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I have decided to resume updating this WordPress site. Mostly with commentary based on news coverage about South African politics and investment risk. Occasionally with articles that I think someone following South African politics may find interesting.

Land ho

Cyril Ramaphosa’s announcement on the land question as president of the ANC has been thoroughly dissected and responded to in the weeklies and online newswires. The statement was delivered late night Tuesday 31st of July after a 2 day ANC NEC lekgotla. There are two linked and slightly discordant payoff lines.

Firstly:

There is also a growing body of opinion, by a number of South Africans, that the constitution as it stands does not impede expropriation of land without compensation. (Emphasis added).

Secondly:

Accordingly, the ANC will, through the parliamentary process, finalise a proposed amendment to the Constitution that outlines more clearly the conditions under which expropriation of land without compensation can be effected.

Read the whole statement here or watch it here.

There was much muttering about the ANC using the national broadcaster to address the nation, the lateness of the hour (after 10pm) and the fact that the ANC was preempting an established parliamentary process. However I don’t think these were matters of key importance.

So what?

There are a number of noteworthy points about this announcement.

  • It had previously been assumed that the parliamentary committee would report back in September this year, and that this would be the point that financial markets responded to the manner and content of a motion regarding Section 25 of the constitution.
  • The statement does not deviate significantly from this rhyming couplet from the Nasrec Conference resolutions:

15. Expropriation of land without compensation should be among the key mechanisms available to government to give effect to land reform and redistribution.

16. In determining the mechanisms of implementation, we must ensure that we do not undermine future investment in the economy, or damage agricultural production and food security. Furthermore, our interventions must not cause harm to other sectors of the economy.

  • The Ramaphosa statement does however break with the past by agreeing that the ANC will support an amendment to the Constitution – even though this paragraph is one away from a paragraph that says the Constitution is not the problem.
  • The implicit conclusion is that the statement is primarily ‘political’ as opposed to ‘principled’ – for want of a better way of describing the obvious tension.
  • The ‘land hunger’, apparently identified by the ANC’s own polling and its observation of the public consultation process by the constitutional review committee refers to both rural land for farming purposes as well as urban land for housing purposes. Also the ANC polls indicate a significant portion of its potential voters, particularly highly motivated voters, are strong supporters of this change. Such a category could swing an election.

So what?

The politics can be read at a number of levels. The ANC leadership agreed that it needed to get out from under the EFF dominance of the land reform issue – especially before the Joint Constitution Review Committee reports back to parliament with a possible recommendation that the constitution be changed and before the next national election. The last thing the ANC needs it to be seen to be being dragged kicking and screaming behind what its own research indicates is a stance that enjoys significant and motivated support.

At another level, the fact that the ANC President rather than the Secretary General (Ace Magashule) delivered the announcement could be interpreted as the Ramaphosa aligned ‘reformists’ getting out from under, and ahead of the Jacob Zuma aligned RET (Radical Economic Transformation) group. It may however be that it was considered a matter of such gravity that only the ANC president could deal with it.

However, this is not an optimal strategy for Ramaphosa or his reformist agenda. His allies fought the RET faction on the issue at Nasrec in December, and lost. (Although in all cases we must remember that the ANC statements on this matter are hedged by the conference declaration: “we must ensure that we do not undermine future investment in the economy, or damage agricultural production and food security … our interventions must not cause harm to other sectors of the economy.”)

What we are seeing is Cyril trying to make the best of an imperfect situation.

The only way this works is if the policy and constitutional change is accompanied by a massive social programme to implement all three pillars of the established but failed land reform programme: restitution, redistribution and tenure reform. This will require something of a Berlin Airlift i.e. a costly and complicated intervention, with tight deadlines, that require high levels of commitment and organisation. The ANC government has never got its act together on anything like this scale previously, and there are grounds for skepticism that it will do so now – especially as a close reading of the statements suggests that Ramaphosa and his allies do not believe this is the apex priority to set the conditions for higher potential growth, and in fact the very opposite may be true.

Speculative

The ANC government either delvers on land, and on economic growth and on a successful election (‘success’, purely to indicate my thinking, means closer to 60% and failure indicates closer to 50%) or Cyril Ramaphosa will face a serious challenge for party leadership at the next national conference in 2022.

Almost any other configuration of the top ANC leadership (aside from the exit of Ace Magashule and DD Mabuza) will cause heightened anxiety in financial markets and be negative for investment.

The successful delivery of land reform is not the terrain on which Ramaphosa would have chosen to fight, but he has been forced onto this battlefield. For him, and perhaps the ANC, this battle might be a decisive driver of outcomes of the Ramaphosa presidency, the ANC’s electoral performance and GDP growth.

I am a political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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