Although this is not accounting related, the writer has decided to give FAS opinion in regards Land Reform.
“I cannot see how productive pieces of land would be expropriated without market-related compensation. Nobody will convince me that the Constitutional Review Committee in Parliament is so stupid that it will allow the same thing that happened in Zimbabwe to happen in SA,” .
Zimbabwe is a case study in what can go wrong when there’s land expropriation without compensation. “There was an exodus of an estimated three-million people, the unemployment rate is at 95% and the GDP has declined by 20% since 2000,”
If the Constitution is amended to allow for radical land reform, the consequences include a diminishing of the protection of property rights, heightened policy uncertainty, a decline in the prices of land and related assets, a negative impact on banks and their ability to provide loans, and rand weakness.
Disinvestment in agriculture and food processing industries, a threat to food security, a substantial rise in litigation costs, a negative impact on GDP and fiscal revenue, growing unemployment and eventually heightened potential for sociopolitical unrest are other likely scenarios.
In addition, junk status will follow “within minutes” of radical land reform being implemented, with a knock-on effect on the rand.
“I am not here to tell you who is right and who is wrong and who stole land from whom. I am just saying SA will go into recession without a shadow of a doubt if radical land reform is implemented.