Ekandjo Will Kill Free Market
MINISTER Jerry Ekandjo’s plan to ban the sale of urban land by public auction and to foreigners is short-sighted and will definitely not benefit the poor.
Municipalities like Windhoek and Swakopmund (for example) earn millions of dollars per year through the sale of erven to middle and higher income residents. Without this income they will not be able to deliver serviced land to the poor (e.g. informal settlers).
For example, if 100 erven in Auasblick (high income residential area in Windhoek) are sold by the municipality for a controlled price (Ekandjo’s plan) of say N$200 000 each, instead of the N$1 million each which they can fetch through a public auction, the following will happen:
- The municipality will earn about N$80 million less from the sale of the land. This N$80 million could be used to deliver serviced erven to at least 4,000 families in informal settlements.
- The 100 middle-income purchasers who bought the land will be able to build middle income houses in a high income residential area. The value of the properties in this area will drop (which is not necessarily bad) but municipal income (property tax) will also fall considerably.
So the controlled sale of erven in this example would benefit about 100 middle class families (without any benefit to the poor), whereas the sale by public auction would benefit at least 4000 poor families (around 20 000 individuals).
For a town like Swakopmund, the impact of Ekandjo’s plan will be even more dramatic. Hundreds of millions of dollars could be generated through the sale of prime property (e.g. seafront erven) to the so-called ‘rich’ (Namibians and foreigners), through the current system of public auctions. It is unclear how this could in any way disadvantage poor Namibians.
However, if the same land is sold to ‘middle class’ Namibians at a controlled (‘discounted’) price, rather than the ‘inflated’ selling prices achieved through public auctions, the municipality will lose hundreds of millions of dollars, without any benefits to the real poor. Without this additional income (essentially obtained from the rich and foreigners), the municipality will not be able to provide serviced erven to the poor, and the situation (for the poor) will only get worse.
Ekandjo, by implication, blames foreigners and high income Namibians (who presumably drive up property prices at public auctions) for the poor delivery of land to the urban poor. He should do more research before coming to such biased conclusions. The main obstacles to effective land delivery to the urban poor are bureaucracy and outdated legislation. To plan, survey and register a new township in Namibia typically take several years and cost millions of dollars, whereas in other countries it can be done a few months. Government should look at improving these land delivery systems, rather than interfering with the basic free-market principles of land sales and ownership.
A ‘Freakonomic’
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