President Thabo Mbeki confirmed the noises government made last year, about restricting foreign real estate acquisition in South Africa, and doing away with the "willing buyer - willing seller" principal, "to speed up land restitution", in his State of the Nation speech in Cape Town, at the opening of parliament, on Thursday.
"This will be done in line with international norms and practices," the president said. But which international principals he meant, we'll have to wait and see.
South African Property Boom
South Africa's property market has shown some of the fastest nominal growth in the world, during the past three years. For those South Africans who already own real estate, this boom in property prices has not made much of a difference, or it has been a rather positive thing. But for South Africans who only entered the real estate market in the past two years, the high prices made acquiring their own real estate more difficult.
Government officials have blamed foreign speculators for driving prices up and thus sabotaging the governmentâ??s land-reform program, aimed at redistributing 30% of South Africa's farmland to black owners, by 2014. If land reform continues at the current pace, the government would be lucky if they reach their target by 2050!
"Land reform and land restitution are critical to the transformation of our society," Mr Mbeki said. "Accordingly, the state will play a more central role in the land reform program, ensuring that the restitution programme is accelerated."
Now, I thought that government wholly handled the land reform and land restitution, but I guess I was wrong. I still think that government should have realised what effect the land reform program would have on property values.
The effect of large scale land redistribution
If farmland is anywhere like the rest of the real estate types, it is likely that around 3% of all farm land will come on the market each year. This means that government would have to buy every last piece of farmland that comes on the market, for a period of 10 years, to reach their goal of 30% black owned farmland!
If the demand for property increases, and the supply remains at a constant level, it is logical that property prices will increase, isn't it? And if the demand for agricultural real estate suddenly increases by 100%, prices could be expected to increase by at least 100% as well, can't it?
The easy way for the South African government to reach their land reform goals would be to implement the system of land acquisition pioneered by the Zimbabwean government under leadership of President Robert Mogabe. The responsible way to reach the land reform goal, however, is to implement certain procedures that will allow government to acquire land without upsetting the delicate investor sentiment, on which South Africa relies for continued attraction of foreign investment.
Agriculture and land affairs minister, Thoko Didiza, could certainly not have expected to follow a willing buyer - willing seller approach to land reform, on the scale that is obviously needed, without causing a huge price boom in the farmland real estate market. This year, the minister will review the policy, and we can only hope that the changes to this policy are not a drastic overreaction, which may result in international sentiment being damaged irreversibly.
The agriculture minister will "review land acquisition models and possible manipulation of land prices", Mr Mbeki said.
I don't like interference in the market forces, but I do think that there has to be some form of mechanism brought in place to counteract the inflationary effect that acquisitions for land reform purposes will have on the market.
Why we need to speed things up
Many poor South Africans are becoming increasingly disillusioned with the slow rollout of service delivery, poor maintenance of the services that are already in place on a municipal level, and the normalising of the agricultural real estate situation in South Africa.
If people become so far removed from government that they take matters into their own hands, all the people of South Africa will suffer. I therefore support any reasonable measures that may speed up the government's performance in this regard. But before we start stealing from Piet to give to Pumolelo, I feel that all other options must be taken into serious consideration first.
Things to consider
The South African government holds title to vast amounts of agricultural land in South Africa. Some of the church denominations in South Africa are also massive landowners. Surely these institutions should also contribute to the land reform target?
I also find it quite interesting that the statistics of land ownership for black people in South Africa seem to exclude the nominal areas of "trust land" (the apartheid era home-lands), which are suitable for agricultural activities, from the sum of black owned farm land. Is this not skewing the picture of land ownership unduly?
Accelerated land reform program
Mr Mbeki said in his speech that South Africa had entered an "age of hope". Did he mean that we should all hope that the local municipalities can keep up with service delivery, and that the willing buyer - UNwilling seller approach to land reform don't mess up the economical future of South Africa too much?
I guess we'll have to wait and see...
