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Wednesday, September 5, 2018

South Africa Staggers into Recession. Are Zimbabwe-Style Land Seizures to Blame?

As critics of the land seizure policy pointed out, we’ve seen this all before with Robert Mugabe’s disastrous rule in Zimbabwe.

Cyril Ramaphosa

South Africa reported on Tuesday that the nation’s gross domestic product unexpectedly fell by 0.7 percent. GDP had been expected to rise by 0.6 percent.

The second quarter dip, Business Insider reports, comes on the heels of a first-quarter contraction that saw South Africa’s economy shrink by 2.6 percent. It’s official: South Africa is in recession, its first in a decade.

Coincidence or Causation?

The news comes not long after the African National Congress’s (ANC) controversial decision to implement constitutional changes that would allow the state to seize land without compensation. (According to Newsweek, the civil rights group AfriForum is claiming there has been a corresponding surge in attacks on white farmers.)

It’s worth pointing out that many predicted South Africa’s decision to seize farmland would have dire consequences.

Is the ANC’s attack on property rights to blame for the nation’s most recent economic woes? It’s probably too early to say.

The Business Insider article makes no mention of the land seizures. It cites a drought in the Western Cape that hampered the region’s agricultural performance, as well as unexpected declines in South Africa’s trade and transport sectors, as the primary factors.

However, it’s worth pointing out that many—from the Wall Street Journal editorial board to FEE author Daniel J. Mitchell, the South African farmers themselves, and the esteemed economist Walter Williams—predicted South Africa’s decision would have dire consequences.

The Example of Zimbabwe

As critics of the policy pointed out, we’ve seen this all before with Robert Mugabe’s disastrous rule in Zimbabwe. There was little to praise in Mugabe’s nearly four-decade reign, but it was his decision to seize the land of property owners that plunged Zimbabwe into ruin.

The Economist, in a 2017 article published shortly after his surprising ouster, explained that Mugabe made the decision out of frustration after lawmakers rejected his proposal to amend the constitution to give him more power.

“Traditional economics do not fully apply in this country,” Mugabe said.

After his constitutional proposal was voted down, by 55 percent to 45 percent, he lost his temper, setting off a reckless campaign of land grabs. In remarkably short order, one of Africa’s most advanced economies collapsed.

When tax revenues plummeted due to the absence of export crops, Mugabe ordered the governor of the Reserve Bank of Zimbabwe to print more cash.

“Traditional economics do not fully apply in this country,” Mugabe said. “I am going to print and print and sign the money…because we need money.”

The results of Mugabe’s ignorance of basic economics—dubbed Mugabenomics—can be seen in the graph above. But those are just numbers. Bob Herbert, in a 2009 article titled “Zimbabwe Is Dying,” vividly described the human costs.

If you want to see hell on earth, go to Zimbabwe where the madman Robert Mugabe has brought the country to such a state of ruin that medical care for most of the inhabitants has all but ceased to exist.

Life expectancy in Zimbabwe is now the lowest in the world: 37 years for men and 34 for women. A cholera epidemic is raging. People have become ill with anthrax after eating the decaying flesh of animals that had died from the disease.

When the ANC announced its land policy in March, the Wall Street Journal predicted the idea was likely to replicate the Zimbabwe experience.

The Core of Any Economy Is Property Rights

It’s a simple formula, the editors explained. Land confiscations rattle investors. The agriculture sector slows, then collapses. The government, needing cash, prints more money. Inflation follows. Then hyperinflation. Soon, a once prosperous nation descends into the poverty, or “hell on earth,” to use Herbert’s phrase.

We don’t yet know if South Africa’s recession is the result of a drought or its land seizures. But that doesn’t matter. We know how the story ends.

Fortunately, there is still time for South Africa to change course.

Property rights are one of the pillars of prosperity and sound economics. The Fraser Institute, which annually scores nations on their level of economic freedom, suggests it is the most essential component of economic freedom.

“Protection of persons and their rightfully acquired property is a central element of both economic freedom and civil society. Indeed, it is the most important function of government,” the authors wrote in their 2017 report.

Fortunately, there is still time for South Africa to change course, and evidence suggests President Cyril Ramaphosa is perhaps not as enthusiastic about the policy as he may seem.

Ben Cousins, research chair in Poverty, Land and Agrarian Studies at the University of the Western Cape, recently told Newsweek,

It is clear that Ramaphosa is under pressure from his own party, in particular from factions aligned to the former president, [Jacob] Zuma, or to other factions, and in effect he has not had much choice. He has been brought under severe pressure. 

Perhaps South Africa’s unexpected recession will be the wake-up call South Africa needs. There’s still time to reject Mugabenomics—and to avoid the fate of Zimbabwe.

  • Jonathan Miltimore is the Senior Creative Strategist of at the Foundation for Economic Education.