important point is, as has been reliably estimated by Stephen Meintjes (Our Land, Our Rental, Our Jobs), the rental will be sufficient to replace all other taxes.
The question of how to compensate older folks, who are close to retirement with pensions held largely in their real estate (and who would thus not benefit so much as the young from the doing away of the other taxes), is something I’m quite confident can be satisfactorily formulated. From my point of view it is regrettable that it is the EFF who are closer to the solution of this problem than the other political parties. Robert Stewart PetroLogistics