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Limit on Foreign Ownership of Land in South Africa

At the State of the Nations Address (SONA) last Thursday, President Jacob Zuma announced that foreigners will no longer be able to buy land in South Africa, and will only be entitled to a long-term lease.

The proposed new Land Holdings Bill will prohibit foreign ownership of land, and once assented to by the President, foreign nationals will only be entitled to long-term leasing of land with a minimum of 30 years.

The proposed new Land Holdings Bill will prohibit foreign ownership of land, and once assented to by the President, foreign nationals will only be entitled to long-term leasing of land with a minimum of 30 years.

The Bill will also regulate the amount of land that any individual can own, the limit being 12 000 hectares, approximately equivalent to two farms. If any individual owns more than this, it is noted that the government will buy the excess land and redistribute it. 

The Bill will soon be sent to Cabinet for approval, after which there will be a process of public consultation followed by the necessary parliamentary procedures before it is assented to by the President.

Dr Andrew Golding, chief executive of the Pam Golding Property group, says every time this issue rears its head, it further serves to erode confidence in the country as an investment destination - mainly as a consequence of issues of uncertainty.

He says while this is still a proposal, by its very nature it erodes foreign direct investment appetite, and potential investors who may be weighing up South Africa versus a number of other destinations will potentially simply choose to invest elsewhere.

The level of foreign buyers of residential property is insignificant relative to the total market, says Dr Golding, but more importantly, the benefits of foreign investment in property in SA and the knock-on effect of that investment far outweigh any perceived negative.

Dr Golding points out that leasehold is not a conventional South African methodology and would require significant understanding and implementation of dramatic changes to current property practice, not to mention the question of whether or not this is a constitutional issue as well.

However, the practice of limiting land ownership by foreign nationals and juristic persons is an established practice internationally.

According to the proposed policy:

1. Foreign nationals and juristic persons are understood as non-citizens as well as juristic persons whose dominant shareholder or controller is a foreign controlled enterprise, entity or interest. Hence not all immigrants to South Africa will be excluded from land ownership;

2. This category of foreign nationals that are non-citizens will not be able to own land in freehold from the time the policy is passed into law; they will be allowed a long-term lease of 30 to 50 years. 

3. It is recognised that this cannot apply retrospectively without constitutional infringements and as such those who have already acquired freehold would not have their tenure changed by the passing of the proposed law (the Regulation of Land Holdings Bill).

However, in such instances the Right of First Refusal will apply in favour of another South African citizen in freehold or the state if the land is deemed strategic.

4. Furthermore, environmentally and security sensitive lands as well as those that are of historic and have cultural significance, and strategic lands (for land reform and socio-economic development) will be classified by law and land ownership by foreign nationals (non-citizens) in these areas will be discouraged.

5. The policy will be affected through a call for compulsory land holdings disclosures. These disclosures will be in terms of race, nationality, gender, extent of land owned and its use. The process will be managed through a Land Commission established, amongst others, to call for these disclosures, collect and assess the information and maintain it in collaboration with the national deeds registry.

The problems that the policy seeks to address include:

1. The need to secure limited land for food security and address the land injustice of more than 300 years of colonialism and apartheid.

45% of population (23 million South Africans) live on or below the poverty line. 58% of these poverty stricken people are in rural areas; Access to a land allotment for households and rural entrepreneurs' and enterprises has shown to go a long way in addressing equity and poverty (two parts of our triple challenges).

2. Furthermore, in many instances high value agricultural land has had its use changed to luxury and leisure uses and environmentally sensitive lands have also been inappropriately developed;

3. In some parts of the country escalations in prices have been experienced which have made land in these areas inaccessible to citizens;

4. The proposed policy makes provisions for exemptions to access lands in classified areas based on certain conditions, primarily developmental. 

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says although there was discussion around this position before the speech, it was expected that foreigners would only be restricted to some degree when purchasing land. 

“While we recognise the fact that a Bill will be implemented later this year limiting foreign land ownership, which is a concern to the real estate industry, the more concerning issue is the lack of stability displayed at the State of the Nation Address, which in turn could impact on foreign capital investment into the country,” says Goslett. “This in itself could lead to a lack of infrastructure development as well as a lack of employment opportunities for South Africans. "

Martin Jansen van Vuuren, director: Advisory Services at Grant Thornton, says the President’s announcement immediately raises concerns about how this will impact on foreign land ownership of game farms as well as foreign investments in hotels in South Africa.

Making foreign buyers feel unwelcome is likely to have a knock-on effect on tourism, especially in the Cape where it is a vital driver of the local economy, says Seeff chairman, Samuel Seeff.

Insofar as privately held residential property is concerned, the wish to restrict foreigners seems to be more about politics than land redress, notes Seeff.

The myth that foreigners buy the most expensive property and pay exorbitant prices needs to be dispelled, he says. "While the weak currency has made our real estate attractive, foreigners, like every buyer out there, want to pay the lowest possible price," says Seeff. "In fact, it is South Africans who understand the nuances and characteristics of the South African property market who are paying the highest prices."

For more information on purchasing, renting or investing in commercial and industrial property in Cape Town, please contact Robert Ryll | Cell Number: 082 374 2662 | Landline: 021 552 4100 or Email: rob@primeindustrial.co.za


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