The defining image of South Africa, both for us in the country and those watching from abroad, in past weeks was not a positive one. It was of mobs plundering shopping centres of their goods, sometimes torching what remained. It was of roads blockaded, and vehicles under attack. It was of shopkeepers, taxi-owners and hastily assembled vigilante groups blocking off roads to keep the chaos at bay.
The rand value of the wrecked stores, smoking malls, desolate pharmacies, vandalised communications towers and cracked open ATMs have yet to be fully enumerated. So too the number of lives that will bear the imprint of these events. Figures put out by the South African Property Owners Association indicate damage to the economy of around R50 billion. The final tally might well be higher – economist Mike Schussler suggested a figure of R70 billion. And 150 000 jobs are in danger, the vast majority of these representing the livelihood of a circle of dependents. Tens of thousands of informal traders have seen their operations pillaged.
Besides this, the reputational damage to the country is profound. The message to current and potential investors – large or small is that their assets are vulnerable. This is guaranteed to compound South Africa’s malaise.
What has been on display is the cumulative result of economic, governance and political failure: the failure to grow our economy, to generate jobs, to maintain a functioning and ethical state.
The ‘unrest’ – doesn’t that word have a sinister 1980’s feel to it? – has precedents. It steps over the bodies of those killed in violent strikes and in xenophobic pogroms, the extortion of businesses by criminal syndicates and follows the wreckage of smashed and plundered infrastructure that lingers after it is stripped and sold for scrap.
Warnings about the perilous course on which South Africa was set were earnestly repeated, acknowledged – and then ignored. The hapless response of the state to the ‘unrest’ was the upshot of this. Indeed, whether one subscribes to the official narrative that this was a planned coup valiantly headed off, or to the view that it represented an explosion of desperation given a spark by Jacob Zuma’s imprisonment, there can be no question that it amounted to a disgraceful intelligence failure. Whether this was a matter of collusion or sheer incompetence, it speaks volumes as to the derelict condition of the state.
The Economist remarked: ‘In South Africa there are plenty of sources of discontent. The official unemployment rate is the highest in the world, according to the World Bank. Gaping inequality means a minority enjoys a rich-world standard of living while most people struggle to get by. Parts of the country regularly go without power and water. The police are a blend of incompetence and cruelty. The pandemic has made life harder in every way. And when corruption is rampant, some ask, what is raiding a supermarket compared with looting a state airline or the national energy company?’
But these events should not be seen only in relation to what they say about our past, but what they portend for the future.
For what we’ve seen is one of the government’s signature policies put into action. This is expropriation without compensation (EWC). True enough, this was an aggressive, do-it-yourself form of EWC, undertaken by mobs with or without direction, with no consideration of the lawfulness of their actions. This may not be the mode of EWC that the government has in mind, but in its essence, it is more similar than dissimilar. Both would dismantle protections which property holders can rely on, and both are at some level justified in references to the injustices and privations that millions of South Africans are exposed to. Those looting television sets and bags of rice would claim to be helping themselves; policy makers eying land holdings and pension funds would claim to be doing so to help others.
The essential difference is that while the looters disregarded the law, the government wants the law to enable its intentions. In so doing, the wasteful disorderliness can be avoided.
And so, a policy drive continues to target Section 25 of the Constitution, and introduce new expropriation legislation to make seizing property simpler and more convenient for the state. The Socio-Economic Impact Assessment Report put it succinctly: it would give ‘the state extraordinary authority to compulsorily take immovable property from persons and corporations for use in the public interest.’
The same document doggedly clung to claims bespeaking either dishonesty or monumental ignorance – it was, for example, ‘misplaced’ to believe that state officials would misuse their powers owing to ‘sufficient checks and balances in both government policy and different legislations to keep the issue in check.’ This is all of a piece for a government that proclaims itself to preside over a developmental state, but failed (or chose not) to see the earth-shaking ructions of the past week, and once they had begun was to all intents and purposes powerless to stop them.
EWC in the hands of the state as it exists threatens something far more profound and damaging than looting. For an already skittish business community, the prospect of our compromised state wielding these powers will in itself be a disincentive.
Econometric modelling on the matter exists. This has been undertaken by Dr Roelof Botha and Prof Ilse Botha. Initially released in October 2018, a revised and updated iteration was produced earlier this year. Following trends in other societies that have undergone EWC-style seizures, it argued that the country could expect a sharp decline in investment – of 5-10%, possibly more – which would undermine growth and wealth creation. Its calculations were based on a nine-quarter timespan, using the third quarter of 2020 as a starting point. The report summed it up:
Annualised nominal GDP in Q3 2022 will be R417 billion less in the event of a 5% decline in capital formation – scenario 1 (induced by EWC) – compared to the retention of statutory protection of property rights. This equates to a loss of 7.2% of GDP. In the case of a 10% decline in capital formation – scenario 2, the decline in GDP amounts to R616 billion (10.7% of GDP). The cumulative loss of economic output over the nine quarters of the forecasting exercise amounts to R735 billion and R1.05 trillion for scenarios 1 and 2, respectively.
On the back of this, some 1.4 million jobs could be lost, and the decline in revenue – between R215 billion and R307 billion would signal an absolutely unsustainable fiscal position.
All of this would dwarf the damage inflicted by what we have just witnessed.
If indeed the looting has now spent itself, we must now think of the future. More to the point, will we learn from the errors of the past? Neither an individual nor a state can confiscate a path into prosperity. Without secure protection of people’s property rights, whether against the mob or the state, a future of growth and opportunity is impossible. This is as true for the small operator – the uninsured trader living off meagre profit margins – and the unskilled worker who relies on the viability of a supermarket for his job as it is for the investment magnate. More, in fact.
President Ramaphosa has appealed for rebuilding, for cooperation and investment roadshows. If he is serious in this, a change of approach to governance and policy is in order. Indeed, it is long overdue.
