Time for Plan B
Investment banks that lost out on big payouts for the work on the shelved Aramco IPO are lining up for a raft of other projects as Saudi Arabia pursues reforms.
Banks are worried that South Africa is taking a wrong turn with laws being considered by the nation’s parliament that could leave the economy worse off.
“They do not seem to be the legislative underpinning of a comprehensive, implementable national economic recovery plan,” the Banking Association of South Africa (Basa) said in a statement distributed in Johannesburg.
“Rather they seem ideologically motivated and do little to address the real needs of an economy desperately in need of jobs, effective transformation and empowerment programmes, and inclusive growth,” it added.
The comments come as President Cyril Ramaphosa’s ruling African National Congress embraces calls to change the constitution to allow for the expropriation of land without compensation.
While the ANC says the change is needed to improve equality 24 years after the end of racial segregation, the opposition say the party is trying to deflect attention from the government’s failure to properly manage earlier land-reform efforts before elections.
“Banks recognise that the present patterns of land ownership in South Africa, which have their origin in apartheid and colonial dispossession, are neither just nor sustainable,” the association added.
Lenders are willing to partner the government and farmers on land reform, which must secure property rights, safeguard financial stability and put in place proper infrastructure to address a shortage of housing that has left 1.2 million families living in informal settlements, it said. White farmers own almost threequarters of South Africa’s agricultural land, according to an audit by lobby group Agri published last year, down from 87 per cent during white rule.
Loans to commercial farmers rose to 148 billion rand ($10.1 billion) at the end of June from 133 billion rand at the end of December, demonstrating confidence that South Africa can find “practical solutions to the challenges of restitution, redistribution and security of tenure”. Lenders have invested about 1.6 trillion rand of customer savings, salaries and investments into mortgages, and rely on the properties as security for the loans, according to the Basa.
Should these property values decrease, banks and the economy won’t be able to absorb the shock, it said. Ramaphosa and his deputy David Mabuza have both said that the government is opposed to land-grabs. The opposition Economic Freedom Fighters has also been pushing for the creation of a state-owned bank to challenge commercial lenders, the five biggest of which control more than 90 per cent of banking assets, which the ANC adopted as policy at its national conference in December.
An “unintended consequence” of the Banks Amendment Bill is that it will enable all state-owned companies to operate or own a bank, said the Basa, which represents 35 local and international lenders.
“Applicants for bank licenses must have the financial means to comply with the requirements of the Banks Act and be able to guarantee depositors’ money without exposing taxpayers to losses or introducing systemic risk,” it said.
“Given the state of the South African fiscus, it is not advisable for the state to take on any additional guarantees.” —