Uncertainty around land reform eroding investor confidence

20 March 2019 | Web Article Number: ME201914082

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LAND reform in South Africa will not take place at the expense of growth and job creation – the two most important issues on President Cyril Ramaphosa’s agenda.

That’s according to agricultural economist Wandile Sihlobo, speaking at the third CGA Citrus Summit held in Port Elizabeth recently on the topic ‘Business Confidence in Agriculture’. He added that land reform needs to be based on sound economic principles.

“There are two objectives that we need to meet – restorative justice and economic growth. The two cannot happen at the expense of each other.”

Sihlobo, who is chief economist of the Agricultural Business Chamber of South Africa (Agbiz) and also serves on the Presidential advisory panel on land reform and agriculture, told the 600 delegates at the Summit that definite decisions on land reform will most likely only be taken after the national and provincial elections that take place on 8 May.

In December last year, the National Assembly in Parliament adopted the Joint Constitutional Review Committee's report which recommends that the Constitution is amended to allow expropriation without compensation.

A parliamentary committee chaired by the National Assembly House Chairperson Thoko Didiza is currently discussing the nature and extent of these changes.

All South Africans will be involved and have the opportunity to speak out if “something does not sit well” with them about the land reform process, Sihlobo said.

Land reform, specifically expropriation without compensation, has created uncertainty among land and property owners in South Africa as well as internationally, weighing on business and investor confidence.

Sihlobo said that the South African economy, including the agricultural sector, can only show sound growth if trust and confidence are restored, and then followed by solid structural reforms.

Foreign direct investment (FDI) into agriculture has declined over time, and is currently only at 0.1% of overall FDI to South Africa.

Business confidence creates an environment for fixed investment. “We need improved confidence levels if we are to release the expansion in agricultural activity, and subsequently job creation.,” Sihlobo said.

He concluded that business and investor optimism will return if South Africa’s political and economic landscape is underpinned by solid structural changes and policy certainty.

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