In Industry News

Article courtesy of: Property Professonal
11 February 2021

Maryna Botha, marketing director STBB

Land reform discussions in South Africa are in 99% of instances either controversial, political or highly emotional – understandably as our discriminatory past is recalled and the present political mayhem is acknowledged. Increasingly more so, where the word “expropriation” enters the fray.

As was stated in a previous note in this regard, expropriation is a well-known tool used worldwide by governments to acquire land needed for important social purposes (‘public purposes’), such as where roads must be extended, dams built and the like. In South Africa, expropriation has an additional function, stipulated for in the Constitution, being to expropriate in the ‘public interest’.  It is in the latter instance where the seed of the current controversy regarding the Expropriation Bill lies.

Let’s consider it one step at a time:

  1. The current version of the Expropriation Bill, 2020 (the “Bill”) was published in October 2020 and has subsequently been introduced as part of the Parliamentary process in the National Assembly.  The last date for public comment is 28 February 2021.
  2. In our 1996 Constitution, a framework was laid down in which expropriation must take place. The “how to” was not provided and hence the need for a law that provides the procedures.
  3. At the time that the Constitution was adopted as the highest law in South Africa, the current Expropriation Act, 1975 (the “1975 Act”) was in operation. Many laws at the time were not in keeping with the Constitution and were amended or replaced over the years. The 1975 Act has not yet undergone the constitutional facelift and requires amendment and/or repeal to align it with the Constitution.
  4. Under the 1975 Act, the amount of compensation to be paid to an owner when property is expropriated, is determined by reference to the willing buyer and willing seller construct. The Constitution, on the other hand, requires government to pay “just and equitable” compensation. The latter is determined by taking various factors into account, one of which is the market value of the property. Various other factors should also be taken into account, such as the history of its acquisition and use of the property; the market value of the property; the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and the purpose of the expropriation.
  5. Keep in mind that the goings-on in respect of the Bill are separate from the review by the Constitutional Review Committee of section 25 of the Constitution. As noted before this is in essence an amendment that seeks to clarify/state explicitly that nil rand compensation may be awarded where property is expropriated in the public interest.
  6. Section 2 of the Bill, echoing the Constitution, confirms that expropriation may not take place (i) arbitrarily; or (ii) for a purpose other than a public purpose or in the public interest; or (iii) without an attempt to reach agreement on the amount of a reasonable compensation. These are strict parameters and an owner or property (including land) may contest an expropriation if these prerequisites are absent. (There are limited exceptions to (i) and (ii) with regards to state-owned land and instances of (temporary) urgent expropriation.)
  7. The Bill allows for an additional ground for expropriation and which ground was absent from the 1975 Act, namely ‘public interest’. ‘Public interest’ is not a new concept and was introduced in section 25 of the Constitution which defines it as being “the public interest includes the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources”. The Bill replicates this definition of ‘public interest’ and also adds at the end “in order to redress the results of past racial discriminatory laws or practices”. This clearly refers to land reform. The definition is wide; but one has to bear in mind that constitutional checks and balances remain in place to oversee the exercise of these powers and the courts will ultimately adjudicate the actions taken against the requirements of the relevant law and the Constitution.
  8. Once the prescribed steps have been followed to commence the expropriation (and assuming it is established that identified public interest gains exist, that the expropriation will not constitute arbitrary conduct, and so forth), then it is proposed (by the Constitution and in the Bill) that the parties should seek to reach agreement on the amount of compensation. If an agreement regarding the amount of compensation cannot be reached, the Bill provides for the parties to go for mediation. And, should the mediation also fail, either party may approach a Court. The owner may also request the expropriating authority to institute proceedings on his/her behalf.
  9. Lastly, where (i) land (not property generally) is expropriated (ii) in the public interest, and (iii) the land is the type described in section 12(3), the possibility exists that the determination of the amount of compensation may be nil. This is not a necessary outcome if the land falls in the section 12(3) category, and nil compensation is not generally expected or anticipated at all. The land identified in section 12(3) of the Bill is: (a) land which is not used by and the owner’s main purpose is not to develop the land or use it to generate income, but to benefit from appreciation of its market value; (b) where an organ of state holds land that it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration; (c) where an owner has abandoned the land by failing to exercise control over it; (d) where the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land; (e) when the nature or condition of the property poses a health, safety or physical risk to persons or other property; and (f) where the expropriation occurs in terms of the Land Reform (Labour Tenants) Act, 1996.

Remaining concerns

Although the step-by-step approach assists in addressing unnecessary concerns, it does not mean that the Bill is not without remaining issues.   One of these is the fact that the Bill defines expropriation only to refer to instances where the state acquires property. Were the state to expropriate and transfer the property directly to a beneficiary, presumably the provisions of the Bill will not apply. This is hardly the intention of the Bill and it is assumed that this will still be implemented, or that the property will be transferred simultaneously to the state and then to the beneficiary.

Another concern refers to the description of land which may be expropriated for nil, specifically where “it is not being used and the owner’s main purpose is … to benefit from appreciation of market value.” Would this for example include property held for development purpose?

Further commentary will be provided here once the public input has been addressed by the legislature.

About the author: Maryna Botha is an admitted attorney, notary and conveyancer and the marketing director of national law firm, STBB. She currently specializes in all aspects of property law and conveyancing, as well consumer and credit law. She lectures widely on these topics and publishes regularly on all aspects related to property law.

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