SA pays ‘terrible economic price’ for land reform
CAPE TOWN – The Institute of Race Relations (IRR) said on Tuesday that the government’s push for expropriation without compensation was making South Africans poorer.
The rand had a nasty reaction to the growth data after breaking through R15 in early trade.
The IRR said in a statement that the economic growth numbers released by Statistics SA (Stats SA) reflected a number of factors including investor fears that the government wished to persist with plans to seize property and not pay for it.
The IRR has led a global and domestic lobby against expropriation without compensation in order to put pressure on the South African government to abandon its expropriation plans.
Stats SA data showed that the economy contracted by 0.7 percent in the second quarter of the year after contracting by 2.6 percent in the first quarter. The sector which saw the biggest decline was agriculture, forestry, and fishing, which declined by nearly 30 percent in the second quarter.
Peregrine Treasury Solutions' corporate treasury manager, Bianca Botes, said the domestic currency slipped to R15.12 a dollar after news broke.
“The figure speaks to the lack of economic activity, partially driven by policy uncertainty. Structural issues remain prevalent, while investment in manufacturing and development has been hampered by uncertainty regarding the mining charter, independence of the SA Reserve Bank and land redistribution.
“The economy remains lacklustre, and the rand is struggling to gain any meaningful momentum towards stronger levels as the emerging market crisis and subdued local performance weighs heavily on sentiment,” said Botes.
By comparison, emerging markets are expected to average economic growth rates of around 5 percent this year.
IRR chief executive, Dr Frans Cronje, said, “Unemployment is the single greatest driver of poverty in South Africa and South Africa’s unemployment rate is a multiple of emerging market norms. Short of economic growth rates approaching 5 percent, South Africa has little prospect of lowering the unemployment rate.
“Hence anything that undermines economic growth keeps people poor. Far from empowering anyone or righting any historical wrongs expropriation without compensation is exacerbating - and will continue to exacerbate - poverty, and worsen prospects for poor people.”
Investor fears that the government was committed to push ahead with its expropriation policy explained much of the weakening in the rand which had given up more than 25 percent of its value since the beginning of the year, the IRR said.
- BUSINESS REPORT ONLINE