Key take-aways of the Expropriation Bill, 2020

Another step was taken in the South African land reform debate with the publishing of the Expropriation Bill, 2020[1] (“the Bill”) in the Government Gazette on 9 October 2020. The Bill will shortly be introduced in the National Assembly to be debated for adoption in the normal Parliamentary process.

The Bill essentially provides for 1) the expropriation of property for a public purpose or in the public interest; 2) certain instance where expropriation with nil (without) compensation may be appropriate in the public interest (which has been the more controversial part of the land reform debate over the last few years); and 3) matters connected to the Bill.

The purpose of this bulletin is to give some background to and give some context to the Bill and to highlight some key take-aways of the relevant and more controversial provisions of the Bill.

Background and Context

It is firstly important to note that the introduction of the Bill is a separate process than the review[2] by the Constitutional Review Committee of Section 25 of the Constitution[3] to provide for nil compensation. This review process will seemingly continue. 

Arguably, the fact that the Bill proposes that nil compensation for expropriation should apply in certain circumstances, may support the view that nothing in the current wording of Section 25 prohibits nil compensation.  It could therefore be questioned if a review of Section 25 would indeed be necessary if the Bill is adopted in its current form.

Secondly, the current Expropriation Act, 1975[4] is completely outdated and predates the Constitution.  The Bill was initially published for comment on 21 December 2018 and the current version was published following wide-ranging submissions from amongst others organized agriculture, commerce and industry, the financial sector, the legal fraternity, the property industry and the public.

It is important to note that the Bill is not only aligned with Section 25 of the Constitution but also with other constitutional principles of equality and just administration. This will all lead to greater certainty to all affected persons and institutions.

Within this context, the introduction of the Bill has to be welcomed and is a further milestone in the debate on land reform in South Africa.

Some Key Take-Aways

The major part of the Bill deals with the expropriation process which is fairly technical, consisting of timelines and what all affected parties can and cannot do. We intend to deal with these processes in more detail in future bulletins. 

At this stage the following key take-aways can be highlighted:

• The Bill establishes a uniform expropriation process

The Bill will be the enabling piece of legislation for expropriation by all organs of state, in other words all expropriation by any expropriation authority (for example a state department or municipality) will be subject to the provisions of the Bill. This will not only lead to certainty about what the expropriation process is or should be, but also that all state organs will have to follow due process.

• All expropriating authorities must adhere to a mandatory process

In line with the constitutional principle of just administration, it will be mandatory for an expropriating authority to follow a due process with prescribed timelines. The process broadly speaking includes the following  –

• the expropriating authority must publish an intended or actual expropriation, including the reasons for such an expropriation;

• expropriation notices must be served on persons affected by an intended or actual expropriation; and

• all interested parties must be afforded an opportunity to raise objections and make representations and require such authority to consider the representations prior to the decision to proceed with the expropriation.

It is noteworthy that not only the owner of property but also other stakeholders with an interest in the expropriation, amongst others municipalities, the departments of rural development and land reform, environmental affairs, persons with unregistered rights, must be notified and may take part in the process. 

Within prescribed time periods all such stakeholders will be entitled to make representations to and importantly for an owner to make representations regarding compensation payable for the expropriation.

In terms of Chapter 7 of the Bill it makes provision for urgent expropriation in exceptional circumstances, for example, a disaster or a court order for a period not exceeding 12 months. Any extensions will only be possible if done so by a court.

Determination of Compensation

The payment of compensation for expropriation is most probably the most important aspect for a landowner and can in most instances be the most controversial which could lead to disputes.  In this regard it is noteworthy that the theme of compensation runs like a golden thread through all the provisions in the Bill and Chapter 5 (Sections 12 to 20) deals comprehensively with compensation.

Some key take-aways on Chapter 5 are as follows:

• Section 12(1) is a verbatim repeat of Section 25(3) of the Constitution, which essentially requires that compensation must be just and equitable ‘reflecting an equitable balance between the public interest and the interest of the expropriated owner’, taking into account five circumstances including the current use, history of acquisition, market value, state investment and subsidies paid, and purpose of the expropriation.

• Section 12(3) continues that ‘It may be just and equitable for nil compensation be paid where land is expropriated in the public interest, having regard to all relevant circumstances’.  There are then five circumstances mentioned, essentially where -    

• the land is held not to generate income but to benefit from appreciation of its market value (essentially held for speculative purposes only);

• a state organ acquires land from another state organ for no consideration;

• where the owner has abandoned the land by failing to exercise control over it;

• where the market value is equivalent to or less than state investment or subsidies; and

• when the nature or condition of the property poses a health, safety or physical risk to persons or other property.

As the debate on proposed nil compensation has been the most controversial over the last few years, we have the following observations –

• the possibility that nil compensation is payable is still subject to the entire expropriation process, in other words, an expropriating authority cannot go ahead and expropriate without following the entire process where objections can be made;

• any disputes arising regarding nil compensation will still be subject to Chapter 6, which provides for mediation and determination by a court, in other words a court may well have the final say;

• even though there are five instances listed, this is not an exhaustive list and all relevant circumstances must be taken into account;

• it can be expected that the two most controversial of the listed circumstances will be where the land is held for speculative purposes and the land is abandoned.  As both these are wide in that there are no time limits – would it pose a problem if land is held for less than a year or a few years, or abandoned for a few months?  This will lead to the most disputes and interesting litigation in the future.

A Court Will Have the Final Say

It is noteworthy that Chapter 6 of the Bill provides that the court will have the final say not only on determination of the compensation, but also on any matter relating to the application of the Act. 

Firstly, if an expropriating authority and expropriated owner do not agree on compensation, they may attempt to settle the dispute by mediation ‘which must be initiated and finalised without undue delay by either party’.

If parties are unable to settle the dispute, either party may within 180 days of the date of the notice of expropriation, institute proceedings in a competent court, for the court to decide or approve the amount of just and equitable compensation.

Interestingly, a disputing party may, instead of instituting proceedings himself or herself, request the expropriating authority to institute proceedings within 90 days of notice of expropriation.  This will most probably ensure that owners without sufficient means to institute proceedings are able to gain access to such court proceedings.

A court may extend time periods on good cause shown and in the interest of justice and the onus or burden of proof is not affected by whatever party instituted the proceedings.

In terms of Section 21(7), where a court finds that a provision of the Act has not been complied with, it must make such order as it considers just and equitable having regard to all relevant circumstances.

General Comments

The Bill should be welcomed not only from a constitutional perspective, but also that it will create certainty for property owners and investors.

It is obvious that the more controversial aspects of nil compensation will lead to numerous disputes and litigation. In this regard it must be welcomed that the court will have the final say.

The success of using the Bill on its own as part of the land reform in South Africa may be overly ambitious. The mandatory processes and timelines as contemplated in the Bill, as well as the involvement of other stakeholders like municipalities and state departments, clearly makes the Bill not ideal for urgent reform. 

The effectiveness of the Bill will also finally depend on how it is implemented and used in practice, as well as precedents from court cases.

This is the first of a series of bulletins where we will unpack the provisions of the Bill in more detail.