President Jacob Zuma. Picture: GCIS
President Jacob Zuma. Picture: GCIS

President Jacob Zuma’s populist rhetoric on land reform is likely to scare away investment, even though there is little chance of his words getting turned into action, BMI Research said in a note on Monday morning.

"Investor sentiment towards SA is already weak in the face of sluggish growth and some decidedly investor ‘unfriendly’ policies, most notably the mining charter amendment," the Singapore-based research firm within the Fitch group said.

"An embrace of more left-leaning rhetoric by the president will only weigh further on investor sentiment and reinforces our view that investment will be sluggish."

In his recent state of the nation address, Zuma outlined plans for "radical economic transformation". In early March, Zuma said he wanted to make changes to the Constitution to facilitate the process of land reform without compensation.

"In order to enact proposed changes, Zuma would need two-thirds of the legislature. While the ANC and the leftist EFF, who would also likely support more populist land reform policies, have enough votes to push such a policy through, we do not believe the entire ruling party is willing to back such policies," BMI said.

"Indeed, a discussion of land expropriation without compensation was notably absent from a recently released ANC policy document, which instead suggests ‘just and equitable’ compensation."

BMI also noted that Zuma’s proposed "precolonial audit of land ownership, use and occupation patterns" was unlikely to be doable before his term as president expired.

"That said, while we do not envision near-term policy change, this shift towards more strident rhetoric will have consequences," BMI warned.

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