A 'No entry sign' is seen at an entrance of a farm outside Witbank, Mpumalanga province, South Africa on July 13, 2018. File photo: REUTERS/SIPHIWE SIBEKO
A 'No entry sign' is seen at an entrance of a farm outside Witbank, Mpumalanga province, South Africa on July 13, 2018. File photo: REUTERS/SIPHIWE SIBEKO

Land prices are “broadly stable” despite uncertainty as the governing ANC moves to change the constitution to expropriate land without compensation, the Banking Association of SA (Basa), said on Thursday.

Investors have been unnerved by one of the signature policy drives of President Cyril Ramaphosa ahead of the 2019 elections, which will be a tough test for his party against the backdrop of a recession and signs of rising social discontent. More than two decades after the end of apartheid, most private land in SA remains in the hands of the white minority, making it a potent symbol of wider economic disparities.

Basa said in a statement that land prices have “broadly remained stable” with exceptions such as drought-hit areas and lifestyle and game farms, which it said have seen “some sharp declines”.

“However, prolonged uncertainty will significantly reduce property values,” it said, while also noting a decrease in farm economic activity.

“There has been a slowdown in the number of farm transactions and a decrease in capital investment into agricultural properties since the proposal to amend the constitution to explicitly allow for [land] expropriation with compensation,” it said, without giving details.

Still, lending by commercial banks to the sector remains robust, rising 10.3% in 2017 and 11.7% in the first six months of 2018. The association said unaudited figures for the big four banks — Absa, Nedbank,Standard and FirstRand — showed their exposure to the farm sector at the end of June was R148bn .

“The collateral held by banks, supported by land values, is still deemed to be reasonable, and the lending criteria of commercial banks has not been impacted at all at this stage. For now, we are confident the loans can be serviced,” it said.

Reuters

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