The move by the Department of Trade and Industry (dti) to remove a clause relating to classifications of expropriation by the state from the controversial Promotion and Protection of Investment Bill has been met with scepticism across industry.
The expropriation of private sector assets by the state no longer appears in the current Investment Bill draft. Instead, it proposes taking custodianship of assets as an alternative.
Commentators have raised concerns about the department failing to make the contents of the Bill available to the public in its current form.
“We need to be sure of what the actual Bill says, Dr Anthea Jeffery, head of special research at the South African Institute of Race Relations, says.
“It’s possible that, even though the particular damaging clause might have been removed, there may be a similar concept in other wording…. We have been given an assurance about the content of the Investment Bill, but we haven’t been given the chance to see the published Bill,” Jeffery adds.
The initial bill contained a clause which indicated that certain acts by the State would not amount to acts of expropriation. Under this clause, Jeffery explains that if “there is a deprivation of ownership but not a matching acquisition of ownership by the state, then there is no expropriation and so no compensation is payable.”
The state could avoid taking ownership if it acquired property as a custodian for others, she added.
Jeffery says the Investment Bill might still have provisions giving the State, for example, “extensive powers to exercise its sovereignty in all sorts of ways.”
“That kind of provision must still be looked at, as must others to see how much of a risk yet remains in the Bill,” Jeffery cautions.
Unless portions of the Investment Bill have been changed, it will affect almost all properties used for commercial purposes including land, movable assets, and intellectual property rights.
Sidwell Medupe, spokesperson for the dti, says the Investment Bill has been processed by the National Economic Development and Labour Council and is still subject to approval by Parliament. The parliamentary process might be due in March, once Parliament reconvenes, Medupe says, adding that the contents of the bill will be discussed in public once it has reached Parliament.
The change in the Investment Bill is unlikely to be sufficient to restore investor confidence or improve the investment climate, says Jeffery. The Bill was introduced as an alternative to terminated bilateral investment treaties – mainly European countries. Europe is currently South Africa’s biggest foreign direct investment destination.
Director of the real estate and conveyancing department at Bowman Gilfillan, Ronel Straughan, says the Investment Bill wipes out any international protection given to foreign investors. Investors must now revert to the protection offered by South Africa’s Constitution. “The potential of a level of compensation in the event of expropriation is not equal to that accorded under the standards set by the bilateral investment treaties,” says Straughan.
In another twist, President Jacob Zuma in the State of the Nation address on Thursday said: “Foreign nationals will not be allowed to own land in South Africa but will be eligible for long term lease. In this regard, the Regulation of Land Holdings Bill will be submitted to Parliament this year.”
Other bills in question
Government has other legislations which impact property rights, including the amendments to Expropriation Bill of 1975 (Expropriation Bill) and the introduction of the Property Valuation Bill of 2014 (Valuation Bill).
The amendment of the Expropriation Bill extends a clause that a property may be expropriated not only for public purposes, but in the public interest to achieve land reform. All tiers of government now have the power to expropriate.
While the Valuation Bill gives a valuer-general exclusive power to value properties in the event of land reform and expropriation, Zuma said in Sona on Thursday that the process of establishing the office of the valuer-general is underway.
“Once implemented the law [Valuation Bill] will stop the reliance on the willing buyer-willing seller method in respect of land acquisition by the state,” Zuma said.
The Expropriation Bill and Valuation Bill have been passed, but there’s no indication as to when they will be operational.