Q&A

Economist ROELOF BOTHA submitted a report to the constitutional review committee showing that expropriation without compensation will have devastating consequences. Chris Barron asked him …

President Cyril Ramaphosa says it will be done in a way that won’t hurt the economy?

I don’t think it’s possible.

If you take [private] property without compensation … it is the same as nationalisation. What will the likely, rational reaction of investors be? They are not going to spend money on working capital. And that is capital formation.

How do you explain recent commitments to invest in SA?

Those commitments were made before this decision was taken.

They knew … but like myself they probably believed we would not take that decision. [It] changes everything.

It’s a clear-cut decision and there’s absolutely no way you’re going to attract investment if you tell people you can invest your money here but we’re going to take your property.

You base your study on worst case scenarios like Zimbabwe, but how likely are they here?

With a little bit of luck the president will come forward with statements like: “No productive land will be taken away … ” If people are fearful that their land could be taken away, whether it’s productive or not, capital formation will not be forthcoming. And without that we will never grow this economy.

Is it possible to implement such a policy without affecting capital formation?

Only if it is clearly stated that the only land that will be taken without compensation is land that belongs to the government or the public at large. But what worries me is that this is a signal that we are going down the economic freedom rankings.

So the mere existence of this policy, regardless of how it is implemented, will have this effect?

Yes. Your propensity for capital formation is going to decline. I can guarantee that.

And I’m the most optimistic economist in this country. This is probably the worst day since Jacob Zuma came to power.

Even if it doesn’t become policy, how much damage has been done?

A large chunk … We’ve seen that in negative GDP growth, in capital formation, which is 7% lower than it was 11 quarters ago, and, obviously, in unemployment.

How do you know this is a result of the expropriation debate?

I’ve addressed 13,000 decisionmakers in SA this year, and people do not want to open new franchises, buy property, or improve their property, and they cannot find buyers. Ask them why. And you see this translated into negative GDP growth.

If it does become policy, will presidential assurances make a difference?

No. You’re affording a bureaucrat appointed by a politician the authority and power to literally come and take your property. That’s what expropriation without compensation means.

“You own this property, tough s**t, I’m going to take it.” That’s what it says on paper.