Government plans to ban foreign land ownership condemned

Private Property South Africa
Tahir Desai

The statement made by President Zuma in his State of the Nation Address to the effect that legislation will soon ensure that no foreigners will be allowed to own land in South Africa is exactly the sort of message that South Africa should not be putting out to the world, says Tony Clarke, Managing Director of the Rawson Property Group – and in particular because in the same speech the President committed the government as part of their new economic stimulation package to seek for, encourage and facilitate foreign direct investment.

“It is strongly felt throughout the property sector that you cannot ask a non-South African to invest in your country’s industries or assets without also offering him the opportunity to own – and to profit from – land held in his own name,” said Clarke. “The proposed leasehold arrangements, even when applied over a long period like 99 years, can never be as satisfactory or as profitable as direct home ownership.”

The battle cry “No foreign land ownership”, said Clarke, has been raised repeatedly in South Africa and has always had a strong patriotic ring to it and it certainly seems to appeal to those who have so far missed out on what South Africa could, and should, have given them. However, he said, it is based on concepts which have been proved time and again to be flawed.

“The first of these,” he said, “is that in selling land to foreigners you are somehow taking it away from South Africans who might otherwise own it. This is to suggest that the size of the pie is limited, which is simply not true. In reality the money made available from most sales goes straight back into alternative or replacement properties on which often the new development calls for planning, building and administration services, all of which benefit South Africans directly.

“The second argument is that foreign buyers, aided by an exchange rate which is often heavily slanted in their favour, raise the price of all properties in “an unfair fashion”. There may be some truth in this, but it has to be remembered that price rises in the middle and upper bracket properties, where most of those from overseas, upcountry and beyond our borders buy, have a trickledown effect on all categories and prices – and this is surely what we all want to see because it encourages property ownership on the grounds of it being an appreciating asset.”

A third anti argument, said Clarke, is that foreigners coming to South Africa may be of some benefit to the tourist trade, but in most other ways contribute nothing else to the country.

“This too is a wholly false line of thinking,” said Clarke. “Any stimulation of the tourist and hospitality sector also has a marked effect on the economy as a whole. We are frequently told that every five to seven visitors to South Africa result in one new job being created – but, in addition to that very obvious fact, it has often been our experience that those who buy here for holiday purposes end up investing in other aspects of the economy, e.g. wine estates, specialist import businesses and in our case property development.”

“We should therefore be encouraging every form of foreign property investment, even if in the case of property it appears that it will initially only be for the benefit of the seller,” said Clarke.

Something that should also be borne in mind, added Clarke, is that the numbers we are talking about here are very small indeed. According to Propstats, from July to December last year, foreigners bought 173 out of a total of 2678 properties sold across the Western Cape – only 6.5%.

So the message is clear: there is nothing to fear from foreign land ownership but there is much to fear from even hinting at distrust of overseas involvement in our economy and land holding.

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