The International Monetary Fund has warned that the raging land debate in the country is creating policy uncertainty on property rights and discrediting South Africa’s stated need for foreign investment.
On Monday, the global lender released its annual Article IV report following consultations with South Africa between May and last month.
The report serves as an economic and financial assessment of government policies in IMF member states.
This comes as Parliament’s Constitutional Review Committee conducts public hearings on whether Section 25 of the Constitution should be changed to allow for the expropriation of land without compensation.
“In line with best international experience, land reform should focus on enhancing agricultural productivity, improving land administration to strengthen security of tenure, and reducing poverty.
“At the same time, there is a need to mitigate any potential negative effects of land reform on the agricultural base, and the financial spillovers from changes in the value of land as collateral,” the report said.
The IMF pointed out that expropriating land without compensating its owners would, however, potentially turn away investors.
“The ‘without compensation’ clause, which has accentuated uncertainty over property rights, has been identified as a concern for investment,” the report stated.
The report also called on the government to consider private equity partnerships in financially troubled state-owned companies, including Transnet, Eskom and national carrier, South African Airways.