No need for new Expropriation Bill

Posted 24 May 2013 Written by Dr Anthea Jeffery
Category Business

The Expropriation Bill of 2013 (the Bill) is better than its 2008 predecessor in allowing the courts, rather than the State, to decide the compensation payable for expropriated property. However, what the Bill gives with one hand it takes with the other, making the gain more apparent than real.
 
In summary, the Bill still:
  • extends the power to expropriate from the minister of public works to all organs of state at all three tiers of government, allowing 500 or more state entities to expropriate property of all kinds, from farms to mines, shares, patents, and homes;
  • allows an ‘expropriating authority’ to take ownership and possession of property simply by notice and before the erstwhile owner has received any compensation;
  • states that compensation becomes payable only when its amount has been agreed by the State or decided by the courts; and
  • puts great pressure on the expropriated owner to agree to the amount of compensation offered by the State, rather than remain without the benefit of either the property or its value in money.
 
In practice, the option of applying to court to decide a different measure of compensation is likely to benefit only those with deep pockets – the few who, despite the loss of their property to the State, can afford the cost of lengthy litigation with no guarantee of success.
 
The Bill also contradicts the property clause of the Constitution (Section 25), for it still allows expropriation to take place simply by notice – and before the State has shown that all constitutional requirements for a valid expropriation have been met. This procedure may have been acceptable in 1975, when the current Expropriation Act (the Act) was adopted, but it cannot pass constitutional muster under South Africa’s present Bill of Rights.
 
In addition, the Bill undermines the constitutional right of access to court (Section 34), for it allows the State to resort to self-help long before relevant legal questions have been ‘resolved by the application of law…in a fair public hearing before a court’.
 
Moreover, the Bill fails to recognise that, where the property expropriated is, or includes, a person’s home, no eviction may take place without the State first obtaining a court order expressly authorising this under Section 26(3) of the Constitution.
 
The Government claims the Bill is needed to align the current Act with the Constitution, and speed up land reform. Neither rationale holds water.
 
As regards the first, the Bill as drafted is just as unconstitutional as the Act. In addition, the current statute can be brought fully into line with the Constitution via three simple amendments – and without any of the further sweeping changes the Bill seeks to usher in.
 
The first such amendment would give the minister of public works the power to expropriate not only ‘for public purposes’ (as now), but also ‘in the public interest’. This change would incorporate both criteria into the Act.
 
The second amendment would add, to the Act’s list of the factors relevant to compensation, Act, the four ‘missing’ indicators listed in section 25(3) of the Constitution (as italicised below). On this basis, the compensation payable on expropriation would be decided on the basis of:
(a)       market value; plus
(b)       the four other factors laid down in section 25(3), ie:
(i)        the current use of the property
(ii)       the history of its acquisition and use
(iii)      the extent of direct state subsidy in its acquisition and beneficial capital  improvement, and
(iv)      the purpose of the expropriation; plus
(c)      damages for consequential loss resulting from expropriation; plus
(d)      an additional ten per cent of the total thus computed as a solatium (solace) for the loss of the property expropriated.
 
This new clause would be fully consistent with Section 25(3), which says that compensation must be determined in the light of all the relevant circumstances. There is thus no reason to exclude the last two factors, ie (c) and (d), which already form part of the current Act and should simply be retained. 
 
The third amendment would acknowledge all the Constitution’s requirements for valid expropriation. It would prevent the State from giving notice of expropriation until it has obtained a court order confirming:
  • that the proposed expropriation is authorised by a law of general application and is not arbitrary;
  • that it is in the public interest or for public purposes; 
  • that the compensation proposed is indeed just and equitable, reflecting a proper interpretation and application by the State of all the factors identified above; and
  • that no person will be evicted from his home as a result of an expropriation without a court order expressly allowing the eviction in all the relevant circumstances. 
 
These three changes would bring the current Act entirely into line with the Constitution, making it comply with Section 25 (the property clause), Section 34 (the right of access to court), and Section 26 (the housing clause with its guarantee against evictions from people’s homes).
 
The Government’s second claim is that the Bill is needed to speed up land reform and correct a great historical injustice. But 93% of land claim beneficiaries have opted for cash rather than the return of their land, as they have no wish to farm. In addition, between 50% and 90% of land reform projects have failed, producing no marketable surplus. As journalist Stephan Höfstatter writes: ‘The Government, by its own admission, has spent billions in taxpayers’ money to take hundreds of farms out of production, costing thousands of jobs and billions more in lost revenue.’ Such pointless waste must stop, not be given further impetus. There is also no need for expropriation when there is more land available on the open market at reasonable prices than the Government can buy.
 
In addition, though the Government emphasises the land-reform rationale, the Bill in fact extends far beyond farming land to property of every kind. Many people outside the farming sector seem convinced the Bill will not affect them, but this is an illusion.
 
The Bill is a draconian measure giving all state agencies the power to take from miners, farmers, firms, and ordinary people their most important assets – often their sole assets, built up over a lifetime of endeavour. In return, less than adequate compensation will be provided. No matter how sparingly the Government may now intend to use the measure, once it has been put on to the Statute Book there will be little to limit state agencies from resorting to it ever more often.
 
The mere risk of this will be enough unsettle the property rights of all South Africans. This in turn will deter investment, undermine already faltering growth, and make it harder still to overcome joblessness, poverty and inequality.
 
Article by Dr Anthea Jeffery, head of Special Research, South African Institute of Race Relations

This article first appeared in Business Day.


The draft Expropriation Bill can be viewed here.

Email your comments on the draft bill to:

Mr Manyane Chidi, Chief Director: Property Policy Development, Department of Public Works
Email address: manyane.chidi@dpw.gov.za

Relevant legislation:
Expropriation Act 1975
Constitution of the Republic of South Africa


 

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