South Africa's Land Seizure Talk Endangers Farm Finance, Agbiz Says

(Bloomberg) -- An absence of reliable collateral in South Africa’s farming industry will constrain agricultural finance, the Agricultural Business Chamber told lawmakers who are reviewing the nation’s constitution to make it possible to expropriate land without compensation.

Total farm debt amounts to more than 197 billion rand ($12.8 billion), about three-quarters of which is collateralized through the value of the land, the chamber known as Agbiz said in an emailed statement. Expropriation would pose a risk to commercial banks, which have 148 billion rand of exposure, and to the state-owned Land & Agricultural Development Bank of South Africa, which has 49 billion rand.

President Cyril Ramaphosa’s party has embraced land expropriation without compensation as a means to achieve equality and racial justice. The African National Congress says the constitutional change should make it clear under what conditions farms can be taken.

The chamber said land reform is a necessary prerequisite for social justice but can’t find “compelling evidence” to indicate that the slow pace achieved so far is directly related to section 25 of the constitution. It said section 25 “strikes a good balance between the prospective protection of property rights from arbitrary deprivation, which is essential to economic freedom and individual liberty, whilst simultaneously placing an obligation to correct the skewed patterns of ownership inherited from the previous dispensation.”

The chamber’s alternative suggestions to fast-track land reform include the state partnering with the private sector and using a portion of its budget to support public-private partnerships.

Systemic bottlenecks that are hindering land reform include issues with beneficiary selection, legislative gaps, poor post-settlement support and poor implementation of existing policies, it said.

White South Africans own 72 percent of the country’s commercial agricultural land, according to a state audit.

To contact the reporter on this story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Liezel Hill

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