Expropriation without compensation Part 3

Last week we discussed the issue of compensation when a property is expropriated.  Compensation for expropriated property is governed by Section 12 of the Expropriation Act 13 of 2024, which repealed the old Expropriation Act 63 of 1975.  Please refer back to last week’s post to read up about Section 12 of the Expropriation Act.

Section 12(3) makes provision for expropriation with nil compensation, in other words, expropriation without compensation (EWC).  Section 12(3) says that it may be just and equitable for nil compensation to be paid where land is expropriated in the public interest having regard to all relevant circumstances.

There are some very interesting points to take note of:

1. Firstly, the payment of nil compensation (EWC) would need to be just and equitable. Hence, the expropriation of any property without compensation would need to be just and equitable.  This means that the government will not be able to expropriate property without compensation in a haphazard or arbitrary fashion.
2. Secondly, Section 12(3), only refers to land and not property. This is an important distinction and should allay fears that people may have that their house or intellectual property will be expropriated without compensation.
3. Thirdly, the land to be expropriated must be in the public interest. ‘‘Public interest’’ is defined in the Expropriation Act as including the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources in order to redress the results of past racial discriminatory laws or practices.  It should be clear that only land suitable for land reform purposes would be the subject of Section 12(3).
4. Fourthly, expropriation without compensation would only occur after having regard to the relevant circumstances, which includes:
5. Section 12(3)(a) – 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 appreciation of its market value;
6. Section 12(3)(b) – where an organ of state holds land that it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration;
7. Section 12(3)(c) – notwithstanding registration of ownership in terms of the Deeds Registries Act, 1937 (Act No. 47 of 1937), where an owner has abandoned the land by failing to exercise control over it despite being reasonably capable of doing so;
8. Section 12(3)(d) – 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.

Let us discuss each of these points in turn.

1. Section 12(3)(a) – this may be the only section of the Expropriation Act that causes concern. This section makes provision for land to be expropriated without compensation where the land is not being used and the owner is not going to develop the land or use it to generate income, but rather to benefit from the appreciation of its market value.  It is my belief, that the purpose of this section is to prevent people from buying land to benefit from the increase in market value, as a result of impending expropriation.  As an example, let us say that it becomes known that the State is expropriating land in a particular area and an investor comes along and buys land in the same area for speculative purposes, in the hope that the land will increase in market value.  One may say that that if someone wants to buy land for speculative purposes, then no reason why they shouldn’t do so.  It would appear that this is one of the sections of the Expropriation Act that will face Constitutional Court challenge.
2. Section 12(3)(b) – land being held by an organ of state that will not use that land for any of its core functions may be better served being used for land reform purposes.
3. Section 12(3)(c) – where the owner of land has abandoned that land, the land may be suitable for land reform purposes.
4. Section 12(3)(d) – where the State has invested money into the land, for example, by building infrastructure, then the market value of the land may be less than the investment that has been made by the State. Again, such land, may be more suitable to be used for land reform purposes.

I am of the opinion that the hype around expropriation without compensation is just that; hype.  My view is that Section 12(3) will be used in very specific, narrowly defined instances.  Of course, a rogue government that does not adhere to the rule of law, may choose to apply Section 12(3) in a manner that suits various political objectives.  No one can say with certainty that this will never happen.

We await to see the outcome of any Constitutional Court challenge to the Expropriation Act.  In the meantime, you should not have any concerns that your house will be expropriated for a government minister to live in and you won’t be paid any compensation.

You are welcome to email me on graeme@cpmd.co.za

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