Business News 1.3.2018 07:15 am

Seven questions about expropriating land without compensation

Seven questions about expropriating land without compensation

As uncertainty mounts over property rights, it could be a long road before SA expropriates land without compensation.

The stage is set for the government to push its radical proposal of expropriating land without compensation.

On Tuesday, MPs voted in favour of a motion to begin a process to amend Section 25 of the Constitution to allow land expropriation without compensation.

The matter will be referred to the Constitutional Review Committee, which is expected to recommend whether Section 25 should be amended.  The committee is expected to report back before August 31, 2018, on whether changes will be made.

1. Why is the government eager to expropriate land?

SA’s land-reform programme is widely regarded to have failed since 1994 given the lack of support from the government for farmers once they become landowners and massive backlogs in processing land claims.

The land reform failures have resulted in most farms and estates still being owned by white people. A land audit undertaken by the Department of Rural Development and Land Reform in 2017 shows whites own 72% of SA’s farm and agricultural land.

The government is under pressure to fast-track land reform. It views expropriation without compensation as a mechanism to redress imbalances of the past, reduce inequality, promote land ownership and agricultural sector participation by black people.

2. What are the proposed changes to the Constitution?

At its 54th national elective conference in December 2017, the ANC resolved to expropriate land without compensation. To do this, it implored the government to begin a process to amend Section 25 of the Constitution. This clause currently prohibits expropriation of land without compensation.

In the event of expropriation, the landowner and state or a court must agree to a “just and equitable” compensation. Compensation is important as the Constitution recognises that owners have mortgages on properties, use their land for productive purposes, or that a property is their primary residence.

Under Section 25, the state can expropriate land in order to fast-track land redistribution, for public purposes or in the public interest. For example, the state might expropriate a person’s property to build a hospital, public transport network or a dam – but compensation must be paid.

3. What kind of property does expropriation apply to?

There is no certainty on which land has been earmarked for purposes of expropriation. Residential, agricultural, communal or urban land might be up for expropriation.

In his State of the Nation Address, President Cyril Ramaphosa said expropriation of land without compensation must be done in a manner that doesn’t harm the economy and improves food security. The exact meaning and mechanics of how this will be done is yet to be clarified.

Judging from recent debates on the merits of the Constitutional amendments, MPs have indicated that the state is mainly targeting expropriation of agricultural land.

4. What happens to agricultural debt?

Latest figures from the Department of Agriculture, Forestry, and Fisheries show that agricultural sector debt was over R144 billion in 2016. The burden to the state might be enormous as it would have to buy debt that is bonded to agricultural land if it plans to expropriate land without compensation.

5. What happens next after the motion was passed?

The matter is now with the Constitutional Review Committee, which will review whether expropriation without compensation is prudent. The committee will work around the wording of amending Section 25 and how much of the current pieces of legislation would have to be repealed due to the amendments.

The committee has to report back to Parliament by August 31, 2018.

A white/green paper, which will outline the policy proposal to expropriate land, will be developed and engagements with lawmakers, attorneys, and the public will begin across SA’s nine provinces.

6. What about the parliamentary vote to finally pass the amendment?

The proposal would have to be approved by at least six of the nine National Council of Provinces. In addition, two thirds (about 67%) of the National Assembly would have to agree to change Section 25. Given that its majority has been on a steady decline, the ANC only holds 62% of the seats in the National Assembly. It has to look at joining forces with other opposition parties like the EFF (holding 6.4% of seats) to change the Constitution.

It has been argued that if changes to Section 25 – which forms part of the Bill of Rights –  impinge on the founding values of the Constitution, then a 75% majority might be required. This might require taking the matter to the courts for a declaratory order.

7. How long will it take to confirm Constitutional changes?

Bulelwa Mabasa, a director at Werksmans Attorneys, reckons it might take years as SA’s entire legal jurisprudence on property ownership is affected fundamentally.  She said expropriation of land without compensation impacts other pieces of legislation that have to be reviewed. These include the National Credit Act and Expropriation Act, which contemplates just and equitable compensation. “It is a complete philosophical shift on how SA has looked at property rights and ownership,” she commented.

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