President Ramaphosa recently stated that the ruling party would seek an amendment to the Constitution to facilitate land expropriation without compensation.

While the move seems to have been met with popular support there have also been warnings that a reduction in property rights will discourage business investment, increase economic uncertainty and lower economic growth prospects. Critics of the amendment believe that strong property rights underpin both economic stability and political freedom and moves to water down property rights may be disastrous politically and economically. The debate raises the question as to how strong property rights are at the moment. One answer is given by the Property Rights Alliance’s ‘International Property Rights Index’ (IPRI). The IPRI measures the strength of property rights in 125 countries taking into consideration aspects like legal framework, the strength of state institutions, political will, and judicial independence and so on.

In the IPRI report of 2018 Finland lands top spot as having the most protected property rights (IPRI 8.6).  Haitians by contrast have, from the 125, the least secure right to their property (IPRI 2.7). The index does not cover closed and troubled economies like Libya, Cuba and North Korea.

The IPRI shows clear geographic trends. The highest ratings are evident in northern Europe, North America and the southern Pacific. Africa countries tend to have relatively insecure property rights. Zimbabwe, for example ranks 117 out of the 125. South Africa (prior to the declaration by Ramaphosa) has an IPRI of 6.3 giving it the second highest in Africa (after Rwanda) and 37th highest rating globally. Although South Africa’s index rating has dropped markedly since 2017 the impact of the proposed constitutional amendment has not yet been incorporated.

The graphic below shows the geographical trend in the IPR Index.

Box plot

The graphic shows the geographical trend in the  IPR Index.

 

Property Right graphic

International Property Rights Index 2018

There is a clear correlation between the secure property rights and the level of development a country enjoys. More developed economies tend to have stronger property rights. The graphic below compares the IPR Index of countries to their level of development with the positions of the BRICS economies highlighted. South Africa has stronger property rights than the other BRICS members which, with the exception of India are also ‘upper middle income’ economies.

South Africa has a property rights regime more in line with ‘high-income’ economies than other ‘upper middle income’ economies.  The close relationship between development and property rights raises the question as to how reduced property rights will impact on its development trajectory. If the proposed constitutional amendment results in reduced investment and lower growth rates is may stop South Africa from making the leap to a ‘high income’ economy (a status in line with the current rights regime).