Ignoring the writing on the wall – BizNews, 13 May 2015

A handful of Bills, either recently enacted or soon-to-be are floating through undiscussed, stipulating the chopping and changing ownership of long-held land as suits the government, not to mention the dabbling with mining regulations that puts the entire economy under threat. Time to wake up and join the conversation.

By Caitlin Hogg: 

I have long believed that the power that will save South Africa in amongst the struggles we face as a nation is the people themselves. When we don’t like something, we rise up together to meet and challenge it – sometimes a little over-enthusiastically. It is a wonder, though, that the passing of crucial Acts such as those discussed below have not made headline news. For a nation so impressively invested in our politics, we would surely want to place more focus on the legislation side of things. A handful of Bills, either recently enacted or soon-to-be are floating through undiscussed, stipulating the chopping and changing ownership of long-held land as suits the government, not to mention the dabbling with mining regulations that puts the entire economy under threat. Time to wake up and join the conversation. 

By Anthea Jeffery: 

The property rights of all South Africans are under massive threat from five bills recently enacted into law or still in the legislative pipeline. If these statutes are implemented, this will lead to disinvestment by foreign-owned companies and slowed investment by local ones, say some 85% of local business executives canvassed in Grant Thornton’s latest International Business Report (IBR).

Grant Thornton’s IBR report for the first quarter of 2015 examines the views of businesses in 36 economies, including South Africa. For the first time, a new question probed local business perceptions of:

  • the Promotion and Protection of Investment Bill of 2013 (the Investment Bill);
  • the Restitution of Land Rights Amendment Act of 2014 (the Restitution Act);
  • the Private Security Industry Regulation Amendment Bill of 2012 (PSIRA);
  • the Mineral and Petroleum Resources Development Amendment Bill (the Mining Bill) of 2013; and
  • the Expropriation Bill of 2015 (the Expropriation Bill).

The Investment Bill has yet to be brought before Parliament. As first released for public comment, it applies to all property owners, both local and foreign, with property used for ‘commercial’ purposes. Such individuals and firms may receive zero compensation on the loss of their property to the State, provided the Government takes their land or other assets, not as owner, but rather as ‘custodian’ for the disadvantaged. This contentious power has reportedly been deleted from a later version of the Bill, but this has yet to be released.

The Restitution Act provides a new five-year window period (until July 2019) for claiming back land lost under apartheid laws, beginning with the Natives Land Act of 1913. Close on 60 000 claims have already been lodged and another 320 000 are anticipated. Since settling all these claims could cost the State R180bn, the ANC may be tempted to retain the original wording in the Investment Bill. This would allow the State to take farming, mining, industrial, and retail land under claim as ‘custodian’ for claimants and without having to pay any compensation.

The PSIRA bill has been passed by Parliament, but has not yet been signed into law by President Jacob Zuma. It requires all foreign-owned private security companies – defined broadly enough to include courier companies that merely deliver security cameras – to transfer 51% of their ownership to South Africans. This requirement could pave the way for similar indigenisation requirements in other sectors.

The Mining Bill was passed by the legislature in 2014, but has now been sent back to Parliament by Mr Zuma to ensure its constitutionality. Also underpinning this redraft, it seems, is the ANC’s desire to raise the required black ownership stake in mining companies from 26% to “something higher” (perhaps the 49% urged by the party’s Gauteng region). Other changes could increase the mining minister’s powers to impose price and export controls over the minerals needed by the “100 black industrialists” the Government is trying to create.

The Expropriation Bill, which is up for debate before the portfolio committee on public works this month, allows municipalities and all other organs of state at all levels of government to expropriate any number of farms, mines, and factories in the supposed “public interest”. It also threatens the property rights of some 9.7m home-owners (almost all of them black), and the 16.5m black people in the former homelands with customary land-use rights.

Under the Bill, an “expropriating authority” must start with preliminary negotiations on the purchase of the property. But if these fail, the State may then expropriate simply by serving a notice of expropriation on the owner. Ownership will automatically pass to the State on the date stated in the notice, which could be one day later. The right to possess the property will pass to the State soon thereafter, while compensation will be limited to something significantly less than market value. The State will also effectively decide the date for paying compensation, which could be many months later. The Bill empowers the courts to review the compensation payable, but seeks to bar them from ruling on whether the expropriation is in fact valid under the property clause of the Constitution.

Given the content of these five bills, it is hardly surprising that 93% of the local business executives canvassed by Grant Thornton said the measures would “negatively impact” the economy. In addition, 90% said implementation of the bills would slow investment by foreign-owned companies, while 86% warned of slowed investment by local companies too. Some 85% of business executives further cautioned that implementation would result in “disinvestment by foreign-owned companies”.

What is surprising is how little media and other attention has been given to these findings. South Africa’s ratio of domestic savings to gross domestic product (GDP) stood at a paltry 15% in 2014, far down on its all-time high of 34% in 1980.  This low domestic savings rate makes the country critically dependent on direct investment from abroad to help raise the annual growth rate and generate more jobs for the 8.3m South Africans in need of them.

The threat to the economy from these five bills – coming as it does on top of a host of other obstacles to successful business operation – should be front-page news on every newspaper, the lead item in every radio and television bulletin, the main concern of every opposition political party, and the key focus for civil society organisations seeking to reduce poverty and inequality.

Instead, these salient warnings from business are quietly being swept under the carpet. This, of course, will make it much easier for the ANC to adopt and implement these laws – and so precipitate precisely the negative outcomes of which we have been warned.

Dr Anthea Jeffery is the Head of Policy Research, IRR. The IRR has drafted a better expropriation bill, which can be found on its website, together with a two-page overview.