Expropriation Without Compensation Not As Simple As It Sounds

People need access to land – the disparity must be addressed. But in 23 years the state hasn't used constitutional powers it already has to fix land reform.
Siphiwe Sibeko/ Reuters

Okay; I will move out of holiday mode for a short moment and talk expropriation.

Also see this as a very short introduction to the law of property: acquisition of property.

In acquiring land, there are two main ways a state can proceed. One is by buying the land, and the other is by expropriating it.

When the state buys land, it is done via negotiation in terms of contract law. Parties will negotiate the price and conditions –– and depending on the power of the parties, the transaction can either favour one party or be fairly equal.

Once the terms of the contract are negotiated, the contract is signed and the land transfers to the state at registration.

Most states also have the power to expropriate property. This is necessary, for instance, for building infrastructure. A project such as building a road cannot be frustrated because one owner is holding on to their property for a ridiculous price –– we see the result in those pictures of a solitary house in the middle of the road.

However, expropriation is a process based on legislation and driven by legislation.

Legislation usually ensures that the state does not overreach its power -- that the expropriation is done for a reason that benefits the whole public (because compensation is paid with our taxes), and also that the person expropriated does not unjustifiably carry a burden that the whole nation should be carrying (by providing compensation for the loss of property).

With expropriation, the land transfers on the date of the notice of expropriation that the state serves on the landowner.

In South Africa, we use the 1975 Act for Expropriation. In terms of this act, the state must pay market value for the property. Market value is then determined by looking at what a willing buyer would pay a willing seller.

But –– we also have a constitution, and in terms of the SA Constitution, the compensation must be "just and equitable", by taking into account a non-closed list of factors (of which market value is one).

In terms of interpretation, the 1975 Act needs to be interpreted in light of the Constitution (if it can be). This means that willing-buyer-willing-seller method of determining the compensation amount is no longer paramount (in theory), but that the state must determine what is "just and equitable".

My suggestion is that conversations about compensation on expropriation should also include clear guidelines on how the state will determine who gets what land.

The question (relating back to calls for "expropriation without compensation" here) then becomes whether zero compensation can ever be "just and equitable".

What is fairly clear, is that market value is not per se the only "just and equitable" amount -- especially if you take into account our history of land (that we cannot agree upon, it seems).

Now, let's talk about what has happened so far in cases of acquiring land for land reform. The ANC for a very long time had a policy of acquiring land through contract -- the so-(confusing)-called willing-buyer-willing-seller principle. This meant that the parties negotiated prices -- and there are many anecdotal tales of owners who "just could not refuse the good offer" from the state.

I would estimate that about 98 percent of land for land reform purposes was transferred in this way. In the few cases that I could find of expropriation (and to find information on this is difficult), the state expropriated and paid market-value compensation.

In fact, just weeks before the Constitutional Court was able to give us guidance on the interpretation of section 25 (that I am 98 percent sure would not have been "market value") in an expropriation case, the state settled the case out of court... for, guess what? Market value.

What this means, is that the state thus far has not properly utilised section 25 at all. In 23 years the state has hardly ever used its expropriation powers for land reform, and when it has, it did not stretch section 25 to its logical limit.

So why, now, do they want to change an unused provision? What guarantee do we have that they will indeed utilise the provision, once it is there?

I think most people will agree that people need access to land and that the disparity in the ownership of land should be addressed. We might differ on how this needs to take place.

My suggestion is that conversations about compensation on expropriation should include clear guidelines on how the state will determine who gets what land –– we already sit with outstanding restitution claims that are 20 years old, because of overlapping claims –– and at the same time, consider the consequences of no compensation.

The studies are there; ways of utilising the property clause are there – but it seems the political will is not.

One example: if there is no compensation and there is a mortgage on the property, how will that mortgage be dealt with at the time of expropriation?

In theory, the banks will still hold the now ex-owner liable for the mortgage. But if that ex-owner simply refuses to pay, the bank loses, and if many ex-owners refuse, the banking system could collapse –– triggering disastrous hyperinflation.

These are complicated matters, further complicated by a delay in land reform for which the ruling party should shoulder a great deal of the blame: the studies are there; ways of utilising the property clause are there –– but it seems the political will is not.

So although "expropriation without compensation" might sound like a simple solution, things are hardly ever as simple as they seem.