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What you might like to know about the Expropriation Bill

Not least of all the proposed inclusion of nil compensation.
The bill aims to ensure that holders of unregistered rights, such as farmworkers, are not excluded from receiving compensation. Image: Shutterstock

In 2019, the Parliamentary Advisory Panel on Land Reform advised the president that the old Expropriation Act No 63 of 1975 was unconstitutional and in conflict with Section 25 of the Constitution of South Africa, 1996.

On October 9, 2020, the Department of Public Works and Infrastructure published the Expropriation Bill B3-2020. This article aims to provide a brief explanatory summary of the expropriation and compensation processes envisaged in the bill, as well as the proposed inclusion of nil compensation.

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What is an expropriation?

An expropriation is the unilateral acquisition of privately owned property by the state for a public purpose.

Expropriations generally occur for a public purpose such as the construction of a road or power plant, and are accompanied by compensation.

In South Africa, expropriations may also occur for the purpose of land reform and improving access to natural resources. Expropriations have historically been governed by the 1975 act, which essentially prescribes market value compensation. However, a discrepancy exists between Section 25 and the 1975 act.

Scholars have criticised our courts as being hesitant to apply the transformative potential of Section 25.

Until recently, the state has followed the ‘willing buyer, willing seller’ approach in calculating compensation, which some have described as exacerbating the already limited land reform budget. Amid growing calls for the constitutional property clause to be amended, South Africa has therefore now been presented with the bill.

Read:

How will expropriations work?

The three phases envisaged in the bill are summarised below.

1. Investigation and valuation phase

An expropriating authority (EA) must first ascertain the suitability of a property for the purpose of the expropriation and must establish the extent of the registered and unregistered rights therein. The EA may inspect, survey and valuate the property.

The inclusion of informal unregistered rights in the expropriation and compensation process is a transformative feature not found in the 1975 act and aims to ensure that the holders of unregistered rights, such as farmworkers, are not excluded from receiving compensation.

2. Notice and consultation phase

The EA must serve a notice of intention to expropriate on the owner and any known holder of a right in the property. At this stage, ownership has not passed to the EA. This notice must explain the purpose of the expropriation, the reason why that particular property was chosen, and the date of the expropriation.

The notice must also include an invitation for objections to the expropriation. The holder must claim an amount as just and equitable compensation.

The EA must then reply to the owner or holder and accept or repudiate this amount and make its own offer of compensation in the latter case, accompanied by full details, reasons for the offer and supporting documentation.

3. Expropriation and compensation phase

If the EA proceeds with the expropriation, it must serve a further notice, which must include the amount of compensation offered or agreed to, and a statement that the owner may institute court proceedings to dispute the amount of compensation within 180 days of the date of expropriation.

The right to ownership and possession of the property will pass to the EA on the date of expropriation stipulated in the notice, together with all unregistered rights, unless same are specifically excluded. An owner remains entitled to the use of and income from the expropriated property, but remains responsible for any operating costs and taxes until the EA takes possession of the property.

If the EA and the owner or holder cannot reach agreement on the amount of compensation, they may attempt to settle the dispute by mediation or by approaching a court. However, property can be expropriated, and ownership transferred to the EA, before an agreement on compensation has been reached or a court has made a determination on compensation.

Determination of compensation 

Compensation for expropriation has long been the subject of heated debate in South Africa.

Most legal practitioners still hold the view that compensation should always be at market value. While following a generally conservative approach, our courts have affirmed that compensation is not based only on market value.

The Constitutional Court has taken the view that a determination of compensation should follow a two-stage approach; starting with the market value and then adjusting it downwards or upwards based on the other factors contained in Section 25(3) of the Constitution.

Section 12 of the bill regulates the determination of compensation. This section will effectively repeal the ‘willing buyer, willing seller’ principle of the 1975 act and replace it with the ‘just and equitable’ principle contemplated in Section 25(3) of the constitution.

Five ‘circumstances’ for nil compensation

However, the bill goes further than the constitution, prescribing five circumstances in which it may be just and equitable for nil compensation to be paid, namely where:

  • Land is held for speculative purposes;
  • Land is held by an organ of state and is not being used for its core functions;
  • Land has been abandoned;
  • The market value of land is less than the state investment or subsidy in the acquisition of the land; or
  • The land poses a health, safety or physical risk.

It should be noted that nil compensation will only be applicable to land expropriated for land reform, and not to expropriations in general.

Moreover, Section 12(3) is a non-exhaustive guideline as opposed to a restrictive list, which creates a discretion to be exercised by a court.

It is conceivable other circumstances may also justify nil compensation.

Examples would be where land is occupied by a labour tenant, or where the property had been acquired pursuant to racially discriminatory laws and is now being expropriated for the purpose of land reform.

Comments for the bill have closed and South Africans are awaiting a possibly amended version.

Bulelwa Mabasa is director and Thomas Karberg a candidate attorney at Werksmans Attorneys.

COMMENTS   25

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SA has a FAKE justice system and this whole EWC is just more proof of it.

Theft is theft. You cant legalize it man!

How many “Chinese companies” will get property from this bill?
SA owes a lot of money to China and they can’t repay it. So guess what, they will hand over land and mines(I think there are already ~11 mines that belong to China). If there is a fair process, then that is ok, but we all know there is not. The ANC government will use distractions/ tricks(race/racist/religion/gender equality/ climate change…to name a few/Covid pandemic ) to deceive the public on land distribution and also the mine (“need to be state owned”)

With these distractions, we the people/public will fight amongst ourselves and the politicians (they are all the same no matter the color/party) will keep getting their slice of the pie. The irony is, the world cake will always be the same size, the slices for each country in the world will change and the way it is going, South African slice is getting smaller and smaller.

What if I worked so long and spend a lot of time and money to build up my farm? How do you calculate my effort? Easy to say market value, but if I had spend 10-15 years to clear trees, put new infrastructure and equipment into my investment. If I bought my farm before all this talk of EWC? Bought not received for free of inherited it, worked 12 hours plus per day, just to hear how I stole my farm from someone? I had no choice on what gender or skin color or who my parents will be or what my ancestors did wrong? i did not asked to be born in South Africa, I am 54 years old, nobody wants me outside South Africa, and in South Africa I am also not wanted. Irrelevant my long hours and effort to make a living?

I know how you feel. You summed it up nicely. Then, on top of the insults that we constantly have to endure, they demand our taxes on income and capital, and they demand that we employ people at a wage they prescribe!

“When misguided public opinion honours what is despicable and despises what is honourable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe.”

― Frédéric Bastiat, Economic Harmonies

I feel it sir, what about the employment created, rates and taxes we’ve paid over the years, loyally, now it seems foolishly?

But it is “legislation” designed by lawyers to make lawyers rich; hence all the half truths in this article. Quick one is the “willing buyer, willing seller” policy lie. It was never policy, that is just the fair and equitable way; yeah I know, unknown to a lawyer. Disingenuous by the lawyers I have to point out that the “budget” wasn’t lost due to this. It was lost due to wholescale corruption and incompetence by the ANC cadres to whom “Land Affairs” was gifted to. Nothing has changed, or will change here.

Finally I think EWC is a cynical political ploy to bait voters into staying with the ANC to enjoys seeing the white famma humbled and score something for nothing. Reality is Zim; the ANC politicians will score a great deal for nothing (and squander it). The people will, like in Zim, become ever poorer; as is already happening.

Lawyers who support this legalised theft are no different to those who supported apartheid and they too will see the error of there ways; the hard way. Right now they should be ashamed of themselves for not opposing the Bill.

Precisely!

Well said Hachmet (and I agree also with Sensei & Paul K.)

I note commentators make mention of “willing buyer / willing seller” to make it fair and equitable.

All what the ANC will do, is to bus a number of squatters to an adjacent farm property (or within your farm border, at the far end). Suddenly, you’ll struggle with eviction issues, and when unable to evict…you’ll be offered much less from a “willing” buyer, knowing you as the seller has a growing squatter problem.

🙁

SARS will have to take the capital loss (and loss of tax on future farming income.)

Australia threw its doors open to SA farmers a while back; they’re MOST keen to have you, be assured!

Let’s suppose that all the available land, by some miracle, has been redistributed successfully, who will benefit from the process? Considering the current track record for land reform, the new farmers will be bankrupt within the first 12 months, leaving debt with the new “State Bank” or the old Land Bank. Economically active land, that can be used as security in the banking system at the moment, will become economically inactive, as it will belong to the state. The consumers will pay the price for the inefficiencies and for the financial aid to new farmers.

There will be benefits for housing projects if the beneficiaries receive the title deed to their land. Title deeds in private hands will make that land economically active. If they privatise the land that currently belongs to the state, or to traditional leaders, and give title deeds to the beneficiaries, it will serve as an enormous capital injection into to banking system as new collateral for loans is created out of thin air. It will serve to increase the money supply. It will have the same benefits on the economy as a military invasion and colonisation of a foreign country.

Therefore, the benefits or disadvantages of expropriation will depend on who owns the land at the moment. If they nationalise land that is in private hands currently, it will crash the banking system and cause poverty and famine. If they privatise land that belongs to the state or the Ingonyama Trust, it will strengthen the economy and the banking system and create jobs.

Well summarized Sensei.
As a farmer of 45 years I and my family have discussed this over and over.
As I have said many times on this forum, and maybe it is wishful thinking, this bunch have driven this bus around the block many times. They do it just before elections and then just after elections.
In the mean time they have achieved absolutely didly squat, if after 27 years you have not got it right what are the chances of getting it right now?
They have in their wisdom rendered the rural areas and towns unlivable. We who live here have adapted but when a “new” land occupier announces to his family that they are moving to an area serviced by a dustbowl town with no doctors, no banks, no pharmacy, no schools, no clean water, no services I doubt they will want to move. We have adapted, we travel further and provide for ourselves even though we still pay rates and taxes for nothing.
I won’t even touch on how tough it is to farm in this country. If it is not the drought, it is the cold or the diseases or the total lack of help from government, thanks to Derek Hanekom who dismantled Ag Tech services.

As is mentioned below, this will lead to a civil war. Farmers aged 50 plus all served in the SADF, trained by the best in the world, we have shooting practice all winter on moving targets culling game.
So bring it on boys, I will not part easily with my 45 years of sweat and tears built with my loyal staff and my own hands.

Privatise trust land? You don’t do that anywhere in Africa no matter how a modern or free market economy might benefit – one can’t simply march in and introduce new systems overnight – or at will. Every continent and different peoples worldwide are as set in their traditions as we are in ours and a perpetuation of British colonial /imperial attitudes won’t help us.

A slippery slope if ever there was one!

A roller coaster …

Compensation must be paid where the land is obtained in a commercial transaction. Purchasers are not responsible for political mistakes or uncontrolled breeding by those who seek to own the land.

This is all a smokescreen, they really want the pension fund assets to continue funding their patronage and cadre network.

Quite importantly, the bill is being passed under the guise of finality regarding expropriation to appease those opposing consitutional amendment that is far harder to pass with the required majority.

Once the amendment is then done, it is then far easier to amend the act (with another bill) and bring in the moronic ideas about expropriation.

The ANC-spawned EFF spilled the beans on the policy years ago.

Don’t be fooled by the ANC’s gobbledegook.

This is one thing that WILL lead to civil war !!!!

Probably not. I fully understand your gut reaction but the steady drip of younsters out of SA will just continue and accelerate. ANC will end up with a lot of property in retirement villages once they get round to expropriation.

The reality is that these clowns cannot organise a p.ss up in a brewery so it will take them a while to get round to expropriation. The main reason that land reform has floundered is not because people were unwilling to sell, gov just do not have the capacity to go through the process of buying land. Same thing will happen with expropriation.

Courts are clogged up enough as it is

WHY the repeated use of the word “Land” Reform/Expropriation. (…in Afrikaans circles I repeatedly hear people refer to “GRONDhervorming” on said topic).

Surely “Asset” Forfeiture is more correct per the (true) intentions of the Bill. (“Bate-beslaglegging”)

Why would the ANC be interest in land (that has to be worked hard to derive a benefit from), when you have your House/townhouse/holiday residence, share account, bank accounts, vehicles registered in your name?? (…and ready to be shared..)

Now I know where SARS will get the money from to float their future budget shortfalls… 🙁

Assets taken under the Expropriation Bill will be an INVERSE CURVE to tax collections by SARS.

The more assets are expropriated, the lower revenue will be collected by SARS (as those owners will not be producing income)

(…what makes the ANC think new land owners will make taxable profit from land use?)

@MichaelfromKlerksdorp,
That is a very well pointed outcome of EWC.

This can been seen in the context and result of Expropriating Citizen Time by Enforcing a Lockdown, the confiscat of this asset with zero compensation created negative the tax collection which hammered GDP and Employment whilst crimes related and unrelated increased.

So if you want to see what EWC will look like and what the result will be just look back at the last 12 months.

Having land and knowing how to use it productively are two completely different things. Hopefully, we won’t see what one sees when driving around: Many sad and forlorn Black people sitting around waiting for an economic and employment miracle and realising they foolishly put their hopes and dreams in the hands of the ANC.

If they take it its scorched earth from me …. there will be dust and ash alone left

If it is worth nil compensation according to the government, then nil is what they are very likely to receive. No structures, no pipelines, no bridges, no dams, no boreholes, no tanks, no generator, no implements, no livestock, no crops, no irrigation system.

Nothing, zip, zero, nada.

I have nothing against some of those categories, for example abandoned, take it.

Gert Pretorius’s farm outside Lydenberg Mpumalanga, was the first to be expropriated in the 90s; showers in the house had no caps; no cupboards; only the cement floor with covering stripped away; no ceilings, etc. That’s in addition to the non-existent (or no longer existent) farm equipment outside….

Easiest solution, mortgage your property to the hilt, make sure once you have built up some equity to refinance.

The liquidity that you raise in this way invest offshore. Best way to minimise your exposure to SA property risk without selling.

Let the banks carry the risk of expropriation, still not an ideal situation for the SA economy, but at least when things goes pear shaped your downside risk is limited.

End of comments.

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