When the Nkandla issue first broke out somewhere around 2012, it was said that former president Jacob Zuma had a home loan on his residence in rural KwaZulu-Natal. The then presidential spokesperson Mac Maharaj said in statement, “We reaffirm that President Zuma does indeed have a bond on the residence with one of the national banks and he is still paying it off monthly.”
This was the beginning of a prolonged saga which many people thought was actually directed at former president Zuma. But I wish to argue that issue pertaining to Zuma’s Nkandla homestead was in fact beyond the former president on three fronts:
(a) First, the publicity of the building of the Nkandla residence and the attached mortgage was a way of scaring rural communities on difficulties in accessing finance to build their homes. Capital, through major lending institutions/ banks had an indirect interest in the whole saga, and sponsored the negative news with a long term view of seeing the Ingonyama Trust annulled. For mortgage lenders the desired outcome from the scrapping of the Ingonyama Trust is simple, they will have access to a market of more than 6 million in the province of KwaZulu-Natal alone.
(b) Second, anyone who transcended the rural-urban divide by offering financial solutions to rural property owners would be ‘guillotined’ since capital desperately wants to take control from tribal authorities. The Venda-based VBS Mutual Bank is just but one example of how anyone who plays in this lucrative market will be hanged or stoned in public to die.
(c) The rural-urban divide will continue to exist for as long as African scholarship and institutions continue to subscribe to Eurocentric concepts and norms, especially on land ownership and economic theory. Former president Zuma may have left office on 14 February 2018 but his silhouette appears to still hang over South Africa.
In hindsight and after a series of recent developments in both local politics and economics, one is tempted to revisit the Nkandla matter in order to contextualise two critical matters, i.e. (a) the proposed scrapping of the Ingonyama Trust; and (b) the placement of the VBS Mutual Bank under administration/curatorship by the South African Reserve Bank (SARB) on Sunday 11 March 2018.
When the Nkandla issue erupted, the City Press reported that “the land on which Zuma’s home stands was owned by the Ingonyama Trust, headed by King Goodwill Zwelithini, which managed 32% of all land in KwaZulu-Natal on behalf of the state for the benefit of its occupants.”
The newspaper further added that “it had been unable to locate public records to support Zuma’s claim that the Nkandla property was bonded.” This was after the City Press had confirmed with the Ingonyama Trust and the deeds office records that “no bond had been registered against the property.”
Although the interest on Nkandla was said to be on the substantially inflated costs incurred to upgrade the former president’s homestead, but reality pointed towards a suspicion that “the invisible hand” was interested in launching the rural property market than the procurement irregularities. The security upgrades to the Nkandla residence were estimated at R250m.
The Nkandla saga involved two issues the mortgage loan that that Zuma had declared he had on the property as well as irregular/ unauthorized expenditure. However, Zuma was only asked by the court to repay about R7.8m for “indirectly benefitting” from the upgrades. A lesser known bank called VBS Mutual Bank provided the relief to the former head of state. The bank has been in operation since 1982 and started with a customer base of residents from the then republic of Venda as clients, specialising in home loans.
The second most important issue concerning the mortgage bond fizzled without trace even in the court judgment. Zuma was never made to clarify who had provided a mortgage loan to finance his rural home. But the point had been made: ordinary South Africans were put in a difficult position of accepting that they had no future of accessing finance while they lived in rural areas.
Those in the field of development economics would au fait with work done by the Peruvian Economist Hernando de Soto on the informal economy and on the importance of business and property rights. De Soto divides the world into two groups: the ones who have defined property rights [urban] and those who do not have property rights [rural]. According to this treatise, legally protected property rights are “the key source of the developed world’s prosperity, and the lack thereof is the reason why many nations remain mired in poverty.”
De Soto then argued that “no nation can have a strong market economy without adequate participation in an information framework that records ownership of property and other economic information.” He also proposed that in order to deal with the scourge of poverty, there is a need to provide the world’s poor with titles for their land, homes and unregistered businesses. De Soto calculations indicate that this would unlock up to U$D10 trillion in assets, or “dead capital” in the hands of rural/ informal settlements worldwide.
This argument further states that property titles “would allow the poor to use their small homes or land in order to borrow money and start businesses, [and eventually assist in] unlocking the entrepreneurial potential of billions of people.” Of course, De Soto’s stand to proven as the informal economy continues to thrive all over the world. But it appears that global capital is interested in finally getting rural South Africa integrated into international capitalism, and markets, by entrapping millions with debt.
Politicians believe that by applying De Soto’s proposals South Africa will not only eradicate its high poverty but will also skip to become a highly developed nation.
Almost all the beautiful houses that are in rural South Africa are fully paid compared to homes in urban areas including some townships, towns and cities. This is a source of frustration for banks and the entire capitalist network locally and abroad.
Consider this example, a home in high-end Pretoria suburbs Silver Lakes or Waterkloof easily fetches ZAR35m bur property in nearby rural areas such as those in former KwaNdebele or Tlhabalatsane cannot even be graded, and land is free of charge. The same goes for properties in Ballito and Umhlanga, houses start from ZAR3.5m but property in Mandeni, KwaDukuza, Maphumulo and Ndwandwe largely falls into the informal category. Also, when you live in townships and rural areas insurance premiums for vehicles are higher.
Nobody has dared to seriously challenge this perpetual existence of two economies in South Africa besides wanting to turn townships/ rural areas into becoming a fortress of white capital. Major townships like Soweto and Umlazi still have a large informal economy but big retailers have moved in to suck out wealth, and there is no proof that the existence Jabulani Mall, Maponya Mall (Soweto), Denlyn and Mahube (Mamelodi, and Mega City (Umlazi) have brought any real change to people’s lives except for lousy jobs.
Nevertheless, the findings of the Motlante Commission appear to be in line with De Soto’s thinking that the Ingonyama Trust Act of 1994 must be dissolved because it was “abrogating the land rights of those it exists to protect.” It also views land holding in rural areas as a wasted opportunity. This finding does not only seek to entrench one of the important cornerstones of neoliberal economics – the security of tenure – but also seeks to open a new market for mortgage lenders. Also, the mining industrial complex is equally interested.
As things stand many people oppose the sudden interest in the Ingonyama Trust and its castigation. King Zwelithini has come out strongly to warn against anyone who wants to take take away land from the people in rural KZN. It appears the monarch has the backing of many in the province, including premier Willies Mchunu.
Sensing the coming trouble, the ILanga newspaper reported that Xhosa King Zwelonke Sigcau’s kingdom would also support the Zulu kingdom in the fight against the commission’s recommendation. Spokesman Xolile Ndevu said, “Even though we [AmaXhosa Kingdom] don’t have a structure like Ingonyama Trust this report affects us too. Our view is that the land must be given back to the Kings so that each can distribute such to their people.”
Ingonyama Trust may not be an ideal mechanism for land ownership through its “permission to occupy” (PTO) certificates, something which experts say falls short to full ownership rights provided by a full title deed. The origins of the Ingonyama Trust will forever controversial in many people’s minds. However, the actions of the African National Congress (ANC) are plausible for wanting to start its sanitized version of “land expropriation without compensation” on lands admistered by Africans instead of stolen lands, presently in the hands of corporations and individuals.
My view is that the Ingonyama Trust represents land owned by blacks (through the King). The calls for reforms to remove the king as the sole trustee are amenable, but shifting the entire land ownership model to suit Eurocentric legal frameworks is objectionable and unwelcome. The pretext of granting people land rights is suspicious and strange as it appears to deflect attention from the real issue, land taken under colonialism and apartheid.
The VBS Mutual Bank had proven that it was feasible to work within the existing framework to lend money to people in rural areas. How is it possible for them to operate in rural areas where there is just common land?
Though mainstream banks have not been willing to provide loans to people in rural communities, VBS Mutual Bank had “shown understanding of the nuances of doing business in these places.” The VBS bank went against the tide and gave home loans to people who resided in rural areas (and in the townships). It understands that clients value their homes whether in rural or rural areas. The bank gained fame for lending former president Zuma a loan following the Nkandla debacle, see above.
Weekend newspapers unexpectedly reported that the VBS Mutual Bank was going to crash, following Treasury’s instruction to municipalities to stop investing with the institution. As a result, a number of councils withdrew more than R1 billion from the bank, causing a major liquidity crisis. VBS chairperson Tshifhiwa Matodzi criticisms both the Sarb and Treasury for creating an impression that a “black bank was not welcome” and that “black management is incompetent and noncompliant”.
On Sunday (11 March 2018) afternoon, the Reserve Bank confirmed what many had feared by announcing that it was putting VBS Mutual Bank under curatorship. Governor Lesetja Kganyago was neither sympathetic nor open to offering a helping hand to the country’s only black bank. He said, “If you apply for a banking license and you are taking deposits you will be supervised in terms of the banks act, irrespective of who owns you. This notion that the SARB decided to attack a black bank has got to be condemned.”
One would consider the liquidity challenges of the bank as something that could have easily been avoided by allowing municipalities to bank with VBS again. Any form of bank crisis is deemed a failure or bad sign in global economics. Why would the National Treasury/SARB allow it to happen if they are seriously concerned with health of the economy? It baffles one’s mind that issues of black economic empowerment are also taking a backseat at this moment. The conclusion is that VBS Mutual Bank is punished for its antiquated conduct which was not condoned by the establishment.
My overall conclusion is that the imminent fall of VBS Mutual Bank places the burning issues of land ownership and the question of SARB ownership on the high table.
The VBS problems and the sudden demonization of the Ingonyama Trust are tangible proof that full participation and ownership of the South African economy by the black majority is a distant dream. If blacks were ever to be allowed to be part of the economy, it has to happen under certain conditions that are not known to anyone but capital and its political front-runners.
The Economic Freedom Fighters (EFF) are right in their convoluted language to point out that the bank fell victim for going against the political tide; by offering Public Enemy No. 1 a loan when all major banks were unprepared to do so. “Had it been a white-owned bank that had offered Zuma a loan, they would not be subject to victimisation today,” the party said in a statement.
The bank appeared to be unmoved by going into markets where the big mortgage lenders financiers feared to go. The attack on the Ingonyama Trust by the ruling African National Congress (ANC), supported by its little chihuahua Six Percent Party, the EFF, is a clear indication that the rural areas had already been identified as a new potential market for the big banks.
The rural areas are the very place that the VBS did not agree white-leaning economic thought. White-leaning economic thought, which drives banks and other lenders, asserts that rural areas as a “dead asset” and therefore no mortgage loans should be extended to over 50% of the population.
To anyone who enjoyed the suspension without reason of accounts of Gupta-linked companies, opposed VBS loan to Zuma, and supports ongoing attacks on the Ingonyama Trust, I say:
People fall for cheap politics and later cry when the only black bank is pushed to close shop. All issues are linked, be they concerning land, economy and all else.
Siya yi banga le economy!