Land grab without compensation could affect all in SA - legal expert

Cape Town - Expropriation of land without compensation will not only affect farmers or those in rural areas, but has the potential to snowball into a situation that will touch all South Africans.

This is the view of Theo Boshoff, head of legal intelligence at the Agricultural Business Chamber (Agbiz) in its latest newsletter.

"While the (ANC) leadership race has certainly stolen the lime light,... one should not neglect the central policy issues postponed in July that are due to be decided at the upcoming conference (in December)," said Boshoff.

He explained that SA's agriculture sector is competing in a tough environment against global competitors who receive "considerable support from their governments in the form of subsidies and non-tariff measures".

In addition, the sector has to import many of its inputs, which places SA producers at a disadvantage due to the fluctuating exchange rate.

As a result, the sector has become highly reliant on credit, which usually takes the form of bond financing. It was recently estimated that SA farmers are indebted to the tune of about R160bn.

This debt is shared between the Land Bank (25%) and development finance institutions and agribusinesses (former cooperatives), but the lion’s share (70%) is held by commercial banks.

To reduce the risk in the event that a farmer cannot repay his loan, banks often couple a loan to the value of the land by registering a bond that allows them to sell the land as a last resort.

"If one were to amend the Constitution to allow expropriation without compensation, it could endanger the faith banks place in the land as security and set into motion a chain-reaction that eventually leads to the ordinary consumer losing out," said Boshoff.

"If the state can take land without paying for it, then the integrity of the land market will be compromised and banks will not be able to recover depositors' money that was loaned to farmers."

No bank has sufficient liquid assets to pay out all of their depositors’ money in one go, as funds are locked up in long-term investments.

"One therefore trusts that the delegates that deliberate on this topic in December are fully aware of the dangers that lurk within this policy proposal and consider alternatives that result in greater land reform and transformation without the associated risks," said Boshoff.

He pointed out that financial institutions have already developed co-financing mechanisms whereby private sector funds are accessed to speed up land reform via "soft loans" with subsidised interest rates.

In his view, such a solution would speed up transformation as desired, without endangering the basic pillars of property rights underpinning the economy.

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