Two very real consequences of EWC which need to be carefully considered

By Alec Hogg

A couple things occurred to me when reflecting on an insightful lunch this week with Magnus Heystek. Much of it was focused on South Africa’s hot topic of the moment, Expropriation of land Without Compensation (EWC).

Magnus shared a very practical story: A client of his, a 63 year old farmer, has started a scorched earth approach. After hearing it is likely to become legal for his major asset to be expropriated without compensation, he is now “farming the hell out of the land”, squeezing everything possible from it before his major asset is confiscated.

Then there’s the leading banker who explained to me the first farm expropriation, even it were legal, would force banks to immediately cut off all agricultural lending. Bankers need the security of assets to back their lending; so if that security is suddenly without any value, they cannot lend. Without the R180bn which banks loan farmers, SA food security would be precarious at best.

Hopefully SA’s business-savvy president will realise that the EWC in its proposed form is akin to a hostile takeover in the corporate world. Most of those fail dismally. Any student of economic history will tell you it’s far better to negotiate a friendly deal. Time to put EWC on ice and approach this complex issue with a scalpel rather than a butcher’s knife.

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