On Tuesday (27 February), the National Assembly passed a motion mandating the Constitutional Review Committee to review Section 25 and the issue of expropriating land under\u00a0the Constitution.<\/p>\n
The motion was passed with an overwhelming majority in Parliament (241 votes supporting), after the ANC and the EFF joined forces on the matter.<\/p>\n
The EFF has long held the view that land in South Africa should be expropriated without compensation, with the view that farm land in particular be nationalised and then leased out by the government.<\/p>\n
For the ANC, however, the topic has not been as clear, with the party formally adopting the policy after its conferences held in 2017 – although not without internal challenges and conflict.<\/p>\n
Notably, the ANC’s policy on land expropriation without compensation comes with several caveats, chief among them being that the process cannot harm the economy of food security in the country. This is one of the changes made to the motion which passed this week, replacing the EFF’s ‘radical land reform’ angle.<\/p>\n
For now, the motion has simply initiated the process to review the current land laws, and had not set anything in stone.<\/p>\n
As part of the motion, the committee has to engage with all stakeholders and propose a way forward in what is expected to be a multi-year process.<\/p>\n
How banks will be affected<\/strong><\/p>\n Despite it being early days, markets have been unsettled by the news, with particular concern around the impact of changing the land laws on bond holders – the biggest of which being South Africa’s banks.<\/p>\n The news drew the rand back against the ‘Ramaphosa rally’ gains made over the past few weeks, edging it back towards R12 to the dollar. The rand weakened from fresh strengths at R11.50, back to R11.82 by Thursday, primarily on concerns around the land policy.<\/p>\n According to Bulelwa Mabasa, director and land claims specialist at Werksmans Attorneys, the\u00a0question of what will happen to banks’ debt is a difficult one and is not clear at this early stage of the process.<\/p>\n “The risk for the banks is, of course, they would be left with the debt on the land that is currently mortgaged in favour of mortgagors,” said Mabasa.<\/p>\n “It is also not clear whether or not the proposed amendments to section 25 of the Constitution would apply retrospectively or prospectively – it will be interesting to see whether or not bonded property will be carved out as an exception and not be expropriated without compensation.”<\/p>\n There is also a question whether the state will have the money to make good on the debt sitting on the banks’ books, Mabasa said.<\/p>\n “Another question is the extent to which expropriation will take place. It remains to be seen whether or not it will only apply to just be agricultural land or whether or not it will include residential land too.<\/p>\n “Whatever the final decision, the amount of debt at stake is likely to run into hundreds of billions of rand<\/strong>,” she said. Analysts have pegged the banks’ potential exposure at between R160 billion and R180 billion.<\/p>\n Mabasa cautioned that government will have to walk a fine line between achieving land reform, redistribution and restitution and expropriation without compensation, while maintaining the health of the overall economy by maintaining the rule of law and access to courts, without eroding the fundamental basis of the Constitution.<\/p>\n “Once the amendment is successfully passed, without any Court challenges, it is anticipated that the entire basis of property law and legislation built on the protection of private property rights will have to be repealed and amended, including but limited to the National Credit Act,” she said.<\/p>\n
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