Property rights are among the issues on which the future of South Africa will be decided. This is a framework issue for the country’s economy. Get it right, and there is a chance of economic acceleration, prosperity and all that comes with it. Get it wrong, and it will condemn South Africa to years of stagnation and impoverishment.
For close to three years, South Africa has faced a very real danger of the latter, as the African National Congress and the Economic Freedom Fighters have driven the idea of a policy of expropriation without compensation (EWC).
The publication of the new Expropriation Bill pushes that agenda a little further. Property owners, particularly those in the agricultural sphere, will be watching this nervously, since it has been phrased in an idiom of agrarian reform (and has long been accompanied by a great deal of vitriol towards farmers).
The early responses to the Bill from stakeholder groups are important, as they are likely to frame the debate in the months ahead. Foremost here is that of the Agricultural Business Chamber (Agbiz), which represents a spectrum of institutions involved in the agricultural value chains and produces a stream of valuable insights into the workings of the farming economy. Its views matter.
Agbiz’s analysis puts a benign face on the Bill. It is at pains to show that the Bill’s main thrust is to make provision for ‘just and equitable’ compensation, rather than ‘nil’ compensation. It notes that the latter – naturally a key concern for its constituencies – is hedged with qualifications.
These qualifications are that ‘nil’ compensation ‘may’ (and not ‘shall’) be applied in a limited range of circumstances and that expropriation at ‘nil’ compensation will be guided by the various considerations set out in section 12 (3) of the Bill. ‘In other words,’ it says, ‘properties falling under the listed instances are not automatically eligible for nil compensation, it simply states that factors such as abandoned land or labour tenant claims should be a consideration to determine if it will be just and equitable to award nil compensation.’
Here Agbiz understates the possible range of considerations that may contribute to a decision to offer nil compensation. The list of relevant conditions in the Bill is not closed – the list ‘includes but is not limited to’ the stated circumstances. The possibilities for compensation-free expropriation may prove to be extensive.
‘Importantly,’ Agbiz states, ‘the state does not make this decision, the courts do.’ Partly true. While the new Bill provides for the courts to determine compensation when a ‘reasonable’ agreement cannot be reached, there doesn’t seem to be anything in the Bill that would prevent the state from offering ‘nil’ (or a very low and inadequate quantum of) compensation as its opening position, for it might regard this as ‘reasonable’ even if the owner does not.
So, yes, the courts are still involved in significant ways – and are potentially important guarantors of property rights – but Agbiz notes a key problem: ‘The biggest risk is that a landowner/bond holder may have to rely on litigation to get compensation.’
It goes on: ‘The biggest risk is that the state officials implementing the Bill may offer nil compensation if an owner's circumstances fall under section 12 (3) and leave it to the owner or bondholder to approach the courts for a determination. This may be costly and cumbersome. Moreover, this may dampen business confidence at a time where investments are needed to rebuild South Africa’s economy from the shock caused by the COVID-19 pandemic.’
The analysis does not adequately develop this point. In the event that initial negotiations fail to produce agreement – let us say, if the state offers ‘nil’ or ‘minimal’ compensation – the Bill enables the state to issue a notice of intention to expropriate. Representations must be invited, and must be considered, but there is no obligation to respond to them.
Once this has been done, the state may issue a notice of expropriation. Ownership and possession pass to the state on the dates given on the notice. The only limit on this is that the date ‘must not be earlier than the date of service’ of the notice. In reality, this could mean that within mere weeks or even days, an owner could be dispossessed.
Challenging this in court is possible, but taking into account that the property will have already been taken (if it is an income-bearing property, the income lost) this will be a difficult route to take. The state, after all, has very deep pockets – to which, ironically, the expropriated owner would probably have contributed.
Note that this is a problem that confronts property owners even if the threat of ‘nil’ compensation is removed and an amount closer to market value has been offered. The Bill shifts the relationship between the state and those subject to it decisively in favour of the former. This in turn may make expropriation a very convenient and attractive route to take.
Indeed, this is probably where Agbiz can be faulted. ‘Expropriation is always a last resort,’ its analysis states. In theory, perhaps this is true. But the relative simplicity of the process and its weighting in favour of the state could well ensure that it is a process easily and readily resorted to.
One of the key unstated risks is that it will not be confined to case-by-case property seizures, but will be used for something far more ambitious. We at the Institute of Race Relations have warned that the endgame here is the effective nationalisation of land, along the lines of water and mineral rights. The Bill defines expropriation as the ‘compulsory acquisition’ of property by the state. On this basis, a mass taking of land into the custodianship, rather than the ownership, of the government would probably not count as expropriation or qualify for the payment of any compensation at all.
Agbiz correctly notes that this Bill is being introduced within a fraught political context. It should be commended for noting this. EWC has been driven by ideology and reckless populism. The Expropriation Bill, if passed, will be managed by a state that is frequently venal and incompetent. And if the Constitution is amended – as remains the intent, even if this Bill may not require it – its latitude will be enhanced further, and the protections afforded its citizens correspondingly reduced.
‘The actual impact of this provision will largely depend on the extent to which the state invokes it and the willingness of the courts to award compensation that deviates markedly from market value.’
How will the state act, and will the courts protect (and be accessible to protect) property holders? This is, unfortunately, a central reality. The Expropriation Bill opens up possibilities for abuse that the political and governance environment make uncomfortably likely. These are not benign prospects. Those who are, like Agbiz, invested in a prosperous future for South Africa – ‘at a time where investments are needed to rebuild South Africa’s economy from the shock caused by the COVID-19 pandemic’ – would be well advised to take this threat seriously.
Written by Terence Corrigan, a project manager at the IRR. Readers are invited to join the IRR by sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).