Land to the Tiller, Market

Asked about the hot-button issue of land in Ethiopia, Lemma Megersa, president of the Oromia Regional State, would answer that every incident in Ethiopia is a cause of, and an end to, land. As a member of the ruling class, he believes that land should belong to those who can, upon the discretion of the state, develop it.

Such statements are thrown around with the scant realisation that under a market economy, land would indeed belong to those that can develop it. Demand and supply would pick the winners and the losers. Even better, it can determine what purpose the land would better be utilised for, just by indicating what is more gainful, leading to a collective well being.

The Revolutionary Democrats do not necessarily object to this concept; they are just developmental. The ‘revolutionary’ in their title is not honorary but consequential. It comes out of the ideal to develop swiftly, if not more rapidly than market forces would have it.

It is ironic in a way. Aside from loans and taxes, land is indeed a scarce resource whose access gives individuals an instant route from rags to riches.

The system of ownership of land, a concept derived from their Marxist predecessors, the Dergue, subsists between public and private proprietorship. It is not the former because an individual can acquire the sole right to use the land for a given period, and it is not the latter because no one can legally own it. Land, as the constitution reads, belongs to the people and the state. The individual is persona non grata.

If citizens want to get access to land, whether urban or for commercial farming, it can only be through a form that grants user rights for a given period. The system is leasehold, a regime which hopes to replace all other types of holdings through time.

If there was a policy that pitted the Revolutionary Democrats against popular challenge, perhaps next to the breakaway of Eritrea, it ought to have been the introduction of the lease law, in 1993. Titled Urban Lands Lease Holding Proclamation, the law set in place an arrangement that – save for details that were later revised, like the modality of land transfer or allocation – still determines the distribution and allocation of land in urban areas.

The leasehold system is critical to the EPRDF-led government. If preambles in bills reflect true intentions of their authors, the EPRDFites have it that the only way transparency and accountability, rapid urban development and a fair distribution of land can be ensured is through the lease regime. That is what the revised land lease proclamation of 2011 says.

Few of the system’s supporters deny that the government wants to remain the driving force in urban development and growth. For an aspiring developmental state, to bring about growth, an approach short of public ownership of land is one in which the state can rent it out. Thus, the Ethiopian state is the most significant rent collector in the economy, ensuring limited supplies of plots at a time, in far between schedule, thereby inflating the price of rent.

Public investment – whose ratio to gross domestic product (GDP) stood at about 17pc last year – is one reason to keep the leasehold system around. The rate is much higher than the sub-Sharan average of a little under six percent, according to data from the World Bank. The economy is not necessarily state-led, with the private sector accounting for over 21pc of the GDP. But, it is undeniable that the state has a far too heavy hand in controlling the commanding heights of the national economy.

Consequently, for the government, whose capital expenditure for the current fiscal year is above 100 billion Br, it would be expensive and inconvenient to carry out infrastructure projects if the land belonged to individual citizens who have the right not to be dispossessed without fair compensation and due process. Through the transformation of urban land into leasehold, thereby removing the irritating obstacle, the state can finance its projects cheaply and in time for electoral gains.

There is also the case of Ethiopia’s agrarian community, making up over 70pc of the labour force by the end of 2013. The past half-decade may have seen the shift of the economy towards service from agriculture, with the latter accounting for almost 40pc of the GDP. But most of the employed still work in the sector that accounts for about 35pc of the GDP.

Private ownership of land could then present a dilemma for the government in this case. The unemployment rate in Ethiopia was about 16pc last year. But this number is not set in stone. It could change once farmers earn the right to free themselves of the land they live on. With a high rural to urban migration, it is unlikely that the state could provide for a large section of the population that could become jobless once they sell their land under a private ownership of land regime. The leasehold system helps control unemployment – less by providing for jobs and more by limiting individuals to few means of making a living.

The imperfection of the land tenure system is not invisible to the government. The first revision in urban leasehold came in 2002, and then 2011. But problems such as land being left undeveloped, inflated bids in auctions and lack of detail have compelled the Ministry of Urban Development & Housing (MoUDP) to draft a revision.

The draft, which aspires for a fairer distribution of land, less corruption and further economic development, has yet to be approved by parliament. It has been tweaked to necessitate developers to prove that they have financial capability. It would also allow municipal homeowners or private developers to expand over the other, based on the share they have within the same enclosure. Bid bonds have also been doubled to fight off speculative developers who inflate bids.

Unfortunately, the revision is too tame to fight corruption, lack of transparency and an unjust distribution of land. Just as the 2011 revision warns, good governance is a fundamental prerequisite to ensure an appropriate administration of land.

It is nothing but paradoxical to see a government trying to do the same thing all over again but expecting different results. As long as the state remains in control of the supply of plots, and undermines the emergence of a robust secondary market for leased land, it is inevitable for legislators to be back at the drawing table, tweaking this and that part of the provisions.

The cure-all is not good governance though. It is essential to realise that the lack of it is but a symptom of the system of landownership Ethiopia operates under. It is the result of a policy that adheres to the thinking that the individual cannot own land and that the state could better manage it by tailoring who could use it and in what manner.

Lease to urban land is only accorded to projects that must have a national significance and “realise the common interest and development of the people”. The main problem exists because the state is the arbiter of which project deserves priority or is nationally significant.

The leasehold system is thus unworkable.

The allocation and utilisation of land should instead be fashioned by market forces. Letting developers deal directly with those that have possession will determine their financial capability. Supply and demand, in this case, would pick the winner.

The national or societal good will sort itself out. If there is a lack of schools in an area where there are many children, then for a businesswoman whose primary aim is to make a profit, the land would be used to build a school. The social wellbeing, thus, fulfilled – the only difference being that while the current system necessitates individuals to contribute to the collective good, private ownership will incentivise them to do so.

Flexibility in land ownership will allow its owners to use the land for what is more profitable. Under such circumstances, it could also be used as a security against loans. Furthermore, corruption will be reduced as there would not be a third party in the negotiation.

The state should instead focus on regulating the market; write policies to facilitate transactions and development; and ensure institutional competence in safeguarding property rights are respected.

Admittedly, given Ethiopians’ attachment to land, as it relates to the notion of identity, the transition would have a jagged sociopolitical impact. Historical grievances that may arise as a result, and augment existing public dissatisfaction, will give the Revolutionary Democrats ground for resistance. It may also require constitutional reform, a subject they are very much averse to.

Published on Oct 21,2017 [ Vol 18 ,No 912]



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