Bad news for some Jhb suburbs from the Expropriation Bill –, 29 April 2015

The Expropriation Bill of 2015 does not bode well for some Johannesburg suburbs such as Orange Grove.

By Anthea Jeffery

The Expropriation Bill of 2015 (the Bill) will allow ‘a decisive shift away from apartheid spatial planning to more inclusive settlements close to places of work’, said ANC spokesman Zizi Kodwa earlier this week.

This is a goal very many South Africans would endorse. But how many know how the Bill would work in practice, or what its wider ramifications are likely to be?

A practical example may help to show the likely consequences. In Orange Grove in Johannesburg, for instance, many black and white South Africans have homes or business premises adjoining the Rea Vaya bus route at the heart of the Government’s proposed ‘Corridors of Freedom’.

Under the Bill, the City of Johannesburg (the City) would have to start by negotiating with these owners to buy their properties for, say, 70% of their market value. If they refuse, the City – after inviting and then rejecting their written objections (which it could do without giving reasons) – would be able to serve notices of expropriation on them all.

If these notices were served on 1 July, ownership could automatically pass to the City the very next day, on 2nd July. (The only time constraint in the Bill is that ownership cannot pass on 30th June, the day before the service of the notice.) The right to possess the properties could pass to the City on 3rd July. The City could again offer 70% of market value as compensation and then give the expropriated owners 60 days in which to sue for more – failing which they would be ‘deemed’ to have accepted its offer.

If some owners managed to sue in the short period allowed, the Johannesburg Magistrate’s Court might in time award them the same amount as the City had offered. Under the Bill, they would then have to pay the City’s legal costs, which would become ‘a first charge’ against the compensation owing to them. Hence, they would get only what was left after the City’s (high) legal costs had been paid.

How many of the Orange Grove owners could afford to sue in these circumstances? Under the Bill, moreover, the Magistrate’s Court would be confined to reviewing the compensation payable. It would be barred from adjudicating on the constitutionality of the expropriation, and would not be able to set it aside.

If the owners decided to accept the City’s offer – or were deemed to have done so – the next question is when they would be paid. Under the Bill, the City should pay 80% of the compensation due when it takes possession, but it could also delay payment merely by proposing later dates for this in its notices of expropriation.

Even this might not be the end of the story. Say the City, having set 1st December as the date for payment, failed to meet its obligation to pay then? Many municipalities are notoriously dilatory in making payments that are due, even to the small businesses the ANC is trying to promote. How long would the expropriated owners have to wait to be paid? Where would they live in the interim? How many business owners would be financially ruined in the process?

In addition, expropriation under the Bill will not stop at the Corridors of Freedom – especially now that an extra 380 000 land claims are likely to be lodged in the re-opened window period. These claims will not be confined to the commercial farmland that helps to feed the cities. Instead, claims are likely to cover land of every kind: from mining land to retail, commercial, and industrial properties. Residential homes, the great majority of which (8.6 million out of 9.7 million) belong to black South Africans, will be vulnerable too.

What message will the Bill send out to existing businesses, many of which are already looking to disinvest?  What chance will it give the country to attract the new direct investment essential to faster growth and many more jobs? How much more will South Africans suffer if food prices rise, jobs shrink, and per capita growth dips below the paltry rate of 0.1% of gross domestic product (GDP) recorded in 2014?

Many commentators seem to think that the Bill is aimed solely at rich farmers or rich mine owners, but its ambit is in fact much wider. Often, it will be people doing all they can to escape poverty and join the middle class who will be hardest hit.

The best hope for the country lies in the fact that the Bill is patently unconstitutional and that a much better alternative can easily be drafted. This alternative bill would recognise that expropriation is sometimes unavoidable, but it would also require the City (in this example) to:

  • obtain a High Court order confirming the constitutional validity of the proposed expropriations before it issues any notice of expropriation;
  • compensate owners for all financial losses resulting from expropriation; and
  • pay the full amount before it takes ownership, failing which its notices of expropriation will automatically fall away.

It is doubtless to avoid dealing with these issues that the parliamentary portfolio committee on public works has allowed only ten working days for written comments on the Bill, which have to be submitted by noon on 6th May 2015. This consultation period is absurdly short – and provides yet another basis for rejecting the constitutionality of the Bill.

Anthea Jeffery is the Head of Policy Research, IRR. The IRR has drafted a better expropriation bill, which can be found on its website together with a two-page overview of its core provisions.