New Bill Prohibiting Foreign Land Ownership In South Africa

Legislation

On 12 February 2015, while delivering his State of the Nation address, Jacob Zuma, the President of the Republic of South Africa declared that land ownership by foreigners will be prohibited. As it stands, just under 8% of land in South Africa is owned by foreigners. This piece of Legislation in its draft form, known as the Regulation of Land Holdings Bill will be submitted to Parliament during the course of 2015[1].

In addition, the Bill sets a ceiling of land ownership that restricts the amount of land that any individual — regardless of nationality — can own to 12,000 hectares. Here, if an individual owns land in excess of 12,000 hectares, the government will purchase and redistribute such land.

There is no White Paper yet on this legislation as the bill has not yet been sent to cabinet for approval and only after this step will there be a process of public consultation.

 

Remarks of South African President

South Africa tightened rules over foreign ownership of its agricultural land amidst concerns that it is losing control of its own food security, slashing the amount beyond which land purchases would require regulatory approval.

“Foreigners will not be allowed to own land in South Africa,” President Jacob Zuma stated. He said they would instead be eligible for long-term leases.

The Presidency said the new Bill will address the problem where highly valued agricultural land has instead been used for luxury and leisure facilities, while environmentally-sensitive land has also been inappropriately developed.

 

Limitation

Under the proposed Bill, “foreign nationals and juristic persons […] as well as juristic persons whose dominant shareholder or controller is a foreign controlled enterprise, entity or interest” will be prohibited from owning agricultural land land and instead only eligible to lease land for periods of between 30 to 50 years. Ownership of residential, commercial and industrial property is not restricted in the Bill.

 

Aims

The aim here is to address injustices of the past by allowing local empowerment and ownership. Furthermore, the new Bill aims to redress the problem of “land injustice of more than 300 years of colonialism and apartheid”[2]

According to the Presidency, the problems that this policy seeks to address include[3]:

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

45% of the population (23 million South Africans) live on or below the poverty line. 58% of these poverty stricken people live 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 the country’s “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.

 

Initial Response

South African Property Owners Association (SAPOA) are of the opinion that such a Bill will reduce foreign investor confidence in South Africa. This means that there will be a knock-on effect on the South African economy.  General remarks also state that such land reforms will be negative as the policy is discriminatory and will most likely impede foreign direct investment and job creation.

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[4] – mainly as a consequence of issues of uncertainty.

 

What to Expect

If this Bill is passed, foreigners may only own land in a business capacity, if the dominant shareholder of an enterprise is controlled from abroad. Furthermore, 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.

The Bill is not likely to have a retrospective effect so the consequence will either be a run on South African properties before the restrictions are implemented or a disinvestment by foreigners who feel that property prices will decline. The further development of this Legislation is sure to attract much interest and debate. Hildebrand Attorneys specialises in property law amongst others and we suggest you contact us should you require more information.

 

Disclaimer: Although Hildebrand Attorneys is committed to furnishing reliable and accurate information, this article is intended as a general reference guide only and does not constitute legal advice. Hildebrand Attorneys cannot take any responsibility for the accuracy or currency of the information and if you require particular information you are advised to consult with the article’s author or a qualified legal authority. This article may not be reproduced without the express written permission of the author and Hildebrand Attorneys accepts no responsibility for any loss or damage that may be occasioned as a result of the reliance by any person on the information contained herein

 

This article was written by Mokgatle R. Mokgatle, of Hildebrand Attorneys


[1] The Presidency, Publications & Documents, Pretoria

[2] Farrell. G, South African People, News & Views, 2015

[3] The Presidency, Publications & Documents, Pretoria

[4] Limiting foreign ownership of land in SA, Market News, 2015

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