While land expropriation without compensation “will be a challenge”, with a “lot of work remaining to be done” before it can become a reality, there is hope that “the rethoric around land will not upset foreign investment too much”, says Econometrix chief economist and director Dr Azar Jammine. So far, the concept does not appear to have had “too negative an impact” on the South African economy, he adds.
Jammine spoke at a business function hosted by Ford Motor Company of South Africa (FMCSA) in Pretoria.
“If you look at the rand, it is still very strong. It hasn’t been negatively affected at all by this talk of land expropriation. Why? Because international investors now see South Africa as the primary turnaround situation in a world that is awash with liquidity. International investors are looking for opportunities that make better returns than the one or two per cent that they can get in banks overseas.
“South African assets now suddenly loom as quite attractive assets, notwithstanding all the risks surrounding them.”
Jammine added that President Cyril Ramaphosa was left with no choice but “to go on land”, as land expropriation wihtout compensation was adopted as African National Congress policy last year in an effort to “pull the rug from under the Economic Freedom Fighters”.
FMCSA MD Dr Casper Kruger said Ford had 130 dealers in the region, a vehicle plant in Pretoria and an engine plant in Port Elizabeth, while it also depended on numerous components suppliers based in South Africa.
“We’ll engage government on the issue. We hope that [land expropriation] will not come at the expense of the production of goods and services.
“We have not flagged this as a major risk to our business in South Africa.”
Looking ahead, Jammine believes the rand might weaken to R13 to the dollar by the end of the year. At the current R11.90 to the dollar, the “rand is bad news for exporters”, he noted.
The Econometrix forecast for economic growth is 1.9% in 2018 and 2.2% in 2019.
The problem, however, was that economic growth was forecast to remain at the 2% to 2.5% level, as there was insufficient focus on the structural problems the country faced, such as slowing spending on infrastructure, said Jammine.
“We are still not doing the right things and, until we do, we won’t see that liftoff into the 5% which is needed to achieve a reduction in poverty.”
Jammine believes that South Africa could save R150-billion a year by acting against State capture and corruption.