ĂŶŐĞƌŽƵƐ͛ ůĂŶĚ ƉŽůŝĐLJ ƵŶĚĞƌ ƐĐƌƵƟŶLJ ŝŶ &ƌĂƐĞƌ /ŶƐƚŝƚƵƚĞ ƌĞƉŽƌƚ
HE Fraser Institute recently released its annual economic freedom report and included an entire chapter titled ‘The Dangers of SA’s Proposed Policy of Confiscating Property’.
This institute is a Canadian thinktank that annually publishes a global economic freedom index.
Its outlook is broadly free market with its audience being foreign investors - the people the administration of President Cyril Ramaphosa tries to attract.
This year SA ranked 84th on the list of 152 countries analysed.
Key reasons for this poor performance include concern about property rights and the polarising debates about ‘expropriation without compensation’ and changing the Constitution.
The latest Fraser report devoted an entire chapter to this issue.
Titled ‘The Dangers of SA’s Proposed Policy of Confiscating Property’, it was written by Martin van Staden of the Free Market Foundation.
Politically, the drive to amend the Constitution along these lines is probably dead in the water, but the overall policy thrust – against the backdrop of SA’s failed attempts at land reform – remains a red flag wrapping additional layers of risk and uncertainty around the domestic investment environment.
‘Expropriation without compensation is not, in fact, expropriation at all, but another form of arbitrary dispossession,’ Van Staden writes, highlighting the dangers of what he calls ‘the government’s proposed confiscation regime’.
He notes the two statutes that have been under consideration.
One is the Constitution Eighteenth Amendment Bill, which appears to have no political traction at the moment because it has been too watered down for the EFF’s liking.
And many critics contend it is not necessary, because the Constitution does in fact allow for expropriation without compensation under the ‘just and equitable clause’.
The other is the Expropriation Bill, which will almost certainly become law.
Van Staden says that ‘the bill makes it significantly easier for government to engage in expropriation’.
The most concerning provisions are those related to so-called ‘expropriation for nil compensation’
– colloquially known as expropriation without compensation – but more accurately described as ‘confiscation’.
Zimbabwe and Venezuela
The Expropriation Bil contains a list of six circumstances empowering the government to do just that.
However, most notably, this list is not a closed list (numerus clausus), but an open list.
This means that in addition to the listed six circumstances, government may in any other circumstance omit paying compensation upon confiscation if it deems that to be ‘just and equitable’.
According to Van Staden, the uncertainty and dangers that come with such awesome power cannot be overemphasised.
‘There is no assurance to domestic or foreign property owners and investors that their assets are safe from an expropriating authority simply deciding to confiscate their property arbitrarily,’ he writes.
Furthermore, he notes that the Expropriation Bill will become ordinary legislation which could be changed, possibly for the worse, by a simple parliamentary majority.
‘In any event, some of its provisions are framed so broadly that it would enable any new, abusive government to victimise property owners.’
The seemingly benign rhetoric from the present ANC government must therefore be considered against the background that the ANC is not guaranteed perpetual political power, and that the present faction in control of the party is not guaranteed such control,’ writes Van Staden
Expropriation models of some kind or another exist in pretty much every country in the world, including those that have top economic freedom rankings from the Fraser Institute.
But the problem in SA is that the making of the policy has transparently been driven by populist impulses and the ANC’s abject failures at land reform and economic management.
With a world record unemployment rate and widening income disparities, more fuel is being thrown on the smouldering embers of social discontent.
Meanwhile, policy remains uncertain and investors will be reluctant to deploy capital under such circumstances.
As a warning, Van Staden points to what unfolded in Zimbabwe and Venezuela when property rights were undermined.
No country that wants to attract outside investment wants to be lumped alongside Zimbabwe and Venezuela, especially in a global report that is high on investor radar screens.