In a weekly Business Leadership South Africa newsletter, CEO Busi Mavuso has unpacked her apprehensions around the Expropriation Bill, as debates continue around amendments to the property rights legislation and the Constitution.
She says that is most disconcerting is the fact the Bill explicitly defines property as “not limited to land”, meaning moveable and financial assets, as well as intellectual property, are up for grabs.
Mavuso points out that property rights can sometimes become a “political football”, pitching those with assets against those without. “In the heat of the argument, we can lose sight of the fundamental role they play, not in how assets are distributed but in how they are created.
“It has arguably never been as important as it is now to encourage investment in the kinds of assets that will transform our economy into a greener, more digital one that is fit for the future,” she says.
Mavuso laments that people do not invest in assets they are not confident they will have the rights to own; and if people do not invest, economic growth does not happen.
She believes the Expropriation Bill is perhaps the most consequential of the legislation and amendments being considered at present, adding that it goes far beyond the main driver of land reform.
While the Bill puts in place several principles underpinning justice and equity in its application, it creates uncertainties that add to the risks for investors considering a jurisdiction for investment.
It is still unknown how organs of State will interpret the law or how courts will rule on it. This while the Bill imposes no penalties for inappropriate or corrupt attempts to expropriate property that would provide some balance against the risks.
Mavuso struggles to see the upside to the all-encompassing definition of property in the Bill. She maintains that it does nothing to advance land reform and merely creates unacceptable risks for investors.
INTELLECTUAL PROPERTY
Particularly, Mavuso foresees consequences attached to investment in intellectual property, should the Bill be amended in such a manner.
“This is meant to be an area we are encouraging in South Africa,” she says, citing the Presidential Commission on the Fourth Industrial Revolution’s (4IR’s) report that was gazetted last year.
The report stated that as South Africa looks to mobilise capital for its 4IR strategy, it needs to address policy and regulation challenges relating to policy uncertainty and governance . . . and intellectual property laws that attract investment.
Yet, this advice is being contradicted in the Expropriation Bill, Mavuso says, adding that government is instead creating a law that weakens intellectual property rights and will discourage investment.
She points out that the Bill contains no example of the conditions under which it might be appropriate to expropriate intellectual property or financial assets such as shares.
Mavuso explains that there is already a battle to attract investment into start-up companies. She cites a report by Partech Africa, which ranked South Africa fourth behind Nigeria, Kenya and Egypt on the continent for investment in new start-ups that focus on digital technology in 2019 and 2020.
“While on the one hand we have recognised that our economy is going through fundamental change as digital technologies change the way we do everything, on the other we are frustrating investment in building the new technologies that will maintain our competitiveness.”
Mavuso believes the assets that will matter in the future will be intangible, such as software and other knowledge assets that companies invest in to develop, with long-term payoffs that are difficult to predict.
She mentions that countries like Rwanda and Kenya are building highly attractive policy environments to drive software start-ups in an effort to ensure they are homes to “future African Googles or Facebooks”.
Mavuso says South Africa has produced world-class technology companies and continues to do so, but to turn that trickle into a torrent of innovation, we need legalisation that entrepreneurs can trust to protect intellectual property.
“As we continue to debate on the right balance to strike, let us keep the advice of the Presidential Commission in mind, and ensure we create an environment that attracts investment and encourages entrepreneurs to build the intellectual property we need.”