Adv Johan Kruger, Director in the FW De Klerk Centre for Constitutional Rights, writes;
Early this year, the Department of Public Works (DPW) published the latest version of the draft Expropriation Bill for public comment. The draft Bill is to a certain extent an improvement on its controversial 2008-version. For one, the Bill at least no longer seeks to circumvent the requirement that compensation for expropriated property must, if no agreement can be reached between the parties, be decided or approved by a court. According to the Bill’s Explanatory Memorandum, its purpose is to “align the Expropriation Act with the Constitution and to provide a common framework to guide the processes and procedures for expropriation of property by organs of state”. In principle, this objective is noble. However, the new Bill is arguably so loosely formulated that its enactment might result de facto in a severe erosion of property rights as protected in terms of section 25 of the Constitution.
The question of property rights was one of the most closely contested issues during the constitutional negotiations. The result of these negotiations is today reflected in the provisions of section 25 of the Constitution. The latter was carefully formulated to take into account the core right to own property on the one hand, and the need for the State to be able to expropriate property for a public purpose or in the public interest on the other. Section 25 also carefully includes the provision that any expropriation process must be “just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances”. Moreover, it requires compensation in lieu of expropriation to be agreed upon by those affected; or to be decided or approved by a court.
The provisions of section 25 differ from the previous expropriation process by permitting expropriation not only for a public purpose – but also in the public interest. The latter, by virtue of section 25, specifically includes “the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources” and states that “property is not limited to land”.
It is well understood that the purpose of the draft Bill is to give effect, in context of the transformational nature of the Constitution, to section 25 of the Constitution. Nevertheless, the draft Bill raises a number of concerns which the Centre for Constitutional Rights (CFCR) brought to the attention of the DPW in a recent concise submission. For instance, although in line with section 25 of the Constitution, the inclusion of “public interest” as grounds for expropriation – without properly and clearly defining the meaning of this concept – may result in unintended and negative consequences for property owners and holders when left to subjective interpretation by the Minister or other expropriating authorities.
The Bill’s definition of “public interest” incorporates the wording of the Constitution which determines that for the purpose of section 25, the “public interest includes the nation’s commitment to land reform, and reforms to bring about equitable access to all South Africa’s natural resources”. However, the drafters then slipped in a wide-ranging and potentially contentious extension to the definition by adding the words “and other related reforms in order to redress the results of past racial discriminatory laws or practices”. The meaning of yet-to-be-defined “other related reforms” is vague and indefinite, leaving it to the Minister to decide. As outrageous as it may sound, it could quite easily be the basis for justifying expropriation of virtually any property – including shares, companies and even homes – owned by any person or entity previously advantaged or obliquely linked in some way or the other to “past racial discriminatory laws and practices”. This is clearly untenable in more than one way.
The Bill seeks to implement relevant parts of section 25 and therefore needs to be reasonable, justifiable and precise. As such, a much more exact definition of “public interest” is essential to ensure that the nature of any deprivation of property does not conflict with the foundational and peremptory requirement that “no law may permit arbitrary deprivation of property” – neither directly, nor by implication or unintended consequences.
The DPW quite correctly contends that expropriation is an administrative act subject to just administrative action – thus requiring it to be reasonably justifiable when property is expropriated in the “public interest”. However, an administrative act can for all practical purposes only be reviewed once the act has been completed, leaving the expropriated owner with little recourse but to challenge the justifiability of the decision after the fact.
In considering a more precise definition of the “public interest” the drafters of the Bill would do well to note that experience throughout the world and throughout history has incontrovertibly shown that secure property rights are essential for economic stability, growth and well-being of any society. They are indisputably a core element of the “public interest”.
Furthermore, the way in which compensation is determined, when it is paid and when property can be expropriated prior to full compensation being paid to the owner, raise additional concerns. In terms of the Bill, possession of expropriated property can take place before compensation has actually been paid to the expropriated owner. In addition, compensation only becomes payable when the amount has been agreed by the state or decided by the courts. Should expropriated property owners decide to challenge the compensation offered by an expropriating authority, they could find themselves deprived of their property and any income that it might produce pending the decision on compensation awarded by a court. Since this process might take years to complete, expropriated property owners would be under considerable pressure to accept whatever offer the expropriating authority might choose to make.
Finally, although the Constitution determines that for the purpose of section 25, “property is not limited to land”, the definition of property is broad and vague resulting in possible expropriation of all types of property, including land, other immovable property, movable property, shares and mining rights. The Bill also extends far-reaching powers to initiate expropriation not only to the national government but to provincial governments, municipalities or organs of state “empowered by a law of general application”.
In Port Elizabeth Municipality v Various Occupiers, the Constitutional Court formulated some guidelines for the interpretation of section 25 in context of historical discriminatory land legislation and the new constitutional dispensation within which conflicting rights have to be balanced. According to the court, the starting and ending point of the analysis of section 25 “must be to affirm the values of human dignity, equality and freedom”. In the context of both “protecting existing private property rights as well as serving the public interest”, the proposed Expropriation Bill has to carefully balance the right to private property ownership with the right to infringe upon the aforementioned right, as provided for in section 25 – striking a proportionate balance between these two opposing rights. This balance cannot be achieved without a much more precise definition of the “public interest”; a much more restrained definition of what constitutes property; and a much clearer idea of the role and powers of expropriating authorities.
As the draft Bill now stands, an expropriating authority at any level of government would be able to initiate expropriation proceedings related to any property of any person if they believe, in their arbitrary view that it would be in the “public interest” to do so. They could take possession of the property with immediate effect after having given notice and before payment of any offer of compensation that they might think appropriate. This would result in the expropriated party having to wait until a court determines fair and equitable compensation – which might take years to achieve.
Following the initial public comments, the draft Bill is again to be approved by the Cabinet before it will be formally introduced in Parliament. It is, however, quite likely that it will tabled without any substantial changes. The parliamentary process will, nevertheless, certainly present a further opportunity for concerned citizens, civil society and businesses to make comments, hopefully to be followed by public hearings and a frank national discussion on the matter.