Kruger confirmed that Ford owned the properties on which its manufacturing plant in Pretoria and engine plant in Port Elizabeth were built and had 130 dealers, including dealers in neighbouring countries. He admitted it was unclear how far-reaching expropriation of land without compensation would be and whether it would also have an impact on the retail environment.
Kruger believed it would be able to mitigate the impact through the right level of engagement with government. He said the total impact on Ford’s value chain and not only its plants needed to be understood. “We hope it will not come at the expense of producing goods and services and economic activity. It will not make sense to remove a plant that is producing cars, parts or components,” he said.
Azar Jammine, the chief economist at Econometrix, said expropriation of land without compensation would be a challenge and hoped the rhetoric about the issue did “not upset foreign investment too much”.
Jammine told a Ford breakfast that so far it did not appear the issue has had too negative an impact. “If you look at the rand, it’s still very strong. It hasn’t been negatively affected at all by all this talk about land expropriation.”
“Why? Because international investors now see South Africa as the primary turnaround situation and, in a world that is awash with liquidity, international investors are looking for opportunities where they can get more than the 1percent or 2percent (return) they can get overseas. South African assets now suddenly loom as quite an attractive option, notwithstanding all the risks around that,” he said.
Jammine said the ANC had voted in favour of expropriation of land without compensation to pull the rug out from under the support base of the Economic Freedom Fighters.
He said ANC president Cyril Ramaphosa had immediately on the same day as he was elected stressed it needed to be done carefully and not in a reckless way that jeopardised food security and economic stability.
Jammine added that the correlation between South African and world economic growth was still intact, but the sad part was that the gap between the two had got bigger, although they still followed the same pattern.
There was optimism the world economy would continue to do quite well and because of that the South African economy would see some improvement over the next few years.
But Jammine warned that investors needed to be careful because the world economy was “on a very edgy footing". "For the last decade huge increases in liquidity have been pumped into the world economy by the central banks, which has resulted in a massive boom in share prices rather than real economic activity. The concern is that this is an edifice waiting to blow itself out.
“If that happens, suddenly this wonderful appetite for risky assets like South African assets might disappear. Then you have a very sharp fall in the rand, inflation rises, interest rates rise and the economy slows down,” he said.