An Unintended Consequence Of South Africa's Land Redistribution Program

Back in the 1970's when the War on Drugs began, the homes and cars of drug dealers were routinely seized. These law breakers were not different from the rest of us. The had bonds on their properties and were buying their cars on hire-purchase.

Initially such liens by banks and finance companies were ignored. Financial institutions suffered large losses. They protested to state and Federal governments. The law changed to require that the financial institutions be reimbursed for losses due to loans on such assets. If the lien on the asset was big enough, it was no longer seized.

The properties being taken over now by the South African government in the land redistribution program often have been financed by major banks or other financial institutions. These lenders will be left with large losses that they cannot easily absorb. After court actions and public protests, the South African government will be required to reimburse them. The bill could be tens of billions of Rand. Taxes will have to be raised to cover this cost