Promotion and Protection of Investment Bill will scare off foreign investment

by David de Waal on September 2, 2014 0 comments

The Promotion and Protection of Investment Bill is being promoted by government as a bill that protects commercial and private investments. However, there are clauses in the bill that raise serious alarm bells and allow the state to deprive owners of their property without paying them compensation.

One such clause says that the state does not have to compensate an owner that has been deprived of a property if the state itself does not become the owner of the property e.g. if ownership of the property is given to the local community.   There are sub-clauses which restrict the circumstances in which the state can do this, but these sub-clauses are vague, and this creates legal uncertainty which investors hate.

Any threat to property ownership will have a major impact on the country’s economic standing and investment appeal.

Foreign investors are paying a lot of attention to the South African property market and this bill will undoubtedly scare many of them away. Foreign buyers often purchase expensive properties due to the favourable exchange rate and they do wonders both for tourism and for promoting South Africa as a prime investment region. If their investments are not secure, they will stop investing.

There is a possibility that the courts may find the bill unconstitutional, however by that time the damage would have been done.

The bill should be withdrawn and government should do more to promote investment in South Africa instead of creating uncertainty.

David de Waal (CA(SA))
Steeple – Low cost estate agents

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