Nationalisation talk sees property rights jitters

Talk of mine nationalisation and slow legal processes were the main factors causing SA to slip from 24th place to 32nd in the 2011 International Property Rights Index.

On Tuesday, the Property Rights Alliance, an international organisation, released its fifth annual index measuring nations' abilities to protect physical and intellectual property rights, a cornerstone of free market economies and a measure of international investor confidence.

The index measures the intellectual and physical property rights of 129 nations and enjoyed the participation of 67 global organisations, including SA's Free Market Foundation. Despite the drop, the Free Market Foundation said that property rights remained a "relative" success in SA as the country still ranked within the top 25% of best-performing nations.

The International Property Rights Index uses three primary areas of property rights to create a composite score: legal and political environment, physical property rights, and intellectual property rights.

It also emphasises the great economic differences between countries with strong property rights and those without. Free Market Foundation executive director Leon Louw said secure and freely tradable property rights make for freer economies.

Another Free Market Foundation director, Eustace Davie, attributed the small drop to the ongoing debate about nationalisation, especially in the mining sector, and the protection offered by the rule of law, in particular, the length of time it takes in the South African court system for cases to be heard and ruled upon.

However, Davie said, the state was taking the issue of protecting intellectual property rights, which includes copyright and patents, far more seriously. "An example of this is that the SA Police Service, the SA Revenue Service and the Department of Trade and Industry have set up specialised units to combat piracy and to protect intellectual property rights," he said.

Davie also attributed the drop in SA's ranking due to Zimbabwe, where the government of President Robert Mugabe was pursuing plans for international companies to sell their subsidiaries to local people. "International investors still lump Africa in one category and so SA will suffer some effect from Zimbabwe," he said.

Source: Paul Vecchiatto Nationalisation talk sees property rights jitters Business Live, March 29, 2011

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First published by BusinessLIVE

FMF Policy Bulletin/ 29 March 2011

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