The EconomistJanuary 27th 2018 Leaders 111O
F THE many grievances
from South Africa’s dec-
ades of white rule, the theft of
land still smarts more than
most. The “Natives Land Act” of
1913 set aside 90% of the country
for whites, who made up less
than a third of its people. Over
the next eight decades a succession of white governments
evicted 3.5m black South Africans from their homes, in cities
and in the countryside, prodding them onto the backs of lor-
ries at gunpoint and dumping them in barren reservations
misleadingly called “homelands”. “Even criminals dropping
straight from the gallows have an undisputed claim to six feet
of ground,” mourned Sol Plaatje, one of the founders of the Af-
rican National Congress (ANC), in 1916.
When apartheid ended in 1994 the courts returned land to
individuals who could showthat they had been wrongfully
deprived of it (a minority, given poor records and the passage
of time). And the ANC, now in government, promised to buy
30% of the country’s farmland at market rates to distribute to
blacks by 1999 (see page 40). It has met only a third of this target
and has extended the deadline for another ten years. Corrup-
tion, red tape and incompetence have hobbled land reform.
Even without these problems, finding enough money to satis-
fy the ANC’s ambition would be hard. The budget deficit is 4%
ofGDPand public debt has ballooned to over 50%.
Inevitably, the slow pace of redistribution is leading to calls
for South Africa to take a short cut, by copying Robert Mugabe,
the deposed ruler of Zimbabwe, who confiscated land from
white farmers without paying. Julius Malema, South Africa’s
foremost populist firebrand, has urged his followers to take
whatever land they fancy, because “it belongs to you.” Jacob
Zuma, South Africa’s president, wants to change the constitu-tion to let the state seize land without paying for it. At a confer-
ence in December the ANCvoted to make this party policy.
It is a terrible idea. A central plank of the negotiated deal
that ended apartheid peacefully was that property rights
should be respected. If the government rips up title deeds, no
sane investor will put money into South Africa and the econ-
omy will nosedive, as Zimbabwe tragically shows.
South Africa’s government should certainly try to improve
the lot of the poor, both because it is the right thing to do and to
prevent the likes of Mr Malema from winning elections. But
policymust fit South Africa as it is today. Two-thirds of South
Africans now live in cities, and they are not going back to the
countryside. They want jobs, schools and cleaner govern-
ment, not fields to grow maize in. More than 70% list unem-
ployment as theirbiggest worry. Only 2% say farming is. This is
hardly surprising, as farming is about 2% of the economy.The future is urban
Land reform is still a good idea, butit mustbe well-designed,
cost-effective and part of a broader strategy to promote eco-
nomic growth. First, the government should look in its own
backyard. The state directly owns about 10% of South Africa’s
land. Some tracts, urban and rural, have squatters on them.
Long-standing squatters should be given the land they live on.
Much of the rest should be sold, and the money used to plug
the deficit or improve social services. Another 15% of South Af-
rica is “communal” land, most of which is owned by the state
and which was reserved for black people under apartheid.
Those who farm this land should be given title to it. This would
give them an asset against which they could borrow, and the
security of ownership that would encourage them to invest.
Or they could sell up and move to Johannesburg. South Africa
has plenty of land, but its future prosperity will be generated
by clustering in cities, not scratching out a living on the farm. 7Land reform in South AfricaDon’t do as Robert Mugabe did
To help the poor, try privatisation and property rightsF
OR more than a decade, equ-
ity investors have reckoned
that Goldman Sachs was worth
more than its Wall Street rival,
Morgan Stanley. But on January
17th their opinion was turned on
its head. According to Bloom-
berg, the lasttime Morgan Stan-
ley led Goldman was back in 2006. Back then, a heedless in-
dustry-wide race to win market share and raise returns was
about to end in disaster. Thistime the industry is transformed,
and the two investment banks are on strikingly different paths.
Morgan Stanley is being rewarded, above all, for its post-cri-sis decision to take control of Smith Barney, Citigroup’s
wealth-management business. In 2012 the bank’s core activity
of selling and trading securities accounted for almost two-
thirds of its netincome, and wealth management forjust over a
quarter. The figures now are 55% and 40% respectively.
The mythology of Wall Street is built around big bets and
contrarian calls; the business ofhelping the affluent manage
their money lacks panache. But in post-crisis finance, glamour
is out and stability is in. Wealth management offers relatively
predictable returns and does not suck up too much capital.
Morgan Stanley this month raised its return-on-equity targets—
but only so far. On a conference call with analysts last week,
the firm’s bosses said that, ifthey achieved a return on equityMorgan Stanley v Goldman SachsSorpasso on the Street
Market capitalisation
$bn2006 08 1012 14 16 1804080Goldman Sachs^120Morgan StanleyThe battle of the investment banks is a parable of post-crisis financeРЕЛИЗ
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