13 February 2015
Even in the absence of Economic Freedom Fighters’ MPs, President Jacob Zuma pandered to their populist demands on land and workers’ rights. He also displayed some dangerous deas about how to solve South Africa’s energy “challenge”. It will go down as the most business-unfriendly state of the nation speech in 21 years of democracy.
Zuma signalled his government’s intention to strip foreigners of the right to hold property title in South Africa. While it is not yet clear to what extent this will have an impact on companies and individuals who already own land, it does not bode well for those who believe in freedom of investment without government red tape. It will mean that people with property – such as Sir Richard Branson who owns 13 500 hectares on the border of the Kruger National park – the Ulusaba game reserve - and the Getty family which has interests in the Phinda private game reserve, face a spot of bother in future. There are a host of questions which arise: If a foreign company is a minority shareholder in a South African company which wishes to buy up a property, will it kill the deal? The details of the Regulation of Land Holdings Bill are not yet known, but it looks like to mean that if someone like Sir Richard wishes to sell his game reserve, he will have to sell it to a South African or to a South African company. With only about 1 percent of South African land being held by foreigners, the president has created an investment pothole in the property market. Billionaire businessman Johann Rupert has recently expressed the view (at a conference sponsored by the FW de Klerk foundation) that one of the hallmarks of an economically successful state is one that protects private property and does not restrict land holdings. It is this sort of government intervention that telescopes us on the way to a failed state, he said.
The SA Property Owners’ Association has previously expressed concern that the bill requires that the nationality of land owners should be recorded. It argued, unsurprisingly,
that this would batter investor confidence in South Africa. Indeed, if the Bill becomes an Act of Parliament, it will have massive ramifications not only for the property market but on foreign direct investment in all economic sectors in South Africa.
Zuma also gave his backing to the absurd idea – rubber-stamped by the ANC national executive committee in January - that farm holdings should be restricted to 12 000 hectares.
This will mean that many commercial farms will be under threat because they would become “way too big”. These farms are the backbone of food production in the country. With South Africa now battling to feed itself, this is thoroughly bad news for the agricultural sector. The Bill, of course, still has to go through the two houses of parliament.
Then Zuma was extremely gung-ho about nuclear power. Some estimates put the cost of six mini-nuke stations which the government says it wants at R1 trillion – about a third of South Africa’s GDP. Even though he says that South Africa will be able to ultimately tap into about 15 000MW of hydro-electric power from the Democratic Republic of the Congo, his government still insists that we need nuclear power – which will deliver, if we are lucky and the plants don’t suffer the endless construction delays of the coal-fired Eskom power stations Medupi and Kusile – just 9 600MW. Given much evidence that the governing party has financially benefited through its investment arm, Chancellor House, from the coal-fired power station projects, one can just imagine what sort of bribes will be on offer in the nuke pipeline. Zuma says inter government agreements have been forged with – wait for it – Russia, that great democracy across the seas, as well as France, South Korea, the United States and China.
Then the President announced that the whole matter of regulating labour brokers would be ploughed through again.
[The matter is complicated by the fact that senior ANC members and sponsors have big stakes in the labour broking business. – Ed.]
He said vulnerable workers should be protected from exploitation. Once again in a country with 25 percent official unemployment – and likely employment near double that – telling employers that they can’t employ workers for low wages is likely to mean that the workers will remain unemployed.
It was a thoroughly disturbing state of the nation speech, pandering one suspects to the base instincts of the Economic Freedom Fighters who appear to be becoming an electoral threat to the ruling ANC. Placating this ideological madness could do much damage to the South African economy and reduce prospects of fast-tracking job-creating growth.
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