Land Expropiation – Wait! What?

Politics continues to dominate social discourse in SA‚ with the 2018 Word of the Year being “land expropriation without compensation”.  (The Word of the Year for 2017 was “state capture”.)

Just as confusing as the fact that South Africa’s most used word is in fact four words, so too is its content and consequences.

After both Houses of Parliament resolved in December 2018 that the Constitution should be amended to expressly allow for expropriation of private property without compensation in appropriate circumstances, it was handed over to a Parliamentary Reviewing Committee. In anticipation of the outcome, many debates have been sparked regarding its necessity, morality and economic viability. Before we are able to enter the debate and provide our own opinion, it is important that we understand the basic concepts of the issue at hand.

What is land expropriation according to the current authorising legislation?

In South Africa, the power to expropriate lies with the state and must have a statutory basis. Any expropriation not authorised by legislation or any expropriator acting beyond its authority will be reviewable by our courts. Section 25 of the Constitution and the Land Expropriation Act, Act 63 of 1975, (“the Expropriation Act”), the authorising legislation, are therefore of utmost importance when dealing with this subject matter. Whilst the Constitution prescribes the principles governing expropriation, the current expropriation procedure is regulated by the Expropriation Act.

The Constitution

Even though the word “expropriation” is not defined in the Constitution, it is widely accepted that expropriation is a particular type of deprivation of property and must therefore comply with Section 25 of the Constitution. Section 25(1) provides that no-one may be deprived of property except in terms of a law of general application, and no law may permit arbitrary deprivation of property. Section 25(2) further provides that property may be expropriated only in terms of a law of general application for a public purpose or in the public interest (usually government-related purposes) and subject to compensation. Section 25(3) deals with the amount, time and manner of compensation and requires that it be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected thereby, having regard to all relevant circumstances.

The law of general application

As was mentioned earlier, the empowering statute for the current expropriation procedure is the Expropriation Act. However, the Act pre-dates the Constitution, inevitably leading to certain conflicts between the two and an urgent need for an empowering statute that is in line with the Constitutional principles have arisen.

Supplementary to, but also independent of, amending the Constitution, the Minister of Public Works published a draft Bill to give effect to the new expropriation regime, namely the Expropriation Bill, which will repeal and replace the current Land Expropriation Act as the law of general application and which will hopefully be more in line with our current constitutional dispensation. Even though the Bill contains several provisions similar to the current Act, this article will focus on the most significant amendments which the Bill will bring about, namely the provisions relating to the payment of compensation and the expropriation procedure itself.

Payment of Compensation:

Clause 12 of the Bill provides as follows:

1. The amount of compensation, as well as the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of the expropriated owner, having regard to all relevant circumstances. When determining this balance, the following circumstances are taken into account:
   • The property’s current use;
   • The history of the acquisition and use of the property;
   • The market value of the property;
   • The extent of previous direct state investment in the property; and
   • The purpose of the expropriation.

It is important to note that the above list is not a numerus clausus.

2. Considerations not to be taken into account when determining compensation:
   • The fact that the property was acquired without the property owner’s consent;
   • Special suitability of the property for state purposes, if there is no open market for a property with that purpose;
   • Enhancements or improvements made to the property unlawfully, after publication of the notice of expropriation or to obtain additional compensation;
   • Anything done with the object of obtaining compensation;
   • Any enhancement or depreciation, before or after the date of service of the notice of expropriation, in the value of the property in question, which can be directly attributed to the purpose in connection with which the property was expropriated.

A property owner may however show that in certain special circumstances it will be just and equitable to take these circumstances into consideration.

3. The most significant addition that the Bill brings about is the circumstances wherein it will be just and equitable and in fact permissible for the State to pay nil compensation. In terms of clause 12(3), it includes land:
   • occupied or used by a labour tenant;
   • held purely for speculative purposes;
   • owned by a state-owned entity;
   • which is abandoned by its owner; or
   • with a lesser value than the state subsidies it received.

The focus is clearly on vacant, unused and underutilised state land; land held for speculative purposes and indebted land. In all other circumstances, compensation (which is just and equitable, of course) will be required. There is no formula to determine such compensation and every case will have to be considered on its own merits, with due regard to all the relevant circumstances.

The Expropriation Procedure:

There is no quick and easy way for the state to expropriate. The Bill provides as follows:

1. NEGOTIATIONS AND INVESTIGATION

Except in urgent cases, land expropriation can only take place after unsuccessful negotiations. The Bill specifically states that expropriation may not be implemented before the state has at least attempted to reach an agreement on reasonable terms with the property owner. It is important to note that if this step is done properly and in good faith by all the parties, transparency and fairness can prevail.

If no agreement can be reached, the state may investigate and inspect the property to do a property valuation. Should a property owner deny the state access for such purposes, the state may obtain a court order to do so.

2. SERVING A NOTICE OF INTENTION TO EXPROPRIATE

The Bill requires that the state provide a detailed Notice of Expropriation which includes the reasons for expropriation, the amount of just and equitable compensation offered, full details of the property and how to object to the expropriation. It must also indicate the date of ownership and possession by the state.

3. OBJECTIONS

After receipt of the above mentioned notice, the landowner is allowed 30 (thirty) days to respond and object to the expropriation. During this period, the owner must also submit a statement wherein he claims the amount he considers to be just and equitable as compensation. The owner also has the obligation to inform the state of any other rights held over the property. Should the property already be sold to a new purchaser but not yet transferred or be mortgaged by a bank, last mentioned will determine the amount of compensation.

Section 25(8) of the Constitution provides that if the demands of compensation by private landowners impede land reform, the interests of the landowner must yield to the greater public good of land redistribution. Section 36 of the Constitution also makes provision for a limitation to the compensation claimed by landowners. Although land reform is a necessity, it must be remembered that the public interest cannot be the responsibility of only one landowner.

4. DISPUTE RESOLUTION

Should negotiations fail and consensus not be reached between the parties, a dispute will arise, but the state will proceed with the expropriation. The compensation is then paid into trust with the Master of the High Court and the Court will determine what is just and equitable compensation in the specific context. The onus will be on the landowner to prove that a higher amount of compensation than that offered by the state, is just and equitable. Unfortunately, most landowners will not have the funds for litigation and most expropriations will remain unchallenged. In an attempt to provide a more cost-effective option to resolve disputes, the Bill also provides a mediation clause.

5. TRANSFER OF OWNERSHIP AND POSSESSION TO THE STATE

Possession and ownership will automatically vest in the state on the date mentioned in the notice, who will either hold the property or transfer it to the beneficiary. The Deeds Registries Act provides special procedures when dealing with expropriated property. Vesting of expropriated property is not effected by a transfer of rights but by operation of law.

If the expropriator fails to strictly comply with all the prescribed formalities above, the expropriation will be reviewable by court.

Property rights are fundamental, but not absolute and may indeed be limited. Land expropriation without compensation will test exactly what the extent of such a limitation is. Perhaps in 2019 we can focus less on using this very popular “word” and focus more on actively engaging with this issue to ensure that expropriation is properly regulated and implemented. That is the only way in which we can attempt to enhance the rule of law, protect the rights of the public and the private landowner and guard against the so-called “land grabs”, arbitrary deprivations, damage to the agricultural sector and withdrawal of local and foreign investments.

Article written by Inge Johnson, Attorney at Faure & Faure Inc.

For more information email contact@faurefaure.co.za.