The Long-Term Economic Benefit of Financial Compensation Distributed by the South African Land Restitution Commission

Abstract

After the fall of apartheid, one of the new democratically elected government’s priorities was to ensure that blacks and other previously disadvantaged groups were compensated for property that the apartheid and colonial era governments ruthlessly expropriated without just compensation. Section 25 of the South African Constitution requires the state to compensate all those dispossessed of land after 1913 because of racially discriminatory laws or practices. The Restitution of Land Rights Act provides the legal framework for the fulfillment of this constitutional obligation. One central objective of the Act is to promote sustainable socio-economic development.

Using data from 80 semi-structured interviews, this study investigates whether the financial compensation that South African has paid to people evicted from urban areas has increased their net assets or if the compensation was consumed and had no sustainable economic impact. Existing quantitative studies done by economists provide a narrow response to this important research question — people are more likely to save larger restitution awards while smaller awards are consumed and have no sustainable economic impact. This qualitative study gives deeper insight into the complex circumstances under which restitution awards have had an enduring economic impact.