A Word About the Ongoing Worries About the Expropriation Act in South Africa

We shouldn't be worried about it, but stay vigilant.

I am on the mini roadshow, seeing some of the Agricultural Business Chamber of South Africa (Agbiz) members in central regions of the country. During the long drives, I have listened to many talk radio shows.

As it happens when one crosses from one region to another, the radio stations tend to change in frequency, and I have found myself tuning into various radio stations. The one theme I have heard consistently across most stations is the commentary about the "Expropriation Act" South African President Cyril Ramaphosa recently assented to law.

The commentary is interesting. However, I think some confusion is emerging, where some view this Act as for a new direction for land reform. This is not the case – land reform policy in South Africa hasn't changed and is still under the three pillars of (1) restitution, (2) redistribution, and (3) tenure.

The government is still buying land from the open market for land reform processes, amongst other things. This is unlikely to change as expropriation is no ‘shortcut’; it is a long and cumbersome process, and the law provides a safeguard that it may only be used where attempts to purchase the property on reasonable grounds have failed.

The other important thing to underscore is that South Africa is not unique in having an Expropriation Act; most countries have one. Notably, the Expropriation Act per se is not new; we see an update from the 1975 existing piece of legislation here.

So, what is the Expropriation Act about if that is the case?

Drawing on my work with my colleague at Agbiz, Annelize Crosby, let me state that the first thing to highlight is that the Expropriation Act's provisions are subject to the provisions of section 25 of the Constitution of the Republic of South Africa, which has not been amended. This section requires that compensation be just and equitable, striking an equitable balance between the public interest and the rights of those affected with regard to all relevant circumstances.

Although the new Expropriation Act now explicitly refers to the possibility of (Rands/R) Nil compensation to be awarded, the result must be just and equitable. The term R Nil compensation implies a calculation that considers all relevant factors, including those listed in the Act and the Constitution. The application of relevant factors will have to be justified.

Also important to note that section 12(3) of the Act states that it may be just and equitable to award R Nil compensation, which makes it clear that it is only a possibility where the balance of circumstances justify it; it is by no means a foregone conclusion that compensation will amount to Nil and the courts will have the final say on compensation where an offer is disputed.

A calculation will have to be done considering all relevant factors. Awarding little or no compensation will have to be justifiable in an open and democratic society, and the state will have to show precisely how and why it arrived at an offer of Nil Rand's compensation. There will likely be a lot of litigation over the Nil Rand compensation clauses, and jurisprudence will develop over time regarding what is just and equitable in this regard and what is not.

The new Act contains many checks and balances, including a provision that an agreement must be attempted before the state decides to expropriate and an opportunity to object to the intention to expropriate. The Act guarantees that expropriation can only be used as a last resort after all other attempts to buy the property have failed. It also provides for the possibility of mediation in the case of disputes over compensation.

With that said, I must agree that the definition of expropriation remains a concern, and we will need to watch closely how it is applied and interpreted by the courts. This definition may exclude all instances where the state does not acquire the property but nevertheless limits the owners' rights to such an extent that it becomes of no value.

It opens up the possibility of all sorts of regulatory limitations on the property with no compensation where the state does not acquire the property but rather limits the use and enjoyment of the property by the owner or any other party with a right in the land (i.e. a lessee, mortgagor, occupier etc.).

Another crucial point often missed in this conversation is that the state’s right to expropriate still exists, even without this Act. The state’s power to expropriate land for a public purpose or in the public interest is derived from the Constitution itself. More than 200 other pieces of legislation provide details on the type of property that can be expropriated, the conditions under which it can be expropriated, and the state entity with which this right vests.

The Expropriation Act is merely procedural. It grants no expropriation powers to anyone other than the Minister of Public Works and Infrastructure and only for purposes connected to his/her mandate. In all other instances, the powers to expropriate already exist in other legislation, such as the Restitution Act, Labour Tenants Act, and the proposed Redistribution Bill.

While we should not blow the potential impact of this Act out of proportion, people's concerns are understandable, as South Africa recently had a robust conversation about Section 25 of the Constitution of the Republic of South Africa. But this is not that discussion, and the Expropriation Act is not unique to South Africa.

In the coming months and years, we will have to watch closely the developments and how the Act may be applied, as all that will offer valuable lessons.

The South African agricultural sector is on solid ground for now, and we shouldn't be as worried but vigilant.

Wandile Sihlobo is the chief economist of the Agricultural Business Chamber of South Africa (Agbiz) and senior fellow at Stellenbosch University’s Department of Agricultural Economics.