By Reginald Tachie-Menson

Property rights are absolutely critical according to Leon Louw, Executive Director of Free Market Foundation, who was speaking at the Johannesburg leg of the 2011 Rode Conference on Wednesday.

"This is not my opinion, it is fact," said Louw after demonstrating the statistical correlation between property rights and prosperity within a country.

Louw began by revisiting the Right to Property. In it he highlighted, that as it is phrased, it protects those who own property and prevents "arbitrary deprivation" even through law.

However he acknowledged that this law may be problematic in that it protects those who own property currently and not those who have been deprived already.

With nationalisation, there is an idea that land already belongs to "the people" so there is no requirement for compensation. Big and "strategic" businesses are to get part compensation.

In terms of the property rights index, however it is clear that countries with more property rights outperform countries with fewer property rights, Louw said.

When one examines historical examples of countries who have delved into the nationalisation of mines there has been a consistent drop in production, he added.

Louw noted that in Venezuela mining production reduced by 50%, in Chile it reduced 70%, in Zambia the figure was 75%, in Ghana production fell 70%, and in the DRC, mining production almost ceased, plummeting 95%.

The only exception has been Botswana which technically is not nationalised, according to Louw. The government in that country rather operates as a sleeping shareholder, where operations and strategy are handled privately and government benefits from its holding in the company.

He said in terms of economic prosperity, rule of law comes in as the most important aspect of a country, followed by property rights according to the international property rights index (IPRI).

SA came in at number 29 in 2008 out of 115 countries and has since dropped to number 32 out of 129 countries. Louw said SA's place at the higher end of the scale is encouraging, but this needs to continue for economic progress.

Source: I-Net Bridge