Employers should assist employees to acquire freehold title to land and build houses rather than paying ‘housing allowances’ which are easily misused or consumed.

Tim Bester of Parktown wrote a letter to the editor of Business Day –  State’s property flaw – and this was published this week and can be read by clicking on the link or going to BDlive.   Courtesy of Business Day here is the letter.

AS ECONOMICS students in the ’60s we were taught future personal income flows should be treated as a present-day asset.

The way to convert the future income value into a current asset was by way of borrowing to purchase a house.   Paying off a bond was better than paying someone else rent.   The institutions that facilitated this process were the building societies; independent specialist “savings and home loans” companies.   The financial instrument was a bond.   The bond, in turn, relied on a title deed which served as collateral.

It is widely reported the Marikana miners are given the choice to either live in accommodation provided by the mines or to receive a “housing allowance”.   The amount so paid is reported to be R1,800 a month.   Over a 10-year period this income represents a potential value of R216,000 and over 20 years R432,000.   These cash flows, converted into current assets by way of houses, could surely be used to provide more than “decent” housing.

Why is it that the mining companies, the banks (which now control the housing bond market), local authorities and central government cannot co-operate to facilitate such a solution?   The key, missing ingredient is of course the lack of formal freehold title to an erf of land.   Here, the government is at fault.

Private, inviolate, property rights are a key component of every successful economy, for obvious reasons.   The government should be ashamed that it has failed not only those in Marikana but across SA in this regard.   In effect, it is perpetuating the evil economic and social trap designed by the previous, apartheid government.