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Foreign ownership issue rears its 'ugly' head again

Posted On Tuesday, 14 June 2011 02:00 Published by
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Statements made by Gugile Nkwinti, Minister of Rural Land, Development and Land Reform in which he said that a policy of ‘precarious tenure’ for foreigners owning or leasing land in South Africa will again be investigated, is viewed in a dim light

Tony Clarke, the Managing Director of Rawson Properties, has responded ‘despairingly’ to this statement:  “This is exactly the sort of message that foreigners do not wish to hear from South Africa right now,” said Clarke.  “It is statements of this kind that tend to reinforce a lack of confidence in our country’s future.

“One has,” said Clarke, “to see this matter in its broader perspective.  Numerous recent newspaper reports (most notably one in Business Day’s Dialogues on June 8th) have made clear that despite reasonably low interest rates, favourable tax policies and good potential returns, foreign confidence and Foreign Direct Investment in South Africa (as opposed to investment in stocks and shares) is way below the level South Africa needs - and the reasons for this are a lack of skills, a lack of infrastructure and poor services and serious uncertainty about what policies the government, in its attempts to keep the electorate on its side, will end up pursuing.

“The question being asked is, “Will the government really favour free enterprise or will they revert to some form of meltdown socialism of the kind which at various stages proved so disastrous in other African countries?”  Restrictions on land ownership very definitely seem to fall into the former category.”

If an investor is being wooed to come to South Africa, said Clarke, can it make any sense to encourage him to put money into a business or industry but to restrict his property ownership here?

Clarke said that he ‘unequivocally’ aligns himself with SAPOA’s CEO, Neil Gopal, who said that, while there is definitely a need to address the injustices of the past, there is also a need for “a predictable and non-discriminatory environment for foreign and domestic enterprises and regulation in accordance with international law”.

His remarks, added Clarke, should not be taken to mean that he is opposed to land reform - for which, it is reported, R1,3 billion has recently been allocated to assist newly empowered agricultural entrepreneurs to be more productive and rise above subsistence level.

Even here, however, said Clarke, foreign investment could and possibly should be sought because in so many cases neither the government nor the few farm owners have the long-term resources to survive downturns in their market, droughts, floods and other disasters and to acquire the necessary skills, which can often take longer than five years to learn.

“I cannot see any reason why 50/50 partnerships with BEE land reform agriculturalists should not be profitable to a foreign investor,” said Clarke.

With residential and commercial property, he added, the investor has to know that his investment will give returns that are safe and better than those achievable in his home land.  “Otherwise why come here?”

Several arguments now once again being mooted by those in favour of property restrictions on foreigners, said Clarke, have already been dealt with by the Institute of Estate Agents in SA in 2006.

“It was then pointed out:

  1. That less than 5% of South African land is owned by foreigners;
  2. That foreigners and their agents bargain as hard as South African property buyers and do not therefore markedly affect prices;
  3. That on their visits to South Africa foreign owners tend on average to stay for six to 12 weeks and spend considerably more than South Africans living in their areas; and
  4. That a fairly large number (perhaps 20%) not only encourage friends to come to this country but also end up investing in local businesses.

“This ties in with our experience,” said Clarke.  “Time and again when we have arranged for a foreigner to take over a property in South Africa, we find that he becomes interested in some local enterprise and puts money into it.”

The government itself benefits from foreign property ownership, added Clarke, because like South Africans, foreigners pay transfer duties, rates and taxes and, when they sell their properties Capital Gains Tax.  Furthermore, the payment of this is ensured by legislation making the agent and conveyancer responsible for holding back the required sum.

Another argument put forward against foreign property ownership, said Clarke, is that foreigners are inclined to put land to ‘undesirable or unproductive’ uses such as game farms or golf estates which cater primarily for the affluent.

“This again is not a valid point,” said Clarke, “because the plain truth is that rezoning of land in South Africa is a process that is almost invariably resisted by provincial and municipal authorities - and, in the few instances where it has been allowed, it has usually been South Africans who have been the proposers and the beneficiaries.

“To conclude, therefore,” said Clarke, “stoking up anti-foreign sentiment may be good politics but economically, in the view of almost all of us involved in property, it makes no sense at all.”

Publisher: eProp
Source: RPG
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