A case of how a Free Market results in Self-Empowerment
“A man is not a man until he has a house of his own” – Nelson Mandela: Long Walk to Freedom
The Free Market Foundation’s Khaya Lam Land Reform project should be studied against the historical background of a series of laws. Laws that were designed to economically disempower blacks, and, thereby, provide a black labour pool for the agricultural sector, and, later, for a burgeoning mining industry.
The main thrust of these laws restricted, nullified and prevented ownership of fixed property by blacks. The Glen-Grey Act of 1894 was such a piece of legislation. But, the most effective and devastating of these pernicious policies was the notorious Natives Land Act of 1913.
The Act was passed on 19 June 1913. The day after, Sol Plaatjie lamented: “Awaking on Friday morning, 20 June 1913, the South African native found himself not actually a slave, but a pariah in the land of his birth”. So vehemently opposed to this Act was the South African Native National Congress (a precursor to the African National Congress), that it saw fit to dispatch the leadership which included Plaatjie, to engage the British colonial government in Britain and voice the objections of the native population. This was to no avail.
In another statement on behalf of the Heidelberg District of the South Africa Native National Congress, TM Dambuzu said: “The Natives’ Land Act breaks our people and puts them back in the rearing of their stock and ruins what they term their bank. It causes our people to be derelicts and helpless. We beg the Commission to approach the government and make our grievance clear and find a haven of refuge for our oppressed. There is winter in the Natives’ Land Act. In winter the trees are stripped and leafless…” (llustrated history of South Africa published by the Reader’s Digest)
These voices from the past resound to this day. They foresaw the socioeconomic consequences that the policy would leave in its wake. That is why there has been sustained and vociferous opposition, particularly to this Act.
While some progress has been realised in terms of the socioeconomic upliftment of blacks primarily through their own endeavours, an opportunity exists today that goes beyond ameliorating the consequences of past segregationist policies. It is an opportunity that will address the challenges and catalyse a process of economic self-empowerment that, in turn, will result in people effectively participating in the wealth creation process and progressively becoming wealthier.
Such a process starts with a deep understanding of private property, its logic and the socioeconomic implications that inevitably emanate from it.
Occupied property means only that and nothing more in terms of economic significance. Such property cannot be used as collateral in order to secure capital for purposes of starting or expanding an existing business or for securing a loan for various needs of the household, such as payment for the education of the children. When a property is not their own, the occupants tend to be reluctant to make any improvements to it, even when they are allowed to do so. This point, inter alia, is underscored in Hernando de Soto’s seminal work, the book Dead Capital.
When people have freehold legal title to property, that property can be used as collateral. The capital is no longer dead. And the legal status of being a property owner unleashes a spirit of enterprise and individual initiative more than any other policy measure. The Glen Grey Act, the Natives Land Act, and all other such policies resulted in the economic emasculation of blacks. To confer full freehold legal status on occupied land is the single most important measure to reverse such damage and to set blacks on the steep upward trajectory of socioeconomic progress.
The FMF’s Khaya Lam (My House) Land Reform Project is the measure that will transform the prevailing status quo. To this day, twenty years into democracy, the majority of blacks still continue to be merely tenants on the property they occupy. Government, at national, provincial and local municipal level is still the landlord. The implementation of Khaya Lam is achieving what socialists could only dream of but inherently are unable to achieve: transforming have-nots into haves. In the case of the Khaya Lam template, this occurs at the stroke of a pen. And most significantly, at no stage does the process entail that the government needs to commandeer any portion of taxpayers’ incomes to fund the project.
Freehold title was secured by some blacks just prior to the kicking in of the democratic dispensation and especially during the early years of the Mandela administration. Just as reported to have happened then, the result of the Khaya Lam pilot project being carried out in the townships that fall within the Ngwathe municipal (Free State province) area, such as Thumahole and others, affords abundant evidence of what benefits unfold for the home owners.
The long-time occupiers, now ‘new’ owners of their properties, hire all sorts of artisans to improve their houses. These artisans, of course, include brick layers, plasterers, carpenters, plumbers, welders and painters, and many others. They build additional rooms. In some cases, entire existing structures are demolished and new houses slowly rise up. The now proud owners save a substantial amount of their income for such home improvement initiatives, some work overtime at their places of employment to finance envisaged improvements. The more entrepreneurial individuals establish informal retail shops on their premises, or even low scale manufacturing businesses such as welders manufacturing gate and burglar bars for doors and windows.
These formerly state-owned rental properties now catalyse a cauldron of diverse economic activity in the townships and rural areas on a scale inconceivable only a short while ago.
Another important dimension to the Khaya Lam project is that in many cases the owners bequeath the property to their children. This encourages youngsters who take pride in their family home to seek employment and contribute towards making further improvements to the house. With the added care shown and every improvement, the value of the asset appreciates. So from one generation to another, layer by layer, their level of wealth will increase.
What starts out as a straightforward initiative to convert dead capital into a real economic asset unleashes a stream of progressive wealth-creation that has no end. The demonstration effect of the Khaya Lam project is that it has to be implemented throughout the country as speedily as possible.
Another very important consideration is that, with economic freedom, which means free markets, protection of private property is an essential cornerstone. The logical extension of this is that the policy environment of the country has to be conducive to and support the process for people to acquire private property.
In a free market, there has to be voluntary exchange, personal choice and personal responsibility. Only when government accepts these principles as sacrosanct, can South Africa realise a peaceful, socioeconomic revolution that will result in the socioeconomic upliftment of the greatest number of people in the shortest possible time.
Mandela knew this when he said: “As I moved around the world and heard the opinions of leading people and economists about how to grow an economy, I was persuaded and convinced about the free market. The question is how we match those demands of the free market with the burning social needs of the world.”
South Africa’s policy makers, and those of any country for that matter, must shift from the policy paradigm of throwing money at problems as is characteristic of welfare systems. Such state welfare-oriented policies undermine self-pride and result in low self esteem on the part of able bodied individuals who are, in reality, subsidised by the economically productive individuals. Policy makers must focus instead on policies that will involve the greatest number of people in the wealth creating process. This essentially means adopting policies that are based on the sovereignty and thus the economic freedom of the individual.
Mandela asserts this point quite poignantly: “Money won’t create success, the freedom to make it will”.
The Khaya lam (Ngwathe Land Reform) project speaks volumes in this regard.
Author: Temba A. Nolutshungu, Director, Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.
This is the text of a speech delivered in Cape Town on Friday, 5 September 2014, at the SYPALA 2014 conference hosted by Entrepreneurs in Public Policy and the Independent Entrepreneurship Group. This article was originally published by the Free Market Foundation on its official website.
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