Cas Coovadia. Picture: SUNDAY TIMES
Cas Coovadia. Picture: SUNDAY TIMES

An amendment to section 25 of the constitution has the potential to undermine all property rights, which could hurt the financial sector and the broader economy, the Banking Association of SA (Basa) warned on Friday.

Basa said changes to the property clause will also undermine SA’s efforts to address the triple challenge of unemployment, poverty, and inequality.

Basa is the industry body representing all registered banks in SA. Banks have about R1.6-trillion in property loans, including for land, commercial property and home loans.

The joint constitutional review committee is holding public hearings on the possibility of amending section 25 of the constitution to make it clear how land could be expropriated without compensation.

In his submission to the committee, Basa MD Cas Coovadia said that while it was essential for SA to deal with land reform, this had to be done without discouraging investment.

"We need to be careful about tinkering with the constitution … I am certainly of the view that we have an enabling constitution," Coovadia said.

There was no need to amend the constitution to address land imbalances, he said.

"We can do all of this without amending section 25. Section 25 is a mandate for transformation … it talks of just and equitable compensation. This can range from zero to above market value, depending on individual circumstances.

"So expropriation without compensation is possible under current law in certain circumstances."

The EFF is pushing for a blanket approach to land expropriation.

"If we change section 25 this has the potential to undermine all property rights," Coovadia said.

"In the world we live in property rights are important, particularly for the financial sector to enable us to provide banking services."

He said that under current law, owners of property would still need to settle any outstanding debts with the banks, even when a property is expropriated without compensation.

"If I have a farm and land is expropriated, legally I am liable for the loan because I have an agreement with the bank … these are issues which create uncertainty and when you have uncertainty people start making other investment decisions," said Coovadia.

An expropriation-without-compensation policy would result in high levels of debt impairments and the value of property as security would reduce, with many investors looking to divest from property to avoid future losses.

African People’s Convention MP Themba Godi suggested Basa’s statement that an amendment to section 25 would undermine all property rights was "scare-mongering".

Pierre Venter, Basa’s general manager for the human settlements cluster, said property is all about long-term investor confidence.

"If I don’t have confidence in the biggest purchase of my life … that it will be taken away without being compensated … I will not invest in property. This has the potential to undermine property rights, if you do not create that confidence," said Venter.

Basa called for a land summit, and the establishment of an ombudsman for land reform, among other proposals.

A summit would review the land-reform programme and give interested parties an opportunity to discuss whether compromises should be made.

The creation of an ombudsman would also create a level playing field for people seeking land restitution.

Tanya Cohen, CEO of Business Unity SA (Busa), also told the committee an amendment to the constitution is not necessary.

Busa represents organised business in SA.

Cohen said business acknowledges the urgent need to address the persistent effects of apartheid-era land dispossession.

"Business is, however, concerned by a response that focuses on constitutional reform rather than addressing the endemic structural and administrative challenges in implementing land reform, which has been riddled by inefficacies," she said.

Busa endorsed the position of the High-Level Panel on Assessment of Key Legislation and Acceleration of Fundamental Change, headed by former president Kgalema Motlanthe, as well as Operation Phakisa, that the existing constitutional framework is not an obstacle to sustainable land reform.

In November, Motlanthe tabled a review of key legislation in parliament. His high-level panel proposed that instead of amending the constitution, the government should use its expropriation powers more boldly, in ways that test the provisions in section 25 (3), particularly in relation to unutilised or underutilised land.

The panel also found that a lack of leadership and policy direction, corruption and an inadequate budget (the budget for land reform is less than 0.4% of the national budget, with less than 0.1% set aside for land redistribution) were to blame for SA’s failed land reform.

The public hearings continue.