Terence Corrigan
All eyes are on this week’s long-awaited Investment Summit – and rightly so, because South Africa’s economic future depends on investment.
Without businesses committing enormous sums to productive activities there is no prospect of reaching the levels of growth capable of meaningfully including the country’s millions of unemployed, and probably not even of retaining existing social programmes.
Yet, hanging over the summit will invariably be the repeatedly stated intention of the government and President Cyril Ramaphosa himself to introduce a policy of expropriation without compensation.
Little concerns investors more than the threat of the seizure of their assets.
The experience of Venezuela and, closer to home, of Zimbabwe inevitably colours these concerns.
Someone with a direct interest in this is banker Jacko Maree.
As one of President Ramaphosa’s investment envoys, it’s been his task to promote the country as an attractive place for foreign businesses to put their money.
For his part, he has dismissed concerns about EWC.
"For anybody that understands South Africa the fact that we have to have land reform and deal with some of these issues is clear to all," he remarked.
"I don’t think there is any sense that property rights are under attack. I don’t get that sense from people I talk to.’
Since Maree has been holding these discussions, perhaps he is privy to sentiments that most of us are not.
But it is notable that a rather different "sense" has emerged from the coverage of the investment team over the past few months.
Former finance minister Trevor Manuel, for example, said that the issue of land was complicated and was indeed a concern for potential investors.
"Communicating this, I think, is a bigger challenge than what we thought."
Maree himself said that "the president has also assured us that the land issue will be resolved in a win-win manner, but it's not helping in the short term".
Indeed it is not. Our experience at the Institute of Race Relations (IRR) in our numerous engagements with businesses, investors and market analysts is that this EWC is an investment and growth killer.
The notion that South Africa is "uninvestable" has been raised on a number of occasions. EWC offers nothing of value to South Africa.
Its primary effect would be to extend state power and discretion to intervene in the economy.
It will, by its very nature, inevitably undermine private property rights. It also does nothing to deal with the problems afflicting land and agrarian reform.
Maree may be correct that those familiar with South Africa would appreciate that these are issues that need attention.
Equally, they would be aware that there is no credible evidence – including in research undertaken for Parliament, by a panel under former president Kgalema Motlanthe – that the requirement for compensation is a factor behind the lacklustre performance of land reform.
Unfortunately, it is likely that great damage has been done by the dogged insistence that EWC will become policy, even if the nominal justification for it (dealing with the failings of land reform) is untenable.
That president Ramaphosa committed his party to driving a constitutional change – a change to the Bill of Rights, no less – while simultaneously acknowledging that this was really unnecessary and before waiting for the "consultation" process to run its course only compounds this damage.
And in our experience, for foreign investors, the EWC drive is seen in relation to the termination of bilateral investment treaties.
This has been a source of great insecurity. As the treaties were abolished, investors were assured of protection in terms of Section 25 of the Constitution – precisely that part of the Constitution that is now to be tampered with.
Since Section 25 deals with all property, and not just land, degrading the protections it affords places all property and all investment at risk.
The message in all of this is not a reassuring one. The dispatch of investment envoys was a worthwhile initiative.
We at the IRR endorsed it when it was announced. But for South Africa to become the investment destination of choice it can be, it needs to create an environment that will be conducive to this.
An indispensable part of this is providing proper assurances and binding security for their investments.
This is, incidentally, not just a matter of "policy certainty" or of being "frank", as presidential advisor Trudi Makhaya has put it.
Certainty and candour are important, but they do not in themselves make for an attractive environment. Investors seek not just clarity on what policy will look like – they are interested in the nature of that policy and whether it is conducive to their business.
EWC is not conducive to investment and business, and it is doubtful that it can be explained away.
The impact of this policy – both the consternation it is causing at present and the damage it stands to do once introduced – needs to be acknowledged and confronted forthrightly if South Africa is to attract the scale of investment it so desperately needs.
Denying this will only hold the country back.
* Terence Corrigan is a project manager at the Institute of Race Relations.
