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Land reform is the chance to reform our economy too - for all South Africans

Growth can come from unlocking the potential of a rural middle class

16 December 2018 - 00:05 By RONALD LAMOLA

Like any other land reform programme in the world, the South African version has been contested since 1994 and is intrinsically political.
The economic inclusion of the black population requires security of land tenure. SA is a mixed economy and the forms of tenure should be mixed or be a variety to suit our conditions. A one-size-fits-all approach will not work. The ANC national executive has reaffirmed mixed ownership of the land (not nationalisation), that the land must be owned through the state for its use or lease to those who want to use it, and communal ownership and private ownership (individuals and juristic persons).
These forms of ownership are in line with the mixed economy. For us to create or facilitate the growth of the working class to a rural middle class, or to grow the black middle class, the forms of tenure must link the working class to the mainstream of the economy. This could be done through a mixture of tenure (state ownership, private and communal ownership). We are considering the options that can guarantee security of tenure under communal land as recommended by a high-level panel.
Banks should be able to grant credit when security of tenure is guaranteed on communal land. In this way we can unlock the economic potential of land held under communal systems.
The global discourse in developing countries makes a strong case for the middle class's buying power. Although the middle (not poor, not wealthy) classes in developing countries have relatively lower incomes than in high-income countries, the purchasing power parity is significant. This significance is enough to accelerate growth and demand for manufactured goods and services. Such middle classes hold significant potential for shaping social, economic and political transformation.
The debate on the review of section 25 of the constitution and on land reform is an opportunity to restructure the economy to support the rural middle class and link small towns to the mainstream of the economy.
As a middle-income-trap country, our economic growth can come from unlocking the potential of our rural middle class. Our land reform programme can succeed only if supported by the economy as a whole and the golden triangle of government, civil society and business.
It is in the interests of everyone that the programme succeeds, for our country's economy to grow above 2% and create new avenues of economic participation and jobs. New entrants will participate in our economy and create a rural middle class.
The World Bank argues that the rural middle classes in Africa do have a significance, given the unique structural transformation characterised by urbanisation with no jobs. For Africa, the analysis ought to be on the opportunities and options for policy shifts by the government towards investments that accelerate the growth of the rural middle class.
Urban solutions for employment stagnated decades ago because of a limited domestic market and the declining competitiveness of manufacturing and mining. Most rural towns and small cities have limited manufacturing industries. Poor economic convergence between rural areas and major cities also explains the limited economic vibrancy of Africa's municipalities and rural towns.
Land reform must lead to a convergence of small towns with cities, of rural economy with urban economy. This will integrate the dual economies and have one economy to benefit all South Africans. Our economy must have a relay effect where the small towns give to the big towns and cities to link into the markets and vice versa.
For inclusive economic growth we will use expropriation without compensation to accelerate land redistribution. In line with the constitution, a new, reinvigorated land reform programme should mean that market-related compensation would not be used when expropriating land for restitution or redistribution. Acquisition will be driven by principles of what is just and equitable, which will include zero compensation in cases specified by the law of general application and justifiable under the constitution.
The cabinet has approved the Expropriation Act, which sets out the principles of just and equitable action as informed by the Freedom Charter.
To give effect to the qualifications that food security, economic growth and other sectors of the economy should not be harmed, specific categories of land are targeted by the act, to ensure SA's economic and financial stability.
As of March 2018, outstanding bank credit to the private sector (businesses and households) was R3.5-trillion, according to the Reserve Bank. Mortgages accounted for R1.4-trillion and households R929bn. The mortgage exposure (households and corporates) that the banks have is the equivalent of 29% of GDP.
We highlight the intricacies of the economy because there seems to be confusion between the ANC's land reform resolution and that of other political parties, which argue for "wholesale" expropriation or nationalisation.
The ANC's development policies are in the interest of inclusive growth. Expropriation without compensation is aimed at defined areas. This approach is central to the Freedom Charter, Ready to Govern, the Reconstruction and Development Programme, etc.
This can work with finance models that encourage voluntary redistribution, joint ventures and empowerment projects. Land redistribution requires that criteria and principles be established, to achieve the objectives - the redress of the past injustices and economic development. In the process, some of the groups that could be prioritised could be rural and urban poor, women, farm dwellers, rural and urban entrepreneurs, and new commercial farmers.
• Lamola is an ANC NEC member and sits on its economic transformation subcommittee..

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