EWC: Clarity on security of property ownership needed
MAIN IMAGE: Stuart Manning, CEO for Seeff Property Group; Amanda Cuba, COO and co-regional owner of RE/MAX of Southern Africa; Craig Hutchison, CEO Engel & Völkers Southern Africa and Tony Clarke, managing director of the Rawson Property Group.
The Presidential Advisory Land Reform and Agriculture Panel’s recently released report with recommendations on expropriation without compensation (EWC) received a mixed response – from being lauded as sensible and rational to grave concerns about the consequences of amending the Constitution. We asked some of our property leaders to weigh in on the matter.
On Sunday 28 July the Presidential Advisory Panel on Land Reform and Agriculture released their report with recommendations on how government should continue forward to address the country’s legacy of unequal property ownership. It came as no surprise that the majority on the panel endorsed the use of expropriation without compensation (EWC), subject to certain conditions, as one of many means of redressing the wrongs of the past.
However, it is especially around EWC that there’s been again an emotive reaction. Many say any amendment of the country’s Constitution (Section 25) is unnecessary as the real solution to meaningful land reform lies not in EWC but in addressing the failure of the present government to effectively drive and support restitutive land reform projects over the past 25 years.
One main concern is that even a limited form of EWC could discourage further property investment which is needed to boost the country’s flagging economy. Concerned groups include the agricultural sector, commercial business and political opposition parties.
Today in Parliament a motion will be tabled for a new review committee to be established to draft legislative changes to Section 25 of the Constitution and present their report by March next year.
As far as the residential property sector is concerned, property leaders said that while they welcome the greater clarity provided by the land reform report, there is a critical need for government assurance about the continued protection of private property ownership – “people need to know that no-one is going to come and take their houses away” as stated by Stuart Manning, CEO for the Seeff Property Group.
This is what some of the property leaders said:
“It is a welcomed relief to have received clarity on the policy direction of land expropriation without compensation. Our hope is that this announcement will help to rectify the issue of unlawful land grabs,” says Amanda Cuba, COO and co-regional owner of RE/MAX of Southern Africa.
“In order for the property market to become an attractive investment asset showing growth into the future, it requires economic and political stability as well as security of ownership. The property market in South Africa has never recovered since 2009 due to all three of these factors. There is no question that the land issue needs to be addressed and a solution found urgently. What the market is looking for is the certainty on how this is going to be managed” says Craig Hutchison, CEO Engel & Völkers Southern Africa.
“As long as the market has a clearly identified, well thought out policy in place, when it comes to redistribution and ownership, which gives investors certainty on the parameters that they will be working in, then I believe we will start to see some recovery in the property market and the economy. Until then there is going to be a reduced collection of transfer duties on property transactions for government coffers, as well as further strain on the property market as a contributor to the economy” concludes Hutchison.
Manning began his statement with the following: “While we welcome the latest developments, we would like to see President Cyril Ramaphosa coming out with a clear statement that individual residential property rights will not be affected and that the Constitution will continue to support that – this is vital for investment into property, both domestic and international investment – property being a major catalyst for economic growth and an important generator of government revenue in the form of property taxes (transfer duty and ongoing taxes) and economic knock-on benefits.
He continues that they also believe that the opposition needs to start commenting in a far more responsible manner. He says the average homeowner / consumer / investor easily misinterprets unqualified statements about ”EWC”, which erodes investor confidence causing further damage to industry and the economy. “It is critical that people know that nobody is coming to take their houses and we need a clear, unequivocal message from government and the opposition to that effect,” he says.
“It is critical that people know that nobody is coming to take their houses and we need a clear, unequivocal message from government and the opposition to that effect.”
Manning says clarification is also needed around land held for speculative development, one of the types of land the report earmarked for EWC. “This needs to be clarified as speculative land is necessary for future development, especially high density dwelling and in view of the high growth in urbanisation, ownership is needed for future developments – these again hold significant economic and tax revenue benefits,” Manning concludes.
Tony Clarke, managing director of the Rawson Property Group, says although the report provides some clarity on how government plans to move forward with EWC, certain fundamental recommendations doesn’t seem to be practical. “The last thing we need is further strain on the economy and agricultural sector, and this could very well happen if the recommendations in this report is followed through,” he says.
“Property ownership is a fundamental human right protected not only by our Constitution – which is one of the most highly regarded in the world – but also by international law and several international human rights conventions. Our courts, and the Constitutional Review Committee, have to take this into consideration if they want to avoid causing a massive blow-back from the international community and having a deleterious effect on our democracy, political stability, and economy. Property rights should be protected to encourage healthy growth and development of our economy rather than it being undermined.
“There is already enough awareness around the importance of food security to confine any large-scale redistribution to unused land rather than productive agricultural properties. Food security isn’t the only mitigating factor, however. Indiscriminate expropriation of private property could possibly destroy large parts of our banking and investment sectors – something I believe our government is keenly aware of, having suffered the effects of downgrades by international rating agencies already,” ends Clarke.
It should be noted that the report did endorse EWC but said it need not, and should not, be applied in every case. “The policy question is when and how expropriation without compensation should be applied,” the report reads. Going forward this is a matter that will continue to be followed closely until Parliament makes a final decision in what manner EWC will be executed and which types of properties would be considered appropriate for this type of remedial action.
The full land reform report can be downloaded here