Easy, bloodless land solution
Forget the EFF’s radical plans. All we have to do is introduce a land rental paid to the government
IN 1948, not long after helping rid the world of Nazi racist ideology, South Africa turned its back on this achievement when it was captured by unscrupulous politicians playing the themes of swart gevaar and apartheid.
Now, in 2016, the EFF would have us turn our backs on the globally admired 1994 settlement with racist expropriation policies that are not only unjust and unworkable but an insult to the intelligence of the electorate.
In last week’s Sunday Times, Mbuyiseni Ndlozi wrote a historical analysis of land issues which, even if it were correct in all respects, is irrelevant.
The constitution states clearly that the land “belongs to all who live in it, united in our diversity”. So we, blacks and everybody else, already own it!
To the extent that there is any truth in Ndlozi’s statement that black people in South Africa are trapped in a state of landlessness it is simply because we, the people of South Africa, are not collecting the rent on our land.
To the extent that there is entrapment it is arguably because the state has failed, in terms of section 25(5) of the constitution, to “take reasonable . . . measures to . . . enable citizens to gain access to land on an equitable basis”.
In so far as the EFF is saying that these measures have not been taken it is correct, but, instead of trying to trash the constitution and the real progress in nation-building that has taken place, it should simply demand they now be taken.
The EFF could argue that the only way to ensure access to land on an equitable basis is for the state immediately to start collecting the people’s rent on land.
Why would this make such a difference?
Collection of the people’s land rent (unearned income due purely to ownership of land) would immediately commence on every piece of its land — for people’s benefit.
Land would immediately become more freely available — no more vistas of empty land being withheld from use at the whim, speculative or otherwise, of its owners. They would be forced to use it or lose (sell) it.
Government at all levels would be incentivised to deliver more efficiently (better roads and services raise land values), as well as use land more efficiently, that is, make it available and collect rent.
Even more important would be the massive economic stimulus PEOPLE’S LAND: The EFF is right that land is a central issue, but, the author says, it is wrong about the solution achieved by moving from deadweight taxes on the product of labour and capital, to the collection instead of the value created by the state. (All community-created and natural land value is due to the state if for no other reason than that it guarantees security of tenure, without which no owner would enjoy the value of his land.)
Increasingly freed from the shackles of taxation, and with land much more freely available, large and small businesses would thrive, especially in rural areas, including the former homelands.
The latter, in particular, once thrived more than they do now thanks to low taxes with thousands of industrial jobs. Almost all of these disappeared in the mid-’90s when they were subjected to the higher levels of tax in the rest of South Africa.
The point is that a land rental revenue collection system is based on locational advantage; that is, the principle that an individual or business only pays the state for value received from the state.
In the homelands this was in effect recognised, albeit more by accident than design, since most of them were in economically marginal areas with little or no locational advantage.
A switch now to land rentals instead of tax would mean individuals and businesses there would pay far less land rental than they do now in taxes.
Provided this was accompanied by security of tenure, communal or freehold, economic activity would flourish as there would once again be businesses which could obtain acceptable returns on capital in the absence of deadweight taxes.
The same thing could be achieved in mining by rolling out the gold mines formula tax to the rest of the industry.
Essentially this means that more profitable mines — usually the shallower ones and/or those with high-grade ore — pay high tax rates, whereas marginal mines pay no company tax.
This simple method goes a long way to capturing locational advantage or economic rent, which is what Julius Malema referred to, perhaps unintentionally, as “that delicious fruitcake” some time ago when he was advocating the nationalisation of mines.
Just as marginally located businesses in the former homelands will thrive on low land rentals, marginal mines are better able to survive and richer mines pay more.
Labour relations will improve when it is realised that the government has been taxing the product of both labour and capital while letting land ownership get off scot-free.
Land reform and restitution programmes will proceed in a much more constructive way with increased emphasis on building capacity, so that new landowners can pay the people’s rent.
Spending on motorways, bridges et cetera , which raises land values, would therefore mostly pay for itself.
Debates as to appropriate land usage and rentals would be necessary and constructive — as opposed to the sterile arguments around tax loopholes today.
So the smart thing for the government to do is nationalise not the mines or the land but the value it creates.
This creates an opportunity for the EFF, having correctly identified land as a major issue, to steal a march on its rivals, instead of taking the mindless position that it does now.
Nationalise the Sandton Sun and the V&A Waterfront without compensation? Really?
Nationalise the farming sector and its multibillion-rand improvements without compensation? Come on!
Destroy the economy in the process, like Zimbabwe?
And you think the majority of voters won’t see through the talk of racial slaughter for the cheap, bankrupt populism it is?
Any fool can destroy, but it takes intelligence and wisdom to create harmony and prosperity.
Instead of this nonsense Ndlozi peddles, the EFF has the opportunity to build on the progress that has been made in the democratic South Africa.
So which is it to be? Pitiful Zimbabwe or Syria? Or the Rainbow Nation thriving on justice and progress brought about by land rentals?
Who is going to really address the land issue first? The EFF or the competition?
Meintjes is co-author of ‘Our Land, Our Rent, Our Jobs’
Land would immediately become more freely available