Unpacking how the land and the economy relate

Share this article: Share Tweet Share Share Share Email Share

We must dispute and replace the bizarre “economic collapse” discourse that places land reform at the centre of some apocalyptic future for South Africa. We also need to question the idea that “economic development” equals vast, sprawling construction, which places the right to food, water, health and work on a conflicting path with the right to social housing. Land reform - with its attendant re-entry into the productive economy, the development of small scale farming and agrarian reform to build farming resilience (to market fluctuations and climate change) - will BUILD the economy. Land IS the economy, stupid.* [paraphrasing Clinton: it’s the economy, stupid] Section 25 of the Constitution refers (clearly, at that, precluding arbitrary deprivation) in ONE paragraph, to the protection of property rights. The rest - eight of them - refers to land use in the public interest, just and equitable access, land security, the redress past racial discrimination and action required to achieve this by Parliament. If land IS the economy - then equal land access, would even out the equation and promote economic participation, for all. So why does the narrative of “economic destruction should we pursue comprehensive land reform” prevail? Let's unpack how land and economy relate. In trying to understand the economic rationale of why the city and province are colluding with developers to pave over the Philippi Horticultural Area (PHA) where I farm in Cape Town, it has become evident that a bizarre economic theory is at play. How else can one explain destroying the most productive horticultural area in the country, which employs thousands, provides food, water, ecosystem services, and land reform - for mortgaged housing, shopping centres, private schools and even a prison?

A new analysis by authors Josh Ryan-Collins et el in their book "Rethinking the Economics of Land and Housing" **, offers great insight.

In classical economic theory land was up there with labour and capital. Land has unique properties: its value does not diminish; its productive use holds value for the whole community even if they don't directly work or own it; access to land impacts directly on the affordability of food and housing. Its absence from the modern economic discourse precludes any valid analysis of today's most pressing social and economic problems, including excessive property prices, rising wealth inequality and stagnant productivity. Strangely - as Ryan-Collins points out - land is not regarded in any way as part of modern economic theory.

This amounts to the biggest swindle in history.

Why has productivity (and thus income) flat-lined even as wealth has been increasing? Quite simply, growth in wealth has come from capital gains, and not from profit derived from productive investment, nor savings of earned income. Wealth is generated via disproportionate windfalls resulting from the exclusive control by the 5% of a scarce natural resource: land. Money that should be invested in the productive economy - agriculture and manufacturing - is now tied up in property speculation.

In the PHA, government and developers have for 10 years participated in an ongoing quid pro quo which inflates land-values, and increases city income via rates inflation. Via the stroke of MEC Anton Bredell's pen, where a full city council decision to deny development on agri-zoned land is reversed, R36million of agricultural land is now worth R890m. In another proposed development via an offer to purchase from the city, the developer gets 1.5 times the value of the land, and the tax payer foots a bill of R52.6m for land worth R20m.

When the value of land goes up, the total productive capacity of the economy is unchanged or diminished - because nothing new has been produced: only the value of the asset increases. While this is termed “economic growth” - it is really only growth for the 5%; it is the 95% who pays for this.

Rising land values suck the purchasing power out of the economy, and the benefits of “growth” accrue only to property owners (whose consumption does not increase proportional to their wealth). The rise in the value of that asset has a corresponding cost: someone else in the economy will have to save more for a deposit or see their rents increase. Worse: over the last 30 years we have lost three million of the 14 million hectares of a scarce, finite resource - prime agricultural land - to development.

For the middle class caught in this bubble, even for home ownership this has become precarious.

Escalating rates and taxes now force senior citizens from their own homes. Gentrification is the order of the day.

What's the solution?

Firstly: social housing needs to be prioritised within the city. We have the least dense city in the world. Eleven thousand hectares - with existing infrastructure, public transport, jobs and services - must be used before destroying unique and irreplaceable agricultural land to do this. Housing must be put squarely where it ought to be - a fundamental human right as declared by our Constitution: not in direct opposition to the right to food.

Secondly: we urgently need to stop urban sprawl and protect our peri-urban land in perpetuity for horticultural production. The drought crisis emphasised the vast value of the PHA, including Managed Aquifer recharge, recycling waste water, storm water harvesting, flood mitigation, CO2 sequestration and nutrient recycling (food waste in the city returned to the land as soil amendments).

Gazetted protections for the Cape Flats Aquifer, and Heritage, as well as Environmental Management Zones at City level would protect the PHA in perpetuity.

Lastly: stop allowing our politicians to go to court against the active community of the PHA Campaign, and using YOUR tax rands to collude with developers to destroy the farmland which feeds you.

Just as the value of the land in South Africa belongs to all who live in it, the value of the PHA belongs to us all.

Join us on September 8 for “What’s Behind the Headlines” - an update.

* Nazeer A Sonday is chairman of the PHA Food & Farming Campaign who is going to the high court to keep the PHA, and the Cape Flats Aquifer recharge zone for farming only.

** The views expressed here are not necessarily those of Independent Newspapers.