Recent comments by the African National Congress (ANC) have made it clear that it intends to have expropriation without compensation (EWC) implemented as soon as possible.
The Portfolio Committee on Public Works and Infrastructure is scheduled this week to consider putting the Expropriation Bill forward for adoption by the National Assembly.
Implementing the Expropriation Bill will have a negative impact on food security in South Africa and the wider economy, and will also interfere with the property rights of many South Africans. We simply cannot allow it to be implemented.
Which is why it is deeply concerning that, despite being approached by the Institute of Race Relations (IRR) in recent weeks to publicly clarify their stance on the threat of expropriation, only one of the country’s four major banks has been willing to declare its opposition to EWC and expropriation below market value, as set out last year by the Banking Association of South Africa (BASA).
BASA warned Parliament that if EWC was allowed, or even if compensation was paid at less than market value on encumbered properties, this could ‘lead to systemic consequences for the economy and the financial system as evidenced by the 2007 global financial crisis’.
To not speak up would be unconscionable, considering that the banks’ clients, who are ordinary South Africans, stand to be profoundly affected should the bill go through in its present form.
During his speech at the recent ANC policy conference, President Cyril Ramaphosa said that the ANC ‘must undertake to make a dramatic, as well as a disruptive, lasting change’, adding that ‘despite the setback of our efforts to amend Section 25 of our [sic] Constitution, we must continue to pursue all available options, including through legislation, like the Expropriation Bill, to implement the resolution of our 54th Conference on land redistribution without compensation’.
This serves as a clear indication that the ANC is not backtracking from its position to implement EWC, but is doubling down.
Since the ANC reaffirmed its position, it is worth asking, what about the banks? As noted, BASA last year listed a number of concerns regarding the Expropriation Bill in its submissions to Parliament.
BASA’s most important point was the rejection of Section 12(3), which allows for nil compensation. BASA submitted: ‘As a principle we are opposed to the insertion of this section as this represents a material dilution of property rights which we are opposed to and we recommend that this section be deleted.’
Second, BASA noted that the list of circumstances in which EWC could take place is an open one, which makes the unacceptable material erosion of property rights open-ended.
Third, BASA noted that discussions surrounding expropriation below market value or without compensation had already begun discouraging essential investment by farmers in their property, which affected food security and drove down investment into the general economy.
Fourth, it argued that the Bill was in conflict with global norms, including that of the OECD, and further argued that the Bill was also at variance with existing country bi-lateral trade agreements.
Fifth, BASA argued that the banks would be unjustly harmed if they were not to be remunerated on expropriated properties, or able to reclaim the property (as their mortgage agreements state) as collateral once the state had taken it. This too was a ‘material dilution of property rights’.
‘Should the compensation paid by the expropriating authority be less than market value, in some cases loan balances would exceed compensation’, which ‘can lead to systemic consequences for the economy and the financial system as evidenced by the 2007 global financial crisis’.
Lastly, BASA argued that the Bill conflicted with some existing legislation – for example, in setting out that expropriation can occur before ownership is transferred in the deeds registry, and this undermines a property owner’s rights. It also cautioned that the Bill provided for a property to be expropriated even if this was being disputed in the courts, which again undermined property owners’ rights.
That was the banks’ position then, and given the major alarm bells, one might have expected the banks to react in vocal opposition to Ramaphosa’s reigniting EWC at the governing party’s policy conference.
Or did BASA’s and the banks’ position change? Do some of them no longer think that EWC must be removed by deleting Section 12(3) of the Expropriation Bill? If they still think EWC could blow up the economy how can any, in good conscience, stay quiet?
It was with this in mind that the IRR wrote to the banks to ask:
1. What is your view on [EWC], as well as the Expropriation Bill that has been proposed by the ruling party?
2. Do you support the property rights of South Africans?
3. Do you consider the financial interests of your clients to be connected to their property rights?
4. May you make it clear to South Africans that you are willing to stand up for their financial interests, as it’s your moral and fiduciary responsibility to act on behalf of your clients?
5. Are you willing to unapologetically join the IRR in its campaign to ensure that the property rights and the financial interest of your clients are protected against policies that will harm them?
6. The banks, through BASA, might consider themselves committed to the position that Section 12(3) of the Expropriation Bill must be deleted entirely. But since Ramaphosa has re-committed the ANC to EWC through the Expropriation Bill, [name of bank] might have changed its position. This is the question, have you changed your position?
Last month, the IRR launched a campaign to block the Expropriation Bill. The national government needs to implement genuine land reform, which requires stronger property rights and mass privatisation of occupied government land.
Instead, the Expropriation Bill will damage the property rights of South Africans, worsen malnutrition and accelerate the decline of the economy. Big business can play an important role in blocking the passage of the Expropriation Bill in its present form by making a case for their clients’ interests. They can be guardians, or they can press the mute button.
It cannot be denied that the major banks can play a crucial role in shaping the debate on EWC, considering the size of the sector and its fiduciary duty to savers. One can only hope that the banks will clarify their position on EWC and the Expropriation Bill before it is too late.
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