Constitutional Review Committee, Parliament of the Republic of South Africa Presentation by Nedbank Group Ltd Public Hearings on the review of ...
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Constitutional Review Committee,
Parliament of the Republic of South Africa
Presentation by Nedbank Group Ltd
Public Hearings on the review of Section 25 of the Constitution
7 September 2018
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6 September 2018 1Nedbank’s role in society
■ As one of South Africa’s largest commercial banks and an engaged corporate citizen, Nedbank
strives to contribute to the transformation and development of the societies in which we operate.
■ This is both a moral and business imperative.
■ One of our roles as a bank is to transform the savings and deposits of our country’s citizens and
institutions into investment and productive consumption, thereby facilitating economic growth,
employment, wealth creation and societal transformation.
■ This enables us to contribute to a sustainable and better future for all, and achieve our purpose of
using our financial expertise to do good, for individuals, families, businesses and society.
■ Property and land specifically, as a capital asset and as a basis of security is a key enabler of this role
in that it provides security for many of the loans made, thereby safeguarding the country’s savers
and depositors and ensuring the safety and soundness of the financial system .
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6 September 2018 2Nedbank supports the need for Land Reform in South Africa
■ Our Constitutional obligation enjoins us to recognise and address the injustices and inequalities of
our past, whilst working to build a society based on the rule of law and which aims to improve the
quality of life and potential of all citizens.
■ The racially skewed and unequal land ownership patterns reflect our history of conflict, colonialism,
segregation and apartheid.
■ As a result of our country’s history and given our current realities, Nedbank has an important role
to play, alongside others, in the manner that land reform is to be addressed in South Africa going
forward.
■ Nedbank recognises the national imperative of changing skewed and unequal patterns of land
ownership and effecting land reform that:
■ Is Constitutionally based
■ Is orderly, pragmatic and sustainable,
■ Contributes to socio-economic growth and development
■ Safeguards food security and agricultural production
■ Does not create systemic financial sector and economic risk
■ Does not undermine property values and security 3
6 September 2018 3Nedbank believes that the Constitution already allows Government
adequate powers of expropriation for the purposes of land reform
■ The Constitution provides for land rights in Sections 25(5), (6), (7) and (9).
■ Government has not used its existing powers to expropriate land for land reform purposes effectively , nor
has it used the provisions in the Constitution that allow compensation to be below market value in particular
circumstances.
■ The Constitution ensures that compensation be ‘just and equitable’. This definition takes into account use,
history, market value, previous state subsidies and proposed purpose for each piece of land under review,
and could therefore, in some cases, lead to expropriation without compensation.
■ Changing this would send a very strange and damaging signal to our people and potential investors (ie
contemplating that there are circumstances where compensation could be ‘unjust and/or inequitable’).
■ It is our view that the acquisition of land and the current Constitutional provisions have not been a key
obstacle to land reform so far and that an amendment to S25 of the Constitution would offer little in the way
of sustainable solutions in the future. The key challenges as set out in the Report of the High Level Panel of
November 2017 remain lack of effective implementation of current powers, lack of capacity, lack of resource
allocation and lack of proper and structured support for new land owners.
■ We therefore believe that it is unnecessary and undesirable to amend the Constitution and the risks of doing
so are not outweighed by the espoused benefits.
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6 September 2018While amending the Constitution carries limited benefit for accelerating
Land Reform, it risks unintended consequences to the economy & the
safety & soundness of the financial sector
§ Any changes to the Constitution, however well intentioned, would send a negative signal to
potential investors and be seen as a risk to future property rights. Should this happen:
§ fixed investment spending and job creation would suffer;
§ borrowing costs could rise at a time that the country – and government – could ill-afford;
§ growth would remain below potential.
§ In the unlikely event of a poorly implemented land reform programme, carried out exclusively or
largely through Expropriation Without Compensation, the effects would be more structural and
significant:
§ property prices would plummet along with other asset prices;
§ there would be large-scale defaults, with little or no collateral for the banks to offset losses;
§ Government may have to step in to protect depositors’ funds in the event of a banking crisis;
§ borrowing costs generally would soar;
§ the economy would be severely depressed and unemployment would rise even further;
§ food security would be impaired and food prices would increase
§ The economic and financial effects of a systemic banking crisis can be considerable. For example, in
one study of post World War II banking crises, Reinhart and Rogoff estimate that in their
aftermaths:
§ Unemployment rises by 7 percentage points and takes 4.8 years to turn;
§ Real GDP per capita falls by 9.3% and takes 1.9 years to turn;
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§ Cumulative government debt rises by 86% over a period of three years 6 September 2018 5Nedbank wants to be part of the solution: some recommendations
1. A Comprehensive and well resourced Model for Land Reform is needed predicated on existing
instruments and powers.
2. Legislative and Regulatory Certainty, Predictability and Consistency are key: A clear and predictable
legislative framework should be adopted including judicial oversight, including enabling policy
interventions that may be required. Government and Parliament must provide certainty and clarity on
the category and type of land which may be subject to Expropriation Without Compensation in a manner
that does not negatively impact economic growth and food security.
3. Administrative improvements are also important: Provide a transparent and effective Land Reform
administrative framework, subject to judicial oversight. Apart from building capability this should include
better information, including a proper land audit.
4. The private sector’s participation is vital: Given the above, the State should encourage private sector
support to empower beneficiaries through availability of finance, skills and logistical support.
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6 September 2018 6You can also read
