Moody’s Says South Africa Land-Plan Uncertainty to Limit Investment

JOHANNESBURG (Capital Markets in Africa) – South Africa’s move to change the constitution to allow expropriation without compensation could deter investment, according to Moody’s Investors Service.

Uncertainty over how this will be achieved “continues to limit near-term investment, and could ultimately lead to a more pronounced fall in investment should the final terms of land reform be particularly onerous to businesses,” Moody’s Vice President Lucie Villa said in an emailed report on Tuesday.

Lawmakers have started the process to change the constitution to allow for the expropriation of land without compensation, a move the main opposition Democratic Alliance and farmers’ groups say will deter investment. PresidentCyril Ramaphosa has said land reform is urgently needed to address the skewed patterns of ownership in the country, but must not harm agricultural production or the economy.

Public hearings on the proposal started on Tuesday. It is unlikely there will be meaningful progress on this issue before the 2019 presidential election, Villa said.

After surging on the ascent of Ramaphosa to the presidency, business confidence has fallen back to the level it was at under former President Jacob Zuma. A recovery sentiment and investment is crucial to unlocking economic growth in South Africa, Villa said.

Growth could accelerate to 1.6 percent this year and 2.1 percent in 2019 on the implementation of government reforms such as mining regulations and improving the management of state-owned companies, he said.

Source: Bloomberg Business News