One of the big differentiators between us and animals is the ability to use money.
Money allows us to specialise at doing something, for example, a doorman at a hotel, an actor, a politician, a policeman. You can do a particular job, get paid for it and with that money, pay for shelter, food, transport, entertainment etc…Money can, however, be the root of all evils if you are a fool, or it can be the governor of good economies if you are wise enough to allow it to talk. Economies do well when economic sense prevails over politics.
The latest issue in South African politics is the land grab without compensation. Not a great idea, judging by what happened when politics reigned over economics and common sense in Zimbabwe! Surprisingly the Rand has remained firm and even Moody’s gave us the thumbs up!
Land distribution to peasants is no longer viable as the size of the population is too big compared to the 18th century. Modern society can no longer afford underutilised farms. Passing laws and changing the Constitution does RSA no favours.
What may be a better idea is to implement a land tax, a bit like rates and taxes that we have on our town properties. The tax payable would be linked directly to what the farm is worth. The system could be administered by the Land Bank and SARS.
Two dynamics come into play. The value of a farm would be pegged by sales experienced in the area, just like our house rateable value, and by what motivation the farmer can give to value his farm. If the farmer tries to undervalue his property he will pay less tax but he will have less credit available, and if the State decides to expropriate, he will be paid less than what his property is worth. On the other hand, if a farmer motivates that his farm is worth more than the rateable value, subject to the Land Bank assessment, he could have his property valued higher, but then he would be paying a higher tax. A fair valuation of land could be quickly established and the State, the Land Bank and the farmer could live comfortably going forward.
This system achieves to value all the land that are not already valued by municipalities, and it is at these values that the state can “buy/expropriate” farms for. The taxes collected would be relatively small, and it is not designed to be a major contributing tax. The Land Bank would be protected and the farmer would also have better protection than what is the case now. The land taxes collected could be used to “buy/expropriate”, farms. This may also lead to greater accountability and better use of resources while still serving some political agendas.
The farms bought/expropriated, should be run by the state, like schools, to teach farming to the unemployed at all levels. The farms should be more labour intensive and although it may not be the most profitable in money terms they would be profitable in political and financial terms providing there is no corruption.
As we have seen recently in South Africa, money can be abused in politics. If money can’t talk, there is poor allocation of resources which lead to poor returns on resources and ultimately, poorer tax receipts for the governments. Sadly for RSA, common sense is not prevailing, with the ANC still effectively split between Ramaphosa and Zuma factions and the EFF snapping at their heels with land reform politics!!
South Africa needs to structure reforms that allow money to talk, which in turn should allow efficient use of resources, rather than taking from the efficient and giving to the inefficient.
Nick Russell
Certified Financial Planner CFP®
Please note: This article does not constitute advice