STEPHEN MEINTJES: The great ANC bombing of Joburg's northern suburbs

Were it not for summer rains greening, with blackjacks and other weeds, the vacant stands in Johannesburg and Sandton you would think we had been bombed, not Kiev!

Think of the great big hole next to Old Mutual, and the vacant space over the Gautrain station in Rivonia Road. Then there is the decades-old jungle at the bottom of Bompas in Oxford.

Drive from there, slowly after traffic, to Jan Smuts Avenue, and turn right. On the way, peer over the hoardings and see what lies behind. More weeds and rubble! 

For now, locks and fences prevent land invasions. To what do we owe this state of affairs? As a matter of fact it was the ANC which in 2004 abolished site value rating when it drove the Municipal Rates & Property Act through parliament despite compelling evidence and arguments against it provided by Peter Meakin, Godfrey Dunkley, Michael Jacques and others.

They argued for days before the parliamentary subcommittee, not only for the retention of site value rating in Johannesburg and other cities in Gauteng but its extension nationwide. At the very least, they argued, let the municipalities decide for themselves and see which works best.

However, for some reason the ANC majority on the committee didn’t get it. It seems they thought buildings were a form of wealth that had to be taxed. So instead of municipal rates in Johannesburg being levied on land (site) value only, they decreed that all cities should impose rates on buildings as well as land, a composite rating.

So what? Well, the famous dynamism with which Johannesburg had rebuilt itself more than four times in 80 years came to a shuddering halt. Under site value rating vacant stands were seldom, if ever, to be seen. Landowners knew they would pay full rates on their land regardless of whether they were using it efficiently.

The ongoing buy, implode and rebuild deals facilitated accurate land valuations. Parents would take their children to the Queen Elizabeth Bridge on a Sunday morning to watch the implosions in the CBD and, when driving in to work on a Monday morning, they would see the rubble laden trucks coming out. In a few weeks they would see new buildings arise.

The property owners then were not heroes: they were simply responding rationally to the incentive to use land efficiently. Nor are today’s landowners, who demolish buildings and leave land derelict, villains. They are merely responding rationally to the message sent to them by a rating system that changed from incentivising development to disincentivising it.

If the message is, “by the way, if you can get a better return on capital by waiting for years before selling into a land value uplift, be my guest”, don’t be surprised at the outcome - countless hectares of the most valuable land in Africa lying idle.

There is only one exception to the rule “if you want less of something, tax it”. So, of course we have the “sin” taxes on booze, tobacco and pollution. Less rational is the taxation of earnings of work and capital, but the rule still applies.

The only exception is land. Tax it and you get more of it! More accurately, site value rating, to which we should immediately revert, is collection by the community of community-created rent or the locational advantage with which the grant of security of tenure endows the landowners. They can thereby enjoy the human-made and natural advantages of their land and at the same time are encouraged to use it properly. Site value rating is not a tax: it is recoupment of community-created rent instead of rates, which are a form of tax.

Commenting on Western Cape judge-president John Hlophe’s recent racist rant on land, a Cape Town attorney at NPO Ndifuna Ukwazi, Mpho Raboeane, said: "I am not certain of (his) motivations, but what I can speak to is the dire need for reform and distribution in the urban land context."

She added that a significant part of the urban economy was premised on real estate and related activities. "The fact that access to and ownership of urban land remains out of reach for the majority of the urban population is unsustainable given the steadily increasing patterns of urbanisation, unemployment and inequality."

In case you don’t know what she is talking about, take a look at the growing masses of shacks all around the outskirts of greater Johannesburg. Ironically, this decades-old exodus from the rural areas is also due to the ANC, which heeded Michael Katz’s advice to “harmonise” homeland taxes with the rest of SA instead of recognising that, when shorn of the original apartheid motivation, they were merely a partial recognition of the fact that areas with minimal locational advantage (minimal land rent) cannot yield the minimum required returns on capital if taxed.

So, most of the homeland industries closed down. This folly was exacerbated by the replacement of an avoidable 4% GST with the efficient 15% VAT, while the decades-long delay in putting a half decent N3 through the Transkei did nothing to improve locational advantage either.

The decimation of economic activity in rural areas is part of a larger conversation, but right now urban dwellers throughout SA have a stand-alone, no-brainer of a solution to urban blight. Moreover, it also addresses the spatial inequities of apartheid.

Site value rating only in Soweto and other former townships would put the emphasis fully back on their mostly lower land values, as compared with more affluent areas and CBDs, without the comparison being blurred by including buildings. So whichever way you look at it, site value rating would spur development.

Whether you think of the space above the Sandton Gautrain station, the hole next to Old Mutual or the encouragement to build structures for small, and not so small, businesses in Soweto close to labour and customers, it will be a winner.

If it sounds like magic it is just the magic of reason and need not await the survival or otherwise of the ANC. Being practical rather than political, this proposal can be taken up by almost any political party, but it would not be surprising if it were first to be taken up by one of the newer political formations now in the offing.

• Meintjes is head of equities research at a Johannesburg brokerage and co-author of “Our Land, Our Rent, Our Jobs”. He writes in his personal capacity.