An overview of the Draft Expropriation Bill published on 21 December 2018 and how it affects the implementation of land.
This briefing has been published by Johan Coetzee of Fasken Martineau, South Africa, who have agreed to Simmons & Simmons making it available to elexica subscribers.
Equitable access to land ownership and the protection of property rights against arbitrary state expropriation will always be a delicate balance. Any debate on these issues, the more so in South Africa, where there is an overwhelming need to expedite the land reform process, will always be controversial and complex.
Review of the property clause
The debate on the review of the property clause contained in Section 25 of the Constitution commenced early 2018 when the National Assembly adopted a resolution in this regard. The main intention of the proposed review was to change the property clause to make it explicit that expropriation without compensation can be used to address skewed land ownership patterns.
The review process was undertaken by a Constitutional Review Committee (CRC) and culminated in the adoption by both Houses of Parliament of the report by the CRC early December 2018. The CRC called for a constitutional amendment to allow explicitly for the expropriation of land without compensation.
During the final sitting of the National Assembly on 06 December 2018, a draft resolution was adopted for the establishment of an ad hoc committee, which will initiate and introduce legislation to amend the property clause.
At this stage, it is still unclear what a redrawn property clause will look like, but it will most probably be known towards the end of March 2019, when this ad hoc committee will have to report back to the National Assembly.
The debate and review process on the property clause has so far been mostly without any concrete proposals on how expropriation without compensation will actually be implemented in practice.
From a legal perspective, it was, therefore, difficult to discern between the wide spectrum of comments and political noise made by all stakeholders, and on more clarity on what the road ahead would look like.
This has, however, changed due to the publication on 21 December 2018 of the Draft Expropriation Bill, 2019 (Draft Bill) for public comment.
The Draft Bill is available online here.
Written comments on the Draft Bill must reach the Department of Public Works by not later than 60 days after publication.
High-level overview of the Draft Bill
The Draft Bill can be seen as the key legislative tool to establish the process whereby the state is empowered to expropriate land for a public purpose or in the public interest.
The preamble to the Draft Bill commences with a recordal of:
- the property clause as found in Section 25
- the right to administrative action that is lawful, reasonable and procedurally fair (as envisaged in Section 33(1) of the Constitution), and
- that everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court, or where appropriate, another independent and impartial tribunal or forum (as envisaged in Section 34 of the Constitution).
It is clear from the outset that the intention of the Draft Bill is to align the provisions of the current Expropriation Act, No 63 of 1975 (Current Act), which will be repealed by the Draft Bill, with the provisions of the Constitution. As the provisions of the Current Act is outdated and could be seen as against the spirit of the Constitution, there should be no issue with this intention.
The Draft Bill consists of nine Chapters, the most important of which is most probably Chapter 2, which deals with the powers of the Minister to expropriate, and Chapter 5 which deals with compensation for expropriation.
A high-level discussion of some significant aspects contained in these chapters will follow below.
Powers of Minister to expropriate
In terms of Chapter 2, the Minister of Public Works may, subject to the provisions of Chapter 5 (Compensation), expropriate property (as contemplated in Section 25) for a public purpose or in the public interest. It is notable that the expropriation power includes property in the widest sense and that it is not limited to land.
Section 3(3) of the Draft Bill provides that the Minister’s power to expropriate applies to property "which is connected to the provision and management of the accommodation, land and infrastructure needs of an organ of state, in terms of his or her mandate". This wording is not contained in Section 2 of the Current Act (which limits expropriation only for a public purpose) and the proposed Section 3(3) notably expands the Minister’s power to expropriate property.
The Minister may also expropriate property on behalf of any organ of state and is also, subject to certain limitations, entitled to delegate or assign any power or duty conferred in terms of the Draft Bill to an official of the Department.
Compensation for expropriation
The most significant section of Chapter 5 of the Draft Bill is Section 12(3) which provides 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:
- land that is occupied or used by a labour tenant (as defined in the Land Reform (Labour Tenants) Act, No 3 of 1996
- where the land is held purely for speculative purposes
- where the land is owned by a state owned corporation or state owned entity
- where the owner of the land has abandoned the land, and
- where the market value of the land is lesser than any direct state investment or subsidy in the acquisition and beneficial capital improvement of the land.
Even though it is clear that expropriation with payment of nil compensation will not be limited to these five types of land only, it is now at least clear what types of land could well be at risk. It is important to note that these exclusions only apply to land and not to other forms of property (for example intellectual property or shares).
Section 12(1) of the Draft Bill provides how compensation for expropriation must be determined and is a verbatim repeat of Section 25(3) of the Constitution.
Section 25(3) provides that compensation must be just and equitable and reflect an equitable balance between the public interest and the expropriated owner, having regard to all relevant circumstances, including:
- the current use of the property
- the history of acquisition and use of the property
- the market value of the property
- the extent of any direct state investment or subsidy in the acquisition and beneficial capital improvement of the property, and
- the purpose of the expropriation.
There should be no issue with these principles contained in the property clause, but it is important to note that this is a complete departure from the provisions of Section 12 in the Current Act.
In terms of Section 12(1) of the Current Act the existing determination of compensation is based amongst other on the aggregate of:
- the amount which the property would have realized if sold in the open market by a willing seller to a willing buyer, and
- an amount equal to make good any actual financial loss caused by the expropriation.
Section 12 of the Current Act also contains a proviso that if there is no open market, compensation can be determined on the basis of the amount it would actually cost to replace the improvements on the property, or in any other suitable manner.
It is significant that the proposed Section 12 of the Draft Bill includes “market value” as one of the factors to be taken into account. This is not a defined term and will definitely lead to uncertainty of interpretation.
Apart from generally being streamlined, the expropriation process as contained in Chapter 4 of the Draft Bill is not substantially dissimilar to the process contained in the Current Act. It is, however, important to take note of the following:
- a notice of expropriation must in terms of Section 7(1)(a) be served on the owner and “any known holder of a right in the property”. Examples hereof would be holders of servitudes or leaseholds and it is required that an owner must also identify any unregistered rights holders like tenants, and
- the time periods in the process have been reduced - for example, the 60 days that an owner has to respond to an expropriation notice in terms of the Current Act has been reduced to 30 days.
It is commendable that time periods are reduced to speed up the process, but the question should be posed if it will be practical to implement this. Another example that may be difficult to implement is that the expropriating authority must within 20 days after receipt of a response from an owner either accept the amount of compensation or offer another amount as compensation.
If parties are unable to agree on the amount of compensation, Section 21 (Chapter 6) makes provision for a mediation process and referral to a court to decide or approve just and equitable compensation.
As this is an important affirmation of the rule of law in the expropriation process, this is commendable. However, the nature of the proposed mediation process is not defined and time periods are not included, all of which may lead to uncertainty.
The Draft Bill is based on the wording of the property clause contained in Section 25 of the Constitution. Any recommended changes to the property clause by the CRC may have a direct effect on the wording contained in the Draft Bill.
Comments on the Draft Bill may therefore at this stage be premature and comments may have to be reconsidered in time, all of which leads to continued uncertainty on land reform.
With this in mind, one has to ask why the Draft Bill was published for comments prior to the finalization of the review process and why comments must be made before the CRC reports back to Parliament? Nevertheless, all stakeholders will hopefully be able to comment timeously and that all other possible concerns will be taken into account.
It is, however, to be welcomed that there is at least some clarity on the way forward and how expropriation will most probably be implemented in the future.
Certainty on the future implementation of expropriation of land without compensation will only be achieved once the property clause has actually been amended.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.