Earlier this month, Cabinet approved the Expropriation Bill and sent it to Parliament for adoption. This prompted a revived deluge of negative press, fears of government-approved land grabs and visions of a fast forward to Zimbabwe-style land losses.
No such perceptions are warranted or correct, as the short discussion below highlights.
Expropriation by a government is not a ‘South African thing’. Governments worldwide have laws in place allowing land expropriation for defined purposes and within legislated parameters. Typically, expropriation is considered where land is required for ‘public purposes’, such as the building of roads, hospitals and infrastructure. The Gautrain project is a good local example. Our current 1975 Expropriation Act and our Constitution make provision for this form of expropriation.
The Constitution and expropriation
The reason for expropriating – per the Constitution
In addition to expropriation for ‘public purposes’, our Constitution also allows expropriation ‘in the public interest’, which phrase is defined in the Constitution to include ‘land reform’ and ‘reforms to bring about equitable access to all South Africa’s natural resources’. Arbitrary expropriation (with or without compensation) is thus not allowed: Government/an expropriating authority will have to show, on facts presented, that an envisaged land expropriation is ‘in the public interest’ or for a ‘public purpose’.
Compensation – per the Constitution
The Constitution is explicit in stating that expropriation for land reform purposes shall be for compensation and, in determining the amount thereof, there must be a process of negotiation between the landowner and the expropriating authority. Where no agreement is reached, a court should determining compensation. When making such a determination, a court must take various factors into account, including the current use of the property; the history of the acquisition and use of the property and the market value of the property. (As has been shown in a previous article, nil compensation is in fact possible under section 25 of the Constitution, in its current form, as a court may, taking into account the various factors, conclude nil compensation is ‘just and equitable’ in the specific circumstances of the case. Nonetheless, the process to make this more explicit and to amend the wording of section 25 for this purpose, is still underway.)
The Expropriation Bill
The Bill gives flesh to the provisions of the Constitution as far as expropriation is concerned. It does so by aligning its provisions fairly closely with that of the Constitution, as follows:
The reason for expropriation – per the Bill
The Bill confirms that property may only be expropriated to serve a public purpose or if it will be in the public interest. The landowner will receive notice in advance and have the opportunity to object. (For example, a land owner may argue that the expropriation will not serve the public purpose objectives alleged by the expropriating authority.) The state will have to give reasons for why the land is needed and for what purpose the land will be used.
The opinion that a piece of land is suitable for expropriation for a public purpose objective constitutes ‘administrative action’ and as such is further reviewable by a court, if not exercised properly. Thus, the power to determine whether land may be expropriated remains with our courts, ultimately (as does the determination of the amount of compensation where the parties do not agree on the amount, as shown below).
Amount of compensation – per the Bill
It is envisaged that the expropriating authority will in good faith attempt to reach agreement on a reasonable amount of compensation. The Bill echoes the Constitution and provides that property owners must receive a ‘just and equitable’ compensation for land that has been expropriated, which amount must reflect ‘an equitable balance between the public interest and the interests of the expropriated owner’. Depending on the circumstances, the amount of compensation can range from reflecting the market value of the property to nil.
The Expropriation Bill provides clarity on the types of instances where the compensation could be (not must be) nil. The Bill states that it ‘may be just and equitable for nil compensation to be paid where land is expropriated in the public interest’ in these circumstances (but not limited to them):
(a) Where the land is not being used 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) Notwithstanding registration of ownership in terms of the Deeds Registries Act, 1937 (Act 47 of 1937), 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.
The Bill makes provision that expropriation will only be used in very limited circumstances, and the courts will have to be satisfied that a public purpose or public interest is properly identified. Once this hurdle is overcome, the parties can reach agreement on the amount of compensation. Should they be unable to reach a just and equitable compensation, the court must be approached for assistance. Such compensation can be nil, if ‘just and equitable’ in the Court’s opinion. The importance of the judiciary’s and Courts’ roles in this process, is a valuable safeguard against any perceived opportunity for abuse of expropriation.
Article published in Property Professional | 22 October 2020