Submission on the Expropriation Bill
2015
Profs. Ruth Hall and Ben Cousins
Institute for Poverty, Land and Agrarian Studies
University of the Western Cape
Parliamentary hearings
Portfolio Committee on Public Works
4 August 2015
Why a new law?
1. Bring law into line with Constitution, especially
in relation to payment of compensation
2. Remove the ‘veto power’ of land owners in
relation to land reform
3. Ensure consistency in expropriation undertaken
by different arms of government
WE NEED A NEW EXPROPRIATION ACT
BUT IT WILL NOT RESOLVE THE PROBLEMS FACED
BY LAND REFORM
Landowner’s veto
• Absence of expropriation as a credible threat has
impeded the land reform process, and in
particular the resolution of land restitution claims
• Land claims cannot proceed where current
owners refuse to sell at prices offered by the
state
• This effectively privileges the property rights of
current owners over the property rights of the
dispossessed
• To be a credible threat it must have been used to
good effect in the past
Compensation in the Constitution
The Constitution sets out criteria for ‘just and equitable’
compensation, having regard to all relevant
circumstances, including:
(a) the current use of the property;
(b) the history of the acquisition and use of the property;
(c) the market value of the property;
(d) the extent of direct state investment and subsidy in the
acquisition and beneficial capital improvement of the
property; and
(e) the purpose of the expropriation
Current policies
• Policy and procedures for expropriation of
land in terms of Provision of Land and
Assistance Act (126) and Extension of Security
of Tenure Act were adopted in 1999
• Policy sets out an approach to determining
just and equitable compensation
• Draws on a formula developed by Judge
Antonie Gildenhuys of the Land Claims Court
Gildenhuys formula
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Compensation = C – ko(B-A) – E1*k1 – E2*k2 – E3*k3 …
where
C is the present day market value of the property,
k0 is the inflation factor related to land acquisition, based
on the CPI
B is the market value of the property at the time of
acquisition,
A is the actual price paid at the time of acquisition,
E1, E2, E3, etc., are the historical values of infrastructure and
interest rate subsidies received, and
k1, k2, k3, etc., are the corresponding inflation factors for
these subsidies, based on the CPI.
Critique
• The formula discounts for past subsidies and
other support received, but does not address the
other three criteria cited in ss 25(3)(a) (b) and (e)
of the Constitution
• These are not easily reducible to a value in a
formula
• Rather, “having regard to all relevant
circumstances”, these are to be determined case
by case
• But how exactly? This remains unclear
Significance
• Expropriation may be used more often in the
future
• The state will aim to use these criteria in
negotiated sales as well – not only where
properties are to be expropriated
• (NB: National Development Plan proposes
that the costs of doing land reform be shared
between state and landowners)
Significance
• Office of a Valuer-General must address “the
absence of a nationwide comprehensive,
reliable hub for the assessment of property
values in the country”
• OVG will :
– provide of fair and consistent land values for rating and taxing
– determine financial compensation following expropriation
under the Expropriation Act provide specialist valuation and
property advice to government
– set standards and monitor service delivery
– undertake market and sales analysis, & set guidelines, norms
and standards to validate integrity of valuation data
– create and maintain a data-base on valuations
The need for clarity on ‘just and
equitable’ compensation
• Lack of clear policy, guideline or formula is likely
to cause a bottleneck of court cases
• Urgent need to operationalize the criteria in
different types of circumstances
• A practical approach should be widely debated
and, once finalised, widely publicised
• The more predictable the process of
expropriation, the fewer court challenges – i.e. in
the interests of everyone: claimants, landowners
and the state
• Would make land reform more efficient,
transparent, equitable and predictable
Will expropriation speed up land
reform?
• ‘The willing buyer–willing seller has frustrated efforts
to fast-track land reform, distorted the market, made
land price negotiations excruciatingly prolonged and
increasingly making land reform financially untenable
for the state’ (Minister Nkwinti 2012)
• ‘Government will now pursue the ‘just and equitable’
principle for compensation, as set out in the
Constitution instead of the ‘willing buyer, willing seller’
principle, which forces the state to pay more for land
than the actual value’ (President Zuma 2013)
• The key question: how much cheaper will expropriation
be?
Michael Aliber’s critique (2015)
• If expropriation reduces the expense of buying
a hectare of land for land reform by 10%, a
given budget will be able to acquire 11% more
hectares
• If effective price per hectare reduced by 50%,
then 100% more hectares can be purchased
• If effective prices are cut by 80%, the
‘purchasing power’ of a given budget
increases by 500%
Michael Aliber’s critique (2015)
• DRDLR has a choice: apply just and equitable
compensation to pursue modest cost savings, in
which case it will not accelerate land reform
much, depending on the extra administrative
burdens of both performing expropriations and
dealing with court challenges
• OR it can seek more substantial cost savings,
which would be likely to prompt a relatively small
number of conspicuous court cases, which, once
again, would barely accelerate the delivery of
land reform
• Is there a rationale for expropriation for land
reform?
Michael Aliber’s critique (2015)
• Distinguish restitution from redistribution
• In restitution, current owners of claimed farms
have a qualified monopoly over this land;
negotiations are skewed in favour of the
owner, who can hold the deal to ransom
• Not always, but too often, the state has paid
too much for this land
• A clear rationale for expropriation is to help
break deadlocks over price, presenting a
credible threat to land owners who attempt to
veto a land claim
Michael Aliber’s critique (2015)
• In redistribution, for every such project, between
2000 and 2008, there were 25 farm properties
transacted in the market
• In 2006–08, redistribution land was acquired at
same price per hectare as market average,
whereas restitution prices were almost 3x greater
• In part because land under a restitution claim is
more likely to be actively used
• Conclusion: expropriation needed in restitution;
needs to be used as part of wider strategy in
redistribution, but without total reliance on it.
Michael Aliber’s critique (2015)
• Only two possible ways to significantly accelerate
land reform: (a) seize or expropriate white-owned
land with little or no compensation, which is
unilkely at present,
• or (b) significantly increase the government
budget for land reform
• Current budget = 0.4% of total (1/34th of what
capital infrastructure budget)
• Whether and how to use WB/WS is important,
but in relative terms it’s a detail
Is the Bill constitutional?
• Yes, for the most part, BUT:
(a) It does not provide for a land owner to go to
court to challenge the validity (constitutionality)
of an expropriation, only to determine the
amount of compensation
(b) Need to address how it will affect communal
land, where people have (informal) rights to
land that sometimes has minerals underneath it,
who are at risk of being deprived of rights to
compensation (see LRC submission)