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A MORE LEVEL PLAYING FIELD

30/06/2022 08:24:00 Chris Morgan

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The factors of production – bear with me, the sports pages can wait – are simply the contributors to what produces your food, motor car or hair restorer.

Incidentally, on the last mentioned item don’t believe the adverts; I’ve tried them. The factors of production are split into fixed and variable. The variable ones – raw materials, labour, power, fuel – are those that are increased or decreased according to production needs. A fixed factor of production is one that cannot, at least in the short-term, be increased or decreased according to need. This includes buildings and machinery. And the one that is fixed, in both short and long-term, is land; also the most sensitive and hotly contested, especially in small countries. There endeth the economics lesson.

Land

In urban areas of most countries the ownership of land is taxed, the revenue being, in the English-speaking world, known as ‘rates’. These are, in Eswatini, set by local governments in accordance with categories of property ownership and utilisation. In Mbabane, for instance, a rating percentage is applied to assessed property values, depending on whether the property has been developed, and is for commercial or residential use. This article is not about the whys and wherefores regarding city rates other than to mention that your rates bill is a tax bill. Like with central government, your tax payments are not identified as being allocated to a specific service. You may live along a road full of potholes, with unsightly neighbouring building developments and only half the street lights working. You pay tax which is a contribution towards the total of local government costs, regardless of what you actually get. Like it or lump it.

Access

As a property owner within the city boundary, you have access to the city, its roads and its services. But, there again, so do people outside the urban areas of the country, as well as access to the national roads and bridges in their area; and not paying any property tax. Therein lies an anomaly and a substantial potential source of income for the country. I emphasise the word ‘country’ because it should not be revenue for central government other than as an intermediate recipient. Outside urban areas there is plenty of land; and vast areas lying unutilised. A substantial proportion of that is Swazi Nation Land which is an entirely separate issue, though hopefully with modernisation, such as long leases, planned in order to empower emaSwati to make the transition from subsistence to commercial agriculture. One also hopes that the huge tracts of previously unused government-owned land are now being productively utilised.

This article is only about a separate category – title deed land in those rural areas. And there are stacks of it, with the owners not paying a cent of property tax, and many of them not even living in Eswatini – partly a historical anomaly – and certainly not using the land. That doesn’t make any sense at all. We should have a tax on title deed land outside urban areas. Within the agencies of central government in this kingdom, there will be records of who owns what around the country. A basic ad valorem tax per hectare could be applied to title deed land, with a substantial discount – even exemption – for property being utilised for productive or socially-oriented activities, which can include agriculture and other commercial development, nature reserves, churches and schools.

The revenue collected by the central government could then be allocated for the purposes of small, medium and micro-scale enterprise (SMME) development in the respective rural areas, perhaps through tinkhundla offices. Close to 70 per cent of the population lives in such areas, so there’s a huge degree of isolation currently endured by them. They need empowerment to pursue commercial activities. The money can be used to build estates of small industrial and commercial units. This will not only encourage greater decentralised concentration of business activity but also more compact residential development – a longstanding dream of this country. What follows then is commercial efficiency and the economies of scale within such concentration, with electricity, water and other supplies provided more cost-effectively.

This is not brain surgery or rocket science. But, at the same time, you can’t just press a switch and the process is activated. It requires a project, though not one to gather dust on shelves after it’s completed. And even when implemented, in the initial development stages there can be anomalies in applying a flat rate per hectare; that can be resolved. The fundamental objective is to utilise the available land in the country for the benefit of the people of the country, especially the poor and non-empowered. This article is identifying a source of funding that can bring real opportunity to the rural folk of Eswatini; one that ticks every box in sight. I won’t be popular with some for offering this suggested initiative, but that doesn’t matter. It’s for the greater good.