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Monday Sep 15, 2014

'Legislation to limit foreign ownership of land is a blunt instrument'

There's no doubt that the timing of the announcement about the government's plans to limit foreign property ownership is bad, and has done nothing to improve investor sentiment or business confidence, says a property executive.

'What is worse, though, is that Rural Development and Land Reform Minister Gugile Nkwinti has never really explained the thinking behind the proposed new land legislation in public, even though it has been on the cards since at least 2011, so we don't actually know whether the reaction it has engendered is too harsh - or perhaps not harsh enough,' says Berry Everitt, managing director of the Chas Everitt International property group.

'What if, for example, it is not really motivated by what we in the property industry tend to think of as 'foreign buying' - that tiny but high-profile percentage of home and farm sales a year that is mostly concentrated in a few high-end areas of the Western Cape and Johannesburg - but by something else entirely?'

Writing in the latest Property Signposts newsletter, he says: 'In my opinion, it is quite possible, for instance, that the real drivers of this legislation are two quite different concerns - the first being South Africa's food security over the next 15 to 20 years, and how this could be threatened if a large percentage of the country's productive farmland was to be acquired by foreign companies or even countries intent on using it only to grow food for export.

'Certainly, this type of corporate 'land grab' is already happening all over Africa as certain rich countries and big agribusinesses prepare to meet - and profit from - the global food shortages they see coming as a result of climate change. And last year, a chief director in the land reform department, Sunday Ogunronbi, did say at a meeting of farmers and farmworkers that the government was 'determined' not to allow that to happen here.'

Second, says Everitt, the new land legislation that will restrict new foreign investment in South African property to a 30- or 50-year leasehold ties in strongly with the fact that the government has just opened a new five-year window for land claims, and is also revisiting the question of how it will acquire (expropriate) and distribute land.

'Obviously, having a lot of land in foreign hands would make this process much more complicated than it already is. Meanwhile, we all know that there are also many, many potential benefits to be derived from foreign investment in property - and other sectors - if these are properly managed.

'We can just look at what Mauritius has done with the money earned from its IRS and RES property investment schemes for foreigners; or at Australia, where foreign investors can only buy into new housing developments... and if we do that, it becomes evident that the legislation being proposed is not only badly timed but a horribly blunt instrument. Surely as Africa's leading nation, we could - and should - find a better way to approach and manage this issue?'

Weekend Argus (Sunday Edition)

    
 

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