Wealth and want

By Franklin Obeng-Odoom

The co-existence of wealth and want is the defining feature of modern political economy. The story of modern society is an account of global inequalities. Thomas Piketty has brought this issue to the fore, perhaps, more than anyone else in recent times. His book, Capital in the Twenty First Century (Piketty, 2014), put the spotlight on income inequality. Published in 2014, the book became an instant best-seller. More than two million copies were sold in three years dwarfing the record of most successful academic books which sell only a few thousand copies. It was widely discussed in the press as well as in policy circles. Much of this book, however, focused on the widening wealth gap in the ‘Global North’ (a common reference to the richer Western world). So, a second book, Capital and Ideology (Piketty, 2019), followed, seeking to demonstrate the nature of the problem in the ‘Global South’ (in catch-all reference to the poorer developing nations of Asia, Africa, and Latin America). However, Piketty could not tell the story of the Global South with as much clarity as he did in his first book.

Consider South Africa. Widely regarded as ‘the world’s most unequal country’ (Baker, 2019), it is also Africa’s largest economy. It provides the space for much international business. As systematic research (Barra et al., 2017) shows, the cost of doing business in South Africa is among the lowest in Africa. South Africa’s infrastructure is widely regarded as one of the most advanced in the continent. Its banking sector and capital markets are among the most sophisticated. Ranked seventh in terms of financial development among 144 countries globally (2014/2015), and first among 185 countries worldwide in terms of the cost of doing business (2013), the environment for commerce in South Africa could rival many of the world’s most powerful markets.

Yet, South Africa is also a highly unequal and stratified country. Over the years, many have sought to explain this general phenomenon in which want and wealth co-exist and co-vary (see, for example, George, 1875/1935; Stilwell, 2019). Typically, explanations for South Africa’s inequality focus on everything from unequal technology to inequalities in human capital development and brain drain. Social scientists have blamed capitalists, private business, and transnational corporations. In recent times political corruption has become the focus of recurrent attention, with Jacob Zuma’s trials often seen as the apogee of the country’s wider rent-seeking system of governance (The Economist, 2020, pp. 27-28; The Economist, 2021a, pp. 32-31). Unequal race relations do get mentioned, but are mostly confined to the historical context of apartheid. The apartheid state was officially dissolved in 1994, and yet, the country has continued to grow apart. Analysts have tended to focus on corruption as the most plausible explanation of inequality and social stratification in South Africa.

In this essay, I argue that, to date, the best explanation of inequality and social stratification in South Africa is land. Land Matters presents this thesis by analysing a newly published book with the same title. Digging Deeper shows that land, indeed, matters but beyond the treatise of that book, and Towards the Future proposes ways of addressing past problems, confronting present crises, and creating the conditions for an inclusive future.

Land Matters

The question of land in South Africa is sometimes reduced to a narrative of historical injustice. However, in Land Matters (Ngcukaitobi, 2021), Tembeka Ngcukaitobi shows that land mattered then as well as now. In the past land was taken away from Africans by colonialists pushing them to subsistence living on crowded, degraded lands. The little capital they possessed – cattle - was also taken away sometimes through fraud and other times through force. This created conditions where Africans were coerced to work for low wages. They were, in effect, reduced to living like slaves. The process of land dispossession also came with racial discrimination. Officially called apartheid, this policy of racial segregation institutionalised land grab. Between 1948 when it was instituted and 1994, when it ended - a period of 46 years - white minorities in South Africa used the wealth, arms, and the force of law to maintain colonial-era inequalities.

White minorities kept most of the land. They dominated the economy and politics. Business flourished based on appropriated land and cheap slave-like labour. Even the right to vote was based on private land ownership. While blacks occupied small and degraded land in the most obscure locations, the ruling whites wrote the political rules in such a way that the common land tenure system of the black South Africans did not qualify them to vote. Therein lies the economic roots of political marginalisation.

After nearly five decades of activism, including a full range of legal battles, international appeals, non-violent confrontation, international, and global sanctions in support for the anti-apartheid struggle the white minority regime eventually gave way to a multi-racial coalition government in 1994. Land restitution, redistribution, and reform became paramount.

As Ngcukaitobi (2021) notes, the critical issues were  (1) whether, in giving back the land, those who took land by force had to  be compensated (2) whether, in exercising its power of eminent domain, the only justification to be provided by the state is public purpose or the state could also assert redistribution as a reason (3) whether a positive statement acknowledging the sanctity of private property must be made and (4) the bank, mortgages, and expropriation question. The latter was a subset of the first three, but it raised its own sub questions, too. For example, must just compensation be set at market value? Should the state expropriate mortgages? If it did, what would happen to the banking sector in South Africa? In the expropriation of mortgages, should the state pay the remainder of the mortgages or should those who were given ownership continue to pay the remaining periodic payments  even though they have lost their properties? As banks themselves were beneficiaries of the land and labour gambit, should they continue to be protected by the state or should the banks be nationalised altogether?

Most of these questions were eventually resolved in the final South African constitution, which does not explicitly guarantee sanctity of private property. It allows for the state to expropriate for redistribution, and recognises that compensation must be just, without defining just in market terms. Contrary to recent demands by several groups to amend the constitution, Ngcukaitobi (2021) argues that the constitution is not really the problem. The courts, in reflecting the wider South African economic re-orientation, have given rulings which do not necessarily reflect the literal meaning of constitutional provisions. An advocate of expropriation without compensation but only on a case-by-case basis and, hence, a supporter of some of the current proposals to bring about far more clarity on the question land, restitution, redistribution, and compensation, Ngcukaitobi (2021) argues that land is, perhaps, the most important explanation of inequalities in South Africa.

Although they constitute only 8% of the total population, whites still hold 72% of the agricultural land in South Africa.^[1] An assortment of other communities including coloureds - the official term for people of mixed race - and Indians hold 24%, while the majority blacks who make up 81% of the population own only 4% (Ngcukaitobi, 2021, p. 110). Indeed, the deadline to redistribute 30% of the land to blacks by 1999 has been missed several times (Ngcukaitobi, 2021, p. 122). If colonial distribution of land was problematic, apartheid made it worse. But what is most regrettable is that even under the post-apartheid dispensation South Africa has made little progress in reversing this stratification. Almost 27 years after apartheid, blacks still own less than 20 % of the (Ngcukaitobi, 2021, p. 122).

It is not simply that land is unequally distributed between blacks and whites (important as that is), land is also unevenly distributed between women and men. The 2017 audit found that women only held 13 % (Ngcukaitobi, 2021, p. 110) of the land. Black women suffered the worst under apartheid, but their status has not improved much even under the post-apartheid democratic order. Between 1994 and 2017, out of the 308, 000 people who benefitted from land redistribution, only 23 % were women (Ngcukaitobi, 2021, p. 129), although women constitute 51% of the South African population (Statistics South Africa, 2021).

Land distribution was uneven across regions, too. The highest beneficiaries of women (~36%) were in the Western Cape, while the Northern Cape had the least: ~ 12%. Other places varied widely: ~16 % (Eastern Cape), ~29 % (Free State), ~14% (Gauteng), ~26% (KwaZulu-Natal), 13% (Limpopo), 13 % (Mpumalanga), ~12 % (Northern Cape), and 27% (North West). Of the total redistributed land of 3715736 hectares, female-headed households obtained only 4 % of redistributed land (Ngcukaitobi, 2021, p.167). This is a serious problem. Because the South African land redistribution programme is dependent on the willingness of landowners to cede some land voluntarily, its progress has been slow. White landowners have been dragging their feet on the issue. Even where they do give up land, they prefer to pass it to black men, not black women (Ngcukaitobi, 2021, p.130). The result is the creation of a poverty pyramid in South Africa. About half of the South African population are considered chronically poor. Outside this group is the class of transient poor who are sometimes poor, but not always so, and then there are the nonpoor but vulnerable who are not exactly poor but are at the risk of falling into poverty. In general, the so-called economic miracle in South Africa has benefitted only 24% of the population because, for rest poverty is endemic (Ngcukaitobi, 2021, p. 119).

The reality is that this problem is unlikely to be resolved anytime soon. After looking at evidence from competing parties, in Mwelase and Others v Director-General for the Department of Rural Development and Land Reform and Another (CCT 232/18) [2019] ZACC 30; 2019 (11) BCLR 1358 (CC); 2019 (6) SA 597 (CC) (20 August 2019)^[2], the Constitutional Court of South Africa made a scathing indictment of the state of affairs. In its final judgement it said: ‘it will take up to 35 years to finalise all old order claims, 143 years to settle new order claims and, if land claims are reopened, up to 709 years to complete land restitution’ (cited in Ngcukaitobi, 2021, pp.111, 239). These inequalities and social stratification have ricocheted in the past few years. However, in the aftermath of the COVID-19 pandemic existing inequalities in South Africa have intensified (Mackett, 2020a). Something must be done urgently to correct it.

Tembeka Ngcukaitobi (2021, pp. 7-10) offers seven concrete proposals. First implement the South African Constitution because it has got enough in it to substantially address the problem. Second, where there are ambiguities, it is crucial to give real meaning. That is evidently the case of ‘just and equitable compensation’. The Constitution, at least, gives clues for interpretation. They include ‘how the land was acquired, what investment was made by the state, what input was provided by the owner, whether the land was acquired for speculation or is being used productively, and if the owner has alternative land’ (Ngcukaitobi, 2021, p. 8). Even by these standards, many parcels of land can be redistributed without compensation: ‘vacant land, underutilised land, abandoned land, land held by absentee landlords, land held for speculation, and illegally acquired land’ (Ngcukaitobi, 2021, p. 8). Third, the idea of compensation for ancestral lands lost should not be allowed to create divisions between ethnicities. Practically, the idea should be interpreted as redistribution or compensation based on need, not ethnicity. Fourth, figuring out what land is whose is pointless. Instead, the notion of comparable land could be used. So, if it is disputed whether parcel A must go to claimant B but not that claimant B is entitled to land, comparable land could be given.

His fifth argument is that the principle of proportionality must guide expropriation without compensation. ‘The focus should be on striking the proper equilibrium between the interests of the nation in land reform, the landless, and those who must ultimately give up the land’ (Ngcukaitobi, 2021, p. 9). Sixth, the programme of land reform must be both transparent and accountable. Questions about ‘who has benefited from farm allocation, what criteria were used, how much was paid, and where that money went’ must be part of the design (Ngcukaitobi, 2021, p. 9). Even in the process of land reform, the fundamental question must remain what really ‘is the class agenda behind land reform?’ (Ngcukaitobi, 2021, p. 9). Finally, it is not enough to reject colonial rule, white settlers and their neocolonial apartheid system of government, the present and future leaders of South Africa must also reject colonial and neocolonial ‘morally corrupt ways’ (Ngcukaitobi, 2021, p.10).

Digging Deeper

It is important to dig deeper into the case of wealth and want. An opportunity cost analysis is fundamental because it raises the question of alternative scenarios. That Land Matters (Ngcukaitobi, 2021) is centred largely on the African National Congress (ANC) is understandable. In existence for over 100 years the impact of the ANC on policy and the direction of South Africa can hardly be overstated. The position of those calling for a fair distribution of wealth within and outside the party is becoming increasingly influential. So, a bit more evaluation of the policy proposals defended by this movement and what that might mean for wealth and want in South Africa could strengthen what is already a compelling treatise. Such an engagement would be particularly germane for two reasons. First, address the question of land, second, because of criticisms (e.g., The Economist, 2021b, p.29) that the EFF’s proposals would destroy prosperity in South Africa even though the movement’s alternatives are becoming increasingly popular. Formed in 2013, EFF describes its ideology as ‘Marxist-Leninist-Fanonian’ with a political programme that includes the nationalisation of South African mines and land redistribution without compensation, the EFF has become the country’s most radical political movement (Nieftagodien, 2015, p. 447). Similarly, a more systematic, political-economic analysis of the alternatives forgone when the ANC positions were accepted in the constitution could be helpful. How would South Africa be today had its constitution rather accepted the alternative proposals? Might a uniformly materially poor South Africa have resulted had other types of land reform been implemented? Would South Africa be far more inclusive had some other reforms been pursued?

Another major question not so carefully addressed in Land Matters is land rent, especially urban land rent. This economic relation receives much less attention than is deserved. How much surveyed urban land do whites own? In comparison with the blacks, what proportion of urban land value is held by whites? Has this division changed over the years? How much does society produce and what proportion of that is kept by landlords and landladies? As analysed carefully in Capitalism, Cannibalism, and How We Must Outlaw Free Riding (Harrison, 2021) and in Property, Institutions, and Social Stratification in Africa (Obeng-Odoom, 2020a), a subset of this rent is what is typically paid to owners of landed property. So, an analysis of land must go with a careful examination of land rent, particularly in the cities and regions of South Africa.

Focusing on ancestral dispossession and historical expropriation is useful. However, doing so without looking at present day social contribution of black people to rising property values which is privately appropriated by minority landlords, largely white, makes the analysis incomplete. Similarly, examining historical dispossession without probing generational wealth gap built on the rent question is problematic. White South Africans have inherited the best pieces of land. They can, therefore, continue to live in neighbourhoods where blacks cannot afford to reside. Today blacks are barred from these places, not by apartheid, but through land rent. Without land, blacks are locked in a state of perpetual poverty. They can neither ‘cash in’ on the rent system, nor obtain protection against the rent system that confines them to their ancestral reserves.

Consider the role of banks in perpetuating this inequity. Across Africa banks have often contributed to the artificially raising the value of land. Mortgage officers, working in partnership with property developers, landowners, and valuers, often help raise the value of landed property. That is because the four parties stand to gain from the inflation of property values. This process is less discussed, but it is documented elsewhere in Africa (Obeng-Odoom, 2020b). Finally, and analytically, land redistribution focuses on physical redistribution. Much like the Marxian approaches to political economy, the approach to commoning the land or bringing equity to land is centred on the parcels themselves. However, redistribution could be organised in other ways, for example, by focusing on economic rent, as Georgist political economists (e.g., Harrison, 2021) tend to argue.

These considerations bring methodological, conceptual, policy, and pragmatic questions to the fore. Expanding how African economies are studied is the goal. The focus on their growth alone is no longer tenable, but neither is the use of restrictive and problematic theories of inequalities and social stratification entirely focused on corruption, capital, class, or culture. Institutions, particularly those related to land, matter, both in historical and contemporary times. A recent special issue of the African Review of Economics and Finance, a leading journal on the African continent, concluded that it is necessary, but not sufficient to examine inequality, gender, race, and class. The need to examine how they interact is increasingly being made, but the centrality of using this framework as part of a process to transform African countries and economies is laggard (for a review, see Obeng-Odoom, 2020c). So, concepts such as ‘decent work’ (Macckett, 2020) and ‘just transition’  (Marais et al., 2022) continue to be used even though policies based on them could produce growth only to reproduce inequality and unsustainability.

Towards the Future

Much needed change could start with rethinking African economics. In doing so, the actual experiences of African economies need to be taken far more seriously. The focus on economic growth has diverted attention away from addressing inequities. Mainstreaming of inequality-based policy interventions is, therefore, urgently needed. Doing so requires embracing new theories of inequalities and social stratification. Asking new questions because of such theories is a condition subsequent. As this essay suggests, special interests persist in preventing transformative change. One alternative is to change the theory of change itself.

Georgist political economists have preferred ‘commoning’ the rent or value of land. Commoning is essentially the act of putting asset to use for the benefit and well-being, of individuals, communities, and lived-in environments. That could mean taxing away property values that are socially created but privately appropriated and investing the resulting revenue for public purposes. Commoning rent could also entail reparations and restitution, but the estimation of these need not be done by reference to plots of land. Instead, money payments of reparations could go hand-in-hand with the application of the ‘single tax’, which includes progressively excluding workers from income taxation. As most workers are black, the single tax could disproportionately benefit them by removing income tax and encouraging work, while benefiting them again by falling on land value, most of which is captured by white landowners. In the South African context, this economic solution could avoid the age-old schizophrenic fear of damaging the banks, capital flight, and rent seeking. Instead, rent theft could be addressed effectively so that the widespread problem of absentee ownership and land monopolies could be curtailed. As I have argued elsewhere (Obeng-Odoom, 2021a, 2021b), removing rent theft can also help in addressing the present socio-ecological crises. As a coal economy, considering such a policy could be part of the policy mix currently discussed as ‘just transition’ (Marais et al., 2022).

The problem of South Africa is not labour or capital, even if the rules for these can be substantially transformed. Politics is an easy target, as is corruption, for recurrent, emphasis. These two are symptons of a deeper problem: land. Yes, land matters, and nobody demonstrates this better than Tembeka Ngcukaitobi. His book, Land Matters (Ngcukaitobi, 2021), provides an authoritative account of the limitations of South Africa’s policies, why they have persisted, and what should be done now and in the future.

There is a role for business. Historically, it has seen itself as a profiteer (Friedman, 1970) or a ‘growth machine’ (Molotch, 1976). In between these poles, it has been obsessed with corporate social responsibility and creativity, interspersed with performance. Pitched along superficial lines of promoting financial inclusion (Matsebula and Yu, 2020), the role of business has often been about papering over deep social cracks. Talks of financial literacy and offer of financial products characterise the process, but it is the responsibility of business is to comprehensively address inequality and social stratification. Contributing to the process of restitution and reparations are obvious enough, especially because the ‘co-owned’ land earlier mentioned might in part be land held by businesses. Giving back land unjustly taken is one step. Facilitating such return of the land is another.

Other steps are less obvious, but crucially important. Paying just wages for fair work, paying appropriate tax on property, ending monopolies, and providing decent work conditions, such as paid-leave, maternity benefits, corporate housing, and retirement pensions (Marai, 2018; Mackett, 2020b). Such measures will contribute to black social empowerment revitalise the national economy. (Posel et al., 2020). Breaking the stratification by institutionalising measures against labour aristocracy and labour suppression and championing labour inclusion could be other steps. When the business environment is conducive self-employment can flourish too.

Even more fundamentally, the conditions for future sustainable prosperity would be set when land has become common by socialising privately appropriated land rent. In this process, labour would be freed from both past and present economic slavery. Productive capital could be used more effectively, and land would serve its purpose of correcting past wrongs, countering present inequalities, and stratification, and creating a future of wealth without want.

 

Acknowledgements

For excellent suggestions, I gratefully acknowledge the contributions made by Professor Lochner Marais of the University of the Free State, South Africa and Mr Amit Jain, Director of the NTU-SBF Centre for African Studies, Singapore. The views and opinions expressed in this article, however, are entirely mine. 

 

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