Land Redistribution and the Poor Future of South Africa

The tale of South Africa is one of tragedy: its past and present governments have set the nation up on a very difficult road to prosperity.  Much has to do with private property rights and historic injustices to the native black community.  In 1913, the white colonial government passed the Native Land Act, restricting the natives from purchasing rural land and effectively setting the course of a predominately white agricultural sector in the country.  These circumstances existing, the rise of predominately black governments has led to a crusade against white farmers.  These political movements have widened across the continent.  It would not be news to mention that Zimbabwe’s Robert Mugabe spearheaded land redistribution in that country to expropriate land from the whites to set up communal farms.  The South African government had slowly undertaken a similar process, by buying white land and giving it to black South Africans.  Although this policy is not as crippling as Zimbabwe’s forceful eviction of white commercial farmers, it will nevertheless lead to a seriously damaged South African market.  Agriculture employs an estimated 9% of the labor force and makes up 8% of the country’s exports.  These land redistribution schemes promise widespread destruction of wealth and possibly economic crisis.

Although racist colonial policies alienated the native black population from market sectors which could have made them wealthy, the modern South African government should not practice retaliatory policies.  There is no doubt that the South African government is much more civil than that of Zimbabwe, shown by their willingness to pay for the land they are redistributing, but although their intentions are fairer, the consequences will not be any better.  Continued “economic segregation” should be solved through the free market, or a gradual improvement in the purchasing power of all South African citizens, regardless of skin color.  But, this gradual increase in aggregate wealth can only come through market liberalization, including the allowance of current farm-owning demographics (that is, allowing for a white majority).  Over time, given market liberalization, these statistics are bound to change, as black farmers become wealthier and are able to set up farms of their own at market price.

The problems with redistributed land are not just in motivation and incentives, but in the capabilities of the laborer.  According to the government’s own statistics, 50% of land redistribution has failed.  Black farmers who received the land for free did not originally invest in the territory and have no knowledge on agriculture.  There have been declines in the supply of several different foodstuffs, including maize, showing an aggregate decline in rural productivity.  This is related to shifting the industry from the hands of those who are more experienced to those who have no experience at all, simply for the sake of “correcting” past racial injustices.  Furthermore, these policies have actually set back the movement towards parity in terms of wealth, since the thousands of jobs destroyed will only guarantee the continuation of low wages.

The solution to South Africa’s disparity in demographics lies within the free market.  Only in a free market would there be gradual, but constant, increases in the average standard of living.  Wages will not necessarily increase (although competition for labor would drive the price of labor up, over time), but the costs of consumer and capital goods would necessarily decrease (please see Jesús Huerta de Soto’s Money, Bank Credit and Economic Cycles).  The gradual production of capital, or wealth, would eventually allow a greater amount of blacks to invest in agriculture—assuming, of course, that is the route they would want to take.  Otherwise, it would lead to “racial parity” in any and all industries.  The point is allowing the once poor to increase their capital, so that they can invest and become entrepreneurs.  Through the regulation of profit and loss, the market would grow accordingly, as the investment of capital catalyzes the production of even more capital.

Land redistribution does not complete this goal.  As aforementioned, agricultural productivity has dropped severely in farms whose ownership was changed.  This leads to a loss of jobs, as employers can no longer afford the labor required to run their fields.  Under normal circumstances, the land would have been purchased and after an original investment it would have been brought back to a standard which would allow for productivity.  But, in a country where the government only allows investment if it comes from a sector which does not have enough capital to invest, productivity is severely hampered.  Indeed, although the intentions may be fair, the South African government is only guaranteeing further poverty in the groups of people who they are trying to help.  It is exactly the same problem occurring in Zimbabwe, which suffers from unbelievably high unemployment—despite land redistribution.

Unfortunately, the road to prosperity is not as clear to many as it should be.  A major factor blurring the correct path to take is racial violence.  There is growing disgruntlement about this disparity between white and black landowners, and there is a growing jealousy of the capital ownership in the country.  There is growing pressure for the government to speed up its land redistribution scheme, given that the pace of the program has continued at a fairly slow pace—the government must purchase the land at market value and the government may run into problems if the land owner does not want to sell the land.  However, the level of violence is not as high as it is in Zimbabwe, nor is it at a level at which the government should be alarmed.  But, continued land reform programs which target white commercial farms may further tarnish relationships between the whites and the blacks, to the point that if it was truly desired, some type of race war (similar to what is occurring in Zimbabwe) is possible.

The key is to turn around now and reverse these land redistribution policies which will only help make South Africa a much poorer nation.  Economic prosperity can only come through the respect of private property laws and the free market.  Only further regulation will hamper the increase in the costs of labor and the decrease in the costs of consumer and capital goods—these two factors, in an unregulated market, will lead to general prosperity.  Of course, there will always be some who are wealthier than others, but life will be made much more affordable for the population as a whole.