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Foreign land ownership: where are we headed?

02 Apr 2015

President Jacob Zuma recently introduced government's position regarding the ownership of agricultural land by foreigners in South Africa and not long after that, the Rural Development and Land Reform Minister Gugile Nkwinti stated that the Regulation of Land Holdings Bill would be submitted to Parliament later this year. The communication to the people of South Africa and the world has, in a nutshell, been that foreigners will not be allowed to own agricultural land in South Africa. 

The issue of ownership of agricultural land is and has been a difficult issue for most African governments to address effectively, purely because whichever way one deals with it, not everyone can walk away satisfied with the outcome.

Due to the social ills of the apartheid regime, more specifically, the displacement of certain racial groups and the dispossession of their land by the apartheid government, there has been a general understanding that at some point the issue of agricultural land ownership in South Africa would have to be addressed. It has certainly been the subject of debate in the media and in social and political rhetoric for some time now, not to mention that it has also been a source of anxiety for many foreign agricultural land owners. 

It is unclear at this stage as to how the proposed legislation is intended to work and whether it will have retrospective effect. In other words, how will the legislation address the issue of foreigners who acquired agricultural land prior to the enactment of the Bill, assuming it is passed into law later this year? What is clear, however, is that foreign owners of agricultural land will have the option of selling their farms at a negotiated price or converting their ownership into long-term leases of 30 years.  

It is also unclear what will happen to any agricultural land in respect of which a foreign owner elects to sell. How will any such land be dealt with and what criteria will be applied in allocating it for agricultural purposes in order not to affect the agricultural industry, and most importantly, the export of agricultural produce, which earns revenue for the country. 

The issue of ownership of agricultural land is and has been a difficult issue for most African governments to address effectively, purely because whichever way one deals with it, not everyone can walk away satisfied with the outcome. This is unavoidable due to the competing interests at play, which the government has the tough task of balancing. The government has to  bear in mind the need to stimulate and grow the economy, and most importantly the need to create investor confidence in order not to negatively impact other areas of the economy that are big revenue contributors to the National fiscus. 

As the Bill gathers momentum, it will be interesting to see what obstacles lie in its path and what challenges it will have to overcome in order for the Bill to be passed into law. As with all Bills that are perceived to take away from some and give to others in order to redress imbalances of the past, it will also be interesting to see whether foreign owners launch any constitutional challenge against the proposed law and how the conversion of ownership to long-term leases will work in practice. A further consideration will be how government will seek to enforce transformation and skills development in the agricultural sector in the event that long-term leases are agreed. Will government seek to enforce certain conditions to ensure that the conversion to long-term leases contributes to the empowerment imperative? 

The potential for litigation exists, however, this will become clearer once the Bill gains momentum in Parliament and government's plans regarding foreign ownership of agricultural land become a reality for foreign owners. - Munya Gwanzura

About the Author
Munya Gwanzura

Munya Gwanzura

Munya Gwanzura is a Director in the Dispute Resolution Department of Cliffe Dekker Hofmeyr and a CEDR (UK) accredited commercial mediator.

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