What does SA’s Expropriation Bill Mean for Property Rights?
10 Mar 2021
The finalisation of the commentary process for South Africa’s Expropriation Bill is set to conclude on 19 March. The proposed amendment of section 25 of the Constitution of the Republic of South Africa, 1996, to, explicitly, allow for the expropriation of property without compensation has attracted the ire of many organisations and individuals – with more than 200 000 written submissions received.
But why exactly is the bill needed? According to the draft bill, expropriation of land without any compensation can only take place in extreme circumstances, as the new bill looks to align with South Africa’s constitution, by defining how and when this controversial process can take place.
The new legislation is needed to correct the conflict of the apartheid-era Expropriation Act of 1975 with the Constitution of South Africa, which requires expropriation to be just and equitable. It also makes allowances for unregistered rights to be recognised, another point of contention surrounding the bill.
Public discourse on expropriation of land, however, narrowly addresses the question of how to acquire more land and accelerate the pace of land reform, says Professor Ruth Hall, of the Institute for Poverty, Land and Agrarian Studies (PLAAS).
“No mention has been made of the rights and interests of those claiming land — for instance, the tens of thousands of claimants who have lodged their claims before the end of 1998, and who are now into their third decade of waiting for the rightful return of their land,” says Hall.
Economist, Mike Schüssler however says “if implemented, the Expropriation Bill will deter investment and economic activity, leaving millions destitute.” The Free Market Foundation (FMF) also considers the Expropriation Bill, if passed in its current form, as a “strike at the heart of private property rights and a violation of the principles underlying the Constitution and the Rule of Law”.
According to NEASA Chief Executive, Gerhard Papenfus, the Expropriation Bill will have several distinct ways in which it will undermine South African society and economy. NEASA is calling for the Bill to be stopped.
‘Ill-defined public interest principle’
“Firstly, the Bill allows for any asset to be expropriated without compensation. This undermines the property rights of every business owner in the country. Consequently, the Bill is aimed at the redistribution of assets and not restitution. The Bill allows the State to target any property based on an ill-defined “public interest” principle.” This leaves every citizen’s assets open to attack by the State, suggests Papenfus.
“The Bill attacks the security associated with property rights. Such uncertainty will deter international investment and will lead to further capital flight, locally. South Africa is in a highly vulnerable position, economically and socially. This Bill will create unmet expectations. The disarray that will ensue will increase social tension and uncertainty, threatening what is left of our post-COVID-19 economy. Nobody will go unaffected by the impact of expropriation without compensation. The government is aware of this, yet they persist.
The FMF has also made detailed arguments that several of the Bill’s definitions, including “expropriating authority”, “public interest”, and “public purpose”, are too vague, would entail absurd consequences and would fail the requirements of the Rule of Law. The FMF says it has thus made recommendations to “ensure constitutional compliance and protection for property rights”, as well as called for a socio-economic impact assessment (SEIA) be undertaken as required by Cabinet mandate.
‘Definition of abandonment is potentially dangerous’
FMF Committee member Martin van Staden adds, “The Bill’s definition of abandonment is potentially dangerous. It provides that when one fails to exercise control over a property, that property is regarded as abandoned. This means if criminals kick you out of your house, the government might see that as ‘abandonment’ and seize your house without paying you anything. The other common law requirement for abandonment – no manifest subjective intention to own – must also be recognised to guard against this kind of abuse.”
Van Staden says, “The Bill makes it too easy for the government to engage in expropriation in general, whether with or without compensation. There must be additional safeguards for the rights and interests of citizens and others who own property in South Africa.”
Papnefus further argues that the Bill will “cause financial institutions to fail”.
He states “bonded assets, targeted for expropriation will threaten the stability of financial institutions – how will anyone be able to recover the losses incurred on loans if they are defaulted due to expropriation at reduced or nil compensation? Such a scenario will impact business lending risk and increase operational borrowing cost.”
In addition, Papenfus emphasised that the Bill will lead to higher inflation. “For price stability, a stable and predictable environment is required to sustain the economic value chain. Expropriation threatens this and creates an additional risk that will be priced into the ordinary marketplace.”
According to Schüssler, another concern is that the implementation of the Bill will exacerbate job losses and lead to stagnation of the economy. “The Bill represents an increase in uncertainty and consequently the cost of capital will rise, the practical implication being that starting and/or expanding a business will become financially impossible. That will deter anyone from starting a business.”
Schüssler states “for investment you need security of rights and ownership. Without security, you will lose investment. Once you lose investment, you lose employment.”
What’s the next step before the bill becomes law?
According to Legal Expert Simon Dippenaar, as a draft version of a law, most Bills are drawn up by a government department under direction of the relevant minister or deputy minister.
“The Bill must be approved by the Cabinet before being submitted to Parliament. A bill is then introduced to the National Assembly and/or the National Council of Provinces. After this comes the commentary stage. Once public comments are closed they are debated in the Committee and amended if necessary. The bill then gets submitted to Parliament for further debate before a vote is taken. Once the vote is taken the Bill goes to the president for assent. Assenting is when the president signs the Bill into law and it becomes the law of the land, an Act.
“The President can take weeks or months to sign the bill. He has the opportunity to assess the constitutionality of a bill and can refer it back to Parliament for reconsideration if he has any reservations. When exercising this right, the President seeks counsel and considers submissions and petitions made to him. In some cases, this includes listening to concerns raised by foreign governments or international bodies.”