EDITORIAL VIEW
Drying up the Amazon and other Foreign Investment
Going bald early might not be such a bad thing , especially here in South Africa . At least I have no more hair to pull out in frustration at how our policy uncertainty keeps shooting ourselves in the foreign investment foot .
There are many examples in recent history , but for a perfect case in point , look no further than the recent High Court order granting an interdict against Amazon ’ s multi-billion Rand River Club development in Cape Town . The finding was that the significant socio economic and infrastructure benefits do not supersede the rights of indigenous Khoi and San communities .
Its not my place to debate the legal merits of this case or wade into the complicated issue of First-Nation Peoples rights , especially given South Africa ’ s historical heavy baggage of Colonialism and Apartheid .
My point is that the developers complied with every legal requirement during the approval process and they were granted approval by all relevant authorities to start construction , which they duly did . But now , as a result of the interdict , all construction has been halted and around 750 construction workers have already been sent home . Some 6000 direct and 19000 indirect potential jobs are under threat while the developer may be liable for more than R100m in penalties .
A breach of contract of this magnitude with the world ’ s biggest online retailer is major news , and this case made headlines across major international media . And what sort of investment proposition is South Africa putting out there to the international investors ? When you combine this case with the controversial land expropriation bill , rampant corruption , and the July 2021 looting spree - it ' s like we are actively trying to erode investor confidence by parading our policy uncertainty and social instability .
This climate of uncertainty must have sent out mixed messaging at the fourth South African Investment Conference ( SAIC ) which took place late March in Sandton . On a positive note President Ramaphosa made the announcement that new investment pledges have reached 95 % of the ambitious target set in 2018 to raise R1.2 trillion in new investment . But pledges don ' t create jobs and economic prosperity by themselves , and it ' s important to note that of the R774 Billion that was pledged in the first three SAICs , less than half ( R316 Billion ) has actually been invested to date .
Obviously any investment carries risk , that is the nature of the game . American economist Frank Knight ’ s theory of uncertainty applies here ; where risk can be defined as either measurable uncertainty or unmeasurable uncertainty . An investment is risky when the probability distributions are known but it becomes uncertain when the probability distributions are unknown . While it ' s impossible to remove the element of the risk , it is up to South Africa ’ s policies to qualify and quantify these risks to a potential foreign investor so that we can remove the burden of uncertainty .
Property investors and developers in South Africa have enough challenges already , be it economic pressure , labour laws and construction mafias to name a few . We need to call on our government representatives to create a climate of policy certainty and consistency if we hope to attract the level of property investment our country needs to develop our economy in a responsible , sustainable and profitable way . It ' s up to all stakeholders , regulators , investors and institutions to develop and implement a vision to understand the economic potential and prosperity that South Africa deserves to experience .
Stay safe & successful investing
DAYNE STERN HEAD OF CONTENT
SA Real Estate Investor Magazine APRIL 2022 3