Rand takes a hit over fears of land expropriation without compensation

·28 Feb 2018

The rand weakened significantly in a matter of minutes on Tuesday, after parliament passed a motion that will start the process to allow for land expropriation without compensation in South Africa.

Following subdued gains after the announcement of Cyril Ramaphosa’s cabinet reshuffle on Monday evening, the rand fell from R11.55/dollar at 17h00 on Tuesday to as low as R11.75/dollar by 17h35, after a motion was passed by the EFF and ANC to review land redistribution without compensation under the Constitution.

This drop of 1.4% made it the the worst-performing major and emerging-market currency on the day, Bloomberg reports.

Parliament’s Constitutional Review Committee is now expected to report back to lawmakers on changes to section 25 of the Constitution by 30 August.

Cyril Ramaphosa, who was elected party leader in December and the nation’s president 15 February, affirmed the ANC’s decision to seize land without compensation to speed up land reform, but said it would only be done in a responsible manner that didn’t harm the economy, agricultural production or food security.

The Democratic Alliance (DA) opposed the motion, arguing that changes to Section 25 will undermine property rights and scare off potential investors.

The DA’s Thandeka Mbabama told parliament that expropriation without compensation was a way to divert attention from the failure by successive ANC-led governments to get to grips with the issue. Corruption and lack of farmer training and capacity remain obstacles to land redistribution.

“It is shocking that at the current rate it will take 35 years to finalise (land) restitution claims lodged before 1998,” said Mbabama, who is deputy shadow minister for rural development and land reform.

The rand strengthened slightly, and was trading at R11.72/dollar at 07h30 on Wednesday morning.