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3 minute read
8 Aug 2018
7:25 am

Nedbank opposes amendment of constitution for land expropriation


The banking giant, however, strongly supports the need for land reform.

South Africa is in the early stages of a complex political and institutional turnaround, which needs to lead to structural reforms and more policy certainty – particularly around land reform, the mining charter and key state-owned enterprises.

“If that is able to be delivered, you then get better confidence, then you get investment, then you get growth and then you get jobs,” Nedbank Group chief executive Mike Brown said following the bank’s interim results presentation on Tuesday.

Headline earnings rose 27% to R6.7 billion in the six months to end-June, boosted by the turnaround its associate Ecobank Transnational Incorporated (ETI) achieved (watch the video interview with COO Mfundo Nkuhlu below). However, managed operations – effectively everything besides the ETI business – only grew 2% to R6.6 billion in what Nedbank referred to as a “challenging and volatile domestic macroeconomic environment”.

This echoes the sentiment expressed by Absa Group financial director Jason Quinn on Monday. Absa reported a 3% increase in interim normalised headline earnings to R8 billion. “Our performance … should be considered against the tough macro backdrop in South Africa.”

Nedbank has lowered its GDP growth expectations for 2018 to 1% from an earlier 1.6%, largely due to policy uncertainty.

“It does seem likely that that will remain until at least the elections, probably even after the elections, but if we do want higher levels of economic growth and job creation we simply have no choice but to conclude on these matters,” says Brown. “Otherwise the economy will continue to muddle along, and we should not be surprised with that as an outcome.”

Nedbank has been an active participant in the land reform process and has made formal written submissions to Parliament – both individually and as part of the Banking Association of South Africa. It has also asked for permission to make a verbal presentation in Parliament and is waiting for feedback on the request.

The ANC last week announced its intention to amend Section 25 of the Constitution to expropriate land without compensation.

Brown said while Nedbank strongly endorses the need for land reform, it doesn’t believe that Section 25 needs to change. A proper interpretation of Section 25 as it is currently drafted already allows for expropriation without compensation in certain instances.

“We need to wait for the Parliamentary process to complete, but to the extent that the Parliamentary process does suggest changes, what will be absolutely vital is the precise and specific wording of those changes.”

If these potential changes clarify the current intention of the constitution, people will regard it as a good outcome that provides more certainty, but if the changes result in more uncertainty as to when land can be expropriated without compensation, the country will be in a very difficult period with regard to economic growth and job creation, says Brown.

“The foundation of any society and any financial system is the ability for people to own assets.”

At this point, it is impossible to do any meaningful calculations about the bank’s exposure to land that could be expropriated, as there is too much uncertainty.

“We really need to get through this process really quickly to provide certainty, otherwise the increased levels of investment and growth will just simply not materialise,” says Brown.

The future is digital

Nedbank’s total assets exceeded R1 trillion for the first time during the interim period. Total banking customers surpassed eight million.

Despite new entrants like Discovery, Bank Zero and TymeDigital coming to market, Nedbank still believes it can grow its customer numbers on the back of improvements in its value proposition – primarily in the digital space.

The Nedbank Money App saw a big overhaul in November 2017 and has been downloaded more than a million times. It now has more than 450 000 active users. During the first six months of 2018, it added 42 new services to the app, with plans to add more.

The bank plans to launch “Faceless Fica” during the second half of 2018, giving clients the ability to open a current account from their couch, while its rewards programme Greenbacks will also see changes in the coming months.

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