This article was first published by Business Day on 27 August 2026
South Africa is engaged in a constitutional battle over the Expropriation Act and its provision permitting the State, in open-ended circumstances, to expropriate property for “nil” compensation.
The Western Cape High Court has heard challenges by the DA, AfriForum, Vaderland Stigting, and IRR Legal, joined by the Free Market Foundation’s Rule of Law Project and the Society for the Protection of Our Constitution as amicus curiae.
The case is framed as a dispute about property rights and land reform, however, its implications extend far beyond landowners. They reach the balance sheets of banks, insurers, pension funds and investment managers; municipal revenues; financial stability; and South Africa’s very ability to attract capital.
Yet the institutions whose responsibilities place them closest to these risks have been disturbingly quiet.
Where are the banks and their boards? The insurers, pension-fund trustees, and investment managers? The Prudential Authority, FSCA, Treasury, and Reserve Bank? Where are the municipalities – as one of the three judges asked during the proceedings – whose revenues depend upon productive, well-valued property?
If these institutions have assessed the risks and concluded that they are immaterial, they should say so. If not, why not?
A bank will lose its security while the debt survives.
Consider a farmer who owns a R30 million farm and has a R20 million mortgage secured against it. The bank has lent the money because the farm provides security and generates the income from which the debt is to be serviced.
The State expropriates the farm for “nil”, or substantially below market, compensation. The farmer loses the asset and the income it produces.
But the R20 million debt remains.
The bank has therefore lost its security while the borrower’s obligation survives. If the borrower cannot repay, default and insolvency follow.
This is the crucial point largely absent from the public debate: Expropriation will destroy the asset securing a debt without destroying the debt itself.
One such case may be manageable. Dozens or hundreds will become a financial-stability problem.
Loan impairments reduce bank earnings and capital. Shareholders suffer. Insurers, pension funds, and other institutional investors are among those shareholders. Losses can therefore propagate through the financial system.
The transmission mechanism is simple: Expropriation impairs collateral; impaired collateral distresses borrowers; distressed borrowers produce bank losses; widespread losses become systemic.
That is why prudential regulation exists: To identify risks before they become crises.
Where is the Prudential Authority’s analysis? Where is the Reserve Bank’s stress-testing? Where is the assessment by banks of potentially vulnerable loan books? Where are investment managers assessing the consequences for the portfolios entrusted to them?
This is not merely a farmers’ problem.
Property is collateral for commercial, industrial, agricultural, and development finance. The question for every secured lender is brutally simple:
What is a mortgage worth if the State can take the asset securing it for “nil” compensation?
And what is a loan worth when its collateral can disappear while the borrower’s contractual debt remains?
These are not ideological questions. They are questions of credit risk, collateral valuation, capital adequacy, and financial stability. They belong in every bank boardroom and investment committee.
The Act itself recognises that expropriation can affect parties beyond registered owners, containing provisions dealing with mortgagees and mortgaged property. But what do those protections amount to where compensation is “nil” or substantially below the value upon which lenders have relied?
Section 12(3) identifies some circumstances, in an open list, in which “nil” compensation may be “just and equitable”, including certain cases involving unused or abandoned land and land held principally for speculation. Whether those provisions comply with section 25 of the Constitution is now before the courts.
The financial sector routinely models credit, liquidity, and market risks. Where is the equivalent modelling of expropriation risk?
Markets will not wait for the first expropriation.
The damage begins well before property is actually taken. It begins when investors price the possibility of expropriation into their decisions.
When property rights appear less secure, investors demand higher returns or take their capital elsewhere. The consequences are lower asset valuations, higher risk premiums, more expensive capital, and reduced investment.
South Africa cannot simultaneously plead for investment and create uncertainty about the security of the assets into which that investment must flow.
Treasury, the Reserve Bank, the Prudential Authority, and other financial regulators should therefore have something substantive to say.
Municipalities are exposed, too. Their revenues depend upon property rates and economic activity generating charges for electricity, water, and other services. If property is expropriated, rendered uneconomic, or subjected to prolonged uncertainty, the municipal revenue base can suffer.
The expropriation of approximately 34 hectares of Farm Driefontein by the City of Ekurhuleni in 2019, with “nil” compensation offered, demonstrates that “nil compensation” is not merely theoretical. The dispute predates the 2024 Act, but shows how quickly the concept can move from principle into financial reality.
Where are the municipalities and their representative bodies demanding an impact assessment?
Silence is not risk management. Nor is accepting the rhetorical and functionally useless reassurances by senior politicians that the new confiscatory power will be used “responsibly”.
None of these institutions needs to take a political position on land reform. Their responsibilities are straightforward.
Banks must protect their balance sheets. Insurers and pension funds must protect policyholders and beneficiaries. Investment managers must protect clients’ capital. Regulators must protect financial stability. Treasury must protect investment and growth. Municipalities must protect their revenue bases.
So let them answer some simple questions.
Have they modelled widespread “nil” – or low-compensation expropriation of mortgaged property? How much lending is secured by potentially vulnerable assets? What happens to bank capital if collateral disappears? What happens to insurers and pension funds holding bank shares? What happens to municipal revenues, the cost of capital and foreign investment? At what point do individual expropriations become a systemic event?
If these questions have been answered, why have the answers not been made public?
If they have not been answered, why not?
That question should cause every relevant board and regulator considerable discomfort.
The litigation may be presented as a dispute about land. It is much more than that. Property rights underpin contracts, collateral, credit, and investment. Indeed, they underpin the economy itself.
Banks depend upon enforceable rights in assets. Pension funds and insurers depend upon investment values. Municipalities depend upon productive property. South Africa depends upon investors believing that capital committed here, both local and foreign will remain secure.
They cannot wait until banks are writing off billions, pension funds report substantial losses, or municipalities struggle with eroded revenues. By then, it would be too late.
The issue is before the courts now. The financial establishment should therefore be speaking out.
The potential consequences are too serious for silence to be prudence. Indeed, the conspicuous absence of those whose institutional responsibilities place them closest to these risks has itself become a matter of deep concern.
So here is the question for every banker, insurer, pension-fund trustee, investment manager, regulator, Treasury official, and municipal financial officer:
You are entrusted with safeguarding South Africa’s financial stability. Why are you standing on the sidelines while the courts consider an issue capable of materially affecting the security and value of the very assets upon which your institutions, your clients, your livelihood, and the economy depend?
This is not the time for institutional coyness, studied neutrality, or the comfortable assumption that somebody else will speak.
If the financial establishment genuinely believes the consequences are immaterial, it should say so.
If it believes they are material, its silence will ultimately be considerably impossible to explain.
Where, in the name of financial responsibility, are you chaps?
