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Banks warn against ‘radical’ proposals on land expropriation

Bad expropriation execution could be dire for commercial banks.

A lot is at stake for South Africa’s commercial banks, which have loans of about R148 billion in the agricultural sector and R1.6 trillion in property, if expropriation of land without compensation is executed badly by the government.

The Banking Association of SA (Basa) – a body representing the banking sector – has quantified the staggering amount of bank loans, which have the potential to fuel much-needed economic activity in the country and create wealth for people.

“If this land debate continues in the way that it [is] and we don’t reach a constructive resolution, those figures of lending will start coming down,” warns Basa MD Cas Coovadia. SA is weighing up the merits of amending Section 25 of the Constitution – also known as the property clause – to expropriate land without compensation.

There is an information vacuum about the type of land targeted, with government saying that expropriation will be done in a manner that doesn’t undermine economic growth, threaten food security or promote land grabs. Land already owned by the state or abandoned without any known owner might be up for expropriation, but no facts have been provided.

This creates an environment fraught with uncertainty and conjures up images of SA’s land reform dispensation mirroring that of Zimbabwe or Venezuela.

“The last thing we need in this country is rhetoric that gets investors jittery and stops us from moving from the pedestrian growth,” says Coovadia. “The critical issue for SA is attracting investment and growing the economy.”

He admits that there is no clarity on what happens to bank-held loans, which are collateralised by land and properties, in the current expropriation debate.

Despite the uncertainty, figures from the big four banks that Basa relies on indicate that banks have not necessarily cut back on their lending. Loans to commercial farmers increased to R148 billion at the end of June 2018, from R133 billion during December 2017. “We can’t allow this debate to continue in a way that has radical leftist or radical rightist stances. We need to arrive at a pragmatic solution.”

Worst-case scenario

Arguably, a populist and bad expropriation policy could damage the lending books of banks and agricultural investments by commercial farmers. Pierre Venter, Basa’s general manager for the human settlements cluster, says because commercial banks use depositor’s money and savings to extend loans, most banks would restrict their lending activities.

“If there is a bad execution, there will be uncertainty for a number of years. It will impact on investments, economic growth and job creation,” says Venter.

And the closure of loan taps might be negative for commercial farmers, who rely on loans from banks to invest in their farms to remain competitive. This would have bad implications for the country’s food security. “Without investments in farming, we won’t be able to feed the growing population.”

Coovadia doesn’t believe that a bad expropriation scenario will materialise. Basa is positive that the political administration – led by President Cyril Ramaphosa – will reach a pragmatic resolution.

Basa has made several proposals to salvage SA’s land reform process, including not changing section 25 of the constitution but fast-tracking the release of title deeds to existing property owners, so they can use their properties as collateral to secure loans.

Coovadia says the state must release unutilised land for the development of human settlements, host a land summit to review the land reform programme and create a comprehensive land audit and electronic national database on land ownership. Basa will present these proposals before the constitutional review committee, which is tasked with holding public hearings on changing section 25, on September 7.

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“Coovadia doesn’t believe that a bad expropriation scenario will materialise.”

“Sometimes people don’t want to hear the truth because they don’t want their illusions destroyed.” – Friedrich Nietzsche

Anyone ask him how much of and how many new loans, or “top up” loans have been advanced by the banks to farmers this year? Just curious.

I’m hearing a lot of this same sentiment, that the worst case will not happen under Ramaphosa. I really don’t think South Africans appreciate 100% what the state of affairs will be if god forbid a bus hits Ramaphosa tomorrow. Do you know and understand the next-in-line? Do people really understand the thin thread this country is hanging from at this moment? I really think not.

Land expropriation without compensation in plain English means taking land without paying for it. This simply put, means theft.

What does a reasonable person think of any one entertaining such an idea. Have we deteriorated as a nation so much that this is an accepted way. a Nation of thieves. Congratulations fellow citizens. Now I need to entertain this notion fully to get my own mindset right. This will be hard. Do I really want to live in this environment where thievery is lauded and the norm.

This rhetoric doesn’t get you anywhere. If you go by that definition, the land was originally expropriated without compensation long ago so we have been a “Nation of thieves” all along. Surely you don’t believe that?

SA needs land reform , but the method of EWC , prioritises election votes before economic growth . To have a real impact , the intention will have to be to provide free land to the majority of the poor . Lets say , our jobless rate of 30% , represents the poorest section of SA society . With a population of 50 million , that equates to about 16 million people as the target group . Clearly vast tracts of land will have to expropriated to firstly make a meaningful difference to the 16 m poor citizens , and secondly to prevent civil unrest and illegal land grabs by those groups who did not receive free land . The SA police can hardly catch a local thief , how will they control thousands of angry land grabbers , acting simultaneously all over SA . Bottom line is that the EWC land process ,as proposed by the ANC , will cause massive disruption to all forms of economic activity , and dangerous civil strife all over SA .

Ja, the real trouble starts when after 4 years the ANC has only expropriated say 10,000 claims and the other 15.9 million will be restless because of the slow pace of the distribution..

The voters will want their freebies NOW and won’t be prepared to wait ushering in land invasions.

I keep a big bond on my house and move cash out all the time. Just in case.

I have a suspicion that banks will cancel access bonds in the near future

@boomgloom. Yes, that’s a good idea. Keep debt in SA & life savings abroad.

Maybe it time to take up all those SMS we all receive, offering easy, unsecured loans of R20,000 and up to R150,000 *lol*

(However, local debt collectors can sell your debt to a similar agency abroad, and then the new debt collector will continue to hunt one down. So make sure one is not easy traceable). Or doing it ethically….yes, you do pay your debt back from abroad….after the ZAR imploded to new depths…then the debt will be cheap. 😉

The lack of direction on this important debate is causing deep concern and anxiety. It is only having a negative effect on the economy in general and compounding an already uncertain policy going forward. It is time the government took the country into its confidence and spelt out their intentions.

It has been spelled out in no uncertain terms over the past couple of months.
The ANC policy (and intention) is : expropriation without compensation.
They might say differently at the various forums over the last weeks, but the machinery towards EWC keeps rolling, without any sign of being reigned in.
QED.

24 years later, still no plan, do we really think a plan will materialize in the next 8 months?????

NO, just chaos and most likely bloodshed, another great strategy proudly brought to you by the inept, corrupt, thieving, terrorist ANC.

don’t eye farms with your mouth full.

“inept, corrupt, thieving, terrorist ANC”…just ad rac1st, and we can call a “spade a spade”

Politics should be a very boring topic. Politicians are very boring people. It is only when the majority of voters abuse their power over the legislative process, to legalize plunder, that everybody starts talking about politics. When people realize that they can steal and plunder without any consequence, by simply legalizing plunder, everybody wants to take part in the making of laws. Those without property want to legalize plunder, while property owners want to protect themselves by making laws. The fact that counselors of the same political party kill one another, shows how much people want to participate in the making of laws. The “service delivery protests” outside of parliament, and the shouting and brawls inside parliament, prove the extent to which the law has been perverted already. The country is in a state of anarchy because the ruling party legalized theft with BEE, EE, security of tenure, the nationalization of minerals resources, ESTA laws and now redistribution of land.

Politics is an all-consuming debate in South Africa, because the ANC has turned the law into a tool of plunder.

“Land already owned by the state or abandoned without any known owner might be up for expropriation” – how can land owned by the State be expropriated? Nonsensical obfuscation.

Nonsensical indeed, but to blindly loyal voters this type of logic will never be questioned. Theresa May is probably on the same level when accepting explanations form Cyril – PC convenience is her motivation.

Pretty simple, either land reform happens in a logical way where underutilized land is put to work or there is an absolute economic collapse in SA. I can not see another outcome other than those two.

Your comment is indicative of one of our shortcomings in finding solutions for so called problems.

As usual its either this or that and nothing in between. If SA had high employment rates and decent living conditions, land would be a non-issue.

As Malema said “If you have land you have profit”. Idjit.

The bottom line is…if you upset the taxpayer, there won’t be any country left to expropriate!

100% correct! The taxpayer (minority) has the ultimate power to stop the workings of national (and local) government.

EWC wrongly implemented, could be that trigger(?)

I close my eyes and cup my ears…

The ANC do not or does not know or want to know what the consequences could be for the country, they are all about themselves. No proof that President Ramaphosa would stay in power at the moment, and the balance in the party is of such a nature that he cannot do what he want, if it really differs from the ANC’s policy.
There need to be a plan, not only to make land available, but what happens after that? Where is the Universities with their studies to enlighten us on this problem?
Also bear in mind we are a lazy group of people staying in this country, who demand money for nothing.
Productivity is a swearing word!! Only way to get out of trouble is to work yourself out of trouble…just my 2 cents opinion

…well said! And if I can add: when the rating agencies sees that “no meaningful reform” was implemented (as CR is on tippie-toe with the ANC& unable to do what he want), the risk for full/true “junk status” increase.

Agree, countries WORK themselves out of poverty by being productive. Look at Asia the past decades or two. Up and up, and getting more advanced. Even local trains in Vietnam puts SA’ Metrorail to shame.)

Perhaps an underlying way of collapsing the traditional banks then open a state run cookie jar.

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