JOHANNESBURG - A credit rating to junk status, little or no job creation, less foreign investment and lower economic growth have been highlighted by some economists as among the probable negative economic effects of amending the Constitution to allow for the expropriation of land without compensation.
Economist Mike Schussler said the debate and public hearings about expropriation of property without compensation had created more policy uncertainty and the country would be unable to create jobs in this environment.
Schussler said businessmen and investors, including foreign investors, did not know what was meant by it and South Africa was putting up another barrier to investors when it should be bringing down these barriers.
The terms land and property have both been used in the debate on expropriation without compensation. Schussler said the definition of property could include intellectual property, resulting in people questioning why they would register anything in South Africa.
He said there was a need to look at the restitution and redistribution of land, but if the government really wanted to address the inequality of wealth in South Africa, they had to look at the traditional areas. “You cannot have something like kings and queens in Europe in 1300 who decided everything for the people who stay on that land and those people have got no say,” he said.
Schussler added that there was already a lot of wealth in South Africa, but a way had to be found to unlock that wealth, which meant giving people rights.
Economist Roelof Botha told a recent PPC breakfast event that if South Africa wanted to develop the food and agriculture value chain, the first thing that was required was property rights.
Botha said there were much smarter ways to deal with the necessity for land reform than expropriation of land without compensation.
Latest survey
He referred to the latest survey by the SA Institute of Race Relations survey, which revealed that only 1percent believed land reform should be a priority of the government.
Botha said this was exactly the same percentage to this question as an Afrobarometer survey among 50000 respondents in 36 African countries.
He said people wanted jobs, decent clinics, good schools, good qualified teachers, water and a reduction in crime.
Botha said the resolution passed in Parliament to appoint a Constitutional Review Committee to consider the amendment of the property clause in the Constitution stressed that a change in ownership must be sustainable and must not cause any harm to the agricultural sector or the economy.
“It’s impossible to take somebody’s property without any compensation and not damage the economy,” he said.
Botha highlighted the damage that could be caused to the economy if expropriation without compensation affected the agricultural sector.
He said the agricultural value added in South Africa in 2015 was R84billion and it only contributed 2percent to GDP.
But he said this R84bn became R1.65 trillion once it was put through the entire supply chain, including retail, wholesale, restaurants, transport, logistics and financing.
“You touch that R84bn with policy uncertainty and it flows through the whole economy, which is the reason we are currently growing at annualised rate of roughly 1.5 percent and not 5percent as it should be,” he said.
Cas Coovadia, managing director of the Banking Association of South Africa, said there had not been any policy decisions taken that expropriation of property without compensation would apply to anything and declined to comment on the possible impact on the banking sector if the Constitution was amended.
Coovadia said the association had given input to the Constitutional Review Committee, but there was a process that was still under way. He said the association was not going to have a public debate on its submission until it had engaged with the committee.
Coovadia said that would happen as soon as the committee was ready to consider all of the ramifications and to invite inputs on the submissions the association had made.