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Centre of Excellence
Land Affairs
Agri SA comments on the
Expropriation Bill, 2020
February 2021
Table of Contents
Land Affairs
Agri SA comments on the Expropriation Bill, 2020
Contents
1. EXECUTIVE SUMMARY..................................................................................................... 1
2. BACKGROUND .................................................................................................................. 2
3. GENERAL COMMENTS ..................................................................................................... 5
4. THE CONSTRUCT OF PROPERTY RIGHTS .................................................................... 7
5. LESSONS FROM ZIMBABWE AND VENEZUELA ........................................................... 8
6. DIRE ECONOMIC CONSEQUENCES OF THE CURRENT PROPOSAL........................ 11
6.1 Agricultural capital formation and production credit ................................................. 13
6.2 Tax implications ....................................................................................................... 17
6.3 Balance sheet problems ........................................................................................... 17
6.4 Food security ............................................................................................................ 18
7. SPECIFIC COMMENTS .................................................................................................... 19
7.1 Clause 1: Definitions................................................................................................... 19
7.2 Clause 2(2): Application of Act ................................................................................... 22
7.3 Clause 5: Investigation and gathering of information for the purposes of
expropriation………………………………………………………………………………..22
7.4 Clause 7: Notice of intention to expropriate................................................................ 23
7.5 Clause 8: Notice of expropriation ............................................................................... 24
7.6 Clause 9: Vesting and possession of expropriated property ...................................... 24
7.7 Clause 10: Verification of unregistered rights in expropriated property ...................... 25
7.8 Clause 11: Consequences of expropriation of unregistered rights and duties of
expropriating authority .............................................................................................. 25
7.9 Clause 12: Compensation for expropriation ............................................................... 26
7.10 Clause 13: Interest on compensation ......................................................................... 32
7.11 Clause 15: Offers of compensation ............................................................................ 32
7.12 Clause 17: Payment of amount offered as compensation………………………………32
7.13 Clause 18: Property subject to mortgage bond or deed of sale ................................. 33
7.14 Clause 19: Payment of municipal property rates and other charges out of
compensation money .. …………………………………………………………………...35
7.15 Clause 21: Mediation and determination by court ...................................................... 36
7.16 Clause 22: Urgent expropriation…………………………………………………………...36
7.17 Clause 23: Withdrawal of expropriation…………………………………………………...37
7.18 Clause 24: Service and publication of documents and language used therein……….37
7.19 Clause 27: Civil fines and offences:…………………………………………………….....37
8. CONCLUSION ................................................................................................................. 38
Agri SA © 2021
Table of Contents
Land Affairs
Agri SA comments on the Expropriation Bill, 2020
1. EXECUTIVE SUMMARY
In this submission, Agri SA highlights the following:
• The interest of our members in the Bill – we represent the largest collection of rural landowners
and we want to ensure a sustainable viable sector,
• That we acknowledge the challenges of inequality, poverty and unemployment stand the legacy
of the land dispensation of the past,
• That the farmers of today cannot be held solely responsible for historical events and cannot be
required to bear the burden of addressing apartheid dispossession disproportionately,
• Our support for free market principles and our view that expropriation should be a measure of last
resort,
• That landowners whose land is expropriated should always have recourse to the courts,
• Reference is made to the study by GOPA Southern Africa (Pty)Ltd on the potential economic
impact and specifically the impact on capital formation of the nil Rand approach,
• That most countries’; constitutions require compensation, and we refer to the FAO study on best
practice for compulsory acquisition,
• Lessons from Zimbabwe and Venezuela are shared, illustrating the disastrous consequences of
their land policies on their respective economies,
• The tax implications in terms of a potential loss of tax revenue for the government is also pointed
out and the potential negative impact on food security is mentioned,
• Concerns regarding specific definitions and clauses, such as the definitions of expropriation and
public interest and the nil Rand compensation clauses.
We conclude that current landowners should receive prompt, adequate and effective compensation,
which will enable them to start anew somewhere else; and they should not be worse-off as a result of
the expropriation.
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Agri SA comments on the Expropriation Bill, 2020
2. BACKGROUND
Agri SA is a federation of agricultural organisations, which was established in 1904 as the South African
Agricultural Union and consists of 9 provincial-, 25 commodity organisations and 59 corporate members.
Agri SA, through its affiliated membership represents a diverse grouping of individual farmers regardless
of gender, colour or creed. Agri SA is committed to the development of agriculture in South Africa.
Commercial agriculture ensures that our country is food secure and that the sector remains globally
competitive. We are a non-profit, a-political organisation that is helping to develop a stable and profitable
agricultural environment in South Africa.
Agri SA is supportive of an orderly process of land reform. Our interest in the Expropriation Bill is twofold:
a. Firstly, our members constitute the largest collective of rural landowners and in consequence
we have an interest in ensuring that the legitimate rights of landowners are respected.
b. Secondly, as we aim to ensure a sustainable and viable agricultural sector, we have an
interest in promoting the success of land reform beneficiaries who obtain agricultural land
through the land reform programme. Agri SA supports transformation in the agricultural
sector with a concomitant commitment to increasing agricultural production and improving
national food security. In this regard, Agri SA promotes the empowerment of land reform
beneficiaries to use their land productively and to cultivate new and successful entrants to
the sector.
Agri SA acknowledges that the dispossession of land caused deep emotional wounds, which have not
healed, and that land dispossession caused great physical and psychological hardship of an enduring
nature. We also recognize that we, as a society, are faced with the triple challenges of inequality, poverty
and unemployment and that these challenges are particularly prevalent in rural areas.
We appreciate that whilst our members, the farmers of this country, have managed to create close to a
million jobs currently and have managed to keep our country food secure, there are still far too many
households in rural and urban areas that are food insecure. Today’s farmers cannot be held solely
responsible for historical events and cannot be required to bear the burden of addressing apartheid
dispossession disproportionately. Agri SA believes that past iniquities must be dealt with through positive,
future and solution-driven conversation, and Agri SA wants to make a positive contribution to finding
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Agri SA comments on the Expropriation Bill, 2020
solutions. As such we formulated a holistic Agri SA plan for land reform and rural development in 2016,
have supported a land audit by Agri Development Solutions and LandbouWeekblad in 2017, and co-hosted
a Land Summit sharing success stories in land reform and rural development in 2018. We are currently
part of a Business engagement with Government on a blended financing scheme.
Agri SA participated in the NEDLAC and Parliamentary processes from 2013 through to 2020, which
resulted in the 2016 Expropriation Bill that was adopted by Parliament and forms the basis for the current
Bill. Agri SA also participated in the Constitutional Review Process on the possible amendment of section
25 and our views expressed during that process is also relevant to the Bill in so far as it provides for
expropriation without compensation. In a nutshell, Agri SA is against expropriation without compensation.
We support the principle of equality in the bearing of public burdens, generally accepted in constitutional
democracies and we believe that current landowners should not be required to bear a disproportionate
burden of the imperative for land reform in the public interest. This principle is aimed at achieving at a fair
balance between the interests of the expropriator (usually funded by the fiscus) and the expropriatee (who
has lost his or her land).
Agri SA holds the following general policy views regarding expropriation:
• We firmly believe in the free market and the basic economic principles that drive developed
and developing countries. Property rights are also believed to lower transaction costs by
providing an efficient resolution for conflicts over scarce resources. Empirically, using historical
data of former European colonies, Acemoglu, Johnson and Robinson find substantial evidence
that good economic institutions – those that provide secure property rights and equality
of opportunity – lead to economic prosperity1.
• Expropriation should only be used as a measure of last resort where bona fide negotiations
have failed.
• The procedures followed with expropriation should be fair towards the landowner, and the
principles of administrative justice should always apply.
1
Acemoglu, Daron; Johnson, Simon; Robinson, James (2005). "Institutions as a fundamental cause of long-run growth".
Handbook of Economic Growth. 1. pp. 385–472.
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Agri SA comments on the Expropriation Bill, 2020
• The purpose of the expropriation should be clear.
• A landowner whose land is expropriated should always have recourse to the courts. Agri SA
stands firm on the principle of full access to the courts to adjudicate on the merits of
expropriation as well as the amount of compensation should there be any dispute.
• Under no circumstances should the payment of compensation to a landowner be dependent
on the state’s ability to pay. The government fiscal constraints should in no case play a role
in setting standards for land reform as this would skew the economic principles and the
underlying principles driving the food system.
• It is of utmost importance that a transparent process be followed in valuing land. Landowners
should also have access to valuation reports.
• Payment should be immediate and in cash - which includes transfers of monies, and other
forms of transactional payment.
• Transformation, and land reform will not be possible if the liquidity in the food system changes,
i.e., does not reflect market related prices. This is a principle that has been established in
several countries that have tried similar interventions, as we show in this report.
• Where the agri-economy implodes the whole economy will implode. Primary agriculture
represents approximately 2,5% of GDP, and secondary agriculture approximately 15%, these
two constitute the food system which makes up approximately between 17 – 18% of GDP.
The whole system is hedged against the market value of land.
• An independent study into the possible economic impact of a policy of nil compensation, by the
GOPA Group of Southern Africa2, has concluded that the impact that a policy of expropriation
without compensation will exert on economic capital formation (which augments a society’s
2
A macroeconomic impact assessment of a policy of land expropriation without compensation in South Africa: GOPA Group of
Southern Africa (Pty) Ltd 2020
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stock of productive assets) suggests the inevitability of a sharp decline in the economic growth
rate and a further erosion of taxation revenue growth.
3. GENERAL COMMENTS
Expropriation or compulsory acquisition is a tool, which is widely used internationally, and this has been
the case for many decades. As such, international best practice models have emerged over time.
Most countries’ constitutions require compensation, whether full compensation (Denmark, Norway,
Russia, Kenya, the Seychelles and Lesotho), fair compensation where a balancing test applies (Egypt,
France, Madagascar, Rwanda and Tanzania), equitable compensation (the Central African Republic, the
Congo, Japan, Mozambique, Namibia, Poland, Senegal and the USA) or adequate compensation
(Botswana, Malta, Uganda and Zambia).
The modern approach to compensation is based on the principle of equality in the bearing of public
burdens. Equitability in respect of a public liability is a principle adopted by French-, German- and American
law. According to this approach, “where one or more individuals has to bear a sacrifice (being the loss of
property) for the common good, their individual and excessive burden should be compensated by the
community (thus the State).” If South Africa should jettison the principle of equality, it will be out of step
with most constitutional democracies.
In 2009, the Food and Agricultural Organization (FAO) of the United Nations published a guide on
international best practice for expropriation.3 The point of departure of the document is that forced
acquisition of property could be abused and that measures should be in place to prevent this.
The guide requires, among other things, clear and transparent procedures for forced acquisition of
property, and compensation that will ensure that the affected persons are not worse off after expropriation
than they were before. Further it states that affected persons must not only be compensated for the loss
of land but also for improvements made and for the disruption that accompanies expropriation.
3
Compulsory acquisition of land and compensation: FAO Land Tenure Studies 10: http://www.fao.org/3/a-i0506e.pdf
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The United Nations Conference on Trade and Development published a document on expropriation in
2012 as part of their series on international investment agreements4. In this document the UN sets out the
basic international requirements for expropriation. These are that the taking institution must take for a
public purpose, in a non-discriminatory manner, under a due process of law and with the payment of
compensation.
The document deals with indirect expropriation and regulatory measures not amounting to expropriation.
Indirect expropriation is defined as total or near total deprivation of an investment but without a formal
transfer of title or outright seizure. Most international treaties refer also to indirect expropriation. One of the
salient features among international investment treaties is that most of them incorporate the standard of
prompt, adequate and effective compensation.
According to the document, compensation is prompt if paid without delay; adequate if it has a reasonable
relationship with the market value of the investment and effective if paid in convertible or freely useable
currency. The members of Agri SA are heavily invested in land and expropriation will always be an
unpleasant and disruptive process, which nobody is keen on, so they are understandably concerned about
the possibility of expropriation.
No owner would willingly go through a process of expropriation. In the case of a farmer whose farm gets
expropriated, he or she not only loses their home, but also their livelihood. Primary production is but a link
in the value chain and a farmer who is forced to relocate may also lose their linkages to well-known input
supplies and markets – business relationships, which may have been built up over many years. The power
imbalance between an individual and the powerful state machinery that comes to play in the expropriation
process, needs also to be recognized – i.e., the daunting cost of litigation where an individual has to take
a dispute to the courts.
An economic study conducted in 2020 by the GOPA Group of Southern Africa (Pty)Ltd, led by Dr Roelof
Botha, analysed and quantified the potential impact of a policy of EWC on key economic variables,
including GDP, employment and taxation revenues, as a result of a subsequent (and predictable) decline
in capital formation as percentage of gross domestic product (GDP). The study concluded that economic
capital, which is an indispensable prerequisite for economic development, job creation and growth, needs
to be nurtured and incentivised, otherwise it simply moves to greener pastures. There is a strong
4
https://unctad.org/en/Docs/unctaddiaeia2011d7_en.pdf
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relationship between capital formation and economic growth & employment creation. Capital formation
occurs when some portion of a country’s national income is invested in assets and facilities that serve to
augment value addition in the economy in future. When combined with the other three sets of production
factors (labour, natural resources and entrepreneurship), goods and services are produced and, via a
range of taxes on economic activity, this provides government with the fiscal resources required for basic
public services (especially public health and education), the maintenance of law and order in society and
infrastructure. The study finds amongst other things that: The value of privately-owned property embodies
one of the fundamental sources of collateral whereby most of the funding for fixed investment is secured.
The adoption of a policy of land expropriation without compensation would severely curtail the propensity
of the private sector to channel a significant portion of retained earnings towards capital formation,
especially against the background of the public sector’s inability to address dire infrastructure backlogs,
resulting in capital flight, reduced tax earnings and hence less tax revenue for the state to deliver basic
services.
Please note that any amendment of section 25 of the Constitution is likely to impact on the
Expropriation Bill and on Agri SA’s comments on the Bill. The submission is based on the current
wording of section 25, as contained in the preamble to the Bill. Should this wording change, Agri
SA reserves the right to amend or supplement its comments on the Bill.
4. THE CONSTRUCT OF PROPERTY RIGHTS
The law of property, or also commonly referred to as the law of things, in the South African legal framework
stems from the Roman Dutch as well as the English common law. “Property” is anything which can form
part of a person’s estate, including corporeal things and incorporeal interests and rights. In principle the
protection of the rights of an individual to own a house, or a farm, or shares, or intellectual property is well
vested in international law practices.
These rights also affect the holder of the rights’ ability to bond the specific right – and the mortgage holders’
ability to securitize the right, be that through a security agreement, credit guarantees, express real security,
or usufructus.
In modern economies the ownership of the said asset have been used to unlock financial value, and as
leverage to build economic prosperity. It is an undisputed fact that the best faring economies in the world
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Agri SA comments on the Expropriation Bill, 2020
have used this system to build wealth, economic growth and prosperity. A favourable economic
environment, which is a requirement for stimulating employment and investment is dependent on, amongst
other things, a strong constitutional guarantee of private property ownership as a fundamental premise.
5. LESSONS FROM ZIMBABWE AND VENEZUELA
Both Zimbabwe and Venezuela abolished the constitutional protection of property rights.
Zimbabwe’s agrarian reform policy was implemented 1991-1997. In order to “fast track” the land reform
program, expropriation without compensation was initiated, leading to a fast decline in contribution to GDP
in 2008, as well as a steady, but then sudden drop in the value of land and fixed improvements in the
country. Graph 1 below shows the effect that the collapse of agriculture had on the whole economy.
Zimbabwe today is technically bankrupt. Millions of Zimbabweans have fled the country and the country
that was once a net exporter of food is now reliant on international food aid.
Graph 1: Effects of expropriation on the Zimbabwean economy
Note: Agriculture contribution to GDP (left) and Value of capital stock (right))
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Agri SA comments on the Expropriation Bill, 2020
Table 1: Data map of Zimbabwe
Source: GOPA Group study: 1 A macroeconomic impact assessment of a policy of land expropriation without
compensation in South Africa:
Venezuela is a more recent example of what inevitably occurs to a country’s economy when the state
expropriates property without compensation. According to the 2020 Economic Freedom Index, Venezuela
is ranked second from bottom out of 180 countries for which sufficient data is available (North Korea is
ranked last). In the space of only two years between 2017 and 2019, the country’s GDP per capita halved
to less than $2,600. Hyper-inflation exists in Venezuela, estimated at 20,000%, which effectively makes
Venezuela’s currency worthless.
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Agri SA comments on the Expropriation Bill, 2020
Table 2: Data map of Venezuela
Source: GOPA Group study: 1 A macroeconomic impact assessment of a policy of land expropriation without
compensation in South Africa:
According to the recent study by the GOPA Group of Southern Africa5: “Empirical evidence relating to
seven country case studies confirms the stifling effect on initiative, entrepreneurship and productivity
inherent in the plethora of regulations and restrictions that usually accompany an institutionalised system
where private property ownership is not guaranteed and protected by law. In sharp contrast, the freedom
associated with the economic systems that are prevalent in virtually all free enterprise democracies
provides individuals with the incentives to open new frontiers in science, product differentiation, welfare
creation and the relief of human misery via highly versatile, innovative and efficient economies.”
5
A macroeconomic impact assessment of a policy of land expropriation without compensation in South Africa: GOPA Group of
Southern Africa (Pty) Ltd: 2020
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Agri SA comments on the Expropriation Bill, 2020
6. DIRE ECONOMIC CONSEQUENCES OF NIL COMPENSATION
AND LOW OFFERS OF COMPENSATION BY THE OFFICE OF
THE VALUER GENERAL (OVG)
A reduction in the recognition of property rights will endanger investment into the capital improvement of
the land both by primary as well as secondary agriculture. The financial sector will reassess their exposure
to risk in this sector as this asset base is devalued and diversify into other areas of the economy.
Farmers would no longer have security to support loans resulting in dis-investment in the sector.
In looking at the economic reality of funding in agriculture we will look at the following core elements to
substantiate our findings, namely debt formation and production credit, tax implications, transformation
and food security.
The potential impact on capital formation has already been pointed out in point 2 – General comments.
The GOPA Group study6 has found, following an econometric modelling exercise that a 5% decline in
gross domestic capital formation (GDCF) will cause the real GDP growth rate to remain on a negative
trajectory from the 3rd quarter of 2021 onwards, averaging minus 0.64%. A 10% decline in GDCF will be
worse, causing an average contraction in GDP of 2.17%. See graphs 2 and 3 below:
6
A macroeconomic impact assessment of a policy of land expropriation without compensation in South Africa: GOPA Group of
Southern Africa (Pty) Ltd: 2020
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Graph 2: Nominal quarterly GDP forecasts with and without EWC
Graph 3: Nominal GDP forecasts with and without EWC
Source: GOPA Group study: 1 A macroeconomic impact assessment of a policy of land expropriation without
compensation in South Africa:
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6.1 Agricultural capital formation and production credit
Table 3 Gross capital formation in agriculture: 2019
Source: Abstract of agricultural statistics 2020
The basic principle is that we fund the agricultural sector against the collateral value of land, improvements
and livestock.
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Agri SA comments on the Expropriation Bill, 2020
Graph 4: The relationship between the capital value and debt since 2008 (R / Mil).
Agricultural capital value and debt
600 000
500 000
400 000 470 112 487 953
430 853
394 385
300 000 364 573
331 956
309 562
284 320
200 000 256 978
226 330 238 816
100 000 133 089 144 981
158 342 166 007
88 778 102 507 116 575
79 364
0 57 412 63 945 69 972
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Value of farm assets Farming debt
The graph clearly indicates that we managed to over 10 years almost double the value of primary
agriculture with the debt burden increasing incrementally. Again, the sector managed to do this because
of the unencumbered value of the assets (mainly land).
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Table 4: Composition of total farming debt (R187 506.4 mil) – 2019 data
Source: Abstract of Agricultural Statistics 20207
7
https://www.dalrrd.gov.za/Portals/0/Statistics%20and%20Economic%20Analysis/Statistical%20Information/Abstract%202020_or
ganized.pdf
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The graph indicates that the distribution of farming debt is as follows:
• Land Bank – R45,3 billion8
• Commercial banks – R 111,2 billion (primary) and R37,8 billion (secondary)9
• Agriculture co-operatives – R 10,5 billion
NB! It is important to note that the Landbanks’ terms of borrowing include unencumbered property rights
at market values – the international lenders they account to will call up this exposure where property rights
are affected, and market values compromised.
The R159,5 billion from commercial banks and cooperatives will need to be serviced and represents a real
contingent liability for the economy where farmers will not be able to remain profitable.
Where uncertainty of the asset class comes into play – i.e., land that can be expropriated without
compensation, whether it is for public interest or where there are arbitrary principles such as land” not
being used and where the main purpose is to benefit from the appreciation in market value” - or land where
compensation to be paid in terms of the Labour Tenants Act, the price of the asset class will fall due to
market risk.
Production lending is what farmers access every year against the value of their assets to stay in production.
The borrowing is done against the value of the land, fixed improvements, livestock and machinery. The
reason why production lending can take place is because the lending is done against a secure asset – vis-
à-vis the market value of the land and fixed improvements. Without this form of security, a large percentage
of commercial farmers would not be able to access production loans to buy inputs for the new season’s
crop that would need to be planted, causing the land to either lie idle or be used unproductively – i.e., with
minimal commercial inputs! This effectively “mining” the nutrients from the soil without replacing /
regenerating them until crops eventually fail affecting food security.
8
31 March 2020 figures
9
Unaudited figures provided to Agri SA by the Banking Association of South Africa
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6.2 Tax implications
Our country finds itself in a financial deficit situation with international debt growing and SARS seeking
avenues to increase revenue like the Health Promotion Levy (HPL) on sugary beverages tax. If the current
property valuations by the OVG are used and the valuation is lower than the market valuation, SARS
potentially stands to lose on Capital Gains Tax revenues. On what basis will SARS determine CGT? It
cannot be based on market value while the OVG uses the new regulations which will result in a loss of
revenue or no revenue to SARS.
In a loss of land value, the property rates valuation would decrease, limiting the ability of the Municipality
to raise the same level of rates and taxes for this land. This impact would be severe for raising revenue
for the municipalities operating in deep rural areas.
6.3 Balance sheet problems
Probably the most severe potential impact is that the corporate and individual farmers reflect their land on
their balance sheets at a market value. This market value has been determined in terms of the old valuation
methodology and not the new regulations of the OVG. Our studies indicate that any discount of the sale
of the land will impact the balance sheet and the ability of the future owners to attract bonds and overdrafts.
The impact of the loss of value would include:
• The ability to service the current debt in the business may be brought into question. A decrease
in the value of the land asset would expose financial institutions to a level of risk that they may
not tolerate. Consequently, they may choose to exercise their right to call in loans.
• Legally the financial institutions hold the title deeds for any land subject to financing. Should the
outstanding loan amounts exceed the value as determined by the OVG, the financial institutions
will require that the farmer settle any difference between the valuation amount and the loan
amount. Consequently, the entire farming operations may be placed under pressure should a
portion of the land be disposed of in this way.
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• An overall weakening of the balance sheet would also limit the farmer’s ability to raise additional
financing for expansion or may cause the financial institutions to re-assess any working capital
facilities that they have made available to the farmer.
• These new landowners / farmers would become wards of the state – relying on grants from
government for production and capital purposes because the new value of their property would
not support the finance required to run a farming business.
• Overall, the whole food and financial system may implode as a result of expropriation at nil or
substantially less than market value.
6.4 Food security
Where the food system comes under pressure as described above, food inflation may increase
tremendously, and this may lead to massive food insecurity. The GOPA Group study10 points to the fact
that: “When a country is forced to free up scarce resources in order to import food, it is faced with the
prospect of balance of payments instability and a depreciating currency, whilst often simultaneously having
to cope with socio-political disturbances due to temporary food shortages. There is a link between this
scenario and the first consideration, as most countries that enjoy food security also enjoy a high level of
economic freedom.”
The Covid-19 pandemic affected all sectors in the South African economy. Although agriculture was
classified as being "essential" and therefore excluded from the lockdown regulations, this did not apply to
the full spectrum of products from the agriculture sector, nor did it apply to all of the sectors that supply
intermediate inputs to agriculture (via upstream linkages). Despite this, the agricultural sector managed to
keep the country food secure during one of the worst economic declines in South Africa’s modern history.
Not only that, farmers and organized agriculture provided thousands of food parcels to desperate people
during the hard lockdown.
10
A macroeconomic impact assessment of a policy of land expropriation without compensation in South Africa: GOPA Group of
Southern Africa (Pty) Ltd: 2020
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Agri SA commissioned a study by the GOPA group to identify and quantify the negative impact
exerted on the agriculture, forestry & fishing sector by the Covid-19 pandemic. A copy of the study
is attached hereto as Annexure A.
7. SPECIFIC COMMENTS
7.1 Clause 1: Definitions
“Court”
It is not clear from the definition whether Magistrates courts have jurisdiction over all aspects on the Bill. It
is preferable that the High courts deal with litigation stemming from the Bill, rather than the Magistrates
courts, as expropriations are highly technical.
“Deliver”
All notices of expropriation should be delivered by hand. We suggest delivery by the sheriff of court in
terms of Rule 4 of the Uniform Rules of Court. Service by post is no longer a reliable method to serve
documents, especially important documents such as notices of expropriation, offers of compensation and
compensation claims.
‘‘Expropriation’’
Agri SA has serious concerns regarding the definition of expropriation that was inserted into the previous
Bill at Portfolio Committee stage. The proposed definition limits the concept to instances where the state
acquires rights in property. This definition excludes statutory limitations that undermines the economic
utilisation of property or dismantle its content from the concept of expropriation if they do not include the
transfer of proprietary rights to the expropriator. In other words, the definition excludes constructive
expropriations.
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Internationally, the concept of “expropriation” (also known as compulsory acquisition or the state’s right of
eminent domain in some jurisdictions) has been developed by the courts on a case-by-case basis over a
considerable length of time. The majority of these jurisdictions have opted for the courts to retain the
discretion as to when government action which encroaches upon an owner’s right to use and enjoy the
property will amount to an expropriation. Any definition of “expropriation” should be wide enough to include
all possible permutations of expropriation as recognised by courts internationally.
The danger of a narrow definition such as the current proposal in the Bill is that it may open the door for
all kinds of government action that may severely limit property rights without compensation, or even
acquiring property on behalf of third parties without compensation. The focus should be on the loss that
the owner suffers, not on acquisition by government organs.
Although the state had powers of expropriation before the Constitution was enacted, the modern-day
constitutional state’s authority to expropriate vests in section 25 of the Constitution. It should be noted that
the Constitution itself does not attempt to define or limit the concept of expropriation. The Constitutional
Court has the ultimate authority to make a binding interpretation of any provision of the Constitution. Should
a court faced with a particular set of facts interpret the concept of expropriation as contained in the
Constitution to be wider than a definition imposed by ordinary legislation, that provision would be
inconsistent with the Constitution and can be struck down.
Agri SA is of the view that the definition should be scrapped. This will allow the courts to deal with each
case on its own merit. Alternatively, the definition must be wide enough to include all forms of expropriation
recognized internationally. The exclusion of severe statutory limitations on the use of property from the
concept of expropriation could have a negative impact on investor confidence and the growth of our
economy.
“land parcel”
There is no definition of land, only “land parcel” is defined. It is not clear at all whether buildings and fixed
improvements on land is included in the concept of land. The following definition is proposed: "land in
respect of which a diagram, general plans or sectional plan has been approved by the Surveyor General."
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Agri SA comments on the Expropriation Bill, 2020
“Master”
The following definition is proposed: “in relation to a particular property, means the Master of the High
Court appointed in respect of the area in which that property is situated.”
“Public interest”
Who decides what is in the public interest in any given case? Agri SA is concerned that too much discretion
is given to government officials to decide what is in the public interest. The definition of public interest is
too broad.
The legislature should not attempt to define the term "public interest" in section 25 of the Constitution,
except by restating what is already contained in the Constitution. It is for the courts, and not the legislature,
to interpret the term "public interest" as used in the Constitution. If the Bill should contain a provision giving
the term a wider meaning than its meaning under the Constitution, the provision would in all likelihood be
unconstitutional.
It is furthermore our understanding that an expropriating authority acting in the public interest will only be
able to exercise the power of expropriation if that authority is granted by an existing law of general
application (except for the Minister of Public Works, whose authority to expropriate arises from section 3
of this Bill). It therefore follows that there must be a rational connection between the expropriation and the
purpose for which the authority is granted by the empowering provision. An expropriation will only be in
the public interest if it is undertaken to further the purpose for which the empowering provision was
enacted. Whilst this latter point seems to be self-evident, it would greatly improve investor confidence and
public support for the Bill if the definition of “public interest” was tied to the empowering provision, thereby
clarifying that the “other related reforms” referred to are not government actions taken in the abstract, but
rather actions taken in terms of specific empowering provisions. This will in turn ensure that the
constitutionally protected concept of the “Rule of Law” is concretised within the Bill. In this regard, we
propose the definition be amended to read as follows:
‘‘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 other related reforms in order to redress the results of
past racial discriminatory laws or practices as articulated in a law of general application aimed at such
redress.
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“‘public purpose’’:
This definition is incomplete as there is a need for clear regulation of the “public purpose” requirement in
legislation to ensure conformity with Section 25(2) of the Constitution. This would align the definition to
international norms where the principle of requiring a strong indication of public necessity in applying the
“public purpose” requirement is scrutinised by the courts and it places an onus on the State to provide a
detailed and specific motivation as to the necessity for an expropriation to occur. Agri SA proposes that
provision should be made for regulations which define “public purpose” to be promulgated before
the Bill is enacted.
7.2 Clause 2(2): Application of Act
The Department of Public Works should clarify what is intended with the insertion of the new clause 2(2)
which reads: “(2) Despite the provisions of any law to the contrary, an expropriating authority may not
expropriate the property of a state-owned corporation or a state-owned entity without the concurrence of
the executive authority responsible for that corporation or entity.” State land and land owned by state
entities cannot be insulated from being made available for land reform. If there is a conflict, it can be
addressed in accordance with the principles of co-operative government set forth in sec 40 and 41 of the
Constitution.
The term "executive authority" be defined: is it the responsible Minister, or the Board of the corporation or
entity, or the chief operating officer?
7.3 Clause 5: Investigation and gathering of information for the purposes of
expropriation.
Information on the factors to be taken into consideration in calculating just and equitable compensation
will be crucial to the expropriation process and may well be the determining factor in any enquiry into
whether the compensation offered in any given case is in fact “just and equitable”. Agri SA is of the opinion
that this exercise will require a high level of skill, expertise and experience.
7.3.1 Clause 5(4)(a): Investigation and gathering of information for purposes of
expropriation.
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The documents, which the owner, tenant or occupier are required to make available, should be
limited to official documents (such as title deeds), contracts relating to unregistered expropriated
rights; building plans for improvements, dams and other infrastructure; any other documents which
a court on application by the relevant expropriating authority may order the owner or occupier to
make available. The person conducting the investigation should not have access, for example, to
confidential documents such as the financial records of the owner or to reports and valuations
obtained by the owner for purposes of assisting him in negotiating a sale of the property to the State
or in anticipation of an expropriation. The owner may have obtained a valuation of the property with
which he disagrees and does not intend to use. Why must he/she be compelled to make it available
to the person undertaking the investigation, enabling the State to use it against him in future? Only
documents that are relevant to the expropriation and which are not private or confidential should be
available to be accessed. Valuers should also treat all information that is accessed as confidential
and should only use the information for the purpose of the valuation.
7.3.2 Clause 5(7)
The wording has been changed11 from reading: “if a person suffers damages” to: “if the property
in question is damaged.” An owner can suffer damages as a result of the expropriation and not
only damage to the property being expropriated. The claim for damages should not be limited to
the property in question but should include all damage resulting from the expropriation.
7.4 Clause 7: Notice of intention to expropriate.
Clause (7)(1)(g): The owner has only 30 days to provide certain information following an expropriation
notice. This period is inadequate taking into consideration the information that must be submitted by the
owner.
Regarding clause 7(2)(j), it is unacceptable that an owner’s failure to provide information can be considered
a civil offence.
11
From the previous version of the Bill
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We suggest that clause 7(4) should provide that details of any oral lease, purchase or building agreement
should be provided.
Clauses 7(5), 7(6) and 7(7): One of the biggest frustrations experienced by owners and holders of rights
in the course of an expropriation process is that expropriating authorities, having initiated the process,
sometimes disregard statutory time limits, fail to deliver prescribed documents in time, do not prepare their
cases properly and do not co-operate towards achieving an expeditious hearing. The Bill provides
remedies for expropriating authorities where owners or holders of rights do not comply with their obligations
in terms of the Bill, but few (if any) remedies for owners or holders of rights if expropriating authorities do
not comply.
7.5 Clause 8: Notice of expropriation
Agri SA welcomes the detail in which this clause sets out the requirements for proper notice to the
landowner and other affected parties and particularly the requirement that an offer must contain an
explanation of what the amount of compensation comprises of and that the notice must be accompanied
by copies of reports detailing how the amount of compensation was determined. It has been the experience
of many of our members that they are denied copies of valuation reports in restitution settlements. A
landowner can only make an informed decision on compensation offered if all the relevant information is
available to him or her.
In clause 8(3) the word “disputed” should be replaced with “not accepted”.
Clause 8(4) should also include a requirement that a copy of a valuation or other professional report”
should accompany the notice of expropriation. Clause 8(4)(d): The meaning of "comprises of" is unclear.
It is suggested that the wording of clause 15(2) be followed (particulars of compensation offers made to
holders of unregistered rights).
7.6 Clause 9: Vesting and possession of expropriated property.
In terms of clauses 8(3)(f) and (h) and 9(2)(a) the expropriating authority can take possession of the
property before a dispute regarding compensation process is finalised. A landowner who relies on the
property for his income may not be able to finance litigation if his source of income is gone. For example,
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if a farm is being expropriated, but if there is a dispute on compensation in progress, then the farmer
would need to support them and use the income from the farm. The farmer would not have income if
the property was expropriated with a dispute in process. Agri SA proposes that criteria be included in
the Bill to determine whether it is just and equitable for possession to pass before finalising
compensation. These criteria would include whether the owner has other sources of income and whether
or not the expropriation was urgent.
Regarding clause 9(4) we suggest that the following wording replace the words:” in which case the right
to possession of the property passes to the expropriating authority on that date. at the end of the
clause with the following: ” in which case the expropriating authority shall be deemed to have taken
possession of the property on that date.” This is to cater for the situation where the expropriating
authority may not take possession of the property immediately.
7.7 Clause 10: Verification of unregistered rights in expropriated property
Clause 10(1): Consider inserting, after the words "that person has not been compensated" in the first
sentence, the phrase: "and in respect of which a notice of expropriation has not been served on that person
in terms of section 8(1)"
Clause 10(6): Agri SA objects to this clause which shifts the responsibility of ensuring that all unregistered
rights are compensated to the landowner. This cause should be deleted.
7.8 Clause 11: Consequences of expropriation of unregistered rights and
duties of expropriating authority
Sub-clause 5 states as follows:
“(5) If the expropriated owner or expropriated holder knew of the existence of an unregistered right
contemplated in subsection (2) and failed to inform the expropriating authority of the existence thereof, the
expropriated owner or expropriated holder, as the case may be, is liable to the expropriating authority for
any loss incurred in the event of the expropriating authority having to pay compensation for the
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Agri SA comments on the Expropriation Bill, 2020
expropriation of the unregistered right after the date of payment of compensation to the expropriated owner
or expropriated holder, as the case may be.”
The definition of an unregistered right is very wide and quite vague. It may very well be that a landowner
was aware of people utilizing the land for gathering firewood or access to graves but did not know that
these are compensable rights. This provision seems to be placing an unacceptable burden on owners to
know exactly who is exercising what rights on their farms (keeping in mind that some farms are very large)
and knowing which of these rights qualify for compensation upon expropriation. It is important that
landowners know what kind of rights are included in the definition of "unregistered rights" because, if they
omit to inform an expropriating authority of a right which they thought is excluded but later appears to be
included, the financial consequences for them could be harsh. According to the definition, "unregistered
right" means a right in property, including a right to occupy and use land, which is recognized and protected
by law, but is neither registered nor required to be registered. It is assumed, for example, that any rights
which land invaders and "unlawful occupiers" as defined in the Prevention of Unlawful Occupation Act
(PIE) may have to remain on the land until they are evicted by order of a court, are not included. This
could, however, be debatable, and landowners need certainty. Consideration could be given to replacing
the words "including a right to occupy and use land" in the definition of "unregistered right" by the words
"including a registrable real right and a non-registrable form of land tenure". Also, it must be clear from the
wording that the owner knew about the existence of the right and was aware of the fact that the holder of
that right has a right to be compensated.
7.9 Clause 12: Compensation for expropriation
The issue of compensation is of paramount importance to the members of Agri SA. Whilst we acknowledge
that no person should be allowed to unduly benefit from land reform, and that deductions from market
value may be fair in certain cases, we feel quite strongly that no individual landowner should be unduly
penalised for something, which is in the collective national interest. Agri SA and its members harbour a
legitimate concern that landowners may be undercompensated for their property. Agricultural landowners
cannot be treated differently to other landholders or for that matter the holders of other classes of property.
In our view, an approach whereby compensation paid for land is generally substantially below market value
will have dire consequences for investment in and lending to the agricultural sector. If the market value of
farms is driven downwards, this will eventually impact on food prices, as farmers will start to struggle to
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obtain the required production credit. It will also become more difficult for new black farmers to establish
themselves, as they will also struggle to get access to sufficient production credit. Market value plays a
very useful role in practice because of the determinacy and quantification difficulty in establishing
appropriate compensation. This is best illustrated by the practice, which has been adopted by our courts,
namely to first establish market value, as an initial indicator of value, and then determine whether it should
be adjusted in view of the other less quantifiable factors in section 25(3) of the Constitution in order to
arrive at a just and equitable amount [see the court decisions in Khumalo v Potgieter [2000] 2 All SA 456
(LCC); Du Toit v Minister of Transport 2003 (1) SA 586 (C) paras 23—52].
In Du Toit v Minister of Transport 2006 (1) SA 297 (CC) para 35 the majority of the Constitutional Court
followed a comparable approach in deciding whether a compensation award was constitutionally
justifiable: first establish what compensation would be according to the ‘standard' approach and then check
whether it is in line with the other constitutional demands. Market value should of course not be favored at
the expense of the other considerations enumerated in section 25(3) of the Constitution, but we are of the
opinion that it remains an acceptable starting point as remains the only factor listed in section 25(3) that
can be quantified independently from the other considerations.
Agri SA accepts that section 25 of the Constitution is the basis for the calculation of compensation and
that the norm is “just and equitable compensation”. We also subscribe to the principle of “equivalence” as
set out in the FAO report on compulsory acquisition and compensation.12 This principle entails:
“Compensation, whether in financial form or as replacement land or structures, is at the heart of
compulsory acquisition. As a direct result of government action, people lose their homes, their land, and
at times their means of livelihood. Compensation is to repay them for these losses and should be based
on principles of equity and equivalence. The principle of equivalence is crucial to determining
compensation: affected owners and occupants should be neither enriched nor impoverished as a result of
the compulsory acquisition. Financial compensation based on equivalence of only the loss of land rarely
achieves the aim of putting those affected in the same position as they were before the acquisition; the
money paid cannot fully replace what is lost. In some countries, there is legal provision recognising this in
the form of additional compensation to reflect the compulsory nature of the acquisition. In practice, given
that the aim of the acquisition is to support development, there are strong arguments for compensation to
improve the position of those affected wherever possible.”
12
Compulsory acquisition of land and compensation: FAO Land Tenure Studies 10: http://www.fao.org/3/a-i0506e.pdf
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We believe that adherence to the principle of equivalence will result in the most just and equitable outcome
for all parties involved.
Agri SA views land reform as a national priority, and as such should be funded with general taxpayer
money. Individuals belonging to one industry cannot be expected to bear the costs of a national priority.
Landowners, whose land is earmarked for land reform purposes, must be placed in a position to continue
farming elsewhere in a similar manner, should they wish to do so.
It should be clear that compensation paid to holders of unregistered rights is over and above any
compensation paid to the owner and is not to be subtracted from compensation due to the owner.
7.9.1 Clause 12(2)
This provision states that the fact that the property has been taken without the consent of the
expropriated owner or expropriated holder, must not be taken into consideration by the
expropriating authority. There is much to be said for providing, as part of the compensation amount,
a solatium for the trauma caused by the expropriation.
Expropriation without consent is a traumatic experience often causing financial loss, emotional
trauma and suffering and a property owner should be entitled to receive compensation for this
trauma. The concept of a “solatium” as it appears in the Expropriation Act (1975) should therefore
be retained and actual financial loss resulting from the expropriation should also be compensated
for.
In addition, one should not lose sight of the fact that section 25 (3) of the Constitution states that
the compensation “must be just and equitable having regard to all of the relevant circumstances”.
Although section 25 (3) provides some guidance as to which factors should be taken into
consideration by listing the factors in (a) to (e), it does not limit the court’s interpretation by excluding
any other factors. By attempting to exclude the trauma caused by a forced acquisition extra-
constitutionally, the provision’s constitutionality could come into question should a court decide that
it is a relevant consideration in the circumstances as contemplated by section 25 (3) of the
Constitution.
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