South Africa goes from bull to bust in a week

President Cyril Ramaphosa told investors at Davos that South Africa was open for business and touted the country’s stability and inclusive governance.

However, within days, he signed the controversial Expropriation Bill into law, which sets out how organs of state can expropriate land in the public interest.

“Local, provincial and national authorities will use this legislation to expropriate land in the public interest,” the government said.

“In terms of this law, an expropriating authority may not expropriate property arbitrarily or for a purpose other than a public purpose or in the public interest.”

Property rights are crucial to an economy and society because they provide individuals with the security and incentive to invest in their assets.

When property rights are not fully protected, individuals and companies lack the security to invest in innovation, trade, and capital accumulation.

Social stability is at risk without secure property rights, as individuals are not ensured control over their possessions and cannot freely participate in the market.

Strong property rights create a foundation for a functioning market system where people can confidently exchange goods and services.

The economy of countries like Venezuela and Zimbabwe, where property rights were attacked, collapsed quickly.

Unsurprisingly, Ramaphosa’s decision to sign the Expropriation Bill spoke much loader than his calls to invest in South Africa.

No investor would put their money in a country where they are not guaranteed that their investment is safe.

The government’s intention with the bill is irrelevant. All investors hear is that their property can be taken from them in South Africa.

Zimbabwe is the poster child of expropriation without compensation. Its economy collapsed, it became a pariah state, and its citizens fled the country.

South Africa’s decision to follow in its footsteps is perplexing, considering that it saw the devastation it causes first-hand.

The chart below shows what happened to the Zimbabwe economy after 2000 when it started to take land without paying for it.

Big fight against the Expropriation Bill

Numerous businesses, social organisations, and political parties vowed to oppose the bill in any way they could.

The Free Market Foundation (FMF) urged opposition across all spheres of civil society and politics to obstruct the Expropriation Act.

The FMF said property rights form the foundation of a free society and cannot be treated as a debatable ingredient to prosperity and democracy.

“We reject Cyril Ramaphosa’s reckless abuse of his presidential pen to sign the unconstitutional and illiberal Expropriation Act into law,” FMF CEO David Ansara said.

“This Act is an attack on the foundations of South Africa’s negotiated settlement and the pillars of freedom for all.”

The FMF is consulting with its legal team about marshalling or participating in a legal challenge to the Act’s existential threats.

Free SA, the Foundation for the Rights of Expression and Equality, has strongly criticised President Cyril Ramaphosa for signing the Expropriation Act into law.

The organisation warned that the legislation poses a serious threat to property rights and investor confidence in South Africa.

“This Act grants the state wide-ranging powers of expropriation that are fraught with dangers for individual property rights and the broader economy,” Free SA spokesperson Nolu Hlophoyi said.

The Democratic Alliance (DA) reiterated its opposition to the bill, saying it has serious reservations about the procedure and its important substantive aspects.

“We are in discussions with our legal team to formulate our case,” the DA’s national spokesperson said.

The IRR said Ramaphosa has armed the state with a powerfully intrusive instrument against the property rights of all South Africa’s people and businesses.

“The passage of this Act into law introduces a system for expropriation which is heavily weighted in favour of the state and against the targeted property holder,” it said.

The organisation said it was preparing to challenge the Expropriation Bill in court.