Foreign+Land+Ownership+Report,+Assessment+and+Conclusion

__**//Extract from://**__

=REPORT AND RECOMMENDATIONS=

=BY THE PANEL OF EXPERTS ON THE DEVELOPMENT OF POLICY REGARDING LAND OWNERSHIP BY FOREIGNERS IN SOUTH AFRICA=


 * PRESENTED TO**


 * THE MINISTER OF AGRICULTURE AND LAND AFFAIRS, HON. LULU XINGWANA**

Prof. Shadrack Gutto (Chairperson), Dr Joe Matthews (Deputy Chairperson) Prof. Fred Hendricks, Mr. Bonile Jack, Prof. Dirk Kotzé, Mr. Mandla Mabuza, Ms Nothemba Rossette Mlozi, Ms Mandisa Monokali, Mr Cecil Morden, Ms Christine Qunta
 * Panel Members:**

Mr Jeff Sebape, Ms Tumi Seboka, Mr Sunday Ogunronbi, Mr Sam Lefafa Dr Sipho M D Sibanda, Dr Kwandi K M Kondlo, Mr Ndiphiwe Ngewu
 * Departmental technical support team:**


 * //Pretoria, City of Tshwane, August 2007//**

The lack of minimum basic national standards has contributed to the disparate practices by the provinces and local authorities (municipalities). The latter, according to the Green Paper on Development and Planning, constitute the cutting edge of the spatial development planning system, especially in the form of the Integrated Development Plans (IDP)
 * ASSESSMENT AND CONCLUSION**

The Panel identified the need for urgent rationalization and harmonization of the legislative framework for development planning. In this respect the idea of a new national framework law and requiring of provinces and local authorities to revise, rationalize and harmonise their legislation in order to bring them in tandem with the national legislative framework, is mooted. The constitutional basis for such an approach is Schedule 4 (parts A and B – functional areas of concurrent national and provincial legislative competence) and Schedule 5 (parts A and B – functional areas of exclusive provincial legislative competence).

The Panel is of the opinion that during the process of rationalization and harmonization the President might be able to invoke the presidential proclamation powers under Section 97 of the Constitution to assign (as a transitional measure while new legislation is prepared) the administration of the multitude of legislation that currently reside with different ministries, to the Minister of Agriculture and Land Affairs. The Minister would be required to work through the Inter-Ministerial/-Departmental Oversight Committee, which is recommended by the Panel.


 * Section 2 Part 5:**


 * Recommendations**

The Panel noted the widespread local concern about the purchase and ownership of South African assets by foreigners and therefore considered it imperative to define very clearly who will be viewed as a foreigner and, in respect of juristic persons, how foreign interests should be defined. The Panel was guided by two legal frameworks in this regard: firstly, the manner in which a South African citizen is defined in the Constitution and secondly, in relation more specifically to the various categories of residents and non-residents in South Africa as defined by immigration legislation. In defining who is a foreigner or what is foreign interest the Panel furthermore differentiated between natural persons, corporations and trusts.
 * 5. 1 Foreigners, non-citizens and foreign interest**

• In the case of corporations (businesses that are incorporated in terms of the Closed Corporations statute and other statutes) the Panel recommends that consideration be given to lowering the 50%+1 shareholding by a non-resident as constituting a foreign-owned entity or a foreign interest and should be treated as such in the regulatory framework developed16. • In the case of trusts, information on the citizenship and residence of both the trustees and the beneficiaries of such trusts needs to be obtained. The same goes for partnerships and joint ownership by individuals, some who may be non-citizens and/or non residents. • Given some of the long-term objectives of SADC, the panel recommends that citizens from SADC countries or SADC corporations should either be exempted from the regulations or be given preferential treatment. • Permanent residents should also enjoy preferential treatment.
 * Recommendations**

Under the current policy and practice, including the system of registration of deeds, it is impossible to ascertain the precise extent of foreign and/or non-resident ownership and use of land in South Africa, because the disclosure of nationality is not a prerequisite for the transfer of property. Anybody can buy land in South Africa without declaring their nationality. Consequently, the Deeds Registries Office has neither any record nor a register of the nationality of the land-owners in the country. The Panel is of the opinion that this is a very serious omission which requires immediate attention since it is clearly in the public interest to know the nationality of those who own land. The endeavour by the Panel to provide a provisional analysis of the available information and a spatial mapping of land ownership by citizens and non-citizens in this report is necessarily compromised by the nature of the information available in the Deeds Registries Office. The Panel is therefore strongly convinced that a system of compulsory disclosure/declaration of nationality should be introduced immediately.
 * 5. 2 Compulsory Disclosure/Declaration Requirements**

Such disclosure shall serve the following purposes: • It will enable Government to establish at any given moment the extent of ownership of South Africa’s land and landed property by South African citizens and non-citizens, women and men, different racial groups, state and private persons, and natural and juristic persons; • It will enable Government to have basic, reliable and accurate data and information for informed development and other planning; • It will enable Government to have basic, reliable and accurate data and information for monitoring progress in the implementation of land policies and the impact of these on critical sectors of society, especially women and all those who were excluded and disenfranchised by colonial and apartheid policies, laws and practices; • It will contribute to transparent governance; and • It will contribute to improving the system of land and property registration in the country.
 * Purpose of disclosure**

A two-pronged approach is recommended for existing and future disclosure by registered owners: (a) amending Regulation 18 of the Deeds Registries Act, No. 47 of 1937 and (b) amending the Act itself.
 * Recommendations:**

(a) Amendment to Regulation 18 can be effected immediately by the Deeds Registration Regulation Board which, subject to the approval by the Minister, is empowered under section 10(j) of the Act to make regulations prescribing “the manner and form of identity of persons”. It is consequent to such authority that Regulation 18(2) in its present form provides for “The name of a person, the relevant identity number, date of birth or registered number as the case may be …. shall be recorded in the relevant records of the Deeds Registry”. The Panel recommends that Regulation 18 be amended to have a comprehensive disclosure including: • Citizenship (including dual citizenship) • Nationality • Permanent resident’s status • Gender • Race • South African national identification number • Foreign passport number

In the case of juristic persons (businesses, corporations, etc) also – • Company registration number • Income tax registration number • VAT registration number • Nature of shareholders (name and place of ordinary residence of all substantial shareholders and their race, gender and citizenship and nationality)

In the case of trusts, also - • Trust registration number • Citizenship and nationalities of trustees • Citizenship of beneficiaries • The nature of beneficiaries (their race, gender and place of ordinary residence).

The object of Regulation 18 is for disclosure and statistical purposes and not for causing any unfair discrimination.

A number of pieces of legislation providing for various types of distinctions and differentiations have been passed under the democratic constitutional regime. Examples include the Employment Equity Act, Promotion of Equality and Prevention of Unfair Discrimination Act, Preferential Procurement Policy Framework Act and the broad based Black Economic Empowerment Act.

(b) Amendments to the Deeds Registries Act will require an enactment by Parliament, because they will expect of the existing owners to make a Declaration/Disclosure similar to those required of all future owners under the amended Regulation 18 (see above). The thrust for the provisions of the envisaged amendment must, amongst other things, be:

a. Compulsory identification of land owners b. A verification system of land owners c. Accurate and reliable record keeping of land owners in S.A. d. Admissibility of records for legal purposes. e. Source of finance of land acquisition f. Monitoring mechanism. g. Prohibition of transfers that do not conform to the regulatory regime h. Procedure for forfeiture of land to the state where there is non-compliance i. Protection of confidential information j. Records of current land use.

It is further recommended that the proposed disclosure by companies also be considered for the new Companies Bill, which is under consideration.

The Panel is of the view that the Financial Intelligence Centre Act (FICA) provides a comparable and effective mechanism for disclosures and declarations. It can serve as a model for implementing the proposed recommendations on disclosure.

The Panel recommends that the disclosure requirements should apply to all natural and juristic persons who currently own or have a registerable interest in land and landed property, as well as to the registration of all future acquisitions or disposals of land or landed property. In order to measure progress on the transformation of the South African land holding patterns, disclosure on the basis of race should apply only to South African citizens and permanent residents.
 * Affected owners**

The Panel recommends that individual owners of property are individually responsible for complying with the regulations. The legal right of ceding power of attorney is applicable. Corporate or juristic persons must assign a person who is legally responsible to act on behalf of the juristic person in all respects of this regulation.

It is recommended that after the recommended legislative amendments have been made, disclosure should be implemented in the following two phases:
 * Phases and timeframes for disclosure, and penalties for failure to disclose**

//First phase// The Panel recommends that with immediate effect any new transfer of fixed property or any first-time registration of newly-developed fixed property should include all the recommended requirements for disclosure. In pursuance of this end, the Deeds Office must ensure that the relevant forms and documents are revised accordingly.

//Second phase// The Panel recommends that the disclosure and declaration by existing owners or interest-holders should be in the second phase, starting in January 2008. Two options are proposed to implement this phase: (a) a one-off process, like the initial disclosure procedure of FICA, based on a period of declaration of 18 or 24 months; or (b) a staged process (such as the one for the driver’s licences) by dividing the process in alphabetical blocs according to the surname or name of the juristic person. Such a process will take longer but can be managed better.

For example: A-B: during March – May; C-D: during June – August, etc.

In respect of both options, two administrative considerations shall be borne in mind: (1) decentralisation of the disclosure/declaration process to appointed agencies of the Deeds Registries Office, such as the local government offices, Post Office branches, Magistrate’s Courts, police stations, etc., and (2) disclosure done electronically (e-government) similar to the UIF registration of domestic workers and the IEC’s use of it for its voters’ roll.

Four possible penalties are suggested: (i) no transfer of property ownership may take place in the absence of the required information being disclosed, and the use of old registration documents without the required updated information will be immediately curtailed. (ii) adaptation of some of the FICA penalties17 (iii) a compulsory fine for the defaulter of up to 20% of the value of the property in question. (iv) an appropriate penalty for the official not complying with the requirements.
 * Proposed penalties for failure to disclose**

The Panel recommends that within three months after a change in any of the declared details, the individual or entity responsible for such a declaration or declarations must file amendments to the prescribed documentation in the Office of the Registrar of Deeds. Failure to comply shall render the owner liable to a penalty as prescribed.
 * Disclosure of changes in the owner’s details**

The Panel recommends that special Ministerial Approval (with or without conditions) be introduced for certain changes in land use in general and for disposal of certain categories of land to foreigners – especially where such change in use or disposal to foreigners have the potential to negatively impact on the state’s constitutional obligations of land reform (land which is subject to restitution claims or which is earmarked for redistribution or integrated human settlement).
 * 5. 3 Ministerial Approval**

Special Ministerial Approval should also apply to acquisition of land or changes to land use by South African citizens which may have the same negative impact. The decision whether land falls within such a category or categories should be determined by, amongst others, the mechanisms of the Inter-Ministerial/ -Departmental Oversight Committee (see below in 5.4).

It is recommended that the Minister of Agriculture and Land Affairs should have the power of discretion and approval in the following instances:

There should be guidelines on the size, value and the number of properties a foreigner can own. The guidelines should take into consideration the value of foreign direct investment represented by the prospective foreign purchaser. Ministerial approval should be necessary if a purchase goes beyond these guidelines.
 * i. Urban land**

The acquisition of agricultural (rural) land in excess of a certain value and /or a certain size by foreign individuals/ interest (as defined in 1 above) and/or non-residents should require ministerial approval. The Panel recommends that guidelines regarding size, value and intended land use should be developed.
 * ii. Agricultural and rural land**

Purchase of land (by foreigners or South African citizens) over which there is an established claim for the purposes of either restitution or redistribution, should require ministerial approval.
 * iii. Land Earmarked for Restitution or Redistribution**

Bearing in mind the social, spatial and environmental consequences of these properties, the Panel recommends that the development of golf estates, polo fields and game farms should require the approval of the Minister in consultation with the relevant provincial and/or local authorities.
 * iv. Development of Golf Estates, Polo Estates and Game Farms**

The Panel noted that there are many interested parties involved in the question of ownership and use of land by foreigners. It also considered that foreign direct investment is a crucial component of the development agenda of South Africa:
 * 5.4 Inter-Ministerial/-Departmental Oversight Committee**

The Panel recommends effective, high-level inter-governmental coordination and co-operation for implementation and oversight through the establishment of a permanent committee comprising the following Ministries/Departments: Agriculture, Land Affairs, Provincial and Local Government, Housing and Environmental Affairs and Tourism. The Committee should be convened by the Minister of Agriculture and Land Affairs. Its responsibility should be to monitor trends in foreign ownership of land and changes in land use, and to recommend to Government appropriate corrective interventions. The suggestion that the existing Cabinet Clusters should be used for this purpose is not supported, because the dedicated purpose of this Committee will then be lost.

In line with the practice in some of the countries studied, the Government may consider medium- and long-term leases of public land as a viable alternative for foreigners in future to acquire land and interests in land. Leasehold rights have time-limits and may be an acceptable alternative for full ownership rights, though in practice they still exclude South Africans citizens from acquiring ownership and land use. At the same time leasehold rights provide the type of security of tenure that would be acceptable for many genuine foreign investors.
 * 5.5 Leaseholds**

Policy is recommended regarding prohibition of private ownership of land by foreigners (and in some cases South African citizens) in certain areas (to be classified) within the territorial jurisdiction of the Republic on grounds of national interest, environmental considerations and national security18. Examples of such land include the National Key Points19, coastal areas20, conservation areas, areas of historical and cultural significance, land close to military installations, water catchment areas and land along borders/international boundaries.
 * 5.6 Outright prohibition on foreign ownership in classified/protected areas**

The State Land Disposal Committee and provincial committees have no jurisdiction over municipal lands which (in the view of the Panel) continue to be incorrectly and unconstitutionally categorized as “private land”. This is a convention or practice inherited from the past. The three spheres of government are institutions and organs of one sovereign democratic state and Schedules 4 and 5 of the Constitution do not categorise state land ownership and disposal as an exclusive competence of municipalities (sections 1 read with Chapter 3 and Schedules 4 and 5 of the Constitution). It is therefore recommended that all the three spheres of government should be covered by all the recommendations in this Report. It is also recommended that all the provinces should become part of the system of land disposal committees.
 * 5.7 Disposal of State Land**

Government and all the organs of state ought to lead by example in implementing the regulatory regime on foreign landownership and should refrain from disposing or changing land ownership which may undermine land reform and compromise the sovereignty of the state.

A limited temporary moratorium of (more or less) two years prohibiting the disposal of state land, including land held by any organ of state, state-owned enterprises and any of the three spheres of government, to foreigners21 - and, in limited cases, to South African nationals who do not qualify for redress under the national land reform policies. This is not a blanket prohibition. It is meant to prevent certain spheres of government and organs of state from disposing land that may be used for land reform and human settlements for the dispossessed and marginalized individuals and communities. Naturally, special exemptions could be considered. The limited temporary moratorium could be lifted, once the Ministerial Approval process and the Inter-Ministerial/-Departmental Oversight Committee recommended above, have been established and are operational.
 * 5.8 Limited temporary moratorium on the disposal of state land to foreigners**

Since the recommendation is limited to broadly-defined state/public land (including municipal land), it should be expected that the entities that own the affected land would comply with national policy even in the absence of a statutory prohibition.

The Panel recommends that there should be rationalisation and harmonisation of laws affecting land use planning and zoning of land through the enactment of overarching national legislation to provide some certainty, minimum standards and order. Approval for new developments or rezoning of land for other usages is currently not coordinated between the different spheres of government. A developer, for example, can approach one government (such as a province) for approval of a new development without the knowledge of another sphere of government (such as the local municipality where the development will happen). Alternatively, the local government can approve it without the province’s knowledge. Therefore the current Land Use Management Bill should be revisited and activated. The absence of overarching national standards leads to disparate and confusing practices in land use, especially at local government level. Foreigners and powerful “developers” seem to exploit the situation, thus leading to public resentment and perceptions of corruption. A review of current practices in the zoning and rezoning procedures, especially with regard to the development of golf estates, lifestyle farming, polo estates and game farming22 ought to be brought under the purview of ministerial and intergovernmental oversight.
 * 5.9 Zoning, land use and planning legislation**

Fronting has been identified as an issue that can undermine the Government’s policy on land reform and regulation of foreign land ownership. It is also a practice which can distort the statistics gained from the compulsory disclosures/ declarations recommended in 5.2. It is therefore recommended that measures should be included in any new policy which will regulate foreign landownership. Measures already in place in other legislation regulating companies and broad-based Black Economic Empowerment, as well as taxation, should be considered for inclusion in this policy.
 * 5.10 Fronting**

The Panel recommends a comprehensive General Laws or Land Matters Amendment Bill, similar to the Judicial Matters Amendment Bill, for enacting the recommendations which may require legislative amendments. It will avoid the need for entirely new legislation or subsidiary legislation (regulations), such as the recommended amendment to Regulation 18. The advantage of such an approach is that the consequences of amendments to a specific Act(s) to other legislation are easily accommodated in a single Bill.
 * 5.11 Enabling omnibus legislative amendments to give effect to some of the recommendations**

16 This has to be aligned with the Companies Bill that is under consideration 17 To be developed further 18 Reporting obligations on existing ownership by foreigners on the designated areas within a prescribed period should be imposed via the Full Disclosure Regulations. Thereafter, Government may exercise the constitutional power of expropriation, subject to the “just and equitable” compensation, of such land and either hold the same as state land or allocate the land to authorized nationals. 19 National Key Points Act, No 102 of 1980 20 The Coastal Management Bill covers aspects of this. 21 The Constitutional Court may be approached for an order under section 167(5) of the Constitution asking for a declaration that any legislation or other law, including municipal by-laws and ordinances, is unconstitutional should it categorise land owned by any organ of state or sphere of government as “private land”. 22 The country is already sitting with a case of murder of a farm manager connected to the conversion of land use to game farming (see, W Hlongwa, “Make Way for Wild Animals” **//City Press//**, 28 January 2007 at p. 21).
 * Footnotes:**