Banks downplay risk of land grabs
SA Constitution already provides for expropriation without compensation in certain cases
SOUTH Africa’s major banks have played down the risk to their businesses from government plans to expropriate property without compensation.
Although some banks were coy about explicitly commenting on whether they had amended their criteria for assessing loan applications from the agricultural sector because of potential risk from expropriation of property without compensation, two indicated their agriculture loan books had been growing.
Their comments follow Land Bank chairperson Mabotha Moloto warning last week that expropriation of land without compensation, if poorly executed, could have grim consequences for the bank as a creditor, threaten its sustainability and require government intervention to repay its R41 billion funding portfolio.
Absa said it was comfortable that the bank was not at undue risk to the agriculture sector.
“Our agriculture loan book accounts for less than 5 percent of our total loan book, and this level has not changed significantly over the past few years.
“We continue to award agriculture loans. In fact, our agri loans increased in the first half of the year, compared with a year earlier,” it said.
Ross Lindstrom, a spokesperson for Standard Bank, said the bank continued to actively participate in the land reform debate in the appropriate forums and would work with key stakeholders in resolving this complex and important issue.
Positive growth “As with all our sectors, we continue to assess our agricultural book and the sector on its merits. In recent years, we have in fact continued to see positive growth in the book in line with our risk appetite,” he said.
FNB said that it continued to monitor the developments on land reform and was actively participating in the ongoing constitutional review process through the Banking Association of South Africa as part of the broader industry.
The bank added that the South African government had assured the country the implementation of land reform would consider the impact on the economy, property rights, job and food security and therefore remained optimistic the process would be managed in a responsible manner.
“The bank will communicate to its customers on matters which may impact contractual obligations during this ongoing process. FNB can confirm that it is business as usual,” it said.
Mike Brown, the chief executive of Nedbank, said the land debate has already had a negative impact on overall investor sentiment, and therefore economic activity and job creation, but it had not yet directly affected Nedbank or the way it assessed credit for its clients.
“We fully support the democratic process and land reform debate and the need for historical redress, but it is vital that this sensitive and important issue is handled properly to ensure no lasting impact on economic growth and food security,” he said.
Brown added that the actual wording of any proposed changes to Section 25 of the Constitution would be absolutely vital and would need to be assessed before any economic and credit assessment impacts could be determined.
He said Nedbank was participating in the current Parliamentary process and debate and had made a submission and confirmed Nedbank did not support a change to Section 25 of the Constitution, because it already provided for expropriation without compensation in cases where a court held this to be just and equitable or in the national interest.
Absa added that it had identified five key areas through which it could make a meaningful contribution towards a sustainable land reform agenda in the country.
They included the establishment of a special rural land reform fund funded by the financial sector and other organisations to establish a new black commercial farming class; the establishment of a special urban land reform fund geared towards building an affordable housing market that would also focus on creating a bigger class of black property developers; and the establishment of a land administration agency in a public-private partnership to audit the productivity and use of land that had been transferred through land reform and re-engineer the cumbersome processes through which land restitution claims were assessed and settled.