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Expropriation Land



By Frans Rautenbach, Advocate – Cape Town.


Hortgro as a member of the Agricultural Business Chamber (Agbiz) made submissions to the Portfolio Committee on Public Works and Infrastructure on the recently published Expropriation Bill. This is a summary of the Agbiz submissions as an aid to Hortgro members.

The Bill makes provision for expropriation at ‘nil’ compensation, in other words, a court can decide that it is just and equitable to award nil compensation for land expropriated in the public interest after considering all relevant circumstances. In most cases, it provides for expropriation with compensation. The submissions deal with both these situations.

General submissions on expropriation at ‘nil’ compensation

Although the Bill provides discretion to decide whether or not nil compensation is justified in certain instances, Agbiz is concerned that provisions relating to expropriation without nil compensation will be seen as a license for the state to offer nil compensation for land, which will mean that owners will have to go to court to argue for compensation.

Internationally accepted reasons to oppose expropriation without compensation

In almost all countries the accepted rule is that owners are to be compensated for their loss if their properties are expropriated.

There are good reasons for that principle:

  • That is firstly so that individual owners do not have to pay for the public interest. It is unfair that one person should pay for benefits enjoyed by the general public.
  • Secondly, businesses would not invest in a country if there is a constant risk of such expropriation.
  • Thirdly, if the state is forced to pay compensation, it would always think twice before taking someone’s property.

Reasons affecting farmers

At the moment, approximately R180 billion Rands’ worth of loans taken by farmers is secured by mortgage bonds over farms. If those farms could simply be taken by the state, all that financial security will be endangered.

What is more, how will farmers be able to take out bank loans if their properties which must secure those loans are not safe? Farmers need credit because of the inherent capital requirements of the sector where income is seasonal and operations are capital intensive. Nil compensation can place access to credit for listed properties in danger.

Agbiz understands the importance of land reform and has worked very hard to help with that. It has developed a plan for private financial institutions together with the government to finance black farmers wishing to acquire land.

Land reform can in any event be done without having to use expropriation without compensation. The government can buy farms under the existing law and has done so in the past. This has almost come to a standstill now, since about 2009.

Specific proposals

Aside from Agbiz’s opposition to the nil compensation provisions, Agbiz supports the Bill as it sets out the procedural checks and balances required to place an owner in an even bargaining position with the state during expropriation. The current, 1975 Act does not contain sufficient checks and balances required to adequately protect an owner or bond holders’ interests when expropriation takes place. A modern Bill is required to regulate the procedure as the Bill regulates the procedure for all expropriation including those done to build infrastructure. The Bill is not aimed at land reform alone. Agbiz makes several specific suggestions to improve the processes in the Bill. The main examples are:

  • Agbiz suggests that farmers or other citizens whose properties have been lawfully expropriated should be given the first right to buy the property back if the state no longer requires it for the original purpose. This will ensure that the owner’s rights can be restored.
  • Certain definitions in the Bill have unintended consequences and should be amended.
  • There is a provision that the Minister must expropriate property on behalf of a state-owned enterprise such as Eskom if it is in the public interest. This can place the Minister in a compromised position. The Minister should have a choice to refuse the expropriation on other grounds such as the available budget to pay compensation.
  • When a property is evaluated, owners who suffer damages as the result of valuers gaining entry for inspections should be better protected.
  • A distinction should be drawn between the value of the property and the compensation due to the owner, after considering all relevant circumstances. The owner should only be obligated to provide details about the property’s value whilst the state should apply the non-quantifiable factors to arrive at an amount of compensation which it deems a fair offer.
  • It is unjustified to award nil compensation where owners have failed to develop the property as there may be good reasons not to develop the property at specific times.
  • Government organs enjoy special protection under the Bill. That is unfair.
  • The Bill refers to land as abandoned where the owner no longer controls it. It is incorrect in law that all such owners are treated as having abandoned their properties as not all loss of control means the owner has abandoned property. An example is where squatters take over the land.
  • The Bill provides for nil compensation where the value of historical state subsidies is more than the value of the land. Historical subsidies will in any event be taken into consideration under the Constitutional provisions.
  • Properties that pose a health risk should not be subject to nil compensation. Instead, the actual costs required to remedy the property should be discounted.
  • At the moment the Bill provides that the state can take possession of the property prior to all disputes on compensation being settled, provided that the state pays the amount it has originally offered. This should only be permitted where the state will be prejudiced as the norm should be to settle compensation prior to possession passing.
  • Certain technical errors about urgent, temporary expropriations in cases of emergency are pointed out.
  • If a property is expropriated for a specific purpose but used for a different, public purpose then the compensation paid to the owner should be adjusted as the purpose affects the compensation.
  • The Bill provides that if procedures are not followed, expropriation will not be invalid unless the error is material. The state cannot decide whether an error is material as this would amount to it being the player and referee. Non-compliance with any procedure should only be allowed if both parties agree or if a court certifies that it is not material.

Also, read EWC: Agriculture has strategic value.

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