Page 11 - The Economist Asia January 2018

The Economist January 27th 2018
Land reform in South Africa Leaders 11
Don’t do as Robert Mugabe did

To help the poor, tryprivatisation and propertyrights
F THE many grievances tion to let the state seize land without paying for it. At a confer-
Ofrom South Africa’s dec- ence in Decemberthe ANC voted to make this party policy.
ades of white rule, the theft of It is a terrible idea. A central plank of the negotiated deal
land still smarts more than that ended apartheid peacefully was that property rights
most. The “Natives Land Act” of should be respected. If the government rips up title deeds, no
1913 set aside 90% of the country sane investor will put money into South Africa and the econ-
for whites, who made up less omy will nosedive, as Zimbabwe tragically shows.
than a third of its people. Over South Africa’s government should certainly try to improve
the next eight decades a succession of white governments the lotofthe poor, both because itisthe rightthing to do and to
evicted 3.5m black South Africans from their homes, in cities prevent the likes of Mr Malema from winning elections. But
and in the countryside, prodding them onto the backs of lor- policy must fit South Africa as it is today. Two-thirds of South
ries at gunpoint and dumping them in barren reservations Africans now live in cities, and they are not going back to the
misleadingly called “homelands”. “Even criminals dropping countryside. They want jobs, schools and cleaner govern-
straight from the gallows have an undisputed claim to six feet ment, not fields to grow maize in. More than 70% list unem-
ofground,” mourned Sol Plaatje, one ofthe foundersof the Af- ploymentastheirbiggestworry. Only2% sayfarmingis. This is
rican National Congress (ANC), in 1916. hardly surprising, as farmingis about 2% ofthe economy.
When apartheid ended in 1994 the courts returned land to
individuals who could show that they had been wrongfully The future is urban
deprived of it (a minority, given poor records and the passage Land reform is still a good idea, but it must be well-designed,
of time). And the ANC, now in government, promised to buy cost-effective and part of a broader strategy to promote eco-
30% of the country’s farmland at market rates to distribute to nomic growth. First, the government should look in its own
blacksby1999 (see page 40). Ithasmetonlya third ofthis target backyard. The state directly owns about 10% of South Africa’s
and has extended the deadline for another ten years. Corrup- land. Some tracts, urban and rural, have squatters on them.
tion, red tape and incompetence have hobbled land reform. Long-standing squatters should be given the land they live on.
Even without these problems, finding enough money to satis- Much of the rest should be sold, and the money used to plug
fy the ANC’s ambition would be hard. The budget deficit is 4% the deficit orimprove social services. Another15% ofSouth Af-
ofGDP and public debt has ballooned to over50%. rica is “communal” land, most of which is owned by the state
Inevitably, the slow pace ofredistribution is leading to calls and which was reserved for black people under apartheid.
forSouth Africa to take a short cut, by copyingRobert Mugabe, Those who farm thisland should be given title to it. Thiswould
the deposed ruler of Zimbabwe, who confiscated land from give them an asset against which they could borrow, and the
white farmers without paying. Julius Malema, South Africa’s security of ownership that would encourage them to invest.
foremost populist firebrand, has urged his followers to take Or they could sell up and move to Johannesburg. South Africa
whatever land they fancy, because “it belongs to you.” Jacob has plenty of land, but its future prosperity will be generated
Zuma, South Africa’s president, wants to change the constitu- byclusteringin cities, notscratchingouta livingon the farm. 7

Morgan Stanley v Goldman Sachs
Sorpasso on the Street

The battle ofthe investmentbanks is a parable ofpost-crisis finance
OR more than a decade, equ- sis decision to take control of Smith Barney, Citigroup’s
Market capitalisation Fity investors have reckoned wealth-management business. In 2012 the bank’s core activity
$bn
that Goldman Sachs was worth of selling and trading securities accounted for almost two-
120
Goldman Sachs more than its Wall Street rival, thirdsofitsnetincome, and wealth managementforjust overa
80
Morgan Stanley. But on January quarter. The figures now are 55% and 40% respectively.
40 17th theiropinion wasturned on The mythology of Wall Street is built around big bets and
Morgan Stanley
0 its head. According to Bloom- contrarian calls; the business of helping the affluent manage
2006 08 10 12 14 16 18
berg, the last time Morgan Stan- their money lacks panache. But in post-crisis finance, glamour
ley led Goldman was back in 2006. Back then, a heedless in- is out and stability is in. Wealth management offers relatively
dustry-wide race to win market share and raise returns was predictable returns and does not suck up too much capital.
about to end in disaster. This time the industry is transformed, Morgan Stanleythismonth raised itsreturn-on-equity targets—
and the two investmentbanksare on strikinglydifferent paths. but only so far. On a conference call with analysts last week,
Morgan Stanleyisbeingrewarded, above all, forits post-cri- the firm’s bosses said that, if they achieved a return on equity 1