Eyes open for 2019 - News24

Terence Corrigan.

"Watch this space": a tagline of sorts for President Cyril Ramaphosa's State of the Nation Address(SONA). It's a mark of aggressive optimism, announcing that momentous things are in the works, even if they remain momentarily unseen. For a country desperate for good news, it is an intriguing message.

Certainly, some of what the president had to say was to be welcomed. His comments on the crisis at Eskom, for example, suggest at least that the severity of the problem is understood. And addressing the distressingly poor reading capabilities of the country's children is long overdue.

But if one issue has to define the president's performance, it is on the economy. In lucid and direct language, he stressed that the priority must be to get the economy on track: "Above everything else, we must get our economy working again. I call upon every South African to make this cause your own."

In his opening remarks, he referred to the past year, saying that the focus had been on accelerating growth and attracting investment. But wearing a brave face cannot disguise the reality that 2018 exemplified rather than repudiated the country's crisis. Not only was growth anaemic – it's estimated to have fallen below 1% for the year – but the JSE suffered a net outflow of some R123bn.

Key to understanding this has been the commitment of the ruling party – and by extension, the government – to introduce a policy of expropriation without compensation. In a recent issue of the Financial Mail, respected economist Azar Jammine argued that it was this policy debate that had wiped out the prospects of turning President Ramaphosa's "New Dawn" into an economic windfall.

He is not alone in this. An analysis conducted last year by Roelof Botha of the Gordon Institute of Business Science and Ilse Botha of the University of Johannesburg argued that the prospect of such a policy turn has had a negative impact on investment. Similar assessments are made by agricultural analysts. And we at the Institute of Race Relations have heard this repeatedly from businesspeople, local and foreign.

At the recent Mining Indaba, the president himself said that "investors must not be scared their investments and assets will be taken away from them".

To have to use such a platform to deny an intention to seize investors' assets indicates just how serious a problem this issue has become for the country and its investment efforts.

The SONA address provided no new direction on this. In keeping with the posture of the past few months, the idea of expropriation without compensation was kept discreetly tucked away. It was only mentioned explicitly once. The preferred formulation now is 'land reform'. This is rhetorical sleight of hand: it is expropriation without compensation, the abridgement of property rights and the expansion of the discretion of the state, which is at issue, not land reform.

But the president explicitly confirmed that the Bill of Rights would be amended (on the back of a very questionable public participation process, whose outcome he had pre-empted in his late-night address on 31 July last year). This in itself will be of grave concern, since it is never an inconsequential matter to meddle with the fundamental principles structuring a country's governance.

This is all the more so when – by the president's own admission – doing so is not necessary to enable the relevant policy goal. The precedent is a sinister one.

Those hoping for clarity on how expropriation without compensation would be implemented (and damage contained) would have been disappointed. Journalist Lisa Steyn had speculated a few days earlier that he might use SONA to do so, adding "Investors will surely hope so — without an implementable plan, it is just comforting words". This was not forthcoming. Uncertainty – the cloying accompaniment to doing business in South Africa – remains.

Though there is no guarantee that when certainty emerges it will be of the sort that promotes business confidence. Expropriation without compensation is inherently unsettling as it strikes at the foundations of any investment decision, the security of assets.

The analysis conducted by Roelof Botha and Ilse Botha argues that – with experiences elsewhere as a frame of reference – expropriation without compensation would plunge the country into a severe recession. Billions of rand in investment would be lost, and over a mere two-and-a-half-year period, job losses could amount to over two million.

They remark: "This study confirms imminent socio-economic disaster for SA in the event of expropriation without compensation being pursued. It is clear from international evidence that a strategy aimed at land reform should be based on market principles and pragmatism, with a detailed and comprehensive land audit as starting point."

SONA confirmed only a determination to continue on this path, with no firm assurances for the security of investments and no visible plan to mitigate the inevitable fall-out that expropriation without compensation – whether in policy debate or in implementation – will produce. 

And so it is doubtful that under these circumstances – circumstances that exist not only because of impersonal structural conditions, but because of ideologically infused choices that have been made – South African can achieve the economic lift-off it so desperately needs.

"Watch this space." Indeed. Though in the coming year, we might not like what turns up in it.

- Terence Corrigan is a project manager at the Institute of Race Relations. Readers are invited to join the IRR sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).

https://www.news24.com/Columnists/GuestColumn/eyes-open-for-2019-20190210