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Update On Expropriation Of Land Without Compensation After President Ramaphosa’s Announcement About

Category Property Market News

President Cyril Ramaphosa announced last Tuesday evening, 31 July 2018, that government will proceed to amend the constitution to allow expropriation of land without compensation (ELWC). There is legitimate concern that by pre-empting the findings of the parliamentary consultation processes, the president has used his position as head of state in an effort to address internal ANC divisions and to get ahead of next year’s election battles.

However,

1. President Ramaphosa has always stated three important provisos for ELWC : such mechanisms would:

1.1 not undermine future economic investment, 

1.2 damage agricultural production and food security or 

1.3 harm other economic sectors.

2. Much of the insecurity and fear are based on misinterpretation and a serious lack of reliable data;

3. Land reform has failed rural people, and it has never been an urban programme. It has failed people because it has not redistributed or restituted land on the scale promised nor has it given rural and urban people with little access to productive resources and insecure tenure what they need from land reform. The owners of more than 900 000 of the 3,5 million RDP houses build have still not received their title deeds – which means they have no security and cannot e.g. approach the banks to raise money against their assets.

The causes of land reform failure lie in many quarters, but include: 

3.1 low budgets, 

3.2 incoherent and rapidly changing policy, 

3.3 inadequate staffing levels, 

3.4 the lack of political will and 

3.5 elite capture and corruption of land reform budgets.

4. According to Professor Nick Vink of the University of Stellenbosch’s Agricultural Land Economics Department & member of the South African Reserve Bank’s Advisory Panel. 

4.1 redistribution and tenure reform have so far proved ineffective. The emphasis, therefore, will be on restitution, i.e., the handing back or paying of compensation to disadvantaged people for land on which they formerly lived or worked. Furthermore, the focus will be on such land which is closest to the main work nodes and industrial precincts, the aim here being, among other things, to reduce the excessive time and money spent on commuting by the workforce.

4.2 government is not, as is so widely thought, intent on targeting existing property owners. Rather, they are looking primarily for owners of land in the areas described above which is underutilised, or abandoned or has derelict buildings on it. For example, 50% of Johannesburg’s CBD buildings are today said to be in this category. Government has no intention of taking over viable, productive business land or individually owned residential properties if they are in good condition;

5. Government will be trying hard to establish legal tenure/ownership for the many properties owned by black residents, sometimes for several generations, for which they have no recognised documents - and therefore cannot use them as security for business or other loans - 60% of all property in South Africa is said to be in this category. He also assured people living under chiefs, particularly those on Ingonyama Trust land, that the ANC had no intention of taking land away from black people but would investigate ways of securing the tenure of the customary owners.

6. According to Donna Hornby (rural land researcher) and Lauren Royston (urban land researcher) expropriation without compensation can be a tool for redistribution in both urban and rural contexts.

6.1 In urban areas, it makes sense that little or no compensation is paid where owners have abandoned properties and buildings and the state, in attempting to address social problems arising, battles to trace the owners.

6.2 In rural areas, the portions of farms currently occupied and used by labour tenants and long-term farm dwellers can expropriated with little or no compensation without affecting farm production and national food security, but with a significant impact on securing tenure for a very vulnerable category of South Africans, many of whom are children and young adults. There are farm owners already willing to make these donations, but government has so far failed to act on these gestures of reconciliation.
Land reform has failed rural people, and it has never been an urban programme. It has failed people because it has not redistributed or restituted land on the scale promised nor has it given rural and urban people with little access to productive resources and insecure tenure what they need from land reform.

The progressive prospects of expropriation need to be secured to ensure that the current debate is not simply about politics, and electoral politics in particular. Whatever mechanisms are adopted – including constitutional amendments and amendments to current or old laws – clarification of the details of implementation will need to be developed through court processes as well as state programmes that don’t yet exist. 

This will necessarily take time.

Other stats to take into consideration:

Government published records show that the major sources of credit for farmers are banks (56%)‚ agricultural co-operatives and agri-businesses (9%) and the Land Bank (30%). According to Bloomberg‚ farmers have their highest-ever debt with South African banks with a total of more than R125 billion.

Landbouweekblad / AgriSA – “How land ownership has changed”: 

A comprehensive land audit undertaken by economist Johann Bornman in partnership with magazine Landbouweekblad and Agri SA, made it possible to obtain data about 100,000's of land transactions from the deeds office, as well as geographical data. To determine how much agricultural land there is in the country, a complete set of satellite images of the country’s total surface area of 122.5 million hectares were obtained from 1994 and from 2016.

What does the Constitution currently say about expropriation and compensation?  
 
Section 25(2) of the Constitution provides as follows (our emphasis): - 
 
“25. Property-

1. No one may be deprived of property except in terms of law of general application, and no law may  permit arbitrary deprivation of property. 


2. Property may be expropriated only in terms of law of general application- 
 
a. for a public purpose or in the public interest; and

b. subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.” 
 
Section 25(2)(b) in our view specifically and clearly provides that land cannot be expropriated without compensation.  
 
Can the right to expropriation with compensation be validly limited in terms of the Constitution? Does the Constitution allow for expropriation without compensation? 
 
Section 25(8) reads as follows:  
 
25(8)  “ No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of section 36 (1).” 
 
Section 25(8) creates a mandate for the government to ensure land reform. This mandate is not limited by the rights contained in section 25 of the Constitution which includes the right contained in section 25(2)(b) as discussed above. In other words, if the land rights contained in section 25 are to be limited they may only be limited in terms of section 36 of the Constitution. Section 36 of the Constitution creates the test for when a right contained in the Bill of Rights, in this instance the property right contained in section 25, may be limited.  
 
The question then that must be asked is (i) does expropriation of land without compensation result in a valid limitation of the relevant right contained in the Constitution and as such is allowable in terms of our current Constitutional framework and limitations provisions; or (ii) does expropriation without compensation amount to an outright deprivation and extinguishing of the right to property which is beyond the limitation allowed for and as such is not permitted in terms of section 36 of the Constitution?  
 
if section 25 of the Constitution prohibits expropriation without compensation and the limitation or extinguishing of these rights are found to exceed the powers afforded to the government in terms of the Constitution, then any attempt to adopt such land reform method would be rejected by the Constitutional Court as unconstitutional. Then should the government still wish to proceed with expropriation without compensation the only way forward would be an amendment to the Constitution. 

How likely is it that the Constitution will be amended if the amendment is tabled?  
 
The Constitution would be amended by the national government at a vote at the National Assembly. The National Assembly has 400 seats made up of the various political parties. If the Constitution was required to be amended the parties in favour would require a 2/3 majority (66.6%).   
 
With elections coming up next year the seat allocation may change which may affect the percentage of those in support of the motion. In addition, certain individual members of the parties who are in favour of this motion may, notwithstanding their parties’ agenda, nevertheless vote against party lines and vote against such motion. 

What is the foreign perspective? 
 
Standard and Poor’s (S&P) one of the largest international rating agencies, kept South Africa’s rating unchanged despite the motion put forward in February 2018. S&P commented “It is still too early to tell how the process will unfold, but we expect the rule of law, property rights and enforcements of contracts will remain in place and will not significantly hamper investments in South Africa.” 
 
Where to from here? 
 
It is still early days in the discussion around expropriation without compensation. All eagerly await the feedback to be expected from the Constitutional Review Committee at the end of August to give more clarity on what will be considered and the way forward.  
 
The Committee initially called for written submissions to be submitted before the closing date of 31 May 2018. The Committee received over 140 000 submissions from 13 April 2018 to 8 May 2018. The deadline was then extended to 15 June 2018 and there are currently over 700 000 submissions.  
 
The Committee will travel in two teams to hold at least three meetings in each province starting from 27 June 2018 until 4 August 2018.There will also be an opportunity for members of the public to make oral submissions in Parliament from 7 – 17 August 2018 based on their written submissions. 
 
Once the Committee has heard from the public, policy makers, civil society organisations and academics, the Committee will then report back to the National 

The above should be seen as a brief comment and our interpretation thereof and should not be seen as an extensive guideline.  Please obtain a full legal opinion if you wish to act on any aspect hereof as the guideline is not fully comprehensive. 

Author: DVH / STBB / Daily Maverick / Media 24 & Landbouweekblad

Submitted 07 Aug 18 / Views 100

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