The ANC’s policy of land expropriation without compensation would have harmful effects on the economy were it to generate policy uncertainty, finance minister Tito Mboweni said in reply to a parliamentary question on Wednesday.
Business has long raised the need for policy certainty as a precondition for investment, both foreign and domestic, as it provides a firm framework within which companies can operate and plan.
Parliament is busy processing the Expropriation Bill that will allow for the expropriation of property in specified circumstances, while an ad hoc committee is working on an amendment to the constitution to clarify that expropriation without compensation can take place.
In a written reply to a question by DA MP Ashor Sarupen, Mboweni said that while the National Treasury has not conducted research on the impacts of land expropriation without compensation, or undertaken a risk assessment of the impact on the economy, several studies have looked at the effect of policy uncertainty on the SA economy.
“For example, policy uncertainty diminishes the responsiveness of exports to changes in the real exchange rate, as well as introducing harmful short- and long-run level effects on export performance.
“Other research finds that unanticipated increases in uncertainty are linked to declines in investment, private-sector employment, output and industrial production, while resulting in an inflationary shock. Recent research finds that an increase in uncertainty results in a decline in industrial production and the real, effective exchange rate, while fostering an increase in the general price level and 10-year government bond yield,” Mboweni said.
He added that the National Treasury has used these studies for its own assessments of the effect of policy uncertainty on the macroeconomic outlook, and are typically included as part of the macrofiscal scenarios that inform the budgeting process.
Replying to a question by DA MP Ghaleb Cachalia on whether the Treasury has ever conducted a full cost analysis of the impact of load-shedding on SA’s GDP since 2008 and, if so, what the findings were, Mboweni said that while the National Treasury has not specifically done such an analysis, various analyses have been undertaken over the past few years to assess the impact of the electricity constraint on economic activity.
Some of this analytical work has focused specifically on the economic impact of load-shedding, which has been published in several editions of the Budget Review.
The 2019 Budget Review quantified the impact of a decline in Eskom’s average energy availability factor to between 65% and 70% for 18 months. As a consequence, GDP growth was anticipated to weaken to 0.2% in 2019 relative to the baseline forecast of 1.5%, which is equivalent to a loss in GDP of R40bn in real terms.
The 2015 Budget Review estimated growth to decline by 1% in 2015 should there continue to be a deterioration in electricity availability.
Beyond assessing the impact of load-shedding on the economy, several studies on the evolution of electricity supply and economic growth have been conducted as part of the National Treasury’s Southern Africa — Towards Inclusive Economic Development (SA-TIED) programme.
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