(Bloomberg) -- The South African government’s plans to expropriate land without compensation would be disastrous for the economy, U.S. Secretary of State Mike Pompeo said.
The policy proposal is an example of centralized planning that has failed in other African states like Zimbabwe, Tanzania and Ethiopia, Pompeo told reporters Wednesday in the Ethiopian capital, Addis Ababa.
“South Africa is debating an amendment to permit the expropriation of private property without compensation,” he said. “That would be disastrous for that economy, and most importantly for the South African people.”
African economies need “strong rule of law, respect for property rights, regulation that encourages investment” for inclusive and sustainable economic growth, Pompeo said.
The rand has proved sensitive to White House comments on the issue in the past. It slumped in August 2018 after President Donald Trump asked the secretary of state to “closely study the South African land and farm seizures and expropriations.”
This wasn’t the case on Wednesday. The rand gained for the first day in three, advancing 0.4% to 14.95 per dollar by 11:52 a.m. in Johannesburg.
“As long as the U.S. doesn’t threaten sanctions against South Africa, the domestic news flow about South Africa’s failing state-owned entities and political inability to deal with the problem is enough to keep the rand on the back foot,” said Per Hammarlund, a strategist at SEB in Stockholm. “Pompeo’s comments are not threatening enough to make a bad situation worse for the rand.”
(Updates with market reaction from fifth paragraph)
--With assistance from Paul Wallace.
To contact the reporters on this story: Nick Wadhams in Washington at email@example.com;Colleen Goko in Johannesburg at firstname.lastname@example.org
To contact the editors responsible for this story: Bill Faries at email@example.com, Hilton Shone, Paul Wallace
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