Friday marks the final day of\u00a0public hearings by a parliamentary committee around the state’s proposed move to change the Constitution to make land expropriation without compensation the standard in South Africa.<\/p>\n
Speaking at the hearings, CEO of Nedbank, Mike Brown highlighted a key concern for banks – namely that the move could send South Africa’s banking industry into a crisis if bonded properties are not protected.<\/p>\n
According to Brown, when bonded property is exporpriated, it is likely to result in a direct impairment of that land on the balance sheet of a bank.<\/p>\n
If even a small percentage of properties are expropriated, this will result in that bank losing billions of rands, he said.<\/p>\n
As an example, he said that if 10% of Nedbank’s R153 billion residential mortgage bill was expropriated, it would cost the group R15 billion. With commercial properties at R162 billion and agricultural properties at R17 billion – the risks add up.<\/p>\n
Brown said that banks would be left with few options to protect capital and depositors, saying that confidence in the country’s banking system was critical, and already investors were starting to raise concerns.<\/p>\n
According to Brown, during investor road shows, the group would typically spend 20 minutes talking about the state of the country, 10 minutes discussing the state of the South African banking industry, and 30 minutes presenting Nedbank as an investment opportunity.<\/p>\n
However, because of the uncertainty around land reform, the conversation is now dominated by the state of the country – with the split now being 40 minutes discussing the state of the country, 5 minutes discussing the banking industry and 15 minutes presenting Nedbank.<\/p>\n
“Sometimes investors only want to talk about South Africa and the entire hour is used to talk about the state of the country,” Brown said.<\/p>\n