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Expropriation with(out) compensation:
the road ahead
Sanlam Private Wealth
Sep 27, 2018
Before wading into the expropriation issue, we need to understand the basics. The first thing to know is that if the state wants to acquire property for land reform purposes it can do so either by purchasing the property in the open market, which has been government policy to date, or by using its power of expropriation. Only the state has this power – no private person can ‘expropriate’ property.
While the property usually vests in the state, it’s possible that the state may transfer it to beneficiaries in terms of land reform (public interest). Based on previous ANC policies and presidential utterances, it’s clear that the ANC foresees that the land will be transferred to beneficiaries and not kept by the state. At this stage the identity of those beneficiaries is still unclear as is the process by which they’ll be selected and supported. This is perhaps the most urgent policy that the ANC needs to finalise.
The power to expropriate is legitimate and enables the state to address public problems. In South Africa, our Constitution keeps this power in check. It does so, for instance, by requiring that expropriation be for a public purpose, for example, building a road, or in the public interest, such as to transfer the land to a specific land-reform beneficiary. Strict procedural guidelines are laid down in the Expropriation Act of 1975.
Payment of compensation is also a requirement, although there is a view that once the state has a valid public purpose and the expropriation is done in terms of legislation, it can take possession of property with the compensation issue being dealt with after the fact, for instance by going to court.
The South African compensation standard is ‘just and equitable’ compensation, not market value. While in many instances market value will be ‘just and equitable’, it could also be less, or even more, than market value. What is just and equitable hasn’t been adequately tested in court or challenged by the state, mostly because the state has to date not expropriated any property for land reform purposes.
Since determining what is just and equitable requires weighing up the interests affected against the public interest (Section 25(3) of the Constitution), the argument is that in some instances, balancing can rest on R0. This, however, is only foreseen in very limited instances, such as in the case of abandoned, hijacked and unmaintained buildings and portions of farms on which labour tenants have been residing for decades. There’s no talk of a blanket expropriation of all property or productive property.
An owner cannot choose not to be expropriated, but can ensure the state expropriates the property within the rule of law. This means that although expropriation is a compulsory form of acquisition, the owner is protected in terms of the Constitution and of legislation. Expropriation is an acceptable limitation on private property rights, and if done in terms of the rule of law and mostly when compensation is paid, it does not undermine the system of private property.
Our judicial system recently showed that it could keep the government from exercising its expropriation powers in some instances when it interdicted expropriation in a specific case in which the underlying restitution claim was not proven. Therefore there was no underlying public interest for which the property in question could be expropriated.
The Constitution qualifies ‘property’ as not being limited to land. Yet the ANC’s 54th National Conference resolution on expropriation and its subsequent motion in parliament to consider whether Section 25 of the Constitution needs to be amended limits the discussion to expropriation of land. This is one area where some clarity would be helpful.
Expropriation as a method of acquisition isn’t an end in itself. Without proper guidelines and policies to answer the ‘what after expropriation?’ question, land reform will stagnate. This will lead to more frustration, and more land invasions will most probably follow to protest government inefficiency. This is not beneficial in any way so it’s in South Africa’s interest that land reform happens, that it does so in a sensible and sustainable way, and – most importantly – within the rule of law.
This seems to be the ANC’s plan. The consistent message that’s come through in everything from the party’s National Conference through to the motion and, most recently, utterances by President Cyril Ramaphosa, is that land reform must not harm the economy, undermine food security or damage agricultural production.
Ramaphosa and other ministers have spoken out publicly against land occupations. The President has made it clear that ANC policy is not nationalisation, like the EFF policy, but rather securing land rights and transferring of title where applicable. The ANC also recognises the need for financing, training and market access, among other aspects, to ensure a sustainable emerging agriculture sector. In this regard, the ruling party has been in conversation with organised agriculture.
The ANC is asking for an amendment to Section 25 to bring clarity and not necessarily to introduce anything new. Ramaphosa himself has said the ANC acknowledges that the Constitution does not prohibit expropriation without compensation under certain circumstances, but nevertheless wants it clarified in the Constitution. Indications are that discussion is around adding a few words in Section 25(8) to read:
No provision of this section, or the payment of compensation, may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of Section 36(1).
Such an amendment will not have a profound legal effect.
The Constitutional Review Committee tasked with investigating whether it’s necessary to amend Section 25 (and other provisions) of the Constitution, has until the end of September to consider oral submissions made in the provinces and in Parliament, as well as the 700 000 written submissions received. The Committee will then make its recommendation to Parliament whether section 25 needs to be amended or not.
Any constitutional amendment needs to take place in terms of Section 74 of the Constitution. A broad outline of how this will work is that the Department of Justice needs to introduce a bill to amend the Bill of Rights. With the support of two thirds of its members, the National Assembly then needs to pass this bill. The National Council of Provinces also needs to pass the bill, with the support of six of the nine provinces.
Some commentators argue that expropriation without compensation goes against the founding values of the Constitution and therefore requires 75% support for the Constitution to be amended. The only valid argument in this regard, however, would be if there was no recourse to the courts in a case of expropriation. But as shown above, it is not envisioned that there’ll be no recourse to the courts. The founding values of the Constitution will also be affected if there’s an infringement of the rule of law, for instance if arbitrary deprivation of property, ie deprivation without a legal reason, or that doesn’t generally apply, is allowed. Again, this isn’t what the ANC envisions.
The ANC doesn’t currently have the required two thirds majority in the National Assembly to pass the bill, so it would need the support of other parties. The EFF has been pushing for nationalisation, so it’s uncertain that it would support the ANC in such a vote. The IFP could only support the ANC if such a provision doesn’t include traditional land. The DA wouldn’t support such a motion either. And since we’re a democracy, the ANC can’t push through such an amendment without the needed support.
There are also procedural requirements, of which the public participation requirement is perhaps the most important. If a bill is introduced to Parliament, there will be another round of written comments on the amendment. The Constitutional Review Committee’s provincial hearings as well as the submissions made to this committee in Parliament won’t suffice for this purpose. The question currently before the committee, ie whether the Constitution should be amended or not, differs from the issue that’ll be on the table with an amendment bill. The Constitutional Court has been clear that the greater the public interest in legislation, the more onerous the obligation to ensure public involvement.
Once an amendment is passed in terms of Section 74, it can’t be challenged on the basis of unconstitutionality. The provision then becomes part of the Constitution itself, and the Constitution will then be read as a whole, with provisions read in harmony with one another.
Such an amendment, if this is the road on which the ANC wishes to embark, is unlikely to happen before the 2019 elections. The likelihood of the Department of Justice introducing a bill before March 2019 is slim. And if it does, a bill usually takes six to nine months to be promulgated. This would take us to early 2020.
So, what to do in the meantime? A good start is to encourage the government to enact the current Expropriation Bill without further delay. This bill, which will replace the Expropriation Act of 1975, was withdrawn pending the Constitutional Review Committee completing its work. It allows for land to be expropriated in the public interest, for ‘just and equitable’ compensation.
Enacting the Expropriation Bill in its current form will streamline the expropriation process and provide greater certainty to land owners and investors. And since land reform relies on the political will to implement it, rather than a change to the Constitution, we need to encourage government to start implementing the existing legislation.
In addition, government should also seriously consider the findings of the well-researched and balanced report produced last year by the parliamentary High Level Panel on the Assessment of Key Legislation and the Acceleration of Fundamental Change. The panel, headed by former president Kgalema Motlanthe, found that the pace of land reform in South Africa has been slow, and recommends various pieces of legislation to provide a framework for land reform.
Lastly, on a personal level, we, the people of South Africa, shouldn’t hesitate to join the tables where discussions on these issues take place, to ensure we can create a shared future for all.
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