Fewer farm deals as farmers adopt wait-and-see approach
Banking Association warns that ‘prolonged uncertainty’ will reduce property values, although banks continue to view agriculture as an attractive sector
There has been a decline in the number of farm transactions processed by South African banks since the proposal to amend the constitution to allow for expropriation of land without compensation.
This is according to a statement issued by the Banking Association of SA (Basa) on Thursday, in which it said the farming community had adopted “a wait-and-see approach”.
The association also observed a decrease in capital investment into agricultural properties.
On November 26 and 28, Parliament is expected to debate the motion on whether the constitution should be amended to allow expropriation without compensation, following public hearings and the consideration of written submissions by interested groups.
Basa also said sharp falls in land prices had remained “broadly” stable, despite some in areas that were affected by prolonged drought conditions, such as the Western Cape and North West.
“Banks have taken note of the decline in land prices and will monitor the situation closely. As yet, the decline in land prices has not had any impact on the ability and appetite of banks to advance loans to the agricultural sector,” the statement read.
The association has, however, warned that “prolonged uncertainty” would reduce property values, although banks continued to view agriculture as an attractive sector.
“Lending by commercial banks to the sector increased 10.32% in 2017, and 11.69% for the first six months of 2018. Unaudited figures indicate the ‘big four’ banks had exposure of R148bn to the agricultural sector by the end of June 2018,” Basa said.
The association appealed to the Constitutional Review Committee and the Presidency to expedite the legislative framework on expropriation without compensation.