STEPHEN MEINTJES: How to fix apartheid’s spatial inequities

Do we really need to address SA’s long-impending land crisis right now?

After all, the government of national unity (GNU) is faced with a long list of urgent crises, such as crime and corruption, electricity, transport and water problems, and urban decay. Every one of its members has proposals for addressing the spatial inequities of apartheid, but even the PAC leader and GNU land reform minister recognise that the last thing we need now is yet another expropriation-without-compensation crisis.

As President Cyril Ramaphosa says, 25% of the 77.58-million hectares farmland that was white-owned in 1994 has already been transferred to historically disadvantaged South Africans. All the GNU parties agree that targeting 2-million to 4-million hectares to properly establish suitably qualified black and female South Africans as successful farmers is long overdue. So should we expect the cumbersome GNU to focus and agree on yet another contentious issue? 

None of the above will have the slightest effect on the rural poverty that is relentlessly swelling the number of impoverished shack dwellers on the fringes of our cities, or the growing number of valuable but empty hectares within them. And do we really think there will be no consequences if we don’t act now? As it happens, there are some common-sense, practical measures even the GNU can implement now. Half-a-dozen are listed below. 

In all urban areas we should replace composite rating with site value rating (SVR). The Municipal Property Rates Act of 2004 abolished SVR, which had been implemented with great success for 80 years in Johannesburg and other Gauteng cities. The parliamentary subcommittee was told repeatedly at the time that the enforcement of composite rating — rates on buildings as well as land — would incentivise land speculation instead of timely redevelopment, manifesting in demolitions and an increasing number of valuable sites standing empty for decades.

Since then, while some of the most valuable land in Africa became empty, squatter camps, shanty towns and other informal settlements have mushroomed on the fringes of SA cities. While those fortunate enough to obtain employment have inordinately long commutes, these settlements have placed further pressure on urban infrastructure. 

So much for the leafy suburbs, but what about the Johannesburg CBD, where, apart from some still prestigious nodes thanks to efforts by Anglo American and others, many parts have become no-go areas for everyone except gangsters and exploited, mostly foreign, tenants. CBD property values subsided steadily in the late 1990s with the mugging-driven exodus of the JSE and many other corporate head offices to Sandton and elsewhere.

This continued into the “noughties” despite the influx of Gauteng provincial and other new business tenants, due not only to further deterioration in law and order but to a steady deterioration in urban infrastructure. Up until 2004 property owners would have benefited to some extent from lower land values as they were not being charged rates on their, in many cases multistorey, buildings. 

From then on though, the benefit of lower property prices and valuations was diluted by the inclusion of buildings in the rateable value of their CBD properties. If SVR had been retained while land or site values were plummeting, the entire rates bill on those properties would have declined as well. Post 2004 there was to be no such relief, and therefore no incentive to redevelop or at least stay in business.

From there it was a small step for owners in the more rundown areas to walk away from their properties, leaving them to be hijacked.

The solution now is to reintroduce SVR, as that would lead to minimal rates in the worst affected parts of the CBD until a recovery is well under way. Provided this is accompanied by long overdue repairs to infrastructure and effective policing, this would lead to a revival in all CBDs. 

Next, as an integral part of moving to SVR we need to follow that up by facilitating title deeds for the 6-million to 11-million long-term township house tenants throughout SA. As pointed out by businessman and land activist Christo Wiese, the land is mostly owned by municipalities or provincial councils. Not everyone wants to, or can be, a farmer. But urban land ownership and clarity of tenure is just as important in urban as in rural areas. The Free Market Foundation’s admirable Khaya Lam Project, which has facilitated the transfer of about 10,000 title deeds to occupants of township houses, is but a drop in the ocean.

Up to 11-million new SA property owners would be a lot more careful about running up electricity and other municipal charges since this could imperil ownership of their properties. As Free Market Foundation CEO David Ansara suggests, this would benefit not only the homeowners themselves in the long run, but also Eskom and the municipalities.

So much for the urban areas, which comprise only about 3% of SA’s 122-million hectares yet contribute more than 60% of GDP: what about the 79.4% taken up by agricultural land? Can we afford to have more and more of our land lying idle, lending credence to the populists’ demand for expropriation? The priority should be to ensure that all land is being used productively, so we need to impose a tax-deductible site value rate of 0.5% on all agricultural land (only land) values. 

Substantial areas of arable land are lying idle in the former homelands, which comprise nearly 12% of the total area of SA. A Daily Maverick article recently described how it took Pat Rwexu eight years to get the go-ahead to plant 750ha of maize in the OR Tambo district of Pondoland, where two out three people live below the breadline.

He had grown up in the area and worked from boyhood to steadily accumulate skills and university degrees, so he had all the credentials with which to gain the trust of the community. The relevant government ministries need to ensure community representatives act timeously. This includes the Ingonyama Trust.

Not all mining properties are equal. Commodity prices are inherently volatile. Yet our one-size-fits-all tax system continues to ignore this, with disastrous results — from undercollection of windfall profits in boom times to unnecessarily early mine closures and ensuing joblessness in commodity price slumps.

We need to revitalise the gold-mining tax formula and roll it out to the rest of the industry. This will prevent unnecessary windfall taxes in booms and subsidies in commodity price slumps, when minimal tax will also reduce unnecessary raising of grade cutoffs, premature mine closures and hence opportunities for illegal mining. 

The application of similar principles needs to be addressed in areas such as forestry, spectrum, Big Tech, fishing and others. Though not yet a major source of super profits from natural resources for SA, it is worth noting that Norway has for decades ensured that a major portion of profits from North Sea oil benefited the whole nation.

Norwegian finance minister Trygve Slagsvold Vedum has taken this principle further, introducing resource rent tax on aquaculture and onshore wind power and promoting international tax co-operation.

• Meintjes, a retired equities analyst, is co-author of ‘Our Land, Our Rent, Our Jobs’.