Uncertainty for banks, property legislation in face of expropriation without compensation


The National Assembly recently passed a motion mandating the Constitutional Review Committee to review Section 25 of the Constitution and report back to Parliament by August 31.

The committee has to engage with all stakeholders and propose a way forward. It is important to note this is a long process and it could be some years before the way forward is agreed upon, the land for redistribution and land reform identified and expropriation without compensation takes place.

The question of what will happen to banks’ debt is a difficult one and is not clear at this early stage of the process.

The risk for the banks is of course that they would be left with the debt on the land that is currently mortgaged in favour of mortgagors. It is also not clear whether or not the proposed amendments to section 25 of the Constitution would apply retrospectively or prospectively. It will be interesting to see whether or not bonded property will be carved out as an exception and not be expropriated without compensation.

There is a question whether the state will have the money to make good on the debt sitting on the banks’ books. Another question is the extent to which expropriation will take place. It remains to be seen whether or not it will only apply to agricultural land or whether it will include residential land too. Whatever the final decision, the amount of debt at stake is likely to run into hundreds of billions of rand.

Government will have to walk a fine line between achieving land reform, redistribution and restitution and expropriation without compensation, while maintaining the health of the overall economy by maintaining the rule of law and access to courts, without eroding the fundamental basis of the Constitution.

Once the amendment is successfully passed, without any legal challenges, it is anticipated that the entire basis of property law and legislation built on the protection of private property rights will have to be repealed and amended, including but not limited to the National Credit Act.

Bulelwa Mabasa is a director and a land claims specialist at Werksmans Attorneys.