Land seizures will be han­dled well, says UBS

UBS re­port says ex­pro­pri­a­tion will be in safe hands un­der Ramaphosa but warns of abuse in the fu­ture by a dif­fer­ent gov­ern­ment

Business Day - - FRONT PAGE - Bekezela Phakathi Par­lia­men­tary Writer [email protected]­nesslive.co.za

UBS, the world’s largest wealth man­ager, be­lieves ex­pro­pri­a­tion of land with­out com­pen­sa­tion in SA will be han­dled “suf­fi­ciently well” un­der Pres­i­dent Cyril Ramaphosa, de­spite lin­ger­ing mar­ket con­cerns. In De­cem­ber the Na­tional Assem­bly and the Na­tional Coun­cil of Prov­inces adopted a con­tentious re­port, which calls for a con­sti­tu­tional amend­ment to make it ex­plicit that ex­pro­pri­a­tion with­out com­pen­sa­tion can be used to deal with skewed land own­er­ship pat­terns dat­ing back to the colo­nial and apartheid eras.

UBS, the world’s largest wealth man­ager, be­lieves ex­pro­pri­a­tion of land with­out com­pen­sa­tion in SA will be han­dled “suf­fi­ciently well” un­der Pres­i­dent Cyril Ramaphosa, de­spite lin­ger­ing mar­ket con­cerns.

In De­cem­ber the Na­tional Assem­bly and the Na­tional Coun­cil of Prov­inces (NCOP) adopted a con­tentious re­port which calls for a con­sti­tu­tional amend­ment to make it ex­plicit that ex­pro­pri­a­tion with­out com­pen­sa­tion can be used to deal with skewed land own­er­ship pat­terns dat­ing back to the colo­nial and apartheid eras.

The is­sue of ex­pro­pri­a­tion is set to dom­i­nate the par­lia­men­tary cal­en­dar ahead of the na­tional elec­tions, which are likely to take place in May. ANC and EFF MPs are push­ing for a con­sti­tu­tional amend­ment to be fi­nalised be­fore the polls.

In its In­vest­ing in Emerg­ing Mar­kets re­port pub­lished last week, UBS cau­tions that while Ramaphosa and his team are seen as a safe pair of hands, pro­vid­ing the tools in the con­sti­tu­tion for ex­pro­pri­a­tion with­out com­pen­sa­tion may come back to haunt the coun­try if a less mar­ket-ori­ented gov­ern­ment takes over. “In ad­di­tion, de­pend­ing on the fi­nal im­ple­men­ta­tion of ex­pro­pri­a­tion with­out com­pen­sa­tion, banks may face lower col­lat­eral val­ues for their loan books, im­ply­ing higher credit risks.

The pru­dent man­age­ment and im­ple­men­ta­tion of ex­pro­pri­a­tion with­out com­pen­sa­tion, in com­bi­na­tion with strong prop­erty rights, is there­fore needed to avoid scar­ing away in­vestors.”

How­ever, the fi­nan­cial ser­vices gi­ant said with Ramaphosa and his team of ex­pe­ri­enced min­is­ters in charge, “we think ex­pro­pri­a­tion with­out com­pen­sa­tion will be han­dled suf­fi­ciently well, de­spite lin­ger­ing mar­ket con­cerns”.

The land ex­pro­pri­a­tion de­bate has po­larised the coun­try and spooked in­vestors, with the pro­posed amend­ment set to be chal­lenged in court by var­i­ous stake­hold­ers and po­lit­i­cal par­ties. The mat­ter could even­tu­ally be pro­cessed by the next par­lia­ment only, which means the amend­ment might not hap­pen at all if the ANC and EFF fail to se­cure a two-thirds ma­jor­ity be­tween them.

In its re­port UBS sug­gested that the ANC is likely to re­tain a ma­jor­ity and Ramaphosa looks set to stay in of­fice, but the mag­ni­tude of vic­tory will be im­por­tant for the le­git­i­macy of his re­form plans and to see off fac­tions still aligned with for­mer pres­i­dent Ja­cob Zuma.

“So far, in­fre­quent polling mostly shows the ANC reach­ing an ab­so­lute ma­jor­ity com­fort­ably, but the party needs 55% to 60% of the vote to al­low Ramaphosa to im­ple­ment re­forms and unite the ANC be­hind him. In our base case, we ex­pect a strong enough vote share in the vicin­ity of 60%. How­ever, Ramaphosa’s stand­ing would be harmed if the re­sult were sig­nif­i­cantly below the 62.2% achieved in the last gen­eral elec­tion.”

UBS noted that the DA and EFF are polling around 20% and 10%, re­spec­tively.

“Apart from the uncer­tainty in the po­lit­i­cal out­look, the fo­cus on ANC unity may de­lay re­forms ahead of and after the elec­tion, and sup­port more pop­ulist poli­cies, for ex­am­ple the ini­tia­tive for land ex­pro­pri­a­tion with­out com­pen­sa­tion,” the firm said.

It also said the fi­nan­cial mar­ket out­look for the coun­try is heav­ily de­pen­dent on the im­ple­men­ta­tion of ur­gently needed struc­tural re­forms. “At this stage, UBS Global Wealth Man­age­ment has a neu­tral credit and eq­uity view, and ex­pects the rand to trend broadly side­ways against the US dol­lar.”

Ramaphosa said dur­ing the ANC’s man­i­festo launch in Dur­ban on Satur­day that the party’s ap­proach to land was guided by the con­sti­tu­tion and the need to ad­vance eco­nomic de­vel­op­ment, agri­cul­tural pro­duc­tion and food se­cu­rity.

In its man­i­festo the party out­lined el­e­ments of a plan to ac­cel­er­ate land re­form, mak­ing use of a range of mea­sures, in­clud­ing, where ap­pro­pri­ate, ex­pro­pri­a­tion with­out com­pen­sa­tion.

The In­sti­tute of Race Re­la­tions said in its re­ac­tion to the speech that the pol­icy, which is a “threat to pri­vate prop­erty rights” has al­ready dam­aged SA’s rep­u­ta­tion with do­mes­tic and for­eign in­vestors. “Pol­icy uncer­tainty, if not out­right pol­icy aver­sion, is likely to be an on­go­ing re­al­ity,” it said.

/AFP

Ral­ly­ing the troops: Land ex­pro­pri­a­tion with­out com­pen­sa­tion is an is­sue be­ing used by pop­ulist lead­ers in both the ANC and EFF in the run-up to the 2019 na­tional elec­tions.

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