Expropriation Bill could fail many more than just land-owners – BLSA CEO

Urgent certainty needed around property rights in SA says Busi Mavuso.
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Property rights can sometimes become a political football, pitching those with assets against those without. In the heat of the argument, we can lose sight of the fundamental role they play, not in how assets are distributed but in how they are created. It has arguably never been as important as it is now to encourage investment in the kinds of assets that will transform our economy into a greener, more digital one that is fit for the future.

As we continue to debate amendments to the property clause of the Constitution and the Expropriation Bill, we must not lose sight of one undeniable fact: people don’t invest in assets they aren’t confident that they will have the rights to own. And if people don’t invest, economic growth doesn’t happen.

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The Expropriation Bill is perhaps the most consequential of the legislation and amendments being considered. It goes far beyond the main driver of the reform: land reform. Indeed, my biggest issue with the Expropriation Bill is that it explicitly defines property as “not limited to land”. This means everything is up for grabs: from moveable and financial assets to intellectual property. While the bill puts in place several principles underpinning justice and equity in its application, for an investor considering a jurisdiction for investment, it creates uncertainties that add to the risks. We cannot know how organs of state will interpret the law or how courts will rule. The bill imposes no penalties for inappropriate or corrupt attempts to expropriate property that would provide some balance against the risks.

I cannot see what the upside is to the all-encompassing definition of property in the bill. It does nothing to advance land reform and merely creates unacceptable risks for investors.

One of the consequences I foresee is investment in intellectual property. This is meant to be an area we are encouraging in South Africa. Last year the report of Presidential Commission on the Fourth Industrial Revolution (4IR) was gazetted in parliament. It noted: “As South Africa looks to mobilise capital for its 4IR strategy, it needs to address policy and regulation challenges relating to policy uncertainty and governance; alignment of government efforts; exchange control and intellectual property laws that attract investment…” Yet here we are contradicting this advice in the Expropriation Bill. We are creating a law that weakens intellectual property rights and will discourage investment.

Reading the bill makes clear that its creators have land reform in mind. The overly wide broadening of the definition of property appears arbitrary. There is no example of the conditions under which it might be appropriate to expropriate intellectual property or financial assets like shares. So why create uncertainty for investors?

There is a battle on to attract investment into start-ups, a battle that South Africa has been losing. Despite the relative sophistication of our economy, several studies have shown we are losing the battle to raise funding for venture capital investment. A report by Partech Africa ranked South Africa fourth behind Nigeria, Kenya and Egypt on the continent for investment in new start-ups that focus on digital technology in both 2020 and 2019.

While on the one hand we have recognised that our economy is going through fundamental change as digital technologies change the way we do everything, on the other we are frustrating investment in building the new technologies that will maintain our competitiveness.

Our economy is changing profoundly. The assets that matter in the future will be intangible – software and other knowledge assets that companies invest in to develop, with long-term payoffs that are difficult to predict. The entrepreneurs who will create such companies are globally mobile. Countries like Rwanda and Kenya are building highly attractive policy environments to drive software start-ups in an effort to ensure they are homes to future African Googles or Facebooks.

South Africa has produced world class tech companies and continues to do so. But to turn that trickle into a torrent of innovation, we need a legislative environment that entrepreneurs can completely trust to protect the intellectual property that they will spend their lives creating. The Expropriation Bill fails to support such an environment.

As we continue to debate on the right balance to strike, let us keep the advice of the Presidential Commission in mind and ensure we create an environment that will attract investment and encourage entrepreneurs to build the intellectual property we will need.

S&P Global Ratings decision to leave SA’s rating unchanged is a welcome relief. I wrote in Business Day that it’s important to bear in mind that the market conditions in our favour are short-term. We need to boost the country’s longer-term prospects and the only way to do that is to reform the structural weaknesses in our economy.

As business we welcome government’s push to boost localisation, I wrote in Fin24. However, a research report commissioned by BUSA and BLSA into localisation raises concerns related to lack of capacity, which will take some time to build. The localisation efforts should create jobs and not lead to increased prices in products manufactured locally. Furthermore, the combination of rising electricity costs and unreliable power makes it extremely difficult for any local producer to compete with cheaper imports.

Busi Mavuso is CEO Business Leadership South Africa.

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Don’t stress, it will just destroy the country and economy.

Thank you for letting know, now I will definitely not buy a new house.

As a speculator, I think you are specifically targeted! Although anyone in any business is effectively a ‘speculator’, from someone buying bread for resale, or used cars, or even land. Speculators provide liquidity to a market. I’m not sure what our esteemed government hopes to achieve with this bill.

Great wealth for the politically connected.

This is the one item that WILL result in civil war !!!!!

And why do you think there is a simultaneous drive to amend the Firearms Control Act?

There are always peaceful solutions that are far more effective than wars, but in many instances, the most vulnerable party prefers to fight.

The firsts rockets were fired from Gaza. Iraq invaded Kuwait before the Americans retaliated. Local farmers won’t use rifles to fight land invasion or expropriation. They will employ the natural forces of wind and fire that farmers know so well. Informal settlements are extremely vulnerable to these forces of nature. People who live in glass houses should not throw stones, so to speak.

That thought has been voiced many times in the platteland.

Having been around both the “old and so called new” South Africa I moved my software IP, trademarks and source code off shore some time ago. I have never had any confidence in the politicians in RSA as they flip flop between policies based on the day of the week or how they are feeling for the day (in fact this applies to most countries in Africa) – all you have to do is follow the trajectory of our one time ex ANC Youf prezzie Juliuuuus!

I’ll take a guess why intellectual property and the like is included. Nigeria actually showed us the way via MTN. It’s just an elaborate way of opening up new legitimate ways of stealing; in their case by fining businesses. In our case it is clear that land expropriation can only take you so far (just look at Zim). Once land is expropriated and stops producing anything of value (and loses its intrinsic value), then it becomes worthless, but if you can get your hands on the value of moveable, financial and intellectual property (ownership of which actually mostly resides outside of the country) then you’ve got a new source of income, without having had to do anything to deserve your cut. Stupid and shortsighted, but clever, if you know what I mean.

The recent history of agricultural land describes the true intentions of these socialist looters. The state nationalized everything beneath the topsoil when it expropriated mineral rights and water rights. Then they passed the security of tenure laws that practically expropriated farmworker housing. They are slowly expropriating the value of farmland with municipal taxes, Capital Gains Tax, and estate duties. They tax the profitability of productive land with income tax, while they contribute nothing to mitigate the risks in agriculture.

The state threatens the viability of the agricultural sector. They have been expropriating land in various degrees over the last 27 years. Why will they stop now? This is only the beginning.

I would go even further and say that there are zero SA investment opportunities that can, after tax, beat inflation.

Thank you for your insightful comments as always Sensei.
With more countries (and institutions) around the globe facing financial troubles (going into further debt, money printing, covid effects, etc) , would we not see more of them starting to employ various strategies to curtail these problems? (various tax increases, tapping pension funds, bail-ins / bail-outs)
There can’t be many countries around nowdays that would be able to avoid these; except maybe the extent?

Dismantling the economy in leaps and bounds.

Ho hum same old story, elections coming up, lets talk land, get the votes and stay in power.

The clowns have made the rural areas so inhospitable no one wants to live here. We as farmers now have no doctors, no schools, no banks, no hospitals in our little towns. The ANC drove all our labour to the cities after closing farm schools and introducing minimum wages. We can live with that, because it will keep the new land “owners” to a minimum.

I had an interesting conversation with a farmer last week regarding expropriation which boiled down to the farmer basically saying: “Let them come and try take my farm!”. I tried to explain that it will not simply be a band of hooligans who will try and evict him, but that with this law the government will have the law on its side and can then simply send the police and if need be the army to carry out the eviction as the farmer will be the one outside the law.

This is something that I think has not dawned in many peoples’ minds regarding EWC. That in fact this will be lawful and that no police / justice system will assist. In fact if other people assist those expropriated to resist, those people themselves will be open to prosecution.

Also in my opinion the reason the government is not restricting the definition to land is to include buildings, improvements, implements, etc. when expropriation will take place. In example when a farm is expropriated, all buildings, implements, vehicles, crops will be included in the expropriation. This means that if you lets say implement a scorched earth policy when your farm is expropriated you would be open for prosecution as you technically destroyed state property.

Speaking to my farm staff and others, they are also against it. Their families in towns and cities have already told them they are not moving back to the platteland to live as they said “like farm boys”, they have told my staff they want land in the cities.

The idea that they could take half of a large Sandton property came from them.

The sensible and far sighted farmer will ramp up his production loans and send money offshore; now if not done already. This is what saved some Zim farmers, sell flowers in Europe and bank most of the cash there; borrow money in Zim to finance a new crop. Repeat. Mugabe seizes the farms; the bank squeals and the farmer moves on, zero loyalty to a corrupt regime; ZANU PF or ANC. Don’t say you have not been warned.

The New York Times, the Economist, the Financial Times, and other international respected news media must be made aware of the Corrupt ANC’s attempts to seize private property in S.A. That’s the only way that the theft may be prevented. Appealing to reason will not stop the promulgation of legalisation of the theft process.

Another own goal. Maybe the worst one ever. A defining moment when SA inc chooses the low road to a failed state

The irony that arbitrary dispossession is going to be used to rectify arbitrary dispossession is lost on most people.

Fiddling with property rights is like fiddling with motherhood – you just don’t do it.

EWC or not South Africa is screwed. As an economic force, South Africa is finished. It has attained what prominent historian Niall Ferguson calls a ‘stationary state’. Part of this state is ‘..the ability of a corrupt and monopolistic [political] elite to exploit the system of law and administration to their own advantage’. In my view, South Africa is one of the greatest tragedies in human history. Black people the world over should be so disgusted with the ANC.

End of comments.

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