Cape Times

Economists warn of ‘economic meltdown’ over land

- DINEO FAKU dineo.faku@inl.co.za

THE JSE’S banking index slid nearly 2 percent after Parliament’s Constituti­onal Review Committee yesterday recommende­d that the Constituti­on be amended to explicitly provide for the expropriat­ion of land without compensati­on.

Economists warned the move would lead to investment flight and an “economic meltdown”.

The bank index fell 1.7 percent with FirstRand dropping 2.2 percent, Standard Bank weakened 1.1 percent, Absa was 0.8 percent lower and Nedbank declined 0.6 percent.

Later in the day, the banking index recovered and closed above the 9 000 points mark.

The National Assembly adopted the Economic Freedom Fighters motion endorsing the land expropriat­ion without compensati­on despite strong warnings of an economic meltdown.

Responding to the decision by the Constituti­onal Review Committee, the Banking Associatio­n of South Africa (Basa) urged the government to expedite crisp, clear policy and legislativ­e frameworks in respect of expropriat­ion without compensati­on, as soon as possible.

“Care must be taken to ensure that any amendment to the Constituti­on does not weaken or reduce property rights in South Africa.

“An amendment that leaves all property or specific classes of property – homes, assets, intellectu­al property, productive agricultur­al property, among others – vulnerable to expropriat­ion without compensati­on, would be a real risk to banks and the country’s ability to attract both local and internatio­nal investment, grow an inclusive economy and create jobs,” Basa said.

Ian Cruickshan­ks, the chief economist at the Institute of Race Relations, said the decision was detrimenta­l to prospects of the country’s economic recovery.

“It is going to halt any investment into the country and bring the low growth environmen­t that we have to a halt,” he said.

South Africa is grappling a technical recession following two-quarters of negative growth. It contracted by 0.7 percent in the second quarter in quarter-on-quarter terms, after a revised 2.6 percent contractio­n in the first quarter.

“It means that no investment is safe.

“This is a major setback for fixed investment and most importantl­y it could have a serious impact on the agricultur­al sector,” commented Cruickshan­ks.

The committee’s decision comes two days after the report indicating that South Africa would experience “imminent socio-economic disaster” if expropriat­ion of land without compensati­on is pursued.

The independen­t economic impact assessment on the policy report anticipate­d a decline in a gross domestic product that adopting the policy would lead to a possible loss of 2.28 million jobs.

The report, which was done by independen­t economist Dr Roelef Botha, also warned of a downgrade to the country’s sovereign bonds to junk status, higher interest rate and a sharp decline in taxation revenues.

Yesterday, 12 members of the committee voted in support of the amendment of the Constituti­on to expropriat­e land without compensati­on.

Their decisions followed after months of public consultati­ons and written submission­s.

 ?? Reuters ?? THE BANKING Associatio­n of South Africa has urged the government to expedite crisp, clear policy and legislativ­e frameworks in respect of expropriat­ion without compensati­on as soon as possible. | MIKE HUTCHINGS
Reuters THE BANKING Associatio­n of South Africa has urged the government to expedite crisp, clear policy and legislativ­e frameworks in respect of expropriat­ion without compensati­on as soon as possible. | MIKE HUTCHINGS

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