The state-owned Land Bank of South Africa has warned that the uncompensated seizure of land could cause a default that would cost the country around 41 billion rand, or $2.8 billion.
President Cyril Ramaphosa of the ruling African National Congress (ANC) party announced previously that the government will proceed with plans to amend the constitution to allow land expropriation without compensation, meaning the seizure of farmland held by native white farmers, who are viewed as having disproportionate control. President Ramaphosa also noted that, in his view, a “proper reading” of the constitution already allowed this, but his party would “go through the parliamentary process” to make it “more explicit” for the people.
However, Chairman Arthur Moloto of the Land Bank, a specialized institution financially servicing the agricultural sector, warned the government that implementing the policy could trigger a default on its legal obligations. The bank would be required to repay its 9 billion rand debt immediately, and not being able to do this, its entire 41 billion rand portfolio would have to be bailed out by government intervention.
Outside observers have long been noting that the path South Africa seems intent on careening down mirrors that of nearby Zimbabwe, which in the early 2000s tried the exact same policy. The effect was disastrous: the economy cratered, starvation soared, and $10 billion in land value was wiped out. After a long and painful lesson, Zimbabwe has begun slowly rectifying the situation by inviting back white farmers and offering compensation for stolen land.
The road to land expropriation is paved with legal headaches and pitfalls. For one, most of the value is not contained in the land itself, but in investments such as infrastructure and machinery. For another, much of the land is heavily indebted, which would force the government to choose between having to pay off the banks that de facto own it or refusing to pay them as well, which as Zimbabwe found, would be economically disastrous.
Unfortunately, there is no reason to believe that either reason or the lessons of immediate history will prevail on South African leaders, driven by naked racial hatred and Marxist ideology. It is all too easy to predict the near future of South Africa: more brutal racist violence, the fleeing of the productive white population, and the increasingly extremist country’s economic collapse.
This was originally published by The Schpiel.