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The PEFOL and the Proposed Moratorium on the Sale of Land to Foreigners

The PEFOL and the Proposed Moratorium on the Sale of Land to Foreigners. By HM van den Berg. Introduction.

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The PEFOL and the Proposed Moratorium on the Sale of Land to Foreigners

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  1. The PEFOL and the Proposed Moratorium on the Sale of Land to Foreigners By HM van den Berg

  2. Introduction • “The land question in South Africa is central to the actualisation of the core constitutional values of human dignity, the achievement of equality, the advancement of human rights and fundamental freedoms, non-racism and non-sexism. Equitable access to land is a yard stick for measuring the worth of citizenship and how rights, freedoms and responsibilities are distributed in the new South Africa.” • Media Release by the PEFOL (17 February 2006) • “What we hope for is to balance the need for foreign direct investment and the need for land access to South Africans.” • T. Didiza, as quoted by City Press (05 February 2006)

  3. The Panel of Experts on Foreign Ownership of Land (PEFOL) • Constituted and commissioned by the Minister of Agriculture and Land Affairs on 24 August 2004. • Consists out of 10 members led by Prof. Shadrack Gutto of Unisa. • This is the interim report submitted by the PEFOL to the Minister. The final report, according to the PEFOL, could be expected in April 2006.

  4. Reasons for the appointment of the PEFOL • There remains a strong and growing public opinion that, despite what the Government has been doing so far, more needs to be done, and be so done at a faster pace. • There is also a very strong public opinion an perception that an unregulated ownership of land and landed property, such as housing, by foreigners contributes significantly to the lack of readily available and affordable land for land reform (and affordability of property in general, especially in the Western Cape and Mpumalanga). • “Fears have grown that a surge in foreign interest in South African property is pushing prices out of reach of many locals.” • Cape Argus (17 February 2006)

  5. Reasons for the appointment of the PEFOL • Given the history of SA, unregulated acquisition and disposal of land and landed property without some priority of access being given to those who were arbitrarily excluded can only lead to perpetuating the status quo.

  6. Reasons for the appointment of the PEFOL • In his State of the Nation Address, delivered on 3 February 2006, Pres. Thabo Mbeki said that Minister Didiza will have three tasks this year: • Review the willing-buyer, willing-seller policy; • Review land acquisition models and possible manipulation of land prices; and • Regulate conditions under which foreigners buy land. • The State of the Nation Address can be viewed at http://www.info.gov.za/speeches/2006/06020310531001.htm.

  7. The Terms of Reference of the PEFOL. • The TOR are, amongst others, to investigate, consider and make recommendations regarding: • The nature, extent trends and impact of the acquisition and use of, and investment in land in SA by non-SA citizens; • The extent to which the current lack of comprehensive policy and legislative framework contributes to the acquisition, use and investment in land by non-SA citizens;

  8. The Terms of Reference of the PEFOL. • Whether the Government should (and how) monitor and intervene by policy, legislative and other means, in preventing any possible negative consequence of land acquisition/use by non-SA citizens; • The impact on the property markets on land acquisition and use by non-SA citizens, distinguishing between land use for residential, commercial, agriculture, eco-tourism/tourism/game lodge and golf course purposes; and • Comparative international practices (laws, policies, impact, etc) on the issue of land ownership by non-citizens.

  9. Outline of the report • The Report can be found at http://land.pwv.gov.za/publications/news/press_releases/_docs/2006/Media%20release.doc. • Two volumes: volume one is the report itself and volume two the appendices. • Volume one consists out of seven parts: • The executive summery • Analysis of public written submissions, oral presentations and parliamentary committee’s recommendations and the national land summit resolutions • Quantification and spatial mapping of patterns of land ownership

  10. Outline of the report • Regulation of ownership and use of land and landed property by non-citizens in selected foreign countries • Revision, harmonisation and rationalisation of development planning and land use legislation • Initial recommendations for immediate policy considerations • On-going tasks for the preparation of the final report.

  11. Part One • Introduction and methodology. • Constitutional imperatives on land reform and the case or special regulation of foreign ownership and use of land in SA: • The Constitution makes an important and material distinction in the conferring rights and freedoms to citizens on the one hand and non-citizens of foreigners on the other hand. • Those relevant to citizens only: ss 21(3) and 25(5).

  12. Part One • Terms, concepts and definitions • The extent of foreign ownership of land as reflected in the Deeds Registry data. • Initial recommendations for immediate policy considerations.

  13. Part Two • The Panel received about 60 oral and 10 written submissions that represented a wide range of opinions incl. organised agriculture, organised estate agents, NGO’s, organised business, local communities, municipal councilors, traditional healers, trade unions and political parties. • The wide range of views are divided into two categories: the first category approaches the issue from the perspective of the impact on investor confidence, foreign direct investments (FDI), the free market and economic growth’s “trickle-down” effect on employment opportunities. The second category approaches it from the perspective of land reform and community development.

  14. Part Two • Most of the submissions are based on public perceptions. This can be brought into consideration if complemented by empirical data. • The Panel did not receive any submissions or other information about the economic impact of foreign ownership. • There are a lot of suggestions by the public. Some of them supported an immediate moratorium, others an arbitrary cut-off date for foreign transactions. However, the majority of public submissions did not support such drastic intervention.

  15. Part Two • Submissions by the Institute of Estate Agents. • Parliamentary Committee recommendations and National Land Summit Resolution: both proposed an immediate moratorium.

  16. Parts Three, Four, Five and Seven • Part three looked and the quantification and spatial mapping of patterns of land ownership. • Part four looked at policies and legislation in other countries. There is a detailed report in Appendix 6. • Part five looked at national and provincial legislation directly or indirectly applicable to land use and planning. • Part seven contains outstanding issues to be addressed by the Panel.

  17. Part Six • The recommendations for initial immediate measures are as follows: • Reporting requirements for certain transactions on land and landed property. • Ministerial approval for certain transactions on land and landed property in the interest of non-citizens and non-residents. • Intergovernmental review and oversight committee to oversee the implementation of the regulations with regards to ownership and use of land by foreigners.

  18. Part Six • Rationalisation and harmonisation of zoning and change of land use approval procedures. • The Panel recommends that a moratorium on the purchase and sale of South African land to non-citizens be imposed with immediate effect, as an interim measure until appropriate legislation has been promulgated. This is a measure to prevent a sudden sky-rocket in sale of land and landed property to foreigners.

  19. Response From the Panel on the Restriction of Foreign Buyers. • Asked if it would do more harm than good, Dr Joe Matthews, deputy chairman of the panel of experts, told a media briefing in Pretoria: “We have finished fighting for freedom. We are now in power. We can do anything.” • Citizen Weekend Edition (18 February 2006) • “’You can’t have a situation where a government does not know what is happening to ownership… This is absurd, we have got a land free-for-all, it is a kind of land jungle,’ said Matthews.” • Saturday Weekend Argus (18 February 2006) • “Arguments that a moratorium on foreign land ownership will scare off investors were ‘ideological and hysterical’, the chairman of the panel of experts said… ‘These accusations are not informed by an understanding of how foreign investors work… Foreign investors like security of tenure and predictability.’”Cape Argus (22 February 2006)

  20. Reaction from Political Parties • “It is becoming increasingly clear that government is using the restriction of foreign ownership of land…as a red herring to distract from its own failures in giving South Africans access to land and housing,’ said DA agriculture spokesperson Kraai van Niekerk, adding that the panel appeared to have based its decision on perception and partisan political considerations.” Saturday Dispatch (18 February 2006) • “PAC president Dr Motsoko Pheko said yesterday: ‘Why do we keep on selling our land to foreigners, when our redistribution process has yet to be completed?” Star (20 February 2006) • “Patrick Craven, Cosatu spokesman, said: ‘Cosatu believes that leaving land policy to the market will make it impossible to achieve the land redistribution targets that the government has said.’” • Sowetan (20 February 2006)

  21. Reaction from Estate Agents • “Volgens Mnr. Erwin Rode, eiendomsekonoom, is daar geen bewyse gegrond op ervaring dat huispryse deur buitelanders se transaksies geraak word nie… ‘Ekonomiese groei en lae rentekoerse is presies wat die huismarkte in Amerika, Brittanje en Australië die hoogte laat inskiet het – nie buitelandse eienaarskap nie.’… ‘Die koop van ‘n eiendom in Clifton gaan geen uitwerking op grondhervorming hê nie,’ sê [Dr. Andrew Golding].” • Sake Burger (18 February 2006)

  22. Reaction from Estate Agents • “The Institute of Estate Agents of South Africa (IEASA) yesterday said a moratorium on land sales to foreigners would be disastrous for property development… Seeff Properties chairman Samuel Seeff said…: ‘we have reiterated on a number of occasions that if government wishes to bring out a foreign property ownership policy they should do so with specific terms and conditions that focus on the objectives they are seeking to achieve… What they should not do is just slap a blanket moratorium on sale of lands to foreigners.’” • Daily Dispatch (20 February 2006) • “’This is not the outcome we would have preferred, but at least it seems we will shortly have some finality on the issue of foreign property ownership in SA.’ This was the reaction of Berry Everitt, MD of the Chas Everitt International Property Group…” • Sunday Tribune Property Guide (26 February 2006)

  23. Reaction from Economists • “Azar Jammine, chief economist at Econometrix, said he ‘could see immediate withdrawal of funds from the South African equity market, partly driven by sentiment…even if Thoko Didiza turns this away…some of the damage has already been done.’” • Sunday Tribune Final (19 February 2006) • “Restrictions on foreign ownership of property in SA would not ‘necessarily have a negative effect’ on investor confidence, according to Standard Bank. Senior economist Elna Moolman said yesterday the bank researched other countries’ property markets and found restrictions of varying kinds were imposed.” • Business Day (03 March 2006)

  24. Other reaction • “The Knysna-based Pezula Group which has invested around R1-billion, and intends to invest a further R1-billion in South Africa, is 100% foreign-owned and has lashed out at suggestions of a moratorium. It has asked for a clear-cut statement from the government on the issue ‘because the ambiguity of it all is a cause for great concern’, said Pezula chairman Keith Steward.” • The Herald Morning (20 February 2006)

  25. Conclusion • Minister Didiza told the NCOP that for now no moratorium will be placed on foreign land ownership. A decision over a moratorium will only be made after she has received the final report and discussed it with the Cabinet. Regulatory measures would however be put in place. This is clear from Pres. Mbeki’s state of the nation address and also the comments made by Deputy Minister of Land and Agriculture Dirk du Toit. • According to Du Toit, the Government was unlikely to impose a moratorium on foreign land ownership pending the finalisation of regulations. He said that such a step could impact on an array of constitutionally protected rights.

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