If EWC isn’t executed wisely it may have the unintended consequence of breaking the financial system, warns Busa.
Cape Talk
13 February 2020 10:41 AM
by Kabous le Roux
The government intends to expropriate land without paying compensation.
What would happen to a landowner’s mortgage if she is compelled to hand over her land?
She would still have to pay the full debt, according to the Banking Association of South Africa (Basa) after it sought initial legal opinion.
Loans are secured by a mortgage over a property.
They remain valid and binding irrespective of the value realised for the property used as security.
A summary of Basa’s submission to Parliament:
- The economy can’t grow without a solid financial system. Banks rely on the market value of property as security for loans and to ensure consumer deposits can be repaid on demand.
- Expropriation without compensation (EWC) should not be left to the executive without judiciary oversight.
- The prospect of EWC is starting to dampen investment by farmers into their properties.
- EWC will reduce the value of assets on banks’ balance sheets and, therefore, their ability to give loans. Banks will be forced into far more conservative loan practices to not fall foul of the SA Banks Act and the global Basel regulatory framework for the financial sector.
Refilwe Moloto asked Pierre Venter (General Manager of the Banking Association of South Africa) to explain Basa’s concerns around how EWC will impact on the mortgage of a landowner facing expropriation.