Legal Talk – SA Land Expropriation Draft Bill Bound to Spark Lively Debate

Public comment on the national government’s recently-drafted Land Expropriation Bill is likely to spark lively debate, much of it heated and emotive.

The Bill has been drafted pursuant to enabling powers under Section 9 of South African Constitution, Act 108 of 1996.

To date, government has conducted land acquisition and restitution claims based on the “willing-buyer, willing-seller” model, which, as stated in the Bill, originated from the compensation scheme provided for under the Expropriation Act, No.63 of 1975.

Under the 1975 Act (Section 12), the compensation calculation formula is based on the market value of land, actual losses, and solatium (solace money). The overall calculation has resulted in “inflated” sums the state was unwilling to pay as a buyer, a lack of agreement that has stalled negotiations and hindered land restitution progress.

A frustrated chief land claims commissioner, Thozi Gwanya, said that the model was delaying government’s land reform target to transfer a third of white-owned lands to new black farmers by 2014. Some negotiations had extended for as long as two years.

The Bill proposes to change the willing-buyer, willing-seller model as it applies to land restitution on the ground that:

• The 1975 Act predates the Constitution and does not promote its democratic spirit and transformative intent, as it was structured to formalise existing property relations; and
• The 1975 Act’s compensation scheme is inconsistent with Section 25 (3) of the Constitution on property (land inclusive) expropriation and compensation, as it restricts opportunity for balancing the equitable interest between public purpose and the interests of those affected.

Simply put, it placed land owners at a more advantageous position to demand excessive compensation, which frustrates the public interest and purpose.

Be that as it may, there are certain concerns about the draft Bill that demand attention.

Section 25 subsection (2) subparagraphs (a) and (b) provides that:

(2) 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 (emphasis added) by a court.

While the provision in subparagraph (a) is generally not in contention as it encompasses the public interest and purpose to achieve equitable land distribution, the same cannot be said of the interpretation given to subparagraph (b) in the draft Bill.

The draft Bill’s paragraph 32.3 reads: “There is no doubt that compensation lies at the heart of South Africa’s expropriation regime. The Constitution provides that the amount, time and manner of payment of compensation must either be agreed or decided by a court of law. In this scheme, nothing prohibits the Minister from making a determination subject to approval by Court, by way of judicial review or other legal proceedings.”

The proposal to vest determination of compensation in the Minister has created concerns among land-owners.

With examples of arbitrary land seizure from white farmers in neighbouring Zimbabwe, coupled with the declaration by the Land Claims Chief Commissioner that the willing-buyer, willing-seller model will no longer apply to land restitution, these anxieties are understandable.

They are anxieties insinuated in the commentary from Agri SA (the biggest association of white farmers of South Africa) and SAPOA (South African Property Owner’s Association), which expressed displeasure with the general tone of the draft Bill. They also expressed concern with the proposal to vest in the Minister a greater degree of power and right to determine compensation, albeit only minimum compensation, subject to judicial review.

In legal drafting the word “OR” is used to denote an alternative between two possibilities. When applied to the drafting of section 25 (2) (b) of the Constitution, the Court has the option either to “decide or approve” the compensation.

The only other provision covering the determination of compensation is in the first part of section 25 (2) (b), which provides for compensation amount, time and manner of payment to be agreed to by the parties affected. In this case the parties are the government and the land owners.

Even under the 1975 Act, when agreement could not be reached on compensation, the matter was referred to the High Court for determination. This was also within the ambit of section 25 (3) providing for the relevant circumstances to guide the courts in its determination of what is just and equitable.

The legislative power under Section 9 is not to be applied to circumvent the role of the Court in interpreting and determining Constitutional matters. It is possible that the determination of compensation by the Minister will not satisfy the reasonability test under section 36 of the Constitution to justify limitation of right of due access to the Courts.

Section 25 (3) additionally provides that the compensation must reflect an equitable balance between the public interest and the interest of those affected having regard to all relevant circumstances, including the market value of the property, the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the properties, and other listed circumstances.

The requirement that an equitable balance between the two parties’ interest be sought is a good indication that the Constitutions seeks to protect the interests of the parties equally.

Confirming a decision of the South African Land Claims Court on the interpretation of 25 (3) (a) to (e) circumstances, the Supreme Court of Appeal, in Abrahams V Allie 2004 (4) SA 535 (SCA), endorsed the approach that the equitable balance be achieved by first determining the market value that would be added to or subtracted from consideration of the other relevant factors before determining the compensation amount.

The relevant circumstance listed in section 25 (3) subparagraphs (a) to (e) is open ended – a big plus because it accommodates all the relevant circumstances essential to the interests of both parties on compensation.

Thus:

• Farm land owners can argue their claim of market value and actual losses as previously argued under the 1975 Act;
• The state could argue relevant factors such as costs of housing subsidies to land claimants to reduce excessive claims;
• All relevant facts as proved will be submitted for the courts’ consideration on a case by case basis.

We submit that this process should negate the possibility of an arbitrary “minimum” compensation surviving the scrutiny of the courts.

Courtesy: Yetunde Onagoruwa and Ronel Straughan from Bowman Gilfillan

Yetunde Onagoruwa is an intern and Ronel Straughan a director in Bowman Gilfillan’s Cape Town Real Estate & Conveyancing Department