Many questions about land expropriation policy - Weekend Argus

23 February 2019 - South Africans should be under no illusion about the damage that EWC and the moves to implement it will inflict, or the threat it poses to them – or how far we have come to seeing it become a reality. ‘Alles sal regkom’ is not a realistic option.

Terence Corrigan

‘Alles sal regkom’ is a beautiful piece of pure South Africana. It embodies a particular species of positivity, the indomitable belief that in both our personal and societal affairs – often against the odds – things will work out for the better.

It’s fair to say that circumstances in South Africa today are trying our capacity for optimism. The buoyant mood that attended the accession of President Cyril Ramaphosa to the Presidency (and no less importantly, the ejection of Jacob Zuma from the office) has dissipated. In particular, economic performance has been indifferent; rhetoric aside, South Africa is not prepping for imminent take-off.

Part of this stems from the self-defeating ‘debate’ around Expropriation without Compensation (EWC). Although compensation has never be shown to be a serious stumbling block to land reform, EWC has become an ideological totem with very real effects, most notably – as Azar Jammine recently indicated – short-circuiting the possibility of turning Ramaphosa’s ascendency into an economic opportunity.

There is no end in sight for this. The ANC and the government it leads is committed to this policy. Some commentators have, however, tried to put a benign spin on it. Whatever difficulties South Africa is undergoing, there are steady and prudent hands on the tiller, so the thinking goes, and the policy choices will reflect careful balancing. ‘Alles sal regkom.’

Some comfort is drawn from the argument that the pending change to the constitution will be minor and clarificatory. Of course, it is unnecessary and it might set a bad precedent, but on its own, nothing substantive to worry about.

 The recent Expropriation Bill has likewise been seized upon for reassurance. The focus here is on Chapter 5, which deals with compensation requirements, and provides some sense of when ‘nil’ compensation may be payable. This is addressed specifically with regard to land, and the bill lists five considerations in this regard: land occupied by labour tenants; land held for ‘purely’ speculative purposes; land which is owned by a state-owned entity (which consents to the expropriation, a right not given to the rest of us); land which has been abandoned; and land with market value below the value of previous state investments or subsidies.

 On the face of it, then, its only properties on the margins of the broader economy that may be so targeted. But the Bill does not list a closed set of circumstances; it merely lists examples. It is incorrect to assert – as Stephen Grootes has done recently that the Bill ‘laid out the five type of land that may be subject to EWC.’  These are conditions to be taken into account, but applicable conditions for EWC are ‘not limited to’ them. In other words, an indeterminate degree of latitude has been created for the state to intrude into private property. EWC may loom far closer and cast its shadow very much wider than is appreciated.

More important, is the definition of expropriation. According to the Bill, this ‘means the compulsory acquisition of property by an expropriating authority or an organ of state upon request to an expropriating authority.’ As my colleague Anthea Jeffery has argued, this limits the idea of expropriation to direct takings, in other words, to instances where the state becomes the owner of the property.

The definition excludes indirect expropriation, where the state deprives owners of many of the usual powers and benefits of ownership but does not itself become the owner of the property. The most obvious example here is a custodial taking. This arose when the Minerals and Petroleum Resources Development Act vested all the country’s mineral resources – two thirds of which were previously privately owned – in the custodianship of the state.

 A 2013 Constitutional Court ruling held that the state’s mere ‘assumption of custodianship’ was different from the acquisition of ownership. This meant that no expropriation had occurred and that no compensation was payable. While the ruling itself was confined to the facts of the case (which involved an unused mining right), there have long been concerns that the judgment could be turned into a general principle of law.

The Bill’s definition appears to do just that. Among other things, it would make it possible for the state to assume the custodianship of all land in the country (as the Land Audit recommended), or all agricultural land (as was proposed in the Preservation and Development of Agricultural Land Framework Bill of 2014). This would not count as an expropriation under the Bill, and so no compensation would be payable.

While it is true that some senior members of the ANC have indicated that it is not their intention to take all land in this manner (and they are probably sincere in this), the issue remains unresolved. Certainly, the Expropriation Bill in its current form would make such a move possible.

The bill would also facilitate regulatory takings. These would arise from interventions that result in losses to the owner, but again do not result in the state’s taking ownership. Regulatory takings arise, for example, when firms are required to cede chunks of equity in empowerment or enter into 51% indigenisation deals (as is envisaged in a bill applying to the private security industry). Or, as we have pointed out, in the form of prescribed assets to bail out some of our foundering state-owned enterprises.

The ‘clarificatory’ changes to the constitution are likely to make it far more difficult to mount a constitutional challenge to either custodial or regulatory takings. So perhaps they are not so minor after all?

Meanwhile, the Expropriation Bill needs to be seen alongside regulations recently gazetted under the Property Valuation Act, which establish a formula for determining compensation for property acquired for land reform. Prof Elmien Du Plessis has noted correctly that ‘there are various concerns with the formula used. The exact interaction between this act and the bill will need clarification.’

What the regulations make pretty clear is that the state is accorded a substantial discount when acquiring properties for land reform. Going by the wording of the regulations, unless the property in question produces a substantial daily income, compensation is unlikely to yield anything close to market value. More likely, it would provide half or less. Should this be what is offered where homes are affected, the consequences for households’ financial security would be serious indeed.

Overlaying all of this is a long-standing and multi-layered conundrum that is familiar to any observer of South African governance: how will this ultimately pass into action? The combination of a politicised and poorly capacitated state, highly ideological policy impulses (not least an aversion to private enterprise and a visceral hostility to farmers in some quarters) and expanded state powers could make for a very combustible mix. How this will play itself out remains to be seen, but the direction developments have taken should be cause for concern.

At a minimum, the dogged determination to drive this policy over the past year has shown that a degree of economic damage is viewed – by the ANC, at least – as an acceptable price to pay.

None of this should invite complacency. South Africans should be under no illusion about the damage that EWC and the moves to implement it will inflict, or the threat it poses to them – or how far we have come to seeing it become a reality. ‘Alles sal regkom’ is not a realistic option.

Terence Corrigan is a project manager at the Institute of Race Relations. Readers are invited to join the IRR sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).