Picture: ISTOCK
Picture: ISTOCK

Expropriation without compensation poses a major risk to commercial banks and will constrain agricultural finance, the agriculture business chamber (Agbiz) said on Tuesday.

Total farm debt currently amounts to more than R197bn, of which roughly 75% is collateralised through the value of the land.

Agbiz is an organisation that represents commercial farmers and agribusiness enterprises nationally.

"Expropriation without compensation poses a risk to commercial banks, which have an exposure of R148bn, with the Land Bank holding R49bn and the remainder primarily sitting with agribusinesses," Theo Boshoff, the head of legal intelligence at Agbiz, told Parliament’s constitutional review committee on Tuesday.

"In the absence of reliable collateral, it will constrain agricultural finance. This could likewise have a spill-over effect on the rest of the value chain as well as other sectors of the economy,"

The committee, which is looking into the possibility of amending section 25 of the constitution or the property clause, is in Parliament this week hearing oral submissions from various stakeholders, including organisations that represent agricultural businesses, banks and academics. The ANC has made it clear that it supports an amendment to the constitution that would make it clear how land could be expropriated without compensation.

Boshoff said the uncertainty around land reform was likely to lead to a decline in the productivity of the agricultural sector.

"The Agbiz/IDC agribusiness confidence index has proven to be a reliable indicator for the sector, as real economic growth in the sector and agribusiness confidence has always gone hand in hand. Recently, however, Agbiz has witnessed a deviation, with confidence declining while the sector was still doing relatively well. This deviation is probably due to uncertainty regarding property rights," said Boshoff.

"Business confidence usually reflects business decisions, and the risk posed here is that the revenue being generated by the sector might not be reinvested due to depressed business confidence. This will pose challenges for the future of the sector if investments are not made into fixed improvements. Decreased investment and finance in the sector will inevitably soon lead to reduced production."

SA is currently a net exporter of food, which enables the sector to provide food at export parity prices.

"However, if we lose this status we will be required to import food at import parity prices, which will have a direct knock-on effect on the price of basic food for consumers," Boshoff said.

He said there was no need to amend the constitution as the current provisions of the constitution provide the "best possible framework within which meaningful and sustainable land reform can be achieved". Land reform had largely failed because of a lack of political will, Boshoff added.

The wording of section 25 of the constitution strikes a good balance between the prospective protection of property rights from arbitrary deprivation, which is essential to economic freedom and individual liberty, while simultaneously placing an obligation to correct the skewed patterns of ownership inherited from the previous dispensation, Boshoff said.

"Land reform is a necessary prerequisite for social justice in SA. However, we believe that social justice is not limited to redress but also must create new opportunities for those who were denied in the past.

"The protection of property rights is vital for individuals to achieve economic fulfilment and freedom. We are of the view that the current provisions catering for expropriation in the public interest provide the state with a powerful tool to achieve this goal and therefore no amendment is required. What has been missing to date is the political will to implement these provisions within the context of land reform," Boshoff said.

In its submission, trade union federation Cosatu said it supported any "progressive and rational constitutional measure that will speed up land reform and restitution".

"This can, where needed, include expropriation without full or partial compensation," the union said.