South Africa is facing an expropriation disaster, putting private assets at risk, including land, rights and investments
Economic experts say that an overbroad definition of “property” and ambiguous, exploitable expropriation laws are increasing South Africa’s risk premium, undermining confidence and investment.
Political parties, unions and business groups are currently challenging the most controversial provisions of the Expropriation Act in the High Court.
President Cyril Ramaphosa signed the Act into law in January 2025, where it faced immediate backlash from critics and opponents, particularly around the addition of “nil” compensation in the laws.
Opponents argue that “nil” is not an amount of compensation and thus directly violates Section 25 of the Constitution, which explicitly requires an amount of compensation to be offered for expropriation.
They argue further that the laws are a means for the government to sidestep the Constitution and add political provisions (such as expropriation without compensation) to it that failed to pass in Parliament.
However, even as the legal fight against these laws is just beginning, their presence already poses an existential threat to all forms of property ownership in South Africa.
And beyond that, the uncertainty they create threatens to stymie investment and international relations, self-sabotaging South Africa’s economy and growth.
According to Aluma Capital Chief Economist, Frederick Mitchell, there is a misconception that the Expropriation Act deals exclusively with land reform.
“A rigorous legal examination reveals a far more alarming reality: Section 1 of the Act explicitly adopts the constitutional definition of ‘property,’ extending statutory expropriation mechanisms far beyond real estate and commercial farmland,” he said.
This means that the scope of “property” encompasses vast tiers of wealth, including immovable property like land, homes and buildings, but also movable property like machinery, vehicles, stock and equipment.
A step further, intangible property falls under the same scope, including commercial assets, land rights, mining rights, licences, intellectual property, equity, contractual claims and even investment holdings.
“When this broad definition is paired with the statutory power to expropriate under the nebulous banner of ‘public interest’ for nil (zero) compensation, it creates immediate fear of administrative overreach,” Mitchell said.
While the government has stated that the laws are intended to address the complex legacy of land dispossession and advance the public interest, this does not change the fact that the laws could cause further destruction given their scope.
“The Cardinal Principle of Legal Design is that a law must never be judged by the ‘best intentions’ of its proponents, but rather by the ‘worst atrocities’ that can be legally committed underneath its literal wording,” Mitchell said.
Rippling through South Africa’s economy
Beyond the broad and highly exploitable scope of the laws and their definitions, the Act itself has a strong cooling effect on investor appetite and confidence in South Africa.
Mitchell noted that “capital is cowardly” and goes where it is welcomed and stays where it is protected.
By not only creating ambiguity but also reinforcing it in law, the Expropriation Act and “nil” compensation are elevating South Africa’s risk premium, he said.
This discourages domestic capital deployment—local companies hoard cash and don’t invest—and also deters foreign direct investment.
Mitchell said this is not conjecture or speculation, as the damage is already playing out and is evident in multiple sectors.
Critically, foreign pension funds, asset managers, and sovereign wealth funds are hesitant.
“Because the Act’s scope covers intangible property, foreign capital networks view these provisions as a systemic risk,” Mitchell said.
“If international funds face even a theoretical exposure to uncompensated state acquisition, institutional capital will permanently pivot toward competing emerging markets.”
The other brewing disaster is South Africa’s international relationships, particularly with the United States.
Land expropriation has already featured prominently in the United States’ interactions with South Africa around trade, with neither country budging on the policy.
Mitchell noted that the regulatory uncertainty is a dark cloud over trade negotiations and threatens South Africa’s continued duty-free access under the African Growth and Opportunity Act (AGOA).
“Losing preferential market access or confronting reciprocal trade tariffs would strike a devastating blow to South Africa’s export-oriented industries,” he said.
As has been well established, the affected industries range from automotive manufacturing to citrus, wine, and steel.
“At a time when our economy desperately needs export revenue to stabilise public debt, enacting laws that alienate key trading partners is an act of economic self-sabotage,” he said.
“To restore investor confidence, lower our country risk premium, and safeguard our export corridors, an immediate revision of the Expropriation Act’s statutory wording is non-negotiable.”
Mitchell said that Parliament must explicitly restrict the scope of expropriation, remove the open-ended ambiguity surrounding nil compensation, and provide ironclad constitutional guarantees for all forms of property.
Loading ...