Denis Opudo
Many Africans rely on land ownership as their main asset. The asset has been used in various financial transactions as a security. In December 2017, ANC agreed that individual lands should be taken without compensation. This was during the party’s 54th Congress. After that, President Cyril Ramaphosa said that the government will accelerate its land redistribution program. The president said that during his state of the nation address on 16th February 2018. It was followed by the passing of a motion on the amendment of section 25 of the Constitution by the parliament. The section handles the property ownership in South Africa.
The president assured the National House of Traditional Leaders that there will be proper consultations. He went ahead and said that there was no call for alarm on the issue. Moreover, he asked the public to continue with farming activities as normal. He also asked them to go on with land investment. But Ian Matthews‚ is taking a different direction. Matthew is the head of business development at Bravura.
Mathew says that the move might lead to economic problems in the country. Furthermore, the economic world was on watching to see if land expropriation leads to changes in economic policies. Land expropriation can bring systematic problems for the banking industry in the country. He cited a case where land ownership acts as security for taking loans and bonds in banks. The change of ownership will eventually lead to systematic problems in banks. The problem comes in when there is loan default due to land expropriation. One will fail to tell what action will be taken to the borrower and how the lender will recover the money.
According to the government records, banks are the main creditors for farmers with 54%. Agribusiness and agricultural co-operatives are at 9% while land and the Land Banks are at 30%. The South African agricultural industry relies on banks. This means that farmers are the highest debtors in the South African banks. They have a total of above R125 billion. FirstRand and Barclays Africa are the highest lenders. They are at 3.6% and 3.4% of their total lending books respectively. They are then followed by Standard Bank and Nedbank at 2% and 1% respectively. Failure to repay the loans will lead to bankruptcy which will lead to economic crisis. This will lead to problems in both banking and agricultural sectors.
Banking and financial institutions will get it hard to overcome such scenario. It will, therefore, call for the government to come in for their rescue. The jobs and food security in the country will be also affected. But the matter of land expropriation went back to the Constitution Review Committee. The committee should report back to the parliament by 30th August 2018. There was also a proposal by the Economic Freedom Fighters on a formation of an ad hoc committee. The committee will be charged with the task to review and amend Section 25 of the Constitution.
