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SA's expropriation message a stretch too far for Washington

2018-06-29 14:47


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Assuring platitudes on expropriation without compensation will be insufficient to overcome current investor scepticism, warns Frans Cronje, who has spent the past two weeks in the United States canvassing influential opinion. 

Over the past ten days we have had intensive engagements with American groups in the public and private sectors, politics, the media and civil society, which leave no doubt that the South African government should swiftly make clear its position on property rights.

It is obvious to us that assuring platitudes on expropriation without compensation will be insufficient to overcome current investor scepticism.

The context of widely shared anxiety about expropriation without compensation is, in the first place, that the relationship between South Africa and the United States (US) is very important to both countries. 

American firms contribute a significant proportion of fixed investment stock in South Africa, and American taxpayers make a significant contribution to development programmes across the southern African region. 

Most importantly for the South African economy, the trade relationship is one of few that have historically racked up surpluses. Equally, American firms and diplomats played a very important and often unacknowledged role in supporting South Africa’s transition to democracy. 

Against this background, the US would desire to see South Africa play a point role on the continent. However, the relationship has become strained in some respects. 

Statements by political actors in South Africa about "western interference" in African affairs have not gone down well in Washington, and South Africa's voting record in the united nations is a high agenda item. 

At times in recent years, South African policy makers have risked losing their way on the trade relationship – but an issue that has triggered marked concern is that of expropriation without compensation. 

It was a high agenda item in almost every meeting we attended. 

While the question of historical redress is not in doubt, what is clear is that the expropriation without compensation narrative has cast a question mark over the investability of South Africa, especially when compared to other jurisdictions. 

There is a further concern that no fixed assets would be safe were the South African government to pursue a policy of expropriation without compensation.

South African policy makers also need to realise that American actors will not interfere in South Africa’s domestic affairs. They respect our sovereignty. However, investment decisions will be influenced to a considerable extent by the property rights environment. And, given South Africa's dire economic circumstances, the country should not be taking steps that reduce its attractiveness as a US-investment destination.

What should be done? 

In our view, the first priority is for the South African government to swiftly make clear its position on property rights. 

The message that South Africa will implement expropriation without compensation in a manner that will not harm the economy has clearly failed. It is simply a stretch too far.

Second, it is vital that new diplomatic backchannels be developed to improve the flow of information into the United States. The absence of quiet backchannel opportunities for the two countries to talk to each other is a frustration that applies to a lesser or greater extent on both sides.

There is a lot, here, for our foreign ministry to do. Private and third-party actors should be considered as partners in this.

Third, we think the business and investment communities should do more to promote an understanding both in America and South Africa of the importance of the strategic relationship between the two countries.

There is a lot of genuine goodwill in the US towards South Africa. We spoke to congressmen who are very invested in South Africa’s success and the success of the continent. Likewise, many of the values that underpinned South Africa’s democratic transition are values shared by Americans. Much may be gained by strengthening ties and exploiting that mutual goodwill.

For all the political heat and noise and contorted justifications for expropriation without compensation in South Africa, talking to people at a distance from that, people who actually make investment decisions, makes it clear that no one is going to invest in an economy where the government threatens to confiscate assets without compensation. 

The risk-reward equation is simply too high, especially when other, more attractive investment jurisdictions beckon.

From abroad, the contorted justifications back home are irrelevant to investment decisions. South Africa needs to make its position clear.

- Frans Cronje is the chief executive of the institute of race relations (IRR), a think tank that promotes political and economic freedom. If you agree with what you have just read then click here or sms your name to 32823.   

Disclaimer: News24 encourages freedom of speech and the expression of diverse views. The views of columnists published on News24 are therefore their own and do not necessarily represent the views of News24.

Read more on:    land expropriation  |  land hearings


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