The State of the Nation Address by HE President Jacob Zuma to a joint sitting of Parliament of Parliament of the Republic of South Africa, Cape Town.12/02/2015 Kopano Tlape/DoC.

Nicolette Dirk and Aly Verbaan

President Jacob Zuma’s bombshell at the State of the Nation address that “foreign nationals will not be allowed to own land in South Africa but will be eligible for long-term leases” will lead to a fall in foreign investment and hurt tourism, property industry leaders warn.

Zuma did not elaborate on the reasoning behind the decision, and many in the industry are bemused by the pronouncement.

He said in future foreigners could lease land only on a 99-year basis.

This is the case in several countries like Australia, Thailand, Cambodia, the Philippines, Kenya, Ghana and certain South American countries.

Tourism Minister Derek Hanekom told Sapa yesterday the impending ban would not affect the rights of current foreign land owners and should not be seen as a threat to foreign investment.

He did not discuss what effect it would have on revenue from tourism should foreigners prefer not to lease on a 99-year basis.

He said existing title deeds were not under threat and existing land owners would not have to convert their title deeds to leaseholds.

Dr Andrew Golding, chief executive of the Pam Golding Property Group, disagreed with Hanekom substantially, saying: “Every time this issue rears its head, it further serves to erode confidence in the country as an investment destination – mainly as a consequence of uncertainty.

“And while nationally this is still a proposal, the fact is that by its very nature it erodes foreign direct investment appetite, and potential investors who may be weighing up South Africa versus a number of other destinations will potentially simply choose to invest elsewhere.

“Certainly it is worth reiterating that the level of foreign buyers of residential property in South Africa is so insignificant relative to the total market, but the benefits of foreign investment in property in this country and the knock-on effect of that investment far outweigh any perceived negative.

“Leasehold is not a conventional South African methodology and would require significant understanding and implementation of dramatic changes to current property practice, not to mention the question of whether or not this is a constitutional issue as well.”

DA spokesman for rural development and land reform Tsepo Mhlongo slammed the proposal as a populist gimmick ahead of the 2016 elections, and an attempt to divert attention from the ANC’s dismal track record in job creation and land reform.

“With fewer foreigners being able to buy land, it will also impact on job opportunities, which are driven by foreign investment,” Mhlongo said.

“Any economic sector depends on investment to drive its expansion and sustainability, and this proposal not only caps land ownership, but also caps investment and job creation.”

He said the proposal lacked any real basis in researched data and failed to address the true cause of slow land reform.

Statistics indicate that only about 3 percent of all property is foreign-owned. Many foreigners also sell their South African property annually, which may even take foreign buying into negative territory.

Lightstone data confirmed this, showing that while R9.7 billion worth of property sold to foreigners last year, about R11.3bn sold out of foreign hands, leaving a negative net effect of R1.6bn.

Samuel Seeff, property group Seeff’s chairman, said: “The reason for wanting to restrict ownership, and who this is meant to benefit, is rather difficult to gauge.

“It sends the wrong message to investors and puts undue pressure on the property market.

“Certainly, as far as privately held residential property is concerned, the wish to restrict foreigners seems to be more about politics than land redress.”

According to Propstats, foreigners bought 456 (R2.1bn) out of a total of 10 321 (18bn) properties that sold across the entire Cape last year, and Seeff said “even across the richest and most expensive residential estate strip favoured by foreigners – the Atlantic Seaboard and the City Bowl – only just over 10 percent of all sales last year were to foreigners”.

“In fact, the two highest prices ever paid for residential property were both South African bought.

“A Capetonian paid R190m for a Clifton apartment in 2013, while a Pretoria businessman paid R113m for a penthouse at the One&Only at the Waterfront.”

He added that of the 51 most expensive properties sold last year, only eight were sold to foreigners.

Furthermore, “making foreign buyers feel unwelcome is likely to have a knock-on effect on tourism, especially in the Cape where it is a vital driver of the local economy”, Seeff said.

“If foreigners are made to feel unwelcome they, along with their friends and family, are likely to start looking elsewhere for their annual holidays and winter escapes. Tourism is vital for the economy and the biggest multiplier of jobs. That is direct foreign investment.

“Then there is the residual income that government receives in the form of rates and taxes. We would rather encourage government to engage with industry experts before making statements that do little else other than to upset the market and create uncertainty. Especially considering that we are talking about a paltry 3 percent of property at best.

“If government feels strongly then, yes, restrict the sale of government- owned land rather than interfere with the free market principles of willing buyer and willing seller,” said Seeff.

Cornelius Jansen van Rensburg, AfriBusiness chief executive, said should foreigners be limited to leasing property, it would limit their property rights.

He said AfriBusiness planned to oppose any effort to limit property ownership.

The organisation’s campaign will take place by means of legal action.

“Economically, the Zuma government has lost its GPS signal. By destroying property ownership the country is sent in the wrong direction and will decrease general investment trust. All the government’s other plans, policy proposals and good intentions are actually declared null and void against the background of actively undermining property rights,” he said.

“The announcement on the limitation of property rights was the real low of President Zuma’s speech.”

Zuma said the legislation would be regulated by the Regulation of Land Holdings Bill, which would go to Parliament this year.

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