CAPE TOWN — The ruling party’s obsession with command and control of the economy in pushing laws motivated more by ideology than pragmatic economics has got our commercial banks seriously worried. They have now come out and publicly questioned how ideology on its own will create jobs, empowerment and inclusive growth. In agreement with the ANC on the need to redress historical land ownership inequities, the bankers are willing to put billions into making land reform work in a way that doesn’t endanger property rights, safeguards financial stability and addresses the housing shortages that see 1.2 million families living in informal settlements. The redistribution fanatics will scoff at the banks self interest in the matter – i.e. some R1.6 trillion rand of customer savings, salaries and investments invested in mortgages which if land confiscation begins in earnest, will send property values plummeting. The scoffing won’t last long when the entire economy collapses and we haul out the begging bowl and go crawling to the World Bank to feed our nation. How many failed states that have adopted similar crackpot redistributive policies instead of growing their economies do we have to cite before the ruling party gets the message? – Chris Bateman
“They do not seem to be the legislative underpinning of a comprehensive, implementable national economic recovery plan,” the Banking Association of South Africa said in a statement distributed in Johannesburg on Thursday. “Rather they seem ideologically motivated and do little to address the real needs of an economy desperately in need of jobs, effective transformation and empowerment programs, and inclusive growth.”
The comments come as President Cyril Ramaphosa’s ruling African National Congress embraces calls to change the constitution to allow for the expropriation of land without compensation. While the ANC says the change is needed to improve equality 24 years after the end of racial segregation, the opposition say the party is trying to deflect attention from the government’s failure to properly manage earlier land-reform efforts before elections.
“Banks recognise that the present patterns of land ownership in South Africa, which have their origin in apartheid and colonial dispossession, are neither just nor sustainable,” BASA said. Lenders are willing to partner the government and farmers on land reform, which must secure property rights, safeguard financial stability and put in place proper infrastructure to address a shortage of housing that has left 1.2 million families living in informal settlements, it said.
No land grabs
White farmers own almost three-quarters of South Africa’s agricultural land, according to an audit by lobby group AgriSA published last year, down from 87 percent during white rule. Loans to commercial farmers rose to R148 billion ($10.1 billion) at the end of June from R133 billion at the end of December, demonstrating confidence that South Africa can find “practical solutions to the challenges of restitution, redistribution and security of tenure.”
Lenders have invested about R1.6 trillion of customer savings, salaries and investments into mortgages, and rely on the properties as security for the loans, according to BASA. Should these property values decrease, banks and the economy won’t be able to absorb the shock, it said. Ramaphosa and his deputy, David Mabuza, have both said that the government is opposed to any land grabs.
The opposition Economic Freedom Fighters has also been pushing for the creation of a state-owned bank to challenge commercial lenders, the five biggest of which control more than 90 percent of banking assets, which the ANC adopted as policy at its national conference in December.
An “unintended consequence” of the Banks Amendment Bill is that it will enable all state-owned companies to operate or own a bank, said BASA, which represents 35 local and international lenders.
“Applicants for bank licenses must have the financial means to comply with the requirements of the Banks Act and be able to guarantee depositors’ money without exposing taxpayers to losses or introducing systemic risk,” it said. “Given the state of the South African fiscus, it is not advisable for the state to take on any additional guarantees.”