Sim Tshabalala, CEO of Standard Bank, believes the new Expropriation Act is no real threat to property rights in South Africa.
Speaking at the bank’s FY24 results presentation on 13 March 2025, he leaned on the country’s “gold standard Constitution” and a Werksmans opinion claiming that expropriation without compensation would only happen in “very limited circumstances” (like abandoned property or property used primarily for speculative gain). Tshabalala is so confident, that Standard Bank will not tweak its lending policies or risk appetite.
He – and Werksmans – might be missing the forest for the trees and underestimating the risk.
The Expropriation Act cannot only be analysed by what it says on paper – though what it says on paper is equally problematic. One must have regard to what it does not say (the gaps that invite abuse), and the broader legislative context into which it has been adopted.
The Act lets the government “pay” “nil” “compensation” to expropriate property in what seems like only four narrow circumstances.
Except, inquiring into whether a property’s “main purpose” is speculative gain, or whether property has been “abandoned,” tend to be fuzzy activities that would need to be determined by the state on a case-by-case basis, long before the courts become involved.
Added to this is that the “very limited circumstances” ostensibly identified by Werksmans is an open list, meaning that there are no finite circumstances: it will always be a matter of state discretion under the equally fuzzy standard of “public interest.”
The Act scraps its 1975 predecessor’s solatium safeguard – when it should in fact have adjusted solatium amounts upwards to adjust for inflation since the seventies! Solatium is that extra bit of compensation that owners used to get for the inconvenience and disruption of losing their property – a nod to fairness.
Gone.
Now, compensation can dip below market value, making it cheaper for the government to snatch properties it wants for reasons both ostensibly good and plainly ill.
Tshabalala says judicial review will keep things in check, but good luck to the average person fighting a costly court battle against a state with access to the taxpayer’s unlimited pockets. Most won’t – can’t – bother, and that is by design.
And what happens to people with mortgages if their property gets expropriated?
Section 16 of the Act appears to say that any compensation goes to the bank if the owner had a bond, but if the “compensation” is “nil,” the Act does not wipe the slate clean. Mortgage bonds are private contracts, and banks like Standard Bank cannot be in the habit of eating losses.
Imagine that: the state takes your property, pays you nothing, and you remain stuck paying off a bond for something you neither own nor possess. That’s not a mere loophole; it’s a cliff-edge for owners, and the Act does not build a bridge over it.
If Standard Bank plans to keep mortgages alive post-expropriation – especially for expropriations below market value, and nil-compensation confiscations – it is hard to see how Tshabalala can claim no risk to their lending policies. Property owners could default en masse, leaving banks with bad debts and no collateral to seize, since the state already holds it.
Alternatively, if banks did scrap those loans, they would take a direct hit to their balance sheets, something no profit-driven institution wants. Either way, the ripple effects could destabilise the property market and erode trust in property as an asset.
Tshabalala’s breezy confidence ignores this ticking time-bomb, and it’s ordinary South Africans who would pay the price. All he and we have to rely on, is the paper-thin and non-binding assurance that the government would “never” go on a property-seizing rampage.
Excuse my scepticism after all privately-owned water, mineral, and petroleum resources in the country were nationalised in the late 1990s and early 2000s, followed in 2015 by the “Protection” of Investment Act which directly told investors that they have no guarantee of fair market-based compensation in the event of property seizures.
This is not a government harbouring respect for property rights.
It will only take one or two prominent cases of expropriation at nil or significantly below market value for South Africa’s whole investment profile to crumble. Mass seizures are a political concern, but the economy disembarks this train long before we reach the terminus.
Tshabalala’s optimism feels like a bank exec understandably trying to keep the markets calm, but it sidesteps the real risks.
This is not just the Free Market Foundation’s take. Almost every party that is not the African National Congress (ANC), Economic Freedom Fighters, or uMkhonto weSizwe – all existing on the continuum of far-left to ultra-left – have criticised the principles underlying the Act, and even the United States government weighed in last month. That’s not noise; it’s a signal.
Any economy thrives on secure property rights. We are begging for trouble – capital flight, jittery lenders and investors, and a hit to growth – by messing with that.
In January I noted that economist Wandile Sihlobo was too rosy about this Act. I’ll say the same for Tshabalala.
He’s banking on the Constitution and rule of law as a shield, but the Act’s wording chips away at both. Section 25 of the Constitution demands the “payment” of an “amount” of “compensation” upon expropriation. “Nil” cannot be “paid,” is not an “amount,” and can never be “compensation” – whether just, equitable, or otherwise.
The ANC’s old disdain for private property has not abated. The Expropriation Act is not rote reform; it is a power grab dressed up as justice.
Standard Bank might not see the need to adjust its risk appetite right now while it enjoys proximity to those in power, but in time that will age poorly. If expropriations ramp up – and we have every reason to believe they will in light of an increasingly radicalised political environment – property values could wobble, loans could sour, and banks could take a hit.
Tshabalala’s faith in limited use and judicial oversight feels naïve when you consider the state’s record. Courts are slow and expensive, and markets are impatient.
South Africans deserve better than mere soothing words. Property rights is not just legal jargon. It is the bedrock of freedom and prosperity. The Expropriation Act cracks that bedrock. While some might downplay the risk, but the rest of us should not.
