With investors, perception often counts for a lot more than reality.
And that appears to be the case in South Africa, which said on Tuesday it had stepped up a campaign to hand more land to black people and announced its first state-ordered farm sale, hitting a nerve with those wary of the thorny issue of land reform.
Analysts said investors welcomed the need to erase the hugely uneven distribution of land, left by decades of apartheid and colonial rule, and had faith in South Africa’s stable democracy to implement reforms in a fair manner.
But memories of violent land seizures in neighbouring Zimbabwe several years ago will simply not go away.
Nearly 13 years after South Africa held its first all-race elections, the white minority still owns most of all commercial farmland.
Nic Borain, an independent political analyst, said investors recognised this legacy had to be undone. But despite assurances that South African reforms will be orderly and legal, there are fears that frustration with their slow pace could lead to unrest.
”Obviously, investors are going to look at Zimbabwe. When investors sit 8 000km away the difference between South Africa and Zimbabwe becomes a little obscured,” said Borain, who is based in Cape Town.
But he added that serious investors remained undeterred.
Wait and see
Wary of comparisons with Zimbabwe, where the economy has plummeted into deep recession, South Africa has vowed to carry out its land programme by the book and use expropriation only if lengthy price negotiations with white landowners fail.
Economists say farming features only marginally in the local economy and any trouble in that sector should not have ripple effects, especially in light of the country’s strong growth and optimism about multibillion-dollar state spending plans.
Land is also just one of many issues in investors’ line of vision — along with alarming crime rates and HIV/Aids — but it may become a bigger factor if accompanied by other bad news.
For example, many attributed the decline of South Africa’s rand to record lows at the end of 2001 to the turbulence in nearby Zimbabwe at the time.
”If you think back to when Zimbabwe was in the headlines, there was that fear it would spread to South Africa because there was no clear policy and there wasn’t much progress,” said Monica Ambrosi, an economist at Econometrix Treasury Management in Johannesburg.
Since the ruling African National Congress came to power in the landmark 1994 polls, it has embraced free-market policies and steered the economy towards its fastest growth in decades with steady handed monetary and fiscal policies.
But Ambrosi said a trickle of offshore investment in South Africa belied its solid economic performance and reflected an ongoing wait-and-see approach to the fledgling democracy.
Still, with President Thabo Mbeki’s government poised to spend R431-billion over the next three years to upgrade frail infrastructure, all those jitters may fade into the background.
”The environment for investment looks extremely good. There is a huge investment programme which is being implemented, which in fact is unprecedented in the recent history of South Africa,” said Abdallah Guezour, emerging market debt fund manager at Schroders Alternative Investment Management in London. — Reuters