Property rights essential to uplift and empower South Africans – IRR

Institute says the threat to such rights are the first major impediment to growth

Property rights essential to the investment and growth needed to uplift and empower South Africans – IRR 

19 August 2020

As long as property rights are under threat, foreign investors will continue bypassing South Africa and putting their money into markets ranging from Ethiopia, Zambia and Nigeria to the United Arab Emirates, the United States and United Kingdom.

Reversing this risk, the Institute of Race Relations (IRR) argues in its latest policy document, Growth & Recovery: A strategy to #GetSAWorking (https://irr.org.za/reports/occasional-reports/growth-recovery-a-strategy-to-getsaworking), can be achieved by abandoning expropriation without compensation (EWC), and increasing protection to foreign investors.

“Taking these steps will send a clear signal that the government is serious about policy reform and attracting the fixed investment needed to drive growth and jobs,” the document says.

Growth & Recovery: A Strategy to #GetSAWorking sets out practicable steps South Africa could take, without incurring any significant cost, to achieve a post-Covid-19 economic recovery, and reach growth levels of 7% by the end of the decade.

The document identifies four key steps to achieving this:

- attracting direct investment
- maintaining and expanding infrastructure
- creating a climate favourable to job creation and
- implementing a programme of widespread economic empowerment instead of elite enrichment

But it identifies the threat to property rights as the first major impediment to growth.

Writes author of the report, IRR Chief of Staff John Endres: “The growing threat to property rights is particularly evident in new laws and policies affecting land and real estate, agriculture, mining, oil and gas, the private security industry, private healthcare and the country’s intellectual property regime. The combined effect of these changes, as we know from our daily experience in consulting to investors, is to deter capital investment by both foreign and domestic investors. Their preference is to put their capital into other markets, including Ethiopia, Zambia, Nigeria, the United Arab Emirates, the United Kingdom, and the United States of America. Only firm action to secure property rights will make it possible to reverse this trend.”

To do so, South Africa should

- As a first priority, abandon EWC by scrapping nil compensation clauses, both in the proposed constitutional amendment bill and the Expropriation Bill of 2019B bring the Expropriation Bill into line with the Constitution under a revised bill similar to that put forward by the IRRB and abandon the idea of the state’s taking custodianship of all land, both urban and rural; and
- Rework the Protection of Investment Act of 201J to increase the protection on offer to foreign investors, in particular enter into new Bilateral Investment Treaties (BITs) with major trading and investment partners that incorporate standard provisions found in South Africa’s BITs with countries such as China, Cuba, Iran and Russia.

Said IRR Deputy Head of Policy Hermann Pretorius: “If South Africa cannot attract direct investment, whether domestic or foreign, we cannot hope to achieve real, sustainable economic growth. If this growth cannot be achieved, South Africans cannot hope to see or experience the fundamental and broad upliftment economic growth and prosperity would bring. This simply is not good enough.

“As long as property rights remain under threat from the SACP-ANC government, blinded by ideology, the deadly pandemic of systemic poverty will overwhelm the country and snuff out its potential to become a great emerging economy success story.”

He added: “Let there be no uncertainty: were property rights guaranteed by the government today, we’d immediately see investor sentiment and the economic hopes and opportunities of millions improve.

“If the Tripartite Alliance callously opts not to follow this pro-growth route, no one will fall for its act of playing the victim of global circumstances while simply being unwilling to do the right thing and act in the interests of all South Africans, who are desperate for a real chance to make a living.”

Issued by Hermann Pretorius, IRR Deputy Head of Policy Research, 19 August 2020