Expropriation Bill: Striking a balance in land reform

The Expropriation Bill of 2019 was published in December last year for public comment. People might be surprised to find out that we had an Expropriation Bill in 2008 that was shelved, that there was a lesser known attempt in 2013 and that the 2015 bill that was published, went through four negotiated versions, and was almost passed before it was sent back to the National Assembly due to presumably concerns about public participation on provincial level. 

The current, 2019 bill is a slightly modified version of the 2015 bill. The most important addition to the 2019 bill is the insertion of clause 12(3) that allows for nil compensation in certain circumstances. 

This piece will highlight and comment on some of the contentious issues that is surfacing in public debate. 

The context of land reform

But the comment comes with a caveat: commenting on the legalities of the bill (my angle) becomes challenging in light of the media reports on a Special Investigations Unit (SIU) that found dodgy land deals and large-scale corruption in land reform. 

Similarly, the High Level Panel Report, presented to Parliament in 2017, is a bad report card for the administration of land reform and the implementation of the laws. Speakers at public hearings conducted, spoke of corruption that needs to be investigated. 

This is not new. The department, in its 2011 Green Paper on land reform, recognised (in the context of farm dwellers), that it is not a single piece of legislation that the problem "may be that of a systems-failure". 

And we also know that the Constitution is not to blame.

Law and politics

So law and politics are intertwined, and the efficiency of laws is influenced by a wide variety of non-legal factors. For example, expropriation laws not only protect citizens from government (over)action. It is also the tool that government uses to perform actions such as expropriation, and that enables them to implement policies debated in Parliament chambers. This makes it difficult to separate a discussion of legal principles and rules of expropriation deals with an intrusive government power, without stepping into the boundaries of politics.

When this happens, one should be careful not to confuse the legal principles with political perceptions and ideologies. It is not always clear where muddy the line is between law and political opinion, but I will try and keep on the legal side of things.

Why new legislation is needed

Until the 2019 bill is passed, expropriations are done in terms of the 1975 Expropriation Act. This act is out of sync with the Constitution, and does, for instance, not reflect the “just and equitable” compensation standard. It also falls short of the constitutional just administration standard, there to protect citizens when the government fulfils an administrative function.

While it is possible with statutory interpretive gymnastics to interpret the different pieces of legislation to effect a constitutionally compliant action, streamlining the processes and the procedures in a comprehensive act should enhance the rule of law and give effect to rights. 

Where the legislation fits into the process

Perhaps as clarity to the reader, it should also be re-iterated that the state can only expropriate property if it is authorised by legislation. For example, should the state wish to expropriate land to build a road, the Roads Act authorises the minister to expropriate land for that purpose (and that purpose alone). The nitty-gritty procedural steps are set out in the Expropriation Act, that also lays down how compensation must be calculated. The Roads Act will therefore lay down the purpose of the expropriation, which is a legal requirement for a valid expropriation. 

In the land reform setting, section 42 of the Restitution of Land Rights Act is an example of where the minister can expropriate property where negotiations for sales are deadlocked. In the much discussed Akkerland case, for instance, the state did not fulfil the requirements of the Restitution Act and therefore had no valid purpose for the expropriation. The Department of Rural Development and Land Reform conceded as much in court.

What are the issues?

The most significant addition to the bill is the five types of land (and only land) that may (and not must) be expropriated for nil compensation. This is land occupied by a labour tenant, land held for speculative purposes, land owned by state-owned entities, abandoned land, and land with lesser value than the state subsidies that it received. 

It is important to note that nil compensation is not without compensation. It indicates that these are the circumstances where the state foresees that "just and equitable" compensation can be nil, but it still leaves room to challenge that. It is also important to note that homes and productive agricultural land is not included in this list. The bill therefore does not foresee large-scale seizure of land without compensation. 

The bill is not clear on when land will be deemed to be held for speculative purposes, or precisely when land is abandoned, so this needs to be clarified. It also seems that the last type of land may be land that was already transferred in terms of land reform programs.

Any other expropriation will still require to be compensated with just and equitable compensation. 

Who may expropriate?

Only the state, and not private individuals, can expropriate property. The bill authorises the minister to expropriate property. This is in line with current practices. This power can be delegated, as before, and the exercise of such power will be guided by the Expropriation Bill, and will only be applicable to the specific case at hand. 

There is specific legislation that authorises local government to expropriate property in certain circumstances. These powers must be exercised within the confines of the authorising act to be valid. 

Concerns were raised about the wide definition of "expropriating authority" in the bill to include an organ of state, and requests will probably be made to narrow the definition in order to give clarity.

The process

Expropriation is a long and cumbersome process. The bill adds an additional step before expropriation takes place: an investigation phase. During this phase the state must try and reach an agreement with the owner, before the expropriation process. This is in line with international practice. 

If this step is done properly with a bona fide exchange of information and negotiations in good faith, it will shorten the process and ensure transparency and fairness for all parties. This will make the acquisition cheaper, as expropriation and the possible litigation that can follow, often inflate the costs of acquisition.

The submissions made by the owner or right holders need to be considered by the expropriating authority. Since the process is governed by administrative justice, an owner is entitled to ask for reasons for decisions, and such decisions must be made in line with the rules of administrative justice. Arbitrary or irrational decisions can therefore be declared invalid.

If no consensus is reached during the investigation phase, the state will go ahead and expropriate the property. This will require the state to serve a notice on the owner and rights holders, including unregistered rights holders. With 60% of people in South Africa living "off-register", this affords protection for vulnerable people too, most notably, people living on communal land.

There are groups who are concerned that there is not enough protection for people living on communal land, and that the interaction with other legislation like the Minerals and Petroleum Resources Development Act leaves communities vulnerable to expropriation when it comes to mining. 

Once the notice is serviced there are timelines for responding and objecting. The owner has time to respond to the "public purpose" or "public interest", the proposed date that the state will take possession, and compensation. Since the validity of the expropriation is still questioned at this stage, it would be extremely foolish for the expropriating authority to acquire the property before the process is completed. If it is found that the process or the reason for the expropriation is lacking, the expropriation will be declared invalid and the property will have to revert back to the owner. 

The bill also affirms the current legal position: if the property expropriated is mortgaged, the owner will remain liable for their mortgage. It will be doubtful that compensation that does not cover the outstanding mortgage amount, will be "just and equitable".

And "just and equitable" compensation remains the compensation standard in terms of the bill.

The clause on the calculation of compensation reflects the wording of the Constitution. This is one of the problematic areas of compensation law – there are no exact formulas in the bill for calculating compensation. This is because what is just and equitable is context specific. The best way of developing formulas therefore remains with the courts, who can, when confronted with specific sets of facts, crystallise principles.

On this point it is important to mention that the Property Valuation Act and the regulations published in terms of the act do provide formulas to be used, when property is expropriated for land reform purposes. There are various concerns with the formula used. The exact interaction between this act and the bill will need clarification.

The bill makes extensive provision for deliberations about compensation, where the owner has a chance to put forth valuation reports to challenge the state's valuation. Through previous deliberations on the bill, a mediation clause (clause 21) was inserted to allow for the more solution friendly and cheaper option of resolving deadlocks in the case of disagreement on compensation, always leaving open the option to go to court. Whether rights holders will have the means and the resources to effectively enforce their rights in such circumstances, is a debate one can have.

If the state does expropriate a home, the notice will indicate the date of possession and the date on which the state acquires the property. Should the owner or rights holder stay on in the property after such a date without a legal ground, such a person will be an unlawful occupier. The court will then, in line with section 26 of the Constitution and eviction legislation, have to apply for an eviction. 

What property?

Property in terms of the Constitution is also a wide concept, and has been found to include licences. But before this can be "seized", legislation authorising expropriation is needed. As is already the case and has been the case under the 1975 act, it is possible to expropriate rights, including shares, if there is an act that sets out the public purpose for which this must be done. The same goes for pensions. 

The balancing act in land reform

Land reform needs to happen, and the payment of full market value compensation cannot be an impediment to this imperative. The compensation, however, needs to be "just and equitable", also bearing in mind that the burden of the public interest project (namely land reform) cannot be placed on the shoulders of one person (the land owner) alone. It needs to be spread in society. 

During the negotiations in the 1990s, and in line with transitional justice principles, it was agreed that the state will foot the bill. But in the current political climate, any claim that the government does not have the means to pay for the acquisition of land, will be met with questions about the inadequate allocation of money in the national budget, as well as the wasteful expenditure of money and the cost of corruption. 

Lack of money becomes an increasingly unconvincing argument, and does open the possibility for the argument that compensation can be used punitively. This will not only be unconstitutional, it will also violate international law. 

Property rights 

Property rights are important, and the protection of property rights serves various important functions of which enabling effective trade (commerce) is only one. Providing people with tenure security and enabling them to have a self-fulfilling life is another important function that property rights serve.

But property rights are not absolute, it is and can be restricted. The legal expropriation debate lies in the realm of to what extent it can be restricted, and for what reasons. About the safeguards that owners and right holders (such as communities living on communal land) have in such circumstances, and about the rules of holding government accountable for not using the expropriation powers excessively or arbitrarily.

Of course, the prospect of being a target for expropriation is daunting, and is fuelled on by certain groups with the fear mongering that it might be without compensation. Add to this the context of the fraud and corruption and unlawful dealings, where the rumours whisper the names of the politically connected colluding with current owners, there is a growing perception of the unfairness that a burden that in the past 24 years was enlarged by an inert government is disproportionately placed on one sector of society: agriculture. 

Realistically, owners and rights holders, in the worst-case scenario, face the prospect of having to fight irrational compensation amounts or non-adherence to the authorising legislation. With a court challenge being expensive, some owners might have no effective choice in protecting their rights. 

In between the fear mongering of large-scale seizures and the flipside of high expectations of quick solutions, the bill tries to ensure clarity and guidance.

The bill is a reasonable piece of legislation, that needs to now be applied in a tumultuous environment. The question is always how effective a law can be, when politics are messy. 

The biggest frustration in this conversation is the focus on the compensation element, if that is not where the problem lies. This means that all the conversations about the ineffective post-acquisition support, the absence of clear beneficiary selection and the problems with inefficiency, clumsy administration, corruption and an inertia need to be framed in the talk of compensation, which is impossible. 

The flipside is the fear that even if the Constitution is changed, even if the Expropriation Bill is passed, that the problem will simply not be solved. This does not mean that the bill is not necessary. And this does not mean that we cannot have conversations or try and find solutions. 

It just means that we should always do so bearing in mind the complexity of the problems, and that complex problems will need complex solutions, and a systematic plan on how to move forward. 

We have the people who can do the job, the question is if there is political will to do it.