In 2019, the Parliamentary Advisory Panel on Land Reform advised the President that the old Expropriation Act No. 63 of 1975 (the 1975 Act) was unconstitutional and in conflict with section 25 of the Constitution of South Africa.
On 9 October 2020, the Department of Public Works and Infrastructure published the Expropriation Bill B3-2020. This article aims to provide a brief explanatory summary of the expropriation and compensation processes envisaged in the Bill, as well as the proposed inclusion of nil compensation.
What is an expropriation?
An expropriation is the unilateral acquisition of privately-owned property by the State for a public purpose. Expropriations generally occur for a public purpose such as the construction of a road or power plant, and are accompanied by compensation.
In South Africa, expropriations may also occur for the purpose of land reform and improving access to natural resources. Expropriations have historically been governed by the 1975 Act, which essentially prescribes market value compensation. However, a discrepancy exists between section 25 and the 1975 Act. Scholars have criticised our courts as being hesitant to apply the transformative potential of section 25.
Until recently, the State has followed the “willing buyer, willing seller” approach of calculating compensation, which some have described exacerbating the already limited land reform budget. Amid growing calls for the constitutional property clause to be amended, South Africa has therefore now been presented with the Bill.
How will expropriations work?
The three phases envisaged in the Bill are summarised below.
- Investigation and valuation phase
- Notice and consultation phase
- Expropriation and compensation phase
Traditional land not affected by Section 25 amendment
A meeting of a Ministerial Task Team and National House of Traditional Leaders has resolved that the traditional land would not be affected by the proposed amendment of Section 25 of the Constitution…
9 Jul 2018
Determination of compensation
Compensation for expropriation has long been the subject of heated debate in South Africa. Most legal practitioners still hold the view that compensation should always be at market value. While following a generally conservative approach, our courts have affirmed that compensation is not based only on market value.
The Constitutional Court has taken the view that a determination of compensation should follow a two-stage approach; starting with the market value and then adjusting it downwards or upwards based on the other factors contained in section 25(3) of the Constitution.
Section 12 of the Bill regulates the determination of compensation. This section will effectively repeal the “willing buyer, willing seller” principle of the 1975 Act and replace it with the “just and equitable” principle contemplated in section 25(3) of the Constitution. However, the Bill goes further than the Constitution, prescribing five circumstances in which it may be just and equitable for nil compensation to be paid, namely where:
- land is held for speculative purposes;
- land is held by an organ of state and it not being used for its core functions;
- land has been abandoned;
- the market value of land is less than the state investment or subsidy in the acquisition of the land; or
- the land poses a health, safety or physical risk.
It should be noted that nil compensation will only be applicable to land expropriated for land reform, and not to expropriations in general.
Moreover, section 12(3) is a non-exhaustive guideline as opposed to a restrictive list, which creates a discretion to be exercised by a court. It is conceivable other circumstances may also justify nil compensation, such as where land is occupied by a labour tenant, or where the property had been acquired pursuant to racially discriminatory laws and is now being expropriated for the purpose of land reform.
Comments for the Bill have closed and South Africans are awaiting a possibly amended version.