Banks continue lending to farmers despite threats

Basa wants to ensure any change to the constitution does not make investors, or potential investors, ‘jittery’

Cas Coovadia. Picture: THE TIMES

The heated debate over land reform in the past few months has not discouraged banks from lending to the agriculture sector.
The Banking Association of SA’s (Basa’s) unaudited figures of the big four banks show that loans to commercial farmers have increased 11.2% to R148bn at the end of June, from R133bn in December 2017.

Banks have about R1.6-trillion in property loans.
Basa said this was “hard evidence” that banks are committed to sustainable land reform and are confident that SA can find practical solutions to the challenges of restitution, redistribution and security of tenure.
Basa MD Cas Coovadia said that while it was essential for SA to deal with land reform, a critical issue was attracting investment and stimulating growth to tackle the issues of poverty as well as unemployment.
It had to be determined whether a change in the constitution would promote growth and investment or inhibit it, Coovadia said.
“The last thing we need … is rhetoric or legislation that gets investors or potential investors jittery and stops us from moving from the very pedestrian growth that we have,” he said.
The disparity of land ownership due to apartheid could be dealt with through public-private partnerships with the government and the agribusiness sector, Coovadia said.
While Basa did not think the constitution had to be changed to ensure land reform, any change should be done in a way that does not undermine property rights.
“If property rights are undermined, that is a critical pillar for investment and that would measure negatively to draw investment,” he said.
Bungling the execution of expropriation without compensation could create uncertainty in SA for a number of years, said GM for human settlements in the market conduct division Pierre Venter.
Venter pointed out that the agriculture sector was quite a small part of the assets of the commercial lenders.
But a mass default could create a contagion risk for the banks sector.
“You’re not suddenly going to find all agricultural land expropriated at the same time, so it would be staggered over a long period,” Venter said.
Submissions that Basa would make to parliament next week over whether the constitution should be changed to explicitly allow for the expropriation of land without compensation included ones about a land summit and the creation of an ombudsman for land reform.
Coovadia said that the land summit to review the land-reform programme would host the critical interested parties and give them 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, he said.