Zuma’s SONA 2016 speech disappoints Property Investors

By
Font size: Decrease font Enlarge font
While the State of the Nation Address (SONA 2016) was marred by numerous disruptions, President Jacob Zuma reminded the nation that he spoke this time last year of a Bill that would place a ceiling on land ownership at 12 000 hectares. While the State of the Nation Address (SONA 2016) was marred by numerous disruptions, President Jacob Zuma reminded the nation that he spoke this time last year of a Bill that would place a ceiling on land ownership at 12 000 hectares.

While the State of the Nation Address (SONA 2016) was marred by numerous disruptions, President Jacob Zuma reminded the nation that he spoke this time last year of a Bill that would place a ceiling on land ownership at 12 000 hectares.

SEE NEW DEVELOPMENT: Business Gateway — Mon Trésor Industrial Freeport Zone in Mauritius

Offshore investors are not impressed with any calls to limit foreign ownership of land in South Africa, reports Ortneil Kutama, Africa Property News Media Director.

They therefore would not be impressed with President Jacob Zuma’s brief comments on his plans to do that, which he mentioned in the State of the Nation Address last week.

For the thriving SA property sector, the latest comments are something of a disappointment, says Kutama.

President Zuma said he was encouraging land reform programmes and raised the unpopular restrictions he wants to impose on foreign ownership of land.

The Regulation of Land Holdings Bill was noted as being an imminent feature for the legislature and the draft bill is anticipated to be presented to Cabinet by April this year. The draft bill seeks to limit land ownership to 12 000 hectares and prohibit foreign land ownership. The ultimate contents of this bill will have great impact on foreign investments as currently a sizeable portion of privately owned land lies in the hands of foreigners.

The President did say that foreigners could take up long term leases on land.

Zuma said: “Land reform remains an important factor as we pursue transformation. I spoke about the fifty/fifty policy framework last year, which proposes relative rights for people who live and work on farms. Twenty-seven proposals have been received from commercial farmers and four are being implemented in the Eastern Cape and the Free State,” said Zuma.

“I also announced the Regulation of Land Holdings Bill which would place a ceiling on land ownership at a maximum of 12 000 hectares and would prohibit foreign nationals from owning land. They would be eligible for long term leases. The draft Bill will be presented to Cabinet in the first semester of the year. We also announced the re-opening of land claims for people who had missed the 1998 deadline. The number of new land claims that have been lodged stood at close to one hundred and twenty thousand as of December last year,” he said.

South African Economy

Overall, Economist believe Zuma’s speech did little to suggest ways of creating proper economic growth.

Peter Attard Montalto, economist at Nomura, believes the speech was effectively a let-down.

“However, the key for us was the total lack of any new way of thinking in wider government policy to boost growth. There was only limited recognition of the current economic malaise whilst with an overplaying of success of past policy targets. We did not see any meaningful microeconomic structural reforms to give more hope on growth to investors or, more important, to ratings agencies. As such, our low expectations were broadly met, but local expectations, which were looking to give the benefit of the doubt, are likely disappointed. There was no “rabbit out of a hat” moment,” he says.

South Africa’s economy has been forecast by various banks to grow at less than 1% this year. Manufacturing and mining are both in the doldrums. Property is the most active sector on SA’s JSE. However, property is a secondary industry. Ultimately, listed property companies will need companies to take up new offices and the like in order to perform well. The lack of new investment by industries in SA and also the lack of new companies opening have prompted many listed property funds to seek opportunities offshore.

Attard Montalto feels that Zuma should have mentioned some actual new way of thinking about how to develop the economy, instead of leaving the country with little hope. SA is set to become a sub-investment grade market.

“In the substance of the speech itself, we struggled to find some meaningful new policies to boost current and potential growth and ultimately provide the necessary microeconomic structural reforms needed to avert sub-investment grade. There was no sense of urgency or crisis on the lack of job’s creation forecast for this year. Indeed this is a factor we have commented on throughout the last year from our interactions with the African National Congress and something which seems not to have changed. True, the speech was ‘sombre’, but we think this reflects more the personal political pressure Zuma is under as opposed to recognition of the errors of Nene-gate or the state of the economy,” he says.

Zuma did little to speak about why the respected former Minister of Finance, Nhlanhla Nene was fired. That event had caused devastation in the markets last year and seen the rand plummet.

“Overall we think the speech is negative for South African Rand and South African assets in the medium run but a difficult theme to trade in this current weak USD environment. We maintain our views of a path in the coming 18 months towards two agencies in sub-investment grade and of a credit story developing in the second half of the year,” Attard Montalto says.

Some SA property companies who are running offshore to escape rand weakness and poor economic growth, may actually burn their fingers. They must recognize that markets like the UK and Germany are highly competitive. They need to take some months studying markets before just throwing money at them.

Read more on:

South Africa Property Market  |  Jacob Zuma  |  Nhlanhla Nene  |  Peter Attard Montalto

Mon Tresor Business Gateway

  • Email to a friend Email to a friend
  • Print version Print version

Newsletter

Africa Property Investment News | Commercial & Residential Property | Real Estate and Construction News
News and promos in your inbox