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THE EXPROPRIATION ACT, WHAT NOW?
Issued by Christo van der Rheede on behalf of the FW de Klerk Foundation on 24/01/2025
President Cyril Ramaphosa has signed the Expropriation Bill into law after five years of extensive public participation – whether such participation was meaningful as required by law is another question. Now known as the Expropriation Act, 2024, this law allows organs of state – such as local, provincial and national authorities – to expropriate property for a public purpose or in the public interest. (Nothing noteworthy here as expropriation laws occur globally.) What is noteworthy is that the Act specifically states that it “may be just and equitable for nil compensation to be paid where land is expropriated in the public interest” (see section 12(3)). Colloquially called “expropriation without compensation”, or “EWC”, this is reiterated elsewhere in the Act (see section 12(4) etc.). The Expropriation Act, 2024 repeals the apartheid-era Expropriation Act, 1975.
According to the Presidency, this law is aligned with section 25 of the Constitution which states that no law may permit arbitrary deprivation of property, while recognising that expropriation is a necessary mechanism that allows the state to acquire someone’s property (with property not being limited to land) for a public purpose or in the public interest. However, the Constitution explicitly states that such expropriation is subject to just and equitable compensation being paid by the state to the person whose property is being expropriated. Sections 25(5) and 25(8) of the Constitution requires the state to take reasonable legislative and other measures within its available resources to promote conditions that allow citizens to access land on an equitable basis. No provision of section 25 prevents the state from taking legislative and other measures to affect land, water, and related reform.
The Expropriation Act, 2024 should not be confused with previous attempts to amend section 25 of the Constitution, which guarantees fair and equitable compensation in cases of land expropriation. The Constitution is the highest law in South Africa and takes precedence, which means that any law that contradicts the Constitution is null and void. It was previously attempted to change the Constitution to expressly allow for EWC (see the Constitution Eighteenth Amendment Bill (B18-2021) that was rejected by Parliament on 7 December 2021). Because the Constitution has specifically not been amended to allow for EWC, the Expropriation Act, 2024 is immediately open to a constitutional challenge for being inconsistent with the Constitution.
The Act states in section 12(3) that cases of zero compensation in the Act can be, amongst other things, for abandoned property (both land and buildings). This is, however, not a closed list. It simply states some factors that can be considered, but these are not all the factors that may be considered.
Whilst it is argued that “nil” compensation, one of the big concerns, does not mean that land can be expropriated without compensation as it purports not to be the same as “no” compensation, it in fact boils down to zero compensation.
Section 12 of the new Act allows the courts to determine whether “nil compensation” is just and equitable in a specific circumstance. This also means that the courts can determine when nil compensation is neither fair nor equitable under the Act. Infringement of property rights in the near future is, therefore, unlikely.
The available legal avenues to challenge the Expropriation Act, 2024 consist of a variety of options:
- Option 1: If 1/3 of the MPs in Parliament feel that the Act is unconstitutional, they have a month to bring a direct application to the Constitutional Court asking the Court to find the law unconstitutional (section 80 of the Constitution). This is the most advisable and hoped for option, as it is speedy, direct access funded by the state.
- Option 2: An interested party institutes a court application to challenge the Act’s constitutionality (section 29 of the Constitution). This will have to be funded from private coffers, might have to first start in the High Court and work its way up to the Constitutional Court and is, therefore, much slower than option 1.
- Option 3: Once “nil compensation” of land is attempted, it can be challenged, first through a consultative process required by the Act, and if there is no agreement, through litigation.
In addition, nothing stops Parliament from changing the Expropriation Act, 2024 to remove “nil compensation” from it.
The real test, however, lies in the manner in which the Act will be implemented (at the time of writing the Act had not yet been gazetted and its commencement date is unknown). Either in accordance with the Constitution or in a manner whose outcome is not just and equitable and therefore out of step with the requirements of the Constitution. In cases of large-scale land occupation especially near or even in towns and cities, the courts offer virtually no protection to landowners and court orders are ignored.
The President’s assent to the law could be exploited by people to encourage large-scale land invasion. Urbanisation is a major challenge and it is estimated that 7 out of every 10 people will live in cities by 2030. City planners will have to act proactively to provide housing and thus prevent people from illegally occupying land. Squatter camps in urban areas are already mushrooming out of control.
Another major challenge is farmland. Expropriating land without compensation in the public interest and distributing it left and right in the hope that people will use it productively to produce food for the country is wishful thinking. It is not land that produces food, but expertise. Farming sustainably requires expertise and capital. Cheap and patient capital!
According to the Community Property Associations (CPAs) report of 2023-24 that served in Parliament, the total of registered CPAs nationally stands at 1742 associations. A few of the registered CPAs comply with legislation and produce food, but 82% are dysfunctional.[1] CPAs own approximately 3 549 489 hectares of land in South Africa.
The dysfunction is attributed to members of CPAs losing interest and not farming, internal disputes, conflict, CPA leaders entering into illegal deals, corruption and myriad other challenges. In many cases, it has become a poverty trap characterized by theft and vandalism.
With the exception of a few success stories, the GTAC STUDY published in 2022 reveals[2] that the Agricultural Land Holding Account (ALHA) Trading Entity consistently underspends its budget. This is because of the slow acquisition and redistribution of land, as well as poor productivity on redistributed farms. According to the report, ALHA has failed to achieve most of the set targets in the last 5 years. Inefficiencies in the implementation of policies intended for post-settlement support is a major headache. Lack of funding and financing is an even greater problem. To farm sustainably requires money, cheap money and patient capital!
With the exception of a few success stories, a report on the Recapitalisation and Development Programme (RADP) presented in Parliament in 2022 also reveals a shocking state of affairs in terms of land reform. Most farms that received RADP had medium to commercial potential. The assessment of the performance of the farms revealed that RADP did not have a significant impact on productivity. Of the 529 farms that received RADP, 132 (24%) produced on a medium and commercial scale, broken down as 13% and 11%, respectively. The remainder of 397 (76%) performed on subsistence farming or were not productive.
South Africa faces serious risks if the Expropriation Act, 2024 does not protect property rights, but rather limits and undermines them. South Africa’s farmers produce food on the back of debt. Who is going to invest on land where the ownership is not secured. South Africa’s homeowners invest in property and other assets and owe financial institutions approximately R4 trillion. If this is to be compromised, capital outflows and impoverishment will occur overnight.
This sounds alarmist, but every citizen in the country will face impoverishment and hunger if the Expropriation Act, 2024 is not changed to align with the Constitution and with sound economic principles in mind. Let us not limit property rights but rather expand it. Property ownership equals wealth creation! This is what South Africa urgently requires!
[1] https://static.pmg.org.za/CPA_ANNUAL_REPORT_2023-2024_30Sep2024_Final_Draft_Ramasodi_12h45.pdf
[2] https://www.gtac.gov.za/pepa/wp-content/uploads/2022/04/ALHA-Spending-Review-Report.pdf