Excluding land from economic debate devalues its public good

Nazeer Sonday

IN TRYING to understand the economic rationale why the City of Cape Town and the Western Cape government are colluding with developers to pave over the 3000ha Philippi Horticultural Area foodland (PHA), an irrational economic theory becomes evident. 

How else can one explain the planned eradication of the most productive horticultural land per hectare in the country employing tens of thousands, providing food, water and ecosystem services for luxury housing, more shopping centres, private schools and even a private prison. A new analysis by authors Josh Ryan-Collins et el in their book ‘Rethinking the Economics of Land and Housing’  offers relevant insight. 

In classical economic theory land was up there with labour and capital. Unlike labour and capital, land has unique properties. Its value does not diminish. Its productive use holds value for the whole community even if they don't directly work or own it. Land impacts on the accessibility and affordability of food and housing. Yet strangely as Ryan-Collins points out in his book, ‘How land disappeared from economic theory’, it is not regarded in any way as part of modern economic theory. This amounts to the biggest swindle in history.

The last three decades in South Africa have personified ‘the great productivity puzzle’ known as jobless growth. Why has productivity (and the related average income) flat-lined, even as wealth has been increasing. 

The puzzle is explained by the fact that the majority of the growth in wealth has come from capital gains; rather than increased profits derived from productive investments, or savings via earned income. Money that should be invested in the productive economy – farming and manufacturing - is tied up in property development and speculation.

This generates a widening inequality, reflected in Gini coefficient: South Africa’s is now the highest in the world. This huge growth in wealth relative to the rest of the economy originates not from the saving of income derived from people’s contribution to production (activity that would have created jobs and raised incomes), but rather from a disproportionate windfall resulting from exclusive control of a scarce natural resource: land.

This has dire consequences for South Africans. Of the approximately 1.2m k/2 that is South Africa, only 12% is suitable for crop production- and less than a quarter of that (22%) is high potential agricultural land. Water is the main constraint. 

Ownership of land – concentrated in white hands, developers and banks- generates a very narrow band of beneficiaries. In the PHA foodland, government and developers participate in an ongoing quid pro quo which inflates land-values to increase City income via inflating rates, and happy developers, banks and corporates demonstrate their goodwill via party donations to keep this “market friendly” government in power. 

In one development in the PHA foodland by a stroke of a pen moving the urban edge and with no public participation as required by the law, the Environment MEC Anton Bredell, who also holds the portfolio of Minister of Development Planning, inflated land value for the developer from R36m to R890m.

On 18 March 2025, the PHA Campaign filed another high court review against the development after winning the first round in February 2020. 

Most new credit creation by the banking system now flows into real estate rather than productive activity. Productive investment, both by the banking system itself and non-bank investors, is on the wane; the higher returns on relatively risk-free real estate investment are preferred investment destinations. The net result is food and housing unaffordable to millions, water scarcity on the rise and climate change impacts relegated to policies in hyperbole English.  

When the value of land under a house goes up, the total productive capacity of the economy is unchanged or diminished because nothing new has been produced: it merely constitutes an increase in the value of the asset. 

This may increase the wealth of landowners and they may choose to spend more or draw down some of that wealth via equity withdrawal. But many equally do not.

While this is termed “economic growth” is really only growth for the 5%; it is the 95% who pays for this. The majority - the historically dispossessed of land through colonialism and apartheid, the poor and hungry- remain excluded from the inherent security of land ownership or cooperative curatorship. 

For the middle class, a house has become the only real source of wealth and security but even this is precarious. Escalating rates now force families from their own homes; the poor are evicted by gentrification and social housing is relegated to new townships far from the city. 

Rising land values suck the purchasing power out of the economy, as the benefits of “growth” accrue only to property owners (whose consumption does not increase proportional to their wealth), which in turn reduces spending and investment. The rise in the value of that asset has a corresponding cost: someone else in the economy will have to save more for a deposit or see their rent increase. Its clear unequal land distribution goes together with slower economic growth.

Cape Town’s ‘best run city in South Africa’ rhetoric fails to disclose the silent violence experienced in the neighbourhood in which the PHA foodland is located. 

• One million households live in backyards and shacks. 
• 29% unemployment rate in Cape Town (2021). 
• 65 000 job losses in the Western Cape (2024). 
• 38 000 jobs losses in Western Cape agricultural sector (2024). 
• 43.68% youth unemployment in Western Cape (2024). 
• 45% food insecure households in Gugulethu. 
• 36% food insecure households in Khayelitsha.

The solution has been obvious all along accumulating dust in City and Provincial government policy archives. 

First, we need to urgently stop urban sprawl and protect our peri-urban land in perpetuity- local production for local consumption. Horticulture nourishes the city.

Sixty percent of the 200 000 tonnes of vegetables produced per year in the PHA foodland reach the working class and vulnerable communities on the Cape Flats. An estimated 80 000 units of livestock (chicken, sheep, goats, cows) is sold annually by livestock traders for affordable protein that benefit households, shisa-nyamas and for religious & cultural traditions of Cape Flats communities.

An estimated 1000ha is held by developers and land speculators salivating to change the zoning designation from public good for private profit. The Oaklands City Development alone is 500ha in size proposing a development 10 times the size and similar in style of Century City.

 On 18 March 2025, the PHA Campaign filed high court papers in the on-going battle against the City, provincial government  and the developer. Land reform in the PHA can contribute to creating livelihood opportunities for 900 black and coloured youth and women farmers, creating additional tens of thousands of direct and indirect jobs  and the supply of affordable, organic and local food- elements for a Just Agricultural Transition. This can be achieved without expropriating the land of the current cohort of white commercial farming families (now only 7) responsible for 80% of the production. 

A healthy agricultural sector is the foundation of a healthy economy as can be seen in other successful Global South countries for example Thailand (pop 69m, unemployment 1%). The Thai economy is built on self-sufficiency, the backbone of which are 16 million farmers and 16 million farmworkers.

We need to dispute the bizarre modern economic theory that seeks to keep land out of economic debate to devalue its public good and activate the rights of millions to access healthy affordable food, clean water, good health and a clean environment. 

Land reform – with its attendant re-entry into the productive economy through the development of hundreds of small scale farmers on peri-urban farmland and millions across the country, with climate resilient agroecological farming and food sovereignty– will BUILD the economy.

Sonday is an organic farmer in the Philippi Horticultural Area, chairman of the PHA Food & Farming Campaign, an Atlantic Fellow For Racial Equity. The PHA Campaign is the 2022 Gold Award Winner in the Eco-Champions Ecological Awards. Sonday was nominated for the Mail & Guardian Greening the Future Award