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SOUTH AFRICA LOOKS TO LAND REFORM

What will South Africa’s new proposed land bill mean for the country’s real estate and foreign investment?

August 2015

Known as the ‘rainbow nation’ due to its diverse population, South Africa’s peaceful transition from Apartheid to democracy was said to be one of the most remarkable feats of the past century.

After 21 years of democracy, the country has seen notable accomplishments; however the World Bank says that South Africa’s transformation agenda remains incomplete due to the country’s unresolved and complex socio-economic challenges.

One of these issues is the contested land issue, a legacy of the Apartheid regime. According to JLL South Africa, the slow progress of the land redistribution, restitution and land tenure policies have contributed to tension and political unrest.

Addressing the issue, earlier this year President Jacob Zuma announced a controversial Land Holdings Bill, a proposed law that will prohibit foreign ownership of farm land in the country.

PROPOSED LAND HOLDINGS BILL

Under the bill – if passed – foreign nationals will only be entitled to long-term leasing of land within a minimum of 30 years and will not be allowed to buy farm land in South Africa. Foreigners will still be able to buy suburban homes and residences and only foreign-born non-citizens will be excluded from ownership, meaning foreigners who have become South African citizens will be able to buy land.

The bill, which has drawn criticism from economists and property owners groups, will also regulate the amount of land that any individual can own, the limit being 12,000 hectares. If any individual owns above that limit, the government would buy the excess land and redistribute it.

For Zandile Makhoba, Head of Research South Africa at JLL, the strategic stance to ban the foreign ownership of agricultural land gives the country some time to address the socio-political issues attached to land ownership.

“Our view is that, once viewed in detail, the policy could be a source of increased political and economic stability to South Africa, which would only be encouraging to investors. The Shanghai-Zendai development is a prime example of the fact that South Africa is not opposed to foreigners buying land in the country. There is also no threat to existing land or property investments by foreigners. Rather, the country has sought to make it easier and less risky to invest in the local market by conforming to international standards in the treatment and taxation of REITs on the Johannesburg Stock Exchange,” says Makhoba.

She adds that what is most important to investors is that government policy comes out clear and decisive. “It is when investors do not know when, where and how a policy may affect their investments that FDI decisions are delayed.”

However analysts and experts suspect that the winelands in the Western Cape will be the hardest hit.

In an interview with South Africa’s Mail and Guardian, John Loos, a Property Strategist for First National Bank, said that foreigners investing in wine farms in the Western Cape bring a huge amount of skills to that industry. “It’s come a long way in the last 20 years and there’s a group of foreigners that have contributed positively to that. If you limit ownership, you limit capital, but you also limit the skills coming into the country.”

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