Banks adamant that they do not support land expropriation without compensation

The banking sector did not support the expropriation of land without compensation, Banking Association SA (Basa) MD Cas Coovadia said Monday.

Coovadia’s comments were made at a function of the Cape Town Press Club but were qualified by the statement that the banking sector acknowledged that land reform was a legitimate issue that had to be addressed.

Expropriation he said would erode property rights and would mean that land could no longer serve as collateral for loans.

Currently the public and private sector has loaned R180bn to agriculture.

Coovadia said expropriation would discourage investment in farm technology and innovation, both of which drive productivity.

There was also the danger of international disinvestment and the risk of losing benefits from initiatives such as the Africa Growth and Opportunity Act which was adopted by the US Congress to give free access of certain products to the US market to exporters from Africa.

Coovadia reiterated Basa’s opposition to the proposed amendment to the National Credit Act that would provide debt relief to the overindebted. This would include the forgiveness of debt in certain circumstances.

The measure has been proposed by Parliament’s trade and industry portfolio committee, which has been conducting public hearings on the proposed amendments.

Coovadia said Basa was opposed to a legislated approach as banks had their own measures to provide debt relief. The proposed amendments would send the wrong message to consumers, namely that they could borrow in anticipation that their debt could be wiped out.

Extinguishing debt could increase the cost of credit and carried the risk of low-income consumers being excluded from access to banking services. It was likely to drive them underground.

"Existing measures have been proving effective and should be allowed to continue," Coovadia said, adding that Basa supported "targeted and sustainable" debt intervention measures.

"New measures should not introduce instability into the credit market. Basa proposes the introduction of a subsidy which can be used to cover the cost of using existing debt review measures."

Debt counselling costs between R3,500 and R5,000.

"Appropriate debt intervention measures should rehabilitate, educate and re-introduce consumers into the credit market."

Coovadia noted that banks had their own measures to assist over-indebted consumers that had entered into debt review.

Voluntary concessions on interest rates outside of the provisions of the National Credit Act were granted to the amount of about R3.98bn in 2017, up from R3.4bn in 2016. In addition, R9.3bn was expunged in March 2015 from various credit agreements due to amendments to the act related to prescribed debt. A sizeable amount of prescribed debt was expunged on a monthly basis under the act.

On the payment of social grants, Coovadia insisted that existing banking infrastructure and products could cost-effectively and securely deliver social grants from April 1. Many of the 6.7-million grant recipients with cards issued by the South African Social Security Agency (Sassa) had accounts with banks into which grants could be paid immediately, although Sassa would need to help identify these accounts.

Banks have asked that the cumbersome and time-consuming requirement that beneficiaries present themselves in person to change beneficiary accounts be waived.

Basa has proposed that the R6.71 subsidy for recipient accounts should follow the grant.