A top official of Nedbank in South Africa is warning of a major banking crisis in the country if the country’s tolls out its much talked about land reform.
South Africa intends amending its constitution to allow the expropriation of land without compensation. President Cyril Ramaphosa says his ruling party the African National Congress (ANC) will back the amendment.
But there are fears among banking experts it could trigger a banking crisis affecting property prices. The chief executive of Nedbank, Mike Brown told parliament on Friday that there was no need to alter the current law.
He said the existing legislation already allows the state to expropriate property for land reform purposes.
“As a commercial bank, we are a key role player in funding the economy and any material impact to property prices would adversely affect confidence in the banking system and could trigger a classic banking crisis with significant negative knock-on effects on the economy,” Brown said.
Nedbank is the fourth largest bank in South Africa. But it is not the only bank that has such fears. South Africa’s state-owned Land Bank has also expressed worry about the land reformation program.
The Land Bank last month expressed worried about the implications for its debt portfolio. Managers of the bank say the program could trigger defaults that could cost the government 41 billion rand ($2.8 billion).
It wants it’s rights as a creditor protected by the state. Land Bank provides financial services to commercial farmers and other agricultural businesses.
A 2017 land audit report by the department of land reform states 72% of farm land is owned by white owners, followed by coloureds (people of mixed race) at 15%, Indians at 5% and blacks at 4%.
South African wants to correct this trend.