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Ferial Haffajee: Can Ramaphosa manage R1.2trn investment and expropriation without compensation?

Jan 23 2019 07:30
Ferial Haffajee

The ANC election manifesto is like the biriyani of political documents: it is a mix of many things. But, unlike the perfect symphony of flavours in the Indian rice dish, many of the ANC’s plans do not combine well together.

Take the big deals: the manifesto promises to mobilise R1.2trn in investments from 2019 to 2023 and it promises land expropriation without compensation. At an October investment summit, Ramaphosa and his economics’ advisor, Trudy Makhaya, clocked up promises of R256bn.

So, ANC and country president Cyril Ramaphosa has possibly clicked that R1.2trn over four years is possible. But is it possible with another pledge in the manifesto – that of land expropriation without compensation?

While the ANC has cloaked expropriation with care, inserting it as a last option for land reform, it is, in fact, the biggest bogey for investors. The government has failed to explain its thinking on expropriation or the process set out in the draft expropriation law tabled in parliament at the end of 2018, so foreign investors have the policy as a high-risk star next to South Africa.

Many investors believe that the policy will apply to all property and that the process of expropriation is quick and violent a la Zimbabwe.

The facts reveal that it is not going to be that, but these two big-ticket promises in the ANC manifesto are on a collision course with each other. One of them must give.

It’s also debatable whether the ANC can achieve both its ambitions of unlocking job-creating investment to get an additional 275 000 people into work annually, while also holding out the stick of introducing prescribed asset legislation. One of these will have to give.

The ANC has threatened prescribed asset legislation since 1994, which makes this pledge one of similar longevity (and under-achievement) to the ANC’s pledge of jobs. But this time, the prescribed asset promise has already been met with a wall of resistance, which means that with this promise in its manifesto, the ANC could choke domestic investment.

Without the signalling effect of local business confidence in the economy, it’s unlikely that foreign investors will help to boost the figure to R1.2trn.

In addition, government-employed executives have a dismal record of running investments well. This week, a third judicial commission of inquiry gets underway, this time into the Public Investment Corporation, the asset manager for the Government Employees Pension Fund (GEPF).

More eye-poppers

While it is the ANC manifesto position on prescribed assets and changing the mandate of the Reserve Bank which raised hackles last week, there are other eye-poppers in the 68-page document which need a further explanation too.

Here are four of them. 

·         A R100bn commitment to finance BEE

The manifesto says: "The ANC government will work with the financial sector on implementing its R100bn commitment to support mainly black-owned enterprises over the next five years." The ANC is likely to win the election, but the national treasury is so heavily indebted, it can’t ride up spending by the R20bn annual costs of this promise.

Which means it is going to go knocking at the financial sector’s doors, but that sector is worried about prescribed asset investment, so the promise is another difficult one.

·         New banking licences and new legislation

Here’s one that needs to be unpacked. The ANC says that it will "amend legislation to allow qualifying state-owned enterprises, such as those involved in enterprise development, postal services, and housing finance sectors to acquire state banking licences".

Does this mean the ANC intends to amend the country’s strict, but admired banking licence laws? Even in the light of the VBS bank scandal?

·         Three more state-owned enterprises!

The ANC remains statist in its outlook, which means it still believes that a significant part of the economy should be state-run or state-owned. So, it envisages three new state-owned enterprises including a pharmaceuticals company.

This is despite the fact that the state-owned enterprises like Eskom, Transnet, the SABC and Denel have nearly brought South Africa to its knees because they engaged in the worst state capture and imperilled the national economy. This is because the central government guarantees their loans and each of them is running on state guarantees.

·         Mandatory worker ownership – new legislation coming

While employee share ownership schemes can be the best form of empowerment and there are many sterling examples in South Africa, the manifesto envisages something new.

The ANC manifesto says the party will "Introduce legislation for the extension of company ownership to a broad base of workers through an employee ownership scheme and similar arrangements to supplement workers’ incomes and build greater partnerships between workers and owners to build these businesses."

It is not clear if this can be done as a replacement for equity ownership provisions in black empowerment laws or whether it will be an additional requirement for businesses to give up stakes to workers.

If the private sector was hoping that Ramaphosa would be a business-friendly president, his first manifesto does not yet show that. 

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