Expropriation without compensation is coming - what you need to know
- Parliament is currently hearing public comments on South Africa’s Expropriation Bill.
- It will for the first time allow the expropriation of property without compensation.
- But this can only happen in select circumstances.
- For more articles, go to www.businessinsider.co.za.
Together, they will for the first time allow expropriation without compensation in South Africa.
The Portfolio Committee on Public Works and Infrastructure is currently conducting virtual public hearings on the Expropriation Bill, and over the past week a number of bodies – including the Minerals Council, Business Unity South Africa and various agricultural bodies have opposed it, arguing that it would undermine investor confidence. Still, the bill – perhaps with amendments - is expected to be adopted by parliament
Here’s what will change
As in many other countries, expropriation has been part of South African law for decades. The state has expropriated land to build roads, hospitals, and even for the Gautrain.
But the new changes will allow the state not to pay for land, to allow expropriation for land reform in particular.
The bill says property can only be confiscated when it serves a public purpose or is in the public interest. “It may not be exercised unless the expropriating authority has without success attempted to reach an agreement with the owner or holder of a right in property for the acquisition thereof on reasonable terms.”
The new law also states that the property owners must receive a “just and equitable” amount for the property – “reflecting an equitable balance between the public interest and the interests of the expropriated owner”. The amount that the owner is entitled to must take into account a long list of determinants, including its market value.
But it also makes provision for property to be taken without payment.
When will government be able to take land without paying for it?
The bill states that it “may be just and equitable for nil compensation to be paid where land is expropriated in the public interest” in these circumstances (but not limited to them):
- where the land is not being used and the owner’s main purpose is not to develop the land or use it to generate income, but to benefit from the increase of its market value.
- where a government institution holds land – which it got for free – and it’s not using the land for its “core functions” and is not reasonably likely to require the land for its future activities in that regard
- where an owner has abandoned the land by “failing to exercise control over it”
- where the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land; and
- when the nature or condition of the property poses a health, safety or physical risk to persons or other property.
How will the process work?
First, an “expropriating authority” must determine how suitable the property is for the purpose of the expropriation and it must establish the extent of the rights to the property.
Then, the authority must serve a notice of intention to expropriate on the owner. The owner must state an amount they think is “just and equitable compensation”, and can also lodge an objection to the expropriation.
If the EA proceeds with the expropriation, it must serve a further notice, which must include the amount of compensation offered or agreed to, and a statement that the owner may institute court proceedings to dispute the amount of compensation within 180 days of the date of expropriation.
If the EA and the owner or holder cannot reach agreement on the amount of compensation, they may attempt to settle the dispute by mediation or by approaching a court. “However, property can be expropriated, and ownership transferred to the EA, before an agreement on compensation has been reached or a court has made a determination on compensation,” says Mabasa.
If the property falls into the “nil compensation” categories listed in the previous section, the authority can decide not to pay anything for the land.
It should be noted that nil compensation will only be applicable to land expropriated for land reform, and not to expropriations in general, says Bulelwa Mabasa, at Werksmans, and a member of the Presidential Advisory Panel on Land Reform.
“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,” says Mabasa.
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