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12 February 2015 State of the Nation Address and land ownership in South Africa

17 February 2015

Foreign nationals will not be allowed to own land in South Africa and the law will be amended to no longer rely on the willing buyer-willing seller method when land is acquired by the State.

The above announcement in the President's speech will undoubtedly cause concern to current and prospective foreign investors and the lack of detail will raise many questions. We remain fortified that South Africa is committed to attract and retain much needed foreign direct investment and expect that there will be considered debate and consultation prior to legislation being promulgated.

Our expectation is that any changes will not be retrospective but wholly prospective from a future date to be announced and with an appropriate prior notice period. The need to retain foreign investor confidence will be understood.

We list 12 questions for discussion with the authorities:

  1. Does the President's statement only affect agricultural land or all land - residential, industrial and commercial?
  2. How will the rights of banks and financing institutions be dealt with regarding long-term security and registered mortgage loans?
  3. Will the proposed changes pass the constitutionality test? 
  4. Where the "seller" of land is not a State body but an individual or private sector entity, how will the "sale" be converted into say a 99-year lease transaction?  The private sector "seller" cannot be compelled to enter into a 99-year lease. Will the State then acquire the land from the South African resident and lease it to the foreigner?
  5. How will a "foreigner" be defined especially as it applies to companies, partnerships and trusts? 
  6. Will all long-lease arrangements be for 99 years?
  7. How will the mining industry be affected?
  8. Who will be responsible for the implementation of the proposed changes?
  9. Have the Ministers of Finance, Trade and Industry and Economic Development been consulted?
  10. When will draft legislation be released for comment and how much advance notice will be given before the amendments take effect? 
  11. How much time will be afforded for consultation with the property industry?
  12. Will any aspects of the amendments have retrospective effect?

The team

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