Last week, I drew attention in these pages to the fact that the government’s plans to empower itself to expropriate property without compensation needed to be understood correctly – and this meant that urban property would be under threat. That would be homes and businesses. Moreover, the financial sector is unlikely to intercede on behalf of its clients.

Over the past week, this has become even more apparent.

The prompt has been the campaign that the Institute of Race Relations is running to get the financial sector to declare itself on expropriation without compensation (EWC). The response has not been encouraging, with financial institutions dodging the issue – or at least seeking to dodge the consequences.

On Monday, the Afrikaans-language channel KykNet broadcast a report on the issue. As the on-the-spot reporter remarked, legal opinions on the status of bonds were ‘anything but good news’. Banking Association of South Africa (BASA) managing director Cas Coovadia confirmed concerns about the damage that EWC would do – and went on to argue for protection of the banking industry.

‘Where land is being expropriated, government needs to guarantee repayment to the banks’. This is in line with what banking executives have said on the matter.

Note that this is firmly about the interests of the banks, not their clients.

To its credit, BASA’s submission to Parliament on the amendment of Section 25 makes a reasonable if carefully worded case for property rights, and disputes the need for an amendment at all. It outlines the harm that the policy may do to the banks. But here again, it’s difficult to read this document and not come away with the impression that in the first instance it is the banks’ institutional interests first and foremost that they wish to see protected.

The submission, for example, quotes a policy framework document on land valuation and land acquisition which came before cabinet in 2011:

‘“Just and equitable” compensation may lie below market value. The change to “just and equitable” compensation will have implications for the collateral value of existing debt. This will in turn impact negatively on the capital adequacy of these institutions, and on their ability to provide credit to property-related sectors or accept such property where security for a loan granted is required. In order to mitigate these potential effects, government should automatically guarantee the difference between “just and equitable” compensation determined in terms of Section 25(3) and market value. Thus, where mortgaged land has been acquired at less than market value, government should pay directly the financial institution concerned the difference between the purchase price and the outstanding amount, up to a maximum of the market value of the property. This guarantee will allow financial institutions to continue lending to these sectors on the basis of market value.’

Perhaps this is unsurprising. Institutions have interests that do not always align with those whom they profess to serve. The relationship, one might argue, is a commercial one, and if a choice is to be made between their balance sheets and those of their clients, they will opt for the former.

Yet perhaps things are not quite so simple. The responsibility of business towards the societies they operate in is a long-standing question. Increasingly, it is demanded that business act appropriately on this. Corporate-governance thinking – in which South Africa is a leader – has taken much of this on board. In the King IV report, this is spelt out: ‘It is now accepted that organisations operate in the triple context of the economy, society and the environment. How they make their money does have an impact on these three elements and, in turn, they impact on organisations.’

Just so. While businesses are businesses and need to be recognised as such, there is a legitimate expectation that they will conduct themselves in a manner that takes account of the needs of the community. Call this good corporate citizenship. For institutions like banks – influential in their own right, and central to the economic activities of ordinary people – this cannot exclude an in-depth and ongoing engagement with policy.

Part of this is an ethical responsibility to protect the assets of their clients. It is well and good that BASA – although less so individual banks – have voiced an objection to the amendment of Section 25. It is concerning that its real red line is to be found in ensuring that bond repayments are forthcoming. Their clients’ interests, it would seem, are negotiable.

This is not good enough. Banks have a duty to the clients whose business they have accepted (and solicited) to do all in their power to protect them. Yes, in the present climate, this places banks in the awkward position of having to stand against a government with strong ideological impulses, deep pockets and intrusive regulatory powers. Government is unlikely to receive this well.

With what is at stake, banks need to make a clear choice. The consequences of this policy, for the society as a whole, stands to be dire.

Business in South Africa cannot avoid taking a stand, as it faces being called to account for its conduct. And at times, South African business has shown commendable fortitude in opposing abuses – as when it took a position on state capture and refused to operate particular bank accounts. Now this sort of push back is demanded many times over.

Around the world, populists of both the left and the right have rounded on business as part of the disengaged elite responsible for the hardships faced by ordinary folk. For business, the most effective counter to this is to show not only that its commercial operations provide material benefits, but that its commitment to the broader society is sincere.

Otherwise, it may well find its future imperilled by something other than reckless government policy.