Durban - Farmers and other property owners will suffer devastating consequences if the much-anticipated land expropriation without compensation (EWC) bill is passed, as they will be forced to pay off bonds to the banks for their expropriated properties, warns the Institute of Race Relations (IRR).
The IRR was reacting to the Banking Association of South Africa (Basa), which last month told Parliament that if the bill is passed, it would destroy people whose properties had been
registered by banks as security for mortgage loans.
The IRR, which has intensified
its campaign against the amendment of Section 25, said financial institutions were owed R1.6 trillion, of
which land had been used as security for mortgages.
According to a report published
by BusinessLive, this
amount was owed on residential,
commercial and agricultural mortgages by borrowers.
IRR campaigns manager Hermann Pretorius said instead of amending the Constitution, various stakeholders should band together to assist black people in joining the farming business.
“They (banks) know that if EWC is passed, it would blow a R1.6trillion hole in their books. They know the risk, they know the stakes, but if
they are not going to play the game they might hope ordinary South Africans won’t hold them accountable,” said Pretorius.
In its previous submission two years ago, Basa managing director Cas Coovadia told Parliament that commercial farmers alone owed more than R160 billion on bank loans.
According to Basa, if the creditor loses the property, which had been used by the bank as mortgage security, that would be considered as a default under the loan, and the consequences would be that the repayment of the loan to a bank could be accelerated.
“This would place the borrower in a situation whereby he/she would need to repay the loan far quicker than anticipated, which has the potential impact of financially crippling the borrower” read the Basa submission.
Basa made it clear to MPs that it was opposed to the expropriation.
But Pretorius said opposing alone was not enough to make the government and Parliament feel pressure against passing the expropriation bill.
Economist at FNB property division Siphamandla Mkhwanazi said that the bill would have a devastating effect on the economy.
“It would destroy confidence in the country that you are unable to secure property rights, and that would have an impact on our ability to attract investment,” she said.
Parliament’s land expropriation ad hoc committee chairperson Dr Mathole Motshekga said people should not start panicking as the committee was still receiving submissions which were yet to be considered.
University of KwaZulu-Natal Professor Emeritus George Devenish said it was unlikely that the court would rule against creditors.