SA’s major property business associations have warned that expropriation without compensation will worsen the financial difficulties of many municipalities, possibly affecting service delivery.
The SA Real Estate Investment Trust Association (Sareit), which represents all real estate businesses listed on the JSE and the SA Property Owners Association (Sapoa), the representative body for commercial and industrial property, told parliamentarians that expropriation without compensation can lead to a significant drop in the value of properties and investment.
Reits are income-focused property funds that pay out regular dividends and tend to serve pensioners and other income investors. Reits must pay a minimum of 75% of their distributable income as a dividend each financial year.
“Local authorities are, however, collectively owed almost R170bn for rates and services, and their inability to collect it from residents who are unable or unwilling to pay, is a cause for concern,” the associations said in a joint statement submitted to the ad hoc committee.
The committee is holding public hearings on a proposed amendment to the property clause of the constitution to allow expropriation of land without compensation. This threat will further deter investors from investing in these jurisdictions and so compound the dire financial situation of many of the local authorities, they said.
Maurice Pillemer, the associations’ legal representative, told MPs on Tuesday that this would have an effect on collection of rates and restrict the ability of local authorities to provide services and infrastructure to citizens.
SA’s property industry, excluding agriculture, is estimated to be worth R8-trillion. Residential property accounts for almost R4-trillion, while commercial property carries a value of R1.3-trillion with R790bn held by corporates.
It is feared that land expropriation without compensation, which is meant to tackle skewed land ownership patterns dating back to the colonial and apartheid eras, could rattle investors and hurt SA’s already struggling economy.
In a previous submission to the ad hoc committee, Sareit and Sapoa said the effect of expropriation without compensation on SA’s local authorities cannot be underestimated. The constitution is not an impediment to land reform, they said, but the perception that is bound to arise from an amendment is that SA is seeking to legitimise the confiscation of land. . That will put at risk the R8-trillion investment in the nonagricultural property sector.
Business lobby group Sakeliga said it objects to the proposed amendment as it amounts to confiscation. Since the government is duty bound by international law to provide adequate protection to international investors, “confiscation as a state policy will put SA in violation of its international obligations”.
Agri SA said the property clause in its current form is not an impediment to land reform and no change needs to be made to achieve just and equitable land reform. It said land reform has been hampered largely by inadequate budgeting, policy uncertainty, the lack of a comprehensive, integrated support network, poor or absent communication with stakeholders, corruption and poor settlement support systems.
In its submission to the committee, trade union federation Cosatu said the amendment bill is a rational intervention to deal with inequalities and legacies of colonialism and apartheid.
“The bill is progressive and seeks to enhance the capacity of the state to accelerate land reform, both urban and rural. It is necessary, just, equitable and rational. It is long overdue,” said Cosatu parliamentary co-ordinator Matthew Parks.
Failure to address the land question could lead to instability and land invasions. “As history has shown all too clearly in neighbouring Zimbabwe, this is a wound that cannot, by any sane mind, be allowed to continue to fester untreated. Failure to deal with it in a holistic and progressive manner is a guarantee of social collapse in the future,” Parks said.
The committee chair, Mathole Motshekga, said the “process we are embarking on is not meant to punish anybody but to address historical injustices”.
The public hearings continue.
Updated: March 23 2021
This article has been updated throughout.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.