Land Plan: Time to Take a Much Closer Look

There is little doubt that the timing of the latest announcement about government’s plans to limit foreign property ownership in South Africa was bad, and has done nothing to improve investor sentiment or business confidence.
 
“What is worse, though, is that Rural Development and Land Reform Minister, Gugile Nkwinti, has never really explained the thinking behind the proposed new land legislation in public, even though it has been on the cards since at least 2011, so we don’t actually know whether the reaction it has engendered is too harsh - or perhaps not harsh enough,” says Berry Everitt, MD of the Chas Everitt International property group.
 
“What if, for example, it is not really motivated by what we in the real estate industry tend to think of as ‘foreign buying’ – that tiny but high-profile percentage of home and farm sales per year that is mostly concentrated in a few high-end areas of the Western Cape and Johannesburg – but by something else entirely?”
 
Writing in the latest Property Signposts newsletter, he says: “In my opinion, it is quite possible, for instance, that the real drivers of this legislation are two quite different concerns – the first being South Africa’s food security over the next 15 to 20 years, and how this could be threatened if a large percentage of the country’s productive farmland was to be acquired by foreign companies or even countries intent on using it only to grow food for export.
 
“Certainly, this type of corporate ‘land grab’ is already happening all over Africa as certain rich countries and big agribusinesses prepare to meet - and profit from - the global food shortages they see coming as a result of climate change. And last year, a chief director in the land reform department, Sunday Ogunronbi, did say at a meeting of farmers and farm workers that the government was ‘determined’ not to allow that to happen here.”
 
Secondly, says Everitt, the new land legislation that will restrict new foreign investment in South African property to a 30 or 50-year leasehold ties in strongly with the fact that the government has just opened a new five-year window for land claims, and is also revisiting the question of how it will acquire (expropriate) and distribute land to meet its land reform goals.
 
“Obviously, having a lot of land in foreign hands would make this process much more complicated than it already is.”
 
“Meanwhile,” he says, “we all know that there are also many, many potential benefits to be derived from foreign investment in property – and other sectors – if these are properly managed.

For examples of what can be achieved, we can just look at what Mauritius has done with the money earned from itsIRS and RES property investment schemes for foreigners; or at Australia, where foreign investors can only buy into new housing developments, or at the many European countries that have used ‘golden passport’ property investment plans to help rescue whole economies in recent years.
 
“And if we do that, it becomes evident that the legislation currently being proposed is not only badly timed but a horribly blunt instrument. Surely as Africa’s leading nation, we could – and should – find a better way to approach and manage this issue?”

Other Articles on proposed Foreign Ownership of property in the News:
 
‘SA to limit foreign land ownership’
 
South Africa seeks to limit foreign land ownership - minister
 
New bill to set bar on foreign land ownership high
 
New legislation to stop Foreigners buy land in SA