Standard Bank Sees South Africa Striking Right Balance on Land

JOHANNESBURG (Capital Markets in Africa) South Africa’s biggest bank isn’t panicking about the ruling party’s renewed push to expropriate land without compensation.

The rand has slumped on concerns that the African National Congress’s bid to change the constitution to boost black ownership of land will undermine property rights and deter investment.

“We do not currently expect the proposed constitutional amendment would cause widespread or significant risks to property rights or to the security of the financial-sector’s property lending,” Standard Bank Group Ltd. Chief Executive Officer Sim Tshabalala said on Thursday. The parliamentary process will result in a sustainable land-reform program that supports economic development, he said.

Standard Bank is in constant contact with authorities, the CEO told reporters in Johannesburg, and has made submissions both individually and through business associations on the proposals. A constitutional amendment isn’t necessary to achieve expropriation at below-market prices or even for zero compensation, Tshabalala said.

Lawmakers started a process to change the constitution in February after the ANC decided at its national congress at the end of last year to adopt the measure, bending to populist factions within the organization. Access to land is one of the symbols of inequality in the nation of about 56 million where wealth and poverty are largely divided along racial lines. The party has said that the purpose of the amendment is to promote redress, advance economic development, increase agricultural production and food security.

Turning to some of South Africa’s other challenges, Tshabalala said the government has to sort out state-owned companies like power producer Eskom Holdings SOC Ltd. and South African Airways to unlock growth. The economy contracted in the first quarter as consumers struggled to cope with record gasoline prices, an increase in VAT and a jobless rate of more than 27 percent.

“We need much faster and more decisive action to restore SOEs such as SAA and Eskom to sustainability,” he said. “Eskom remains the single largest immediate constraint to the South African economy as well as being the largest fiscal risk. Its business model and its capital structure need urgent attention as part of a wholesale modernization of the electricity sector.”

Source: Bloomberg Business News