Government and financial institutions must spell out what will happen to bonds under EWC – IRR

29 March 2021

Both the government and the country’s financial institutions must make it clear to South Africans what will happen to mortgage bonds on properties expropriated under the Expropriation Bill.

With all indications being that the Expropriation Bill will be passed, its practical implications need to be spelt out. The Bill makes provision for the expropriation of property at ‘nil’ compensation in various circumstances, and the probability of compensation being significantly below market value in most others.

Bonds to purchase property are a major financial obligation for countless South African households – an arduous one that is taken in the expectation of accumulating assets and building financial security.

In instances where bonded properties are expropriated, what responsibilities will be imposed on the dispossessed bondholders? The Bill suggests that bonds will be terminated, but does this imply that outstanding debts will be cancelled? Or will bondholders be expected to continue servicing their bonds until they are paid off, even if the asset has been taken?

What position do banks take? Will they require bond payments to continue even if a client’s property is seized? And are they prepared to confront mass defaults, where clients who have been expropriated are unable or unwilling to continue paying for the property which they have lost?

These are seminally important questions for millions of South Africans. Will their government and the financial institutions in whom they have placed their trust respect or disregard their interests? This is no longer a conceptual issue, but is poised to become a very real avenue for the abuse of South Africa’s people.

The Institute of Race Relations (IRR) will be pressing both the government and financial institutions to spell out their positions on this clearly and unambiguously.

The IRR has pointed out that expropriation without compensation (EWC), the ultimate form of taxation, comes on top of steady increases in broader taxation – including threats of prescription, wealth taxes, BEE compliance costs, carbon taxes, sugar taxes, tolls, levies, and electricity price hikes – that are strangling households and driving innovation out of the country.

These burdens amount to citizen abuse, which the IRR is challenging through its #StopCitizenAbuse campaign. 

You can learn more about the IRR’s analysis at https://dailyfriend.co.za/2021/03/04/the-mounting-costs-of-citizen-abuse/, and you can join the campaign at https://irr.org.za/campaigns/stop-citizen-abuse
Issued by Gabriel Crouse, IRR writer and analyst, 29 March 2021