By Chantelle Gladwin-Wood, Partner and Anja van Wijk, Associate
Introduction
The threat of the apparent introduction of expropriation without compensation (“EWC”) into South African law is causing a lot of anxiety among many South Africans, particularly property owners. There are many controversial questions doing the rounds, some of which are (purposely) being sensationalized by the media (and especially social media) to increase readership.
This article is one of a series on expropriation, and looks at some of the fundamental legal issues surrounding EWC, with the aim of dispelling some of the myths and alleviating some of the anxiety plaguing land owners. The focus of this article is on the process involved to amend section 25 of the Constitution[1] and whether this is necessary to facilitate EWC.
Is EWC a foregone conclusion?
The ANC has publicly committed to expediting land reform and to amending section 25 of the Constitution to achieve this. Currently public hearings are still taking place with the assistance of the Joint Constitutional Review Committee, with a view to investigating how the people of South Africa feel about the issue. However, following stern warnings from several critical global institutions and organizations within South Africa about the negative impact of EWC on the economy and investor confidence in same, it is possible that we might see the government proceed with caution before ploughing “full steam ahead”.
The irony of the debate about amendment, is that it may be a storm in a teacup (if indeed section 25 already allows for EWC, as several prominent legal authorities claim). To the extent that section 25 already permits EWC, it is no longer a possibility for the future, but rather a reality that we have been living with for over 20 years.
Amendments to Section 25?
Before we look at the substance of section 25 and whether or not amendments are requirement to make EWC a reality, we need to understand the process involved with an amendment to section 25.
In order to pass such an amendment, a 2/3rds majority in votes is needed in the Parliamentary Assembly (267 votes) and further to that, 6 of the 9 delegates of the National Council of Provinces would need to approve such an amendment. Any amendment would firstly require extensive consultation with various experts on various fields (including constitutional law, property law, agriculture, economics, financial services, food security, infrastructure etc.).
In February 2018, the National Assembly adopted the motion to allow for EWC and the Joint Constitutional Review Committee was established in order to obtain the public’s opinion on the suggested amendment. As at the closing date for comments on the issue, the committee has received over 700 000 written submissions from the public.
A proposed amendment would also need to take into consideration whether or not other national acts or provincial legislation which would be impacted by this amendment, would require amendments or repealing as well. One can foresee that various pieces of legislation might need amendment, such as, for example, the Deeds Registries Act[2], the Extension of Security of Tenure Act (“ESTA”)[3], the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (“PIE” Act)[4], the Expropriation Act[5] and the Property Valuation Act[6].
Presumably following the global backlash and a more detailed look into the proposed Expropriation Bill and its shortcomings, on 28 August 2018, the Minister of Public Works, Mr Jeremy Cronin, stated that the proposed Expropriation Bill has been withdrawn and shall be redrafted and resubmitted before the end of 2018 in order to indicate exactly under which circumstances land may be expropriated without compensation. Until such time as the bill is amended and presented, the situation will likely remain unclear.
Going forward though, once all procedural requirements have been met, including properly conducted public hearings, presentations for public comment, tabling of the proposed amendment and assent thereto by the National Assembly and Council of Provinces, the amendments become part of the Constitution and cannot be challenged on a procedural basis.
Does the Substance of Section 25 require amendment?
Unfortunately the media has popularized only a small part of section 25 and how it operates. In order to fully appreciate the discussion about section 25 one must appreciate it in its totality. The full section 25 reads as follows:
25 Property
- No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.
- Property may be expropriated only in terms of law of general application— (a) for a public purpose or in the public interest; and (b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.
- The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including— (a) the current use of the property; (b) the history of the acquisition and use of the property; (c) the market value of the property; (d) the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and (e) the purpose of the expropriation.
- For the purposes of this section— (a) the public interest includes the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources; and (b) property is not limited to land.
- The state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.
- A person or community whose tenure of land is legally insecure as a result of past racially discriminatory laws or practices is entitled, to the extent provided by an Act of Parliament, either to tenure which is legally secure or to comparable redress.
- A person or community dispossessed of property after 19 June 1913 as a result of past racially discriminatory laws or practices is entitled, to the extent provided by an Act of Parliament, either to restitution of that property or to equitable redress.
- No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of section 36(1).
- Parliament must enact the legislation referred to in subsection (6).
Section 25 of the Constitution provides that land may only be expropriated in terms of law of general application for a public purpose or in the public interest (“the public interest requirement”) and subject to compensation[7] (“the compensation requirement”). The State is of the view that the compensation requirement is hindering land reform. The question is whether, in order to achieve this, it is necessary to amend section 25.
The first important point to consider is that section 25 does not prescribe how much compensation is payable for any expropriation – it must only be ‘just and equitable’. Our law recognises that there are situations where it would be just and equitable for the amount of compensation to be less than market value and in some cases even very close to nil (i.e. in a nominal amount). It is also possible that compensation may found to have been provided in a form other than money, at some point in the past, and that this renders the expropriation at zero rand just and equitable. This aspect of the debate will presumably be the subject of a court challenge in the near future as it has been reported that the State has taken two test cases to court in order to test the waters.
The second important aspect to consider when questioning whether an amendment to section 25 is necessary to facilitate EWC is subsection 8. Surprisingly subsection 8 of section 25 has received little attention in this debate. It provides that no part of section 25 may impede the state from taking “legislative and other measures” to achieve land reform, provided that any departure from section 25 is in accordance with section 36(1) of the Constitution.
Section 36(1) prescribes as follows:
- The rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors, including— (a) the nature of the right; (b) the importance of the purpose of the limitation; (c) the nature and extent of the limitation; (d) the relation between the limitation and its purpose; and (e) less restrictive means to achieve the purpose.
- Except as provided in subsection (1) or in any other provision of the Constitution, no law may limit any right entrenched in the Bill of Rights.
When section 25(8) is read with section 36(1) it becomes apparent that section 25 can be departed from (meaning that expropriation could be done without compensation) for the purposes of land reform, provided that it meets the requirements of section 36(1), namely that it is done in terms of a law of general application and the limitation is “reasonable and justifiable in an open and democratic society” as set out further in section 36(1).
It is therefore possible for the state to legislate (in national legislation such as the Expropriation Act or another appropriate act) that expropriation can take place in certain circumstances without compensation provided that this is for land reform and is just and equitable in terms of section 36(1). It is thus submitted that there is thus no need to amend section 25 in order to provide for EWC and that this is actually something that has been permissible in terms of the Constitution for more than 20 years. Viewed in this light, it seems that the hype over the amendment of section 25 is nothing more than a storm in a teacup.
So why has Investor Confidence Suffered?
The first reason that this has occurred is because the media is reporting, sometimes irresponsibly, that an amendment to allow EWC is going to put food security at risk and destroy property rights. Viewed in the context above, this hype seems misplaced because EWC (or at the least, expropriation with nominal compensation) has been permissible for two decades.
The second reason that investor confidence has suffered is because of the manner in which the ruling party has handled the situation. Instead of investigating the legal and social consequences before announcing the potential amendment to the nation’s founding document, which is causing huge emotive and knee-jerk responses from all over the globe, the ANC announced its intention before it had really ‘done its homework’ and sprang the concept on the nation (presumably) in order to rally support for the 2019 elections.
This lack of foresight and bad handling makes one question how well thought out the whole idea of this supposed amendment is. Had the ANC properly researched and planned for this, it could have introduced the notion in a more organised manner and in a way that allayed concerns of investors and land owners by showing that the scheme had been properly investigated and thought out. Instead, the concept came as a shock to the nation and to the market and as a result every stakeholder feeling threatened has come out swinging. A great deal of this negative sentiment and opposition could have been avoided had the saga been better handled by the ruling party.
So is there anything to worry about?
There is no question that land reform is a worthy cause, particularly in the unique history of South Africa. There is also no question that our Constitution (and consequently the whole of our law as a result) recognises that no right (including property) is absolute and that where it is just and equitable, the rights of one can be subordinated to the rights of another. It is not even a question of the rights of the ‘haves’ being subordinated to the rights of the ‘have nots’ – because the rights that might be affected negatively are not only the rights of property owners, but also those of occupiers (lawful and unlawful), property managers (who make a living off of rentals), and municipalities (who rely on income earned from supplying services to properties) in favour of any person who is entitled to benefit from land reform (which may very well be not only indigent persons but also persons of means). The only real question is to what extent our courts will sanction the deprivation of property rights to achieve land reform.
The answer to this question will always be situation specific. Section 25(3) sets out a number of factors that need to be taken into account in the analysis of what compensation is payable, and this list can be added to where appropriate. In every instance where a dispute arises between the state (as the expropriating authority) and the person who is being expropriated, the courts will be the ultimate arbiters of the question of how much compensation (if any) is payable. The courts will always have recourse to the question of whether it is just and equitable in terms of section 36(1), and this will apply regardless of whether section 25 is amended to expressly provide for EWC, or whether the state relies on the provisions of section 25(8) read with section 36(1). At the end of the day, no matter how aggrieved the person being expropriated might feel, they will always have access to the courts and the courts will always be there to protect and uphold property rights (subject to just and equitable limitations, of course).
Checks and Balances
South Africa’s property law regime is considered as one of the best in the world. Section 25 of the Constitution[8] is the centerpiece of our property law. It was written with the express purpose of balancing the rights of property owners and other stakeholders, to ensure that “never again” would the government (or any other body) undermine the property rights of any citizen unjustly.
That being said, our courts have interpreted section 25 to protect not only the rights of property owners, but also those of other parties (such as tenants, and unlawful occupiers). Our courts are obliged to strike a balance between competing rights based on public policy principles as best as they can. For example, in any case involving the loss of ownership of property (for example the repossession of a house) and/or the deprivation of rights of occupation of a property (for example in evicting a tenant from a property), our courts have confirmed that for same to be lawful a stringent process requiring court supervision needs to be followed to ensure that the rights to dignity and equality are not violated in the process.
The manner in which EWC takes place (if it does take place at all) will be no different. Even if section 25 of the Constitution is amended to expressly provide for EWC, the fundamental principles of our law of property (which appear from laws other than the Constitution itself) will remain in place to ensure that any deprivation that occurs will be limited as much as is possible and will be carried out in the most-fair way possible.
Conclusion
Even if section 25 is amended to expressly provide for EWC, this will make no difference from a legal perspective to the way in which the courts will adjudicate upon disputes relating to how much compensation is payable. Our courts will always be the ultimate arbiter of the issue of how much compensation (if any) is payable, and in debating the issue they will take into account the principle of what is just and equitable in our society as well as all of the other central tenants of our property law which will remain intact even if section 25 is amended.
Caveat: Nothing in this article is to be understood as legal advice given to any person in any circumstances. The content hereof is merely an expression of the legal opinion of the authors based on laws as they stand at the time of publishing and possible future consequences, and any person who needs specific legal advice in relation to the issues discussed herein should contact the authors for same. Any specific references to the sources of the laws quoted herein can be obtained directly from the authors upon request.
[1] The Constitution of the Republic of South Africa 108 of 1996.
[2] Act 47 of 1937
[3] Act 62 of 1997
[4] Act 19 of 1998
[5] Act 63 of 1975
[6] Act 17 of 2014
[7] Section 25(3) of the Constitution
[8] The Constitution of the Republic of South Africa 108 of 1996.
