To compensate or not to compensate? Why the Expropriation Bill is probably unconstitutional

Land reform and expropriation without compensation have long been the subject of heated political debate and public discourse in South Africa. Last week Wednesday, submissions made by AfriForum’s Ernst Roets regarding the recently introduced Expropriation Bill B3-2020 (“the Bill“) drew the ire of Floyd Shivambu and Mbuyiseni Ndlozi.

Addressing the Ad Hoc Committee Amending Section 25 of the Constitution (“Committee“), Roets claimed that Parliament is alienated from the realities on the ground and the priorities of ordinary people in calling for expropriation without compensation (“EWC“). Free State Agriculture similarly cautioned that EWC will lead to widespread instability and job losses. BLF’s Andile Mngxitama, on the other hand, labelled the Bill as fraudulent and prophesied that the Bill would fail to return white-owned land to black South Africans. Mngxitama may in fact have a point – contrary to the claims of Roets and others, my opinion is that the Bill, and the concept of EWC in general, will be of limited use in the land reform project and will not lead to the wholesale expropriation of property – but that is a topic for another time. 

But, more fundamentally, it is my opinion that the Bill in its current form is unconstitutional in at least three aspects, namely that it violates the principle of constitutional supremacy; it deviates from the compensation-based nature of section 25; and it is far too vague with regard to EWC.

More on that below, but I pause here for a moment to clarify what an expropriation is. An expropriation is the unilateral acquisition of property by the state. Historically, most jurisdictions globally have stipulated two requirements for an expropriation, namely that there must be compensation and that there must be a public purpose for the expropriation. In South Africa, expropriations can also occur for land reform purposes by virtue of section 25(4) of the Constitution. Currently, expropriations are governed by the Expropriation Act No. 63 of 1975 (“the 1975 Act”) which provides the “willing buyer, willing seller” principle which essentially prescribes that the state must pay market value for all expropriations. The Constitution, however, provides that compensation must reflect an “equitable balance” between the public interest and the owner’s interest, and prescribes other factors that must be taken into account apart from market value. This, too, is a topic for another day – suffice it to say that the state has been attempting to move away from the willing buyer, willing seller principle for some time now. However, our courts have often clung to their old habits and enforced pre-constitutional principles instead of embracing the transformative potential of section 25(3). This has been illustrated by Johan Lorenzen in his incisive criticism of the Land Claims Court’s recent judgment in the MalaMala case.

CONSTITUTIONAL SUPREMACY

The Bill will repeal the 1975 Act and harmonise the legislative compensation framework with the Constitution, which would be a welcome development, given that we have for the past 25 years lived with an Act that is inconsistent with the constitutional property clause. But if that is the case, why is the ANC seemingly in a rush to push this Bill through before the Constitution has been amended? The Committee has recently recommenced its public hearings and has once again asked Parliament for an extension, this time until 21 May 2021. The process to amend section 25 of the Constitution is therefore still underway and there is no way to be sure what the Draft Constitution Amendment Bill will look like in its final form. By introducing the Bill before finalising the process of amending section 25, the state has put the cart before the horse

The principle of constitutional supremacy dictates that all legislation must flow from the Constitution and must be consistent with it. If the amendment is ultimately successful and the amended text of section 25 differs substantially enough from the present section 25, it is conceivable that the Bill will be inconsistent with the amended text of the Constitution. If that were to happen, the Bill will need to be amended again. Given that we have, for the past 24 years, had an Act that is inconsistent with the spirit and objects of the Constitution, it seems premature to publish a new Bill while the constitutional amendment is still pending.

COMPENSATION

To make matters worse, the Bill may also be inconsistent with the current section 25. In its current state, section 25(2)(b) specifically provides that property may only be expropriated “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 and approved by a court.” As I have mentioned above, section 25(3) does not necessarily envision the payment of market-value compensation, but it does require an “equitable balance”. 

There has been a long-standing academic and political debate about the meaning of “just and equitable” compensation and whether section 25 implicitly permits nil compensation. In 2018, the ANC announced that it is of the view that such an interpretation is permissible – the Bill, and the impending constitutional amendment, therefore aim to “make explicit what is implicit” in the Constitution. Whatever interpretation one is aligned with, there is certainly no academic consensus in this regard. If the Bill is passed, there will inevitably be a flurry of challenges regarding its constitutionality. The Bill cannot pass constitutional scrutiny until the Constitution has been amended to allow EWC. But for that to happen, the Bill will need to be passed by a vote of at least two thirds of the National Assembly and at least six provinces. The ANC cannot accomplish this on its own, and it is doubtful whether the EFF will vote for the Bill to be passed, or indeed, whether the ANC will even vote unanimously in favour of the Bill.

 VAGUENESS

My final point is that the Bill is far too vague when it comes to EWC. Section 12(3) of the Bill prescribes five circumstances in which it may be just and equitable for nil compensation to be paid, namely where –

  1. land is held for speculative purposes;
  2. land is held by an organ of state and it not being used for its core functions;
  3. land has been abandoned;
  4. the market value of land is less than the state investment or subsidy in the acquisition of the land; or
  5.  the land poses a health, safety or physical risk.

Some authors have argued that the non-exhaustive nature of this section will allow the state to take any land for free. While this is an extreme view, it is clear that the list is suggestive and not peremptory, meaning that even if one or more of the requirements are met, it is not a foregone conclusion that EWC will be just and equitable. Because the section provides that EWC may be just and equitable, a court will always have a discretion to determine whether or not EWC should apply: the list therefore is a guideline which suggests which kind of circumstances might attract EWC. It has also been claimed that EWC will apply to any property, not just land. This is false. The Bill is clear that EWC will only apply “where land is expropriated in the public interest”. In other words, where land is expropriated in the public interest (such as for land reform) nil compensation may be just and equitable. EWC cannot apply, in my view, to property other than land.

However, other circumstances may also justify nil compensation. In fact the phrasing of this section creates a situation where, instead of limiting the scope of nil compensation, being a deviation from the compensation-based nature of section 25, it is so vague that its precepts may in theory be stretched to apply to any other circumstances in which it is just and equitable to do so. Section 12(3) therefore creates legal uncertainty which will most likely only be settled through crystallisation of judicial interpretation. Björn Hoops argues that the section engenders uncertainty and introduces an excessively wide judicial discretion, adding that the uncertainty might be exploited by the state until such time as a body of jurisprudence has been created by precedent. 

In my view, the Bill may be unconstitutional for three reasons, namely that it violates the principle of constitutional supremacy; it deviates from the compensation-based nature of section 25; and it is vague particularly with regards to nil compensation. One wonders why the state seems to be pushing so hard for EWC when in fact Aunty Patty herself has stated that the Bill is not a silver bullet. Neither should we take lightly any constitutional entrenchment of EWC. Expropriation is but one tool in the state’s belt and when it comes to land reform, we should neither envision that the Bill will magically solve all the state’s problems, nor make alarmist claims that this instrument of disaster will enable the state to steal property from unsuspecting landowners at will.

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