CAPE TOWN: The South African Banking Association has warned of a possible banking crisis if land expropriation without compensation takes effect.
Property rights are the foundation for the free market system, the only basis on which one can attract investment and generate more growth,” said Anthea Jeffery from the South African Institute of Race Relations. “Obviously investors are now looking at South Africa and knowing that we make up 0.5 percent of the world economy, can easily decide to go elsewhere.”
Despite assurances by President Cyril Ramaphosa, the lack of detail at this stage is causing a bit of panic, especially in the banking sector. Commercial banks have collectively loaned around $13 billion to farmers.
“They’ve stated as some of the conditions that the expropriation without compensation would only be done in cases where it would not disturb markets, it would not disturb the economy, it would not slow down food security,” said Cyril Mbatha from UNISA’s Graduate School of Business Leadership. “It would not slow down productivity. So, I don’t think in where instances where such negative effects on banks were possible, that would be pursued from the ANC perspective.”
Like other commercial banks and financial institutions in the country, the Land Bank of South Africa also faces the risk of being unable to recover on its debt. It has a massive loan book of just under $4 billion.
The Land Bank is state owned and is also a major mortgage holder. White farmers, hold 95 percent of the bank’s loan disbursements.
