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CFCR: Does the Expropriation Bill allow third party transfers?

26th February 2016

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The Expropriation Bill (the Bill) has been passed by the National Assembly and is currently on its way to the National Council of Provinces who may either accept the Bill as it is, or accept with changes, or even reject the Bill. Should it be accepted, then all that will remain will be the President’s signature and a date of commencement for there to be a new expropriation process.

But that is where things get interesting. According to the current version at clause 9(1)(a): “The effect of an expropriation of property is that the ownership of the property described in the notice of expropriation vests in the expropriating authority or in the person on whose behalf the property was expropriated…”

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This raises the obvious question: does the Expropriation Bill intend to permit third party transfers? In other words - can there be a legitimate public purpose that involves transferring property from one private party to another? The sort of third party transfer envisaged here should not be needed by the state or the third party for the building of infrastructure such as railway lines and ports. The property should also not be needed for the public to mainly benefit such as environmentally sensitive wetlands.

The Constitution defines public interest as including “the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources” and the Bill simply restates the Constitution without further insight. The Bill goes on to define public purpose as including any purposes connected with the administration of the provisions of any law by an organ of state. Both definitions, while sufficiently wide so as not to restrict legitimate land reform or other purposes that would benefit the public, however, do not lend much guidance in determining whether a third party transfer of expropriated property for purely economic development meets the public interest or the public purpose requirement.

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The requirement that expropriation be for a public purpose or be in the public interest acts as a check against the state’s power to regulate - so another question to be asked is whether a third party transfer for economic development sufficiently meets this public purpose or public interest requirement. Other comparable jurisdictions, cited by academics such as Van der Walt, including Trinidad and Tobago, as well as Australia, have said that expropriation where the property was transferred to another person did not meet the public purpose requirement and was therefore unconstitutional.

Of course in the South African context, and in line with the Constitution, land reform is one such area where private property is transferred from one private party to another. But this is already a constitutional imperative, which would not need mention in the Expropriation Bill. Rather, this inclusion of third party transfers in the new expropriation process appears to be a calculated move to allow the expropriation of private property for the benefit of private persons. This could potentially give rise to irregularities in the expropriation process.

While the Supreme Court of Appeal in Offit Enterprises (Pty) Ltd v Coega Development Corporation (Pty) has held that the expropriation of land so that a private developer could build low cost housing meets the public purpose requirement, it is less clear whether economic development can the meet the public purpose requirement.  Said succinctly, this third party transfer inclusion in the Expropriation Bill may very well allow for private developers to expropriate private property for economic reasons, such as the construction of a mall. The United States in Kelo v City of New London saw the Supreme Court permitting the transfer of land from one private owner to another private owner in a bid to further economic development - namely the creation of new jobs - thereby increasing the tax base. This effectively meant that families were forced out of their homes ostensibly for economic development. Is this what the Expropriation Bill intends - this gross violation of property rights?

Should this current version be signed into law thereby replacing the current Expropriation Act, then there is a need for courts to provide even greater scrutiny in evaluating the legitimacy of a third party transfer. The courts would be required to consider whether the third party transfer for economic development is a valid public purpose and whether the expropriation of the property is strictly required for the realisation of the public interest. It is unclear as to what would qualify as an expropriation in the public interest - in the absence of that clarity, there very well could be violations of property rights. As such, the courts will be required to apply a stringent test in order to determine the legitimacy of an expropriation.

 

Issued by The Centre for Constitutional Rights

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