The Expropriation Bill was finally passed by the National Assembly on Wednesday, 28 September 2022.
The first version of the Bill was withdrawn in 2008 when the Parliamentary legal advisors concluded that it was unconstitutional for its exclusion of recourse to courts.
The next version of the Bill was tabled in 2015 and passed in 2016 by Parliament. It then returned to the National Legislature in 2017, by then President Jacob Zuma, over concerns about inadequate public participation.
At the 2017 ANC NASREC conference, a resolution was passed to adopt expropriation without compensation.
In August 2018, the ANC withdrew the existing expropriation law from Parliament to make way for a new legislative proposal which would incorporate an amendment to Section 25 of the Constitution. In order to achieve an amendment to the Constitution, the co-operation of the EFF was required. In December 2021, a fall out between the ANC and the EFF about the issue of state ownership of land occurred and the constitutional amendment failed.
The Bill, without an amendment to the Constitution, was finally passed by Parliament at the end of September 2022. What does this mean to property rights and is the issue of expropriation without compensation finally determined?
In 1996, Section 25 of our Constitution was the section most hotly debated. President Ramaphosa chaired the ANC delegation which was tasked to consider this. It was understandable that this would be a difficult issue to resolve.
The 1955 Freedom Charter placed land at the centre of liberty. It stated that “All the land must be divided amongst those who work for it to banish famine and land hunger” and that “all shall have the right to occupy land wherever they choose”. Section 25 of the Constitution was a compromise between the call for all land to be returned to the people and the protection of private property rights. It protected the right to property but then stated that property may be expropriated for public interest. It expanded on what was meant by public interest by stating that it included the nation’s commitment to land reform and to bring about equitable access to all South Africa’s natural resources.
Thus, the Constitution contemplated that expropriation could occur to achieve the objective of bringing about equitable access to land and natural resources. Historically expropriation was used to acquire land for the purposes of roads, schools, hospitals and the like. The expropriation power was extended to include the need to acquire land to achieve land reform and equitable access to resources.
In most democratic jurisdictions, compensation on expropriation is equal to market value.
Section 25(3) introduced a new test and stated: “The amount of compensation and time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including:
a) the current use of the property;
b) (b) the history of the acquisition and use of the property;
c) (c) the market value of the property;
d) (d) the extent of direct state investment and subsidy in acquisition and beneficial capital improvement of the property; and
e) (e) the purpose of the expropriation.”
On expropriation without compensation, there are two schools of thought. The first is that Section 25 of the Constitution is sufficiently broad to be interpreted to allow expropriation to occur at no compensation or very limited compensation.
The second, is that the Constitution needs to be expressly amended so as to permit expropriation without compensation. In other words, that Section 25 needs to be amended. The first school of thought is the one favoured by most lawyers.
Section 12(3) of the new Expropriation Act states that it may be just and equitable for nil compensation to be paid where land is expropriated in the public interest, having regard to all relevant circumstances, including but not limited to:
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 is not being used for its core functions and is not reasonably likely to require the land for its future activities;
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 the direct state investment or subsidy in the acquisition of capital improvements of the land; and
(e) where the nature or condition of the property poses a health, safety or physical risk to persons or other property.
It is felt that the identification of these specific instances is incorrect and possibly unconstitutional. The equivalence principle applies to all expropriations and requires that where one or more individuals have to bear a sacrifice in the form of the loss of property for the common good, their individual and excessive burdens should be compensated by the community. In other words, that burden should not partially or wholly be imposed on the expropriated landowners. If the equivalence principle is not followed, the expropriation process is probably unconstitutional.
The provision in Section 25(3) that the amount of compensation must be just and equitable, encompasses the equivalence principle. It is very difficult, if not impossible, to correctly circumscribe the circumstances where it would be just and equitable to pay nil compensation because the practical circumstances of each owner whose property is expropriated cannot be foreseen by a legislature. The best one can do would be to make such instances strictly subject to the qualification of justice and equity and to put the burden of proof in each instance on the expropriating authority. Section 36 to the Constitution states that the rights in the Bill of Rights may be limited only in terms of a law of general application and to the extent that the limitation is reasonable and justifiable in an open and democratic society. Section 232 of the Constitution states that customary international law forms part of the law of the Republic, unless it is inconsistent with the Constitution or an act of Parliament.
The question is thus whether an act of Parliament can be adopted to provide for expropriation without compensation, while still conforming with the Constitution, and international law.
Customary international law does not countenance expropriation without compensation.
The traditional measure of compensation which was accepted as customary international law until about 1974, was adequate or effective compensation which was equated to full compensation or at least market value of the expropriated property. Full compensation means an amount that, insofar as money can do so, will restore the person whose property is to be expropriated to the same financial position in which he/she was before the expropriation.
However, since the acceptance of the Charter of Economic Rights and Duties of States by the General Assembly, a resolution of the United Nations of December 1974, there has been a marked deviation from this measure of compensation. The measure of compensation was watered down in the Charter to “appropriate compensation” taking into account the particular State’s relevant laws and regulations, and also contentions that the State considers pertinent. Appropriate compensation has no fixed meaning on its own and depends upon the circumstances of each case. Various countries have deviated from the traditional full compensation model, and now require in their constitutions just or fair compensation.
Fair compensation is an amount that would redress the imbalance caused by the expropriation
between the public’s interest and the interests of the expropriated landowner. Fair compensation can be equal to full compensation, but it may also be less.
Given the South African circumstances and the imperative for land reform, this can give rise to an internationally acceptable formulation of measures of compensation in individual specified cases. The measure of compensation in Section 25(3) of the Constitution is a very flexible instrument which may in some circumstances, give rise to full compensation, and if just and equitable, to less than full compensation and even very little or none in very exceptional cases.
It is premised on a just and equitable balance of interests. Justice and equity may under very restricted circumstances have the result that very little or no compensation will be payable, for example where the expropriated property has been abandoned prior to expropriation. If no compensation is payable under these circumstances, the person whose property is expropriated is not the victim of a confiscation, because he is entitled to just and equitable compensation which may conceivable be none. The person also will not bear the burden on behalf of society at large.
It follows that Section 12(3) of the new Act may well be unconstitutional, but in all instances, the expropriation will have to be tested against the provisions of Section 25(3) of the Constitution and be “fair and equitable”. Given the factors referred to compensation at less than market value is certainly feasible.
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