Nedbank CEO warns ANC’s land plan could trigger ‘classical banking crisis’
CEO Mike Brown says nearly every potential investor at an international roadshow expressed concern about the land-reform programme
Nedbank CEO Mike Brown says amending section 25 of the constitution or the property clause is not necessary and talk of expropriation without compensation has created uncertainty within the investor community.
This had negatively affected economic activity and job creation, he told MPs on Friday.
In his submission on the final day of parliament’s public hearings on the possibility of amending section 25 of the constitution, the property clause, to make it clear how land could be expropriated without compensation, Brown warned that a blanket approach to expropriation without compensation would trigger a “classical banking crisis”.
Brown said he had recently returned from an international investor roadshow and just about every potential investor had expressed concern about the land-reform programme, particularly expropriation without compensation.
The constitution already strikes a careful and well-considered balance between the need to protect property ownership with the need to ensure land reform while tackling the inequalities caused by our history.Mike Brown
He said a speedy land-reform process was essential to tackle past injustices. However, Nedbank was of the view that an amendment to the constitution was not necessary.
“The constitution already strikes a careful and well-considered balance between the need to protect property ownership with the need to ensure land reform while tackling the inequalities caused by our history…,” Brown said.
“In our opinion, the constitution has not been an impediment to land reform.”
Section 25 of the constitution, Nedbank added, already provided for expropriation without compensation in cases where a court held this just and equitable or it was in the national interest.
In a recent opinion piece in the Financial Times, President Cyril Ramaphosa said the proposal to amend the constitution will “not erode property rights, but will instead ensure that the rights of all South Africans, and not just those who own land, are strengthened.” He said though the constitution provided for expropriation without compensation in certain circumstances, the ANC wanted “certainty and clarity” on the matter.
Brown said wholesale expropriation without compensation would destabilise the banking sector and SA’s broader financial system.
“Any material negative impact on property prices would adversely impact confidence in the banking system and could trigger a classical banking crisis, starting unfortunately with the smaller banks, the Land Bank, and possibly migrating to bigger banks with significant negative knock-on effects to the economy.
“Every bonded property that is expropriated without compensation is likely to result in a direct impairment to that loan on the balance sheet of the lending bank, even when such loans technically remain legally due and payable.
“In addition municipalities would be impacted in terms of rates and taxes,” Brown said.
For Nedbank, an assumed expropriation of 10% of its R153bn residential mortgage book would result in an impairment charge of at least R15bn.
Some MPs described Brown’s submission as “scare-mongering” and insisted that expropriation without compensation was necessary to speed up land reform.
The Banking Association of SA (Basa) warned that an amendment to section 25 of the constitution had the potential to undermine all property rights, which could hurt the financial sector and the broader economy. Basa is the industry body representing all registered banks in SA, which have about R1.6 trillion in property loans, including for land, commercial property and home loans.
Lewis Nzimande, co-chair of the joint constitutional review committee, said members of the committee would meet on Wednesday to adopt a way forward with its programme.
The committee has to report back to parliament by the end of September.