The following is the text of an address I gave in Berlin yesterday at an event hosted by German-South African Forum and the Friedrich Naumann Foundation, the venue being provided by the German-South African Forum.
Ladies and gentlemen, welcome. I would like to thank the organisers − the German-South African Forum and the Friedrich Naumann Foundation − for the invitation, as well as the German Africa Foundation for their organisational support and for providing the venue.
I will keep my remarks brief so that we can move quickly into discussion afterward.
Hans-Werner Bussmann, chairman, German-South Africa Forum (Desafor), Denise Dittrich, senior advisor, Sub-Saharan Africa and MENA unit, Friedrich Naumann Foundation for Freedom, and Dr John Endes, IRR CEO
The title of this event refers to the Expropriation Act, a new expropriation law recently signed by President Ramaphosa. In the second half of my talk, I will discuss the background and risks of this law. However, I would first like to briefly introduce my organisation and then outline the current situation in South Africa so that the law can be properly contextualised.
The South African Institute of Race Relations (IRR) was founded in 1929 and is South Africa’s oldest think tank. Since its inception, the institute has opposed racial discrimination and has followed a classical liberal worldview.
Over nearly 100 years, the institute has accumulated, analysed, and published vast amounts of data, collated annually in the form of the South Africa Survey since 1947. It has produced countless reports, books, analyses, position papers, and data collections on the state of the country, significantly shaping South Africa’s development toward a liberal democratic order.
The democratic transition of 1994 marked an unequivocal victory for liberal values in South Africa. Freedom of speech, freedom of movement, freedom of assembly, the right to political participation, free choice of profession, and fair trials − all these rights, which were severely restricted under apartheid, are now fully available to all South Africans. This is a tremendous achievement that deserves gratitude and respect. The IRR is proud to have contributed to this progress.
However, when it comes to improving the economic prospects of South Africans, the picture is less optimistic. While many positive developments were recorded in the first 13 years after 1994, the outlook darkened around 2008. Economic growth slowed to just 1.2% per year, with a declining trend.
The national debt as a percentage of GDP tripled from 25% to 75%. Few new jobs were created, and the unemployment rate has risen to 31.9%. If discouraged job seekers − those who have given up looking for work − are included, the rate is 41.9%. The murder rate, which had been declining until 2008, has risen again and now stands at 42 murders per 100,000 inhabitants. In 2024, an average of 72 South Africans were murdered each day.
Half of all households receive social grants, and for nearly a quarter of them, social assistance is the main source of income. There are 28 million social grant recipients, but only 16.6 million employed people and just 7 million income tax payers. The tax base is small and shrinking. Meanwhile, the government struggles to control its spending and continues to pursue costly new programmes.
South Africa’s infrastructure is rapidly deteriorating. The economy and households have endured over 15 years of power outages—so-called load-shedding. Water supply is no longer reliable in many parts of the country. Even in Johannesburg, entire districts are sometimes without water for days. The railway system is in disrepair, and exporters complain about the state of the country’s ports, which rank among the worst globally, while export-bound fruit rots in containers.
This is the reality South Africa faces. The country is confronting enormous challenges. In our view, there is no way out of this crisis without significant economic growth. What is hindering faster growth?
Infrastructure measures provide a partial answer to this question. Reliable electricity, functioning roads, railways, and ports would certainly ease economic pressures. If infrastructure reforms take hold and the private sector is effectively involved, South Africa might increase its growth rate from the current 1-2% to perhaps 2-3%. However, this is far from enough to reduce unemployment, raise incomes, and stabilise public finances.
To grow more rapidly, the economy needs reforms that significantly improve the investment climate. The most crucial indicator here is the rate of gross fixed capital formation, which currently stands at 15% of GDP. The global average is 26%. The South African government’s target is 30% − many fast-growing economies even achieve fixed investment rates of around 35%.
Why is South Africa’s fixed investment rate so low? Because investors do not trust the environment. They are uneasy. While they buy South African bonds and stocks − since these can be quickly sold − they hesitate to invest in factories, industrial equipment, and infrastructure. They are uncertain whether their investments will be safe. And this, in turn, is because they are unsure whether their property rights will be respected and protected in South Africa.
This brings us to the Expropriation Act. It is important to note that this is not a land reform law: the Expropriation Act applies to all types of assets, not just land. Anything that can be considered property falls under this law, including patents, business shares, factories, mines, and even pension entitlements.
The second key point about this law is that it allows for compensation below market value in the event of expropriation. While compensation must be just and equitable, market value is only one of several factors considered in determining compensation. This means that an individual could be expropriated and receive only 50% or even just 10% of the market value as compensation. As long as the expropriating authority can argue that this is just and equitable—and a court agrees—there is no protection against such an outcome.
When it comes to land expropriation, in some cases, no compensation at all may be deemed just and equitable. The law lists four conditions under which this could apply. However, this list is not exhaustive—other circumstances could also be considered. This creates legal uncertainty.
Against the backdrop of a gross investment rate of just 15%, this law represents a step in the wrong direction. It weakens property rights in an investment climate that is already unattractive to investors. As a result, it contributes to the continued lack of much-needed investment. Consequently, South Africa will miss its growth targets, fail to reduce poverty, and struggle to create jobs.
Recently, US President Donald Trump has also addressed this issue. Among other things, South Africa’s participation in the AGOA(African Growth and Opportunity Act)programme is at stake, which grants South African exporters duty-free access to the US market. One of the conditions for AGOA participation is that the African partner country must protect or at least strengthen property rights. South Africa is currently doing the opposite.
Additionally, the US is increasingly concerned about South Africa’s foreign policy, particularly its relations with Iran, Hamas, and its attacks on Israel.
It is quite possible that South Africa’s participation in AGOA will soon be revoked. Furthermore, sanctions could be imposed on South African politicians and organisations that the US considers to be supporting international terrorism.
If South Africa does not make quick adjustments to its domestic and foreign policies, relations with the US could deteriorate rapidly. This could create opportunities for other global powers, such as China or the EU.
However, for South Africa’s progress, it would be beneficial for the country to take US concerns seriously − by strengthening property rights, improving the investment environment, and not needlessly antagonising important trading partners. This would foster economic growth and, ultimately, benefit the people of South Africa.
Thank you for your attention. I look forward to the discussion.
From left: Hans-Werner Bussmann, chairman, German-South Africa Forum (Desafor), Dr John Endes, IRR CEO; Denise Dittrich, senior advisor, Sub-Saharan Africa and MENA unit, Friedrich Naumann Foundation for Freedom; Sabine Odhiambo, secetary-general, German Africa Foundation, and Ralf Erbel, head of Sub-Saharan Africa and MENA unit, Friedrich Naumann Foundation for Freedom
[Images: Supplied. Main image, IRR CEO Dr John Endres at the headquarters of the Friedrich Naumann Foundation for Freedom in Berlin]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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