BULELWA MABASA: Expropriation Act deconstructed and demystified

The new Expropriation Act, signed into law by President Cyril Ramaphosa on January 23, comes 50 years after the promulgation of the old expropriation legislation of 1975.

The 1975 act was used to acquire property solely for the public purpose, examples being the construction of public infrastructure such as state clinics, state schools, laying power lines and, more recently, the construction of the Gautrain.

Expropriation is a tool used by governments across the globe to acquire private property for public use, but intrinsic in the legal definition of expropriation is a requirement for compensation to be paid.

In other words, expropriation is inextricably linked with compensation, though the amount and methodology of calculating compensation differs in different jurisdictions. Some therefore argue that the concept of expropriation without compensation is a legal absurdity. 

The 1975 act provided for market value compensation commonly referred to “willing buyer, willing seller”. In contrast, the new Expropriation Act makes provision for “just and equitable” compensation, a concept that was introduced to our law 29 years ago when the constitution was promulgated.

The concept is provided for in section 25(3) of the constitution, which lists factors to be taken into account in calculating just and equitable compensation. Between 1975 and now SA has been expropriating using a financial model that was at odds with this constitution. The Expropriation Act corrects this situation.

Factors that must be taken into account in the calculation of just and equitable compensation are the use of the property, the history of its acquisition, improvements made to the property, if there was any state investment made on the property and the purpose of the expropriation.

The outcome of the application of the just and equitable method of calculation is based on the facts of each case. While it may, in theory, be possible to arrive at nil compensation, this would be in only extremely rare circumstances. 

The second important issue that arises from the promulgation of the Expropriation Act is the inclusion of a state’s powers that enable it to acquire property not only for a public purpose, but also in the public interest.

The public interest is defined in the constitution as the nation’s commitment to land reform. This means the state may now use its existing expropriation powers to make land available so citizens can gain access to land for land reform purposes. The inclusion of land reform objectives in the Expropriation Act aligns with section 25 of the constitution.

Since 1996 the constitution has mandated a model of equitable balance, whereby the public interest and the interest of the landowner must be balanced. In other words, if after consideration of all relevant factors it would be just and equitable to pay less than market value for an expropriated property, the constitution not only justifies but mandates doing so.

What does the Expropriation Act say about expropriation without compensation?

The act may be interpreted to go further than the constitution by expressly stating that expropriation may be nil in certain circumstances. As such, the Expropriation Act expressly introduces the concept of expropriation without compensation to our law.

A few caveats should be noted. Expropriation without compensation applies only to land, as opposed to other forms of property such as mining rights, intellectual property and movable property. The Expropriation Act does not contain a special definition for “land”; this is in contrast to the constitution, which provides that property is not limited to land.

Expropriation without compensation applies only where land is expropriated in the public interest, as opposed to for a public purpose. This suggests that expropriation without compensation will be applicable mainly (perhaps only) to expropriations for land reform purposes, and expropriations in the context of access to natural resources such as minerals and water. Again, in the latter contexts the only form of property that can conceivably be expropriated without compensation is land.

Section 12(3) of the act lists four circumstances in which it may be just and equitable for expropriation without compensation to occur:

• Where the land is held for speculative purposes and is not being used by the owner.
• Where the land is held by an organ of state that is not using it for its core functions, that organ of state is not likely to require the land for its future activities and the land was  acquired for no consideration.
• Where an owner has abandoned the land by failing to exercise control over it despite being reasonably capable of doing so.
• 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. 

These particular circumstances may justify expropriation without compensation, but must be considered in light of all relevant circumstances, which would no doubt include the factors in section 25(3), as mentioned above. 

The Expropriation Act vests the power to expropriate in the minister of public works, currently the DA’s Dean Macpherson, who has already indicated that “no expropriation without compensation of private property will happen on my watch”. 

While the act vests expropriation powers with the public works ministry, other pieces of legislation such as the Mineral & Petroleum Resources Development Act of 2002 and the Restitution of Land Rights Act of 1994 also vest this power with the ministers of mineral resources and land reform & rural development. The Expropriation Act also contemplates that an expropriating authority could be another organ of state.

The constitutionality of the Expropriation Act is contested. Section 25(2) of the constitution provides that property may only be expropriated for a public purpose or in the public interest and must be subject to compensation, which must be agreed between those affected, or must be decided or approved by a court.

On December 7 2021 the Constitution Eighteenth Amendment Bill, which aimed to amend this provision of the constitution to reflect that compensation could be nil, failed to pass in the National Assembly. Some commentators and academics are of the view that the constitution implicitly recognises that it would in some circumstances be just and equitable for compensation to be nil. Others argue that compensation is an integral component of expropriations, and that to expropriate property without any compensation is more analogous to a confiscation. 

This question is by no means clear, and it is likely that the Expropriation Act will be challenged on its commencement. Section 31 of the act provides that the law will come into operation not on the date of presidential assent, but rather on a date determined by the president by proclamation in the Government Gazette.

• Mabasa is director and head of land reform at Werksmans Attorneys.