The South African ruling party’s plan to make it easier to take land without compensation could have an impact on financial-sector stability but it’s “too early to panic,” said Kuben Naidoo, the head of the Prudential Authority, which regulates banks.
The ruling African National Congress supports changing the constitution to make it easier to expropriate land, adding to emerging-market jitters that have knocked the country’s assets. While the party sees the change as a way to speed up redressing racially skewed ownership patterns dating back to apartheid, critics say it could erode property rights and lead to Zimbabwe-style land grabs.
Banks in Africa’s most-industrialised economy have lent farmers about ZAR 150 billion ($10.5 billion) and have in excess of ZAR 1.3 trillion outstanding on property generally, Banking Association head Cas Coovadia said Thursday.
“There’s also concern about what’s next—is agricultural land at risk or is residential land also at risk,” Naidoo, who is also a deputy governor of the South African Reserve Bank, told reporters Friday. “If residential land comes under question, and if property rights more generally come under question, that could have an extremely large systemic effect on the banking sector. The proposals are far too vague and uncertain for us to panic in any way.”
With general elections looming, President Cyril Ramaphosa has embraced expropriation without pay, but insists there won’t be a land grab. The populist Economic Freedom Fighters, which has won support from young voters in impoverished townships, wants all land nationalised.
A parliamentary panel will seek an extension to a 28 September deadline to present its findings on possible constitutional amendments, boosting the odds that the legislature won’t decide on the matter before next year’s elections. The parliamentary committee received 449,522 valid written submissions and 65 per cent of respondents favoured leaving the constitution unchanged, while 34 per cent wanted it amended, an analysis conducted by recruitment company Silumko Consulting shows.
Lawmakers rejected the findings and questioned how parliament selected the company to collate the data and whether its staff is capable of doing a proper job. The panel has yet to decide how the submissions will now be evaluated.
Ramaphosa on Friday named Vuyokazi Mahlati as chairwoman of a 10-member panel that will advise the government on the implementation of the land-reform process. The panel will advise the Inter-Ministerial Committee chaired by Deputy President David Mabuza on various issues, including restitution, redistribution, tenure security and agricultural support, the presidency said in an emailed statement.
If the constitution is changed and there isn’t clarity by what is meant by land reform, theoretically some desirable property in urban areas could also fall under that, Coovadia said by phone Thursday.
“There’s a whole area of the financial exposure of banks in the form of loans which could be threatened,” he said. “This is the worst-case scenario. We’re still quite convinced we will come out at a pragmatic place on this.”