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Tuesday Nov 03, 2020

Should property owners be concerned about expropriation?

Earlier this month, the Expropriation Bill was approved by Cabinet and sent to Parliament for adoption. This prompted a revived deluge of negative press, fears of government-approved land grabs and visions of a fast forward to Zimbabwe-style land losses. None of these perceptions are warranted or correct. Let me explain.

Governments worldwide have laws in place to facilitate expropriation for specific "public purposes", such as the building of roads, hospitals and infrastructure. The Gautrain project is a good local example.

Our current 1975 Expropriation Act and our Constitution make provision for this form of expropriation. In addition to expropriation for "public purposes", our Constitution also allows expropriation "in the public interest" - defined in the Constitution to include "land reform" and "reforms to bring about equitable access to all South Africa's natural resources". Arbitrary expropriation (with or without compensation) is thus not allowed: Government/an expropriating authority will have to show, on facts presented, that an envisaged expropriation is "in the public interest" or for a "public purpose.
The Constitution states that expropriation for land reform purposes shall be for compensation and, in determining the amount thereof, there must be a process of negotiation between the land owner and the expropriating authority. Where no agreement is reached, compensation must be determined by a court. When arriving at the amount, the court must take various factors into account, including the current use of the property; the history of the acquisition and use of the property and the market value of the property. (Rnil compensation is in fact possible under the current version of section 25 of the Constitution, as a court may, taking into account the various factors, conclude that Rnil compensation is "just and equitable" in the specific circumstances of the case. Nonetheless, the process to make this more explicit and to amend the wording of section 25 for this purpose, is still underway.)

The Expropriation Bill gives flesh to the provisions of the Constitution as far as expropriation is concerned. Its provisions are closely aligned with that of the Constitution. The Bill confirms that property may only be expropriated if it can be shown that a public interest will be achieved or a public purpose served.

The opinion that a piece of land is suitable for expropriation for a public purpose objective, constitutes "administrative action" and as such is further reviewable by a Court, if not exercised properly. Thus the power to determine whether land may be expropriated, remains with our courts, ultimately.

It is envisaged that the expropriating authority will in good faith attempt to reach agreement on a reasonable amount of compensation. The Bill echoes the Constitution and provides that property owners must receive a "just and equitable" compensation for land that has been expropriated, which amount must reflect "an equitable balance between the public interest and the interests of the expropriated owner". Depending on the circumstances, the amount of compensation can range from reflecting the market value of the property to Rnil.

The Expropriation Bill provides clarity on the types of instances where the compensation could be (not must be) Rnil. The Bill states that it "may be just and equitable for nil compensation to be paid where land is expropriated in the public interest" in these circumstances (but not limited to them):

(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 it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration.
(c) Notwithstanding registration of ownership in terms of the Deeds Registries Act, 1937 (Act 47 of 1937), 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, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land.
(e) When the nature or condition of the property poses a health, safety or physical risk to persons or other property.

In conclusion

The Bill makes provision that expropriation will only be used in very limited circumstances, and the courts will have to be satisfied that a public purpose or public interest is properly identified. Once this hurdle is overcome, the parties can reach agreement on the amount of compensation. Should they be unable to reach a just and equitable compensation, the court must be approached for assistance. Such compensation can be Rnil, if "just and equitable" in the Court's opinion. The importance of the judiciary's and Courts' roles in this process, is a valuable safeguard against any perceived opportunity for abuse of expropriation.

Kind regards
Annetjie Coetsee
STBB Attorneys
The Big Small Firm


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