Land grabs: SA will cut off its nose to spite its face
Analysts warn land expropriation without compensation will lead to huge investment losses
Government’s commitment to ensure that land is expropriated without compensation jeopardises a nearly R200-billion loan book by financial institutions to commercial farmers and risks entrenching poverty, say experts.
On Tuesday, parliament passed a motion that would see a review of the Constitution on how land could and should be expropriated. The review is to be concluded by 30 August.
The motion has opened the floodgates, with supporters and detractors at each other’s throats over the potential impact.
The lack of clarity on who could lose their land to who, and what kind of land would be targeted, has created widespread panic.
While some, including the SA Banking Association, agricultural economists and traditional white farming associations, warn of massive investment losses, others have called for the review to be used for a national dialogue on the issue of land reform.Banking Association SA managing director Cas Coovadia said such a move would discourage investment and erode property rights.
He said between public and private financial institutions there was an exposure of R180-billion to commercial farmers, for which the land was the collateral.
“A farmer wants a loan for development of his land and the bank gives him a loan, which means the land is now the collateral. The question now is what happens if the land is expropriated and the land is the debt.”
He said no one was questioning the legitimacy of land redistribution and reform, which needed to be urgently addressed.
“But, it needs to be done in a way which does not inhibit growth through investments from both foreign and local investors.”
Coovadia said the association did not believe the Constitution needed to be changed.
“It [the Constitution] speaks to land expropriation and does so widely enough that it can be done for above market value or without compensation.
“The problem is [that] government has not used the implements properly.”AgriSA deputy executive director Christo van der Rheede said expropriation without compensation while still guaranteeing food security, as government believed could happen, was “utter nonsense”.
He said the blame for the slow pace of land reform and the atrocities that had occurred where once commercially viable farms now lay fallow, lay squarely with the ANC and government.
“The entire plan of land reform is not based on firm economical principals, with billons of rands of taxpayers’ money ill-spent on reforms which have borne no positive results.
“The expropriation of land around cities where there is an urgent need for housing and commercial and industrial areas, is the solution.”
He warned of economic havoc if expropriation without compensation occurred.Professor Benjamin Cousins of the Institute for the poverty, land and agrarian studies unit at University of Western Cape, said people needed to be worried as the debate around the expropriation – with or without compensation – could create nervousness around investors.
“Farmers owe the banks at least R160-billon, which at worse could see a run on the banks.”
Agricultural economist Professor Johan Willemse said the motion had created huge uncertainty.
“This [the motion] will impact negatively on investments, especially new investments. Whatever you have invested in your property risks becoming worthless. For a farmer, their land is their biggest asset, and if it is not in their name they cannot use it to raise finances. This will jeopardise the financial security of thousands of properties.”
He added: “There is much confusion on what type of land is to be expropriated. Is it residential urban land, or land used for commercial and industrial purposes? No one knows, which all adds to the confusion.”
African Farmers’ Association of SA president, Dr Vuyo Mahlathi said the review needed to happen, “but in a controlled manner”.
“We must end this hullabaloo and look at the reality of what needs to happen, which for nearly 25 years has not happened. There needs to be a look not only at commercial farm land, but all land to address the burning issue of spatial inequality.”Professor David Everatt, Wits School of Governance head, said it was paramount the issue around the “original sin” of land being violently taken away from its original owners through colonisation, be addressed.
"This motion is not about hating big business or certain races. It's about proper restitution. The country needs to realise that President Cyril Ramaphosa is not South Africa's second chance, but the country's last chance to get issues like this sorted out once and for all. "
He warned that people should not become fixated on expropriation without compensation.
"This is not the first solution. Government is looking at fair and equitable distribution. If we don’t do this and recognise the problems things are going to become very difficult in this country."