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

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)

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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.
  

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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)

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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.

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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/2006/0602031053100
  1.htm.

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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

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The Terms of Reference of the PEFOL.

1. 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
2. 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
3. Comparative international practices (laws,
   policies, impact, etc) on the issue of land
   ownership by non-citizens.

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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 committees
  recommendations and the national land summit
  resolutions
• Quantification and spatial mapping of patterns of
  land ownership

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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.

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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).

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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.

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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, NGOs, 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 growths
  trickle-down effect on employment
  opportunities. The second category approaches it
  from the perspective of land reform and community
  development.

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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.

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Part Two

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

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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.

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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.

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Part Six

1. Rationalisation and harmonisation of zoning and
   change of land use approval procedures.
2. 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.

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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 cant 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)

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Reaction from Political Parties

• It is becoming increasingly clear that
  government is using the restriction of foreign
  ownership of landas 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)

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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)

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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)

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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 sentimenteven if Thoko Didiza turns
  this awaysome 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)

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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)

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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. Mbekis 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.