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The SA Daily 16 November 2018

Risk premium persisting

  • In The SA Daily of 02 August, we outlined the road ahead for SA land reform after the ANC had called for a better understanding of the conditions under which section (s) 25 of the SA Constitution may be implemented. Section 25 deals with land expropriation without compensation (EWC). The parliamentary team, or Constitutional Review Committee (CRC), tasked with advising government, yesterday voted for an amendment to s25. The CRC recommendation now will go to the National Assembly, reportedly as early as next week. Thereafter, engagement with the National Council of Provinces (NCOP) will follow.
  • But the road ahead is long, with a new bill required to outline the conditions under which EWC may take place. Then, that bill would have to be published for public comment and go through parliamentary procedures (see chart), and likely be passed only after the 2019 national SA elections. The CRC has already faced criticism after the vote because of a reported lack of engagement with the written submissions to the CRC. Should this lead to legal action, a bill could be even further delayed.  
  • From a market perspective, the road ahead implies that SA assets will continue carrying their risk premium due to the persistent policy and political uncertainty. This uncertainty would also be seen as credit-negative for SA’s debt ratings.

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