It is an exaggeration to say that expropriation without compensation will collapse the banking sector, says Tembeka Ngcukaitobi who acts as a judge in the Land Claims Court.
He also said banks seemed reluctant to play a role in correcting structural inequalities.
“If you think of how they [banks] have been opposed to any model of justice and equity, not just expropriation without compensation, what it simply means is that the banks want to be excluded from the risk of [addressing] historical disadvantages.”
Ngcukaitobi was also part of the advisory panel appointed by President Cyril Ramaphosa in September 2018 to inform government policy on land reform. The panel proposed using a range of land-acquisition methods to target land owned publicly and privately. These included donations, expropriation and land purchases.
The Banking Association SA (Basa), the industry body representing all registered banks in the country, recently warned that expropriation without compensation could spark an economic crisis, much like the 2007/2008 global recession that started with the downturn in land-based property in the US.
Banks have about R1.6-trillion in property loans that include land‚ commercial property and home loans.
Speaking during a webinar organised by the Wits School of Governance to discuss his new book, Land Matters: SA’s Failed Land Reforms and the Road Ahead’ Ngcukaitobi said banks must think seriously about their involvement in the constitutional project at the heart of which is reparation, the restoration and creation of an equitable society.
“I ultimately conclude that if you put all the numbers together —their [banks] own claims and the impact of expropriation without compensation — largely the claims are vastly exaggerated. It is not as if introducing expropriation without compensation on a targeted basis for specific classes of property will bring down the entire banking industry,” Ngcukaitobi said.He did not provide further numbers.
Basa has said expropriation of land without compensation will destabilise the banking sector and could lead to private-sector lenders withdrawing from providing loans when land-based property is offered as security.
Moves to expropriate land without compensation could also force banks to adopt a more conservative approach to the extent of loans they would be prepared to provide and increase borrowing interest rates to compensate for the additional risk in the event of expropriation, Basa said in a recent submission to parliament
The association pointed out that under present law owners of property would still need to settle any outstanding debt with banks, even when a property is expropriated without compensation.
Ngcukaitobi said banking is central to the functioning of the economy and its importance should not be underestimated.
He said, however, that banks have an obligation not to perpetuate structural inequalities that persist.
“You cannot have an entity that is an island in the context of where the entire national project is about the restoration in order to create a stable economy,” said Ngcukaitobi.
In his book, Ngcukaitobi touches on the government’s successes and failures in land reform and offers suggestions on what can be done to effect meaningful structural change.
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