Banking Association: Land expropriation not the way to go

Banking Association of SA says banks have lent billions to the agricultural sector based on land as collateral, and that the entire financial system could be put at risk.

A farmer inspects his land in the Free State. Picture: Christa Eybers/EWN.

CAPE TOWN - Banking Association of South Africa’s (BASA) says land reform is a legitimate issue but must be addressed properly and expropriation without compensation is not the way to go so far as South Africa’s banks are concerned.

BASA's Cas Coovadia says banks have lent billions to the agricultural sector based on land as collateral, and that the entire financial system could be put at risk if that security was threatened.

But Coovadia says while BASA is opposed to expropriation without compensation, banks want to promote land reform by providing finance and helping beneficiaries get the skills and equipment they need.

Coovadia says banks are opposed to the expropriation of land without compensation, saying it would erode property rights and land would no longer count as collateral for loans.

“The whole area of land reform is a legitimate issue. The bottom line is people were deprived of their land and land is both an emotive and an economic issue and we’ve got to do it properly.”

He says the country’s banks have lent out about R180 billion to the agricultural sector.

“If we threaten that security then there are serious systemic problems for the industry.”

Coovadia says this could discourage investment in farm technology and innovation, which drive productivity and lead to international disinvestment and the loss of benefits from agreements like the African Growth and Opportunities Act which helps exporters from the continent access the American market.