Petition to President on Expropriation Bill – 27 May 2016

Petition to President on Expropriation Bill – 27 May 2016
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You are here: Home Reports & Publications Submissions on Proposed Legislation Petition to President on Expropriation Bill – 27 May 2016

Petition to President on Expropriation Bill – 27 May 2016

Petition to President on Expropriation Bill – 27 May 2016

South African Institute of Race Relations NPC (IRR)
Petition to the President of the
Republic of South Africa
regarding the
Expropriation Bill of 2015 [B 4D-2015]
Johannesburg, 27th May 2016

Contents of this petition:       

Introduction, page 2
Shortcomings in the current Expropriation Act of 1975, page 4
Unconstitutional provisions in the Bill, p5
A narrow definition of ‘expropriation’ and ‘expropriate’, page 5
Preliminary requirements for expropriation, page 8
Notice of expropriation, page 9
Objections to the compensation offered, page 10
Date of payment of compensation, page 12
The rights of third parties, page 13
  Mortgage rights, page 13
  Unregistered rights, page 14
  Constitutionality of the Bill’s provisions relating to rights holders, page 15
Expropriation by the minister of public works, page 15
Trumping effect of the Bill, page 16 
The unconstitutionality of the Bill, page 16
Limited public consultation and a flawed process in the
  National Council of Provinces, page 20
Conclusion, page 22

Introduction
This petition to the President of the Republic of South Africa is made by the South African Institute of Race Relations NPC (IRR), a non-profit organisation formed in 1929 to oppose racial discrimination and promote racial goodwill. Its current objects are to promote democracy, human rights, development, and reconciliation between the peoples of South Africa.

Property rights, including the rights of individuals to own land, houses, and other assets, are vital to democracy, development, upward mobility, and rising prosperity for all. That is why the racially discriminatory laws that earlier barred black South Africans from owning land and many other assets were so profoundly unjust.

Since these restrictions began to crumble in 1975 – and were finally abolished by the National Party government in 1991 – black ownership of houses, land, and other assets has grown exponentially. To speed up this process, South Africa needs an annual growth rate of 7% of gross domestic product (GDP) – which would double the size of the economy every ten years – coupled with an upsurge in investment and employment. However, these advances will not be possible if the Bill is enacted in its current form. The Bill could also reverse the gains that have already been made in extending the benefits of private property ownership to millions of black South Africans.

Under the Bill, the 8.6 million black, coloured, and Indian people who own their homes will be just as vulnerable to the expropriation of their houses as the 1.1 million whites with home ownership. Some 16.5m black people with customary land use rights – and especially those living near major cities – could see these unregistered rights expropriated by municipalities and their land turned over to RDP housing or other purposes.  Some 2.8m black people living on commercial farms could also lose their unregistered residence rights, yet will receive very little compensation for their resulting losses.

The many black South Africans who have already bought some 2 million hectares of farming land on the open market since 1991 could likewise see their farms expropriated by any organ of state at any tier of government. So too could all the black people with leases or other rights over the 7 million hectares of land thus far transferred under the land restitution and redistribution initiatives. In all instances, those affected will be left without adequate compensation and with little effective redress for the loss of their homes, business premises, customary plots, or other vital assets.  Often, these will be their only assets – built up by them over a lifetime of endeavour.

Though some improvements have been made to the Bill since it was published for public comment in 2015, the Bill still remains unconstitutional.  The problem, in a nutshell, is that the Bill still empowers an expropriating authority, after completing some simple preliminary steps, to take ownership and possession of property by serving a notice of expropriation on the owner. Though disputes over the compensation payable must now, in the absence of successful mediation, be referred to the courts, the Bill still seeks to limit the right to dispute the validity of an expropriation. In addition, the Bill tries to put onus of proof in any such proceedings on the expropriated owner or holder of a right. 

However, if the Constitution is to be meaningful in protecting the property rights of all South Africans, the onus of proof must lie on the expropriating authority to prove that all relevant constitutional requirements for a valid expropriation are met. The expropriating authority must also discharge this onus – and obtain a court order confirming that it has done so – before it issues a notice of expropriation. In addition, where an intended expropriation will result in the eviction of an owner or rights holder from his or her home, the prior court order thus obtained must also authorise this eviction, as required by Section 26(3) of the Constitution.

Also of great concern is the unconstitutional definition of expropriation that has belatedly been included in the Bill. This seeks to allow an expropriating authority to take custodianship (rather than ownership) of property without having to pay any compensation at all. It also seeks to deprive South Africans of all constitutional protections against regulatory or indirect expropriations. This definition makes a mockery of the property clause in the Constitution (Section 25), which (as the Constitutional Court stated in the FNB case in 2002) is aimed at ‘both protecting private property rights, as well as serving the public interest…, and also at striking a proportionate balance between those two functions’. [First National Bank of SA Ltd t/a Wesbank v South African Revenue Service; First National Bank of SA Ltd, t/a Wesbank v Minister of Finance, [2002] ZACC 5; 2002 (7) BCLR 702 (CC), at para 50] The definition is also inconsistent with the rights to administrative justice (Section 33) and access to court (Section 34).

No legislation can lawfully be enacted if it contains provisions inconsistent with the Constitution. As the Constitutional Court stressed in the Certification case in 1996: “Under our constitutional democracy, the Constitution is the supreme law. It is binding on all branches of government and no less on Parliament… Parliament ‘must act in accordance with, and within the limits of, the Constitution’”. [Certification of the Constitution of the Republic of South Africa, 1996, 1996 (10) BCLR 1253 (CC), at para 109]

Also relevant to the constitutionality of the Bill is the limited opportunity given to the public to comment on its terms. A scant 18 days was initially allowed by the portfolio committee on public works for public comment on the Bill, which is too short a period for meaningful deliberation and consultation on the impact of its provisions. Though the deadline for comment was then extended by some seven weeks, few additional submissions were made in this period, which means the extra period meant little in practice.
In addition, the definition of expropriation was added only in late 2015, when the Bill was already before the portfolio committee. This means that it was never discussed at the National Economic Development and Labour Council (Nedlac), or made available for public comment.

The National Council of Provinces (NCOP) and the various provincial administrations represented within it have also failed to provide adequate opportunities for public consultation. The various provincial legislatures failed to advertise clear and realistic deadlines for the making of written submissions. Some also omitted to issue sufficiently timeous invitations, with clear details of venues, to those who wanted to make oral submissions. This also made it difficult for the public to make its views on the Bill known. However, adequate public consultation is essential to constitutionality, as the Constitutional Court has stressed.

In addition, the process for adopting the Bill by the NCOP was fundamentally flawed. Fundamental objections to the unconstitutionality of the Bill were simply brushed aside, while a significant number of proposed provincial amendments were given short shrift, instead of being properly considered. Moreover, many negotiating and final mandates from the nine provinces were received by the select committee only after the relevant deadlines had passed. In addition, few provincial legislatures met to confer their final mandates on their provincial delegations, as required by the Mandating Procedures of Provinces Act of 2008.

The Bill also has major ramifications for all land held in traditional or customary tenure. Both traditional leaders and individuals who hold unregistered customary land use rights could have their rights taken by municipalities or other organs of state for inadequate (or no) compensation. Traditional leaders thus requested last year that all land held in customary tenure be exempted from the operation of the Bill, but this request was refused. [City Press 9 August 2015]

The State Law Advisers have nevertheless advised that ‘it is not necessary to refer the Bill to the National House of Traditional Leaders’ because it ‘does not contain provisions pertaining to customary law or the customs of traditional communities’. [Para 15.6, Memorandum on the Objects of the Expropriation Bill of 2015]

This opinion overlooks the fact that the Bill is likely to result in the loss of significant amounts of customary land rights if municipalities or other organs of state decide to expropriate, or take custodianship, of land in such tenure. Any such development will have enormous ramifications for both customary law and the customs of traditional communities. The Bill should therefore be referred to the National House of Traditional Leaders for its comments before the president gives his assent to it, as required by the Traditional Leadership and Governance Framework Act of 2003. [Section 18(1), Traditional Leadership and Governance Framework Act of 2003]

Shortcomings in the current Expropriation Act of 1975

The ruling African National Congress (ANC) has long noted that the current Expropriation Act of 1975 is at odds with the Constitution in two respects. First, the Act does not allow expropriation ‘in the public interest’, whereas the Constitution does. Second, the Act leaves out four factors listed in the property clause (Section 25) of the Constitution as relevant to the compensation payable on expropriation. These four factors are often called the ‘discount’ factors because the monetary value assigned to them may be deducted from the market value of the property.

Under Section 25, compensation on expropriation must be ‘just and equitable’ in the light of all the relevant circumstances. Factors expressly listed as relevant include market value, along with the ‘discount’ factors, which are: [Section 25(3), Constitution of the Republic of South Africa, 1996 (Constitution)]
• the current use of the property;
• the history of its acquisition;
• the extent of any direct state subsidy in its acquisition or capital improvement; and
• the purpose of the expropriation.

The ANC is correct in highlighting these two contradictions between the Act and the Constitution. However, it overlooks the most important contradiction of all. Provisions allowing the state to take ownership of property by notice to the owner could not be legally challenged in 1975, when the current Expropriation Act was adopted and the principle of parliamentary sovereignty applied. However, they are now clearly in conflict with South Africa’s Constitution. Instead of recognising this fundamental weakness, the Bill repeats these contentious provisions and seeks to give them new life.

Unconstitutional provisions in the Bill
Provisions in the Bill which are clearly inconsistent with the Constitution are highlighted below:

A narrow definition of ‘expropriation’ and ‘expropriate’
According to the Bill, ‘“expropriation” means the compulsory acquisition of property by an expropriating authority or an organ of state upon request to an expropriating authority’ and ‘“expropriate” has a corresponding meaning’.

This definition of expropriation was inserted into the Bill by the portfolio committee of public works in the final stages of the parliamentary process before the National Assembly. Hence, it was never discussed at the National Economic Development and Labour Council (Nedlac) or opened up to public consultation.

To most people, the new definition looks harmless enough, for it describes expropriation, in essence, as the compulsory ‘acquisition’ of property by the State. The significance of this wording can be understood only in the light of the main Constitutional Court judgment in the Agri SA case in 2013.

This case began when a company, Sebenza (Pty) Ltd, found it lacked the funds needed to convert an unused old-order mining right it had bought in 2001 for R1m into a new-order mining right under the Mineral and Petroleum Resources Development Act (MPRDA) of 2002. This Act, which took effect in 2004, vested all mineral resources in the ‘custodianship’ of the State. It also required unused old-order rights to be converted within a year, failing which they would ‘cease to exist’. Since Sebenza could not afford the application fee for this conversion, the mining right for which it had paid R1m duly came to an end, prompting it to sue for compensation.  Agri SA, a lobby group for commercial farmers, many of whom had earlier owned unused old-order rights to the minerals beneath their land, took over the claim and brought it before the Pretoria High Court. [Agri South Africa v Minister of Minerals and Energy and Another (55896/07) [2011] ZAGPPHC 62; [2011] 3 All SA 296 (GNP); 2012 (1) SA 171 (GNP); 2012 (1) BCLR 16 (GNP) (28 April 2011)]

The High Court found that Sebenza had lost all the competencies of ownership it had previously enjoyed, while the MPRDA had given the mining minister substantially similar rights. The State had thus acquired ‘the substance of the property rights’ that Sebenza had previously owned, and it made no difference that the State’s competencies were termed ‘custodianship’ rather than ‘ownership’. Expropriation had indeed occurred and compensation of R750 000 was payable. [Business Day 4 May 2011; Pretoria High Court judgment, supra, para 96]

The Constitutional Court then overturned this ruling. The main judgment was penned by Chief Justice Mogoeng Mogoeng, who agreed that Sebenza had suffered a ‘compulsory deprivation’ of its mining right and that the ‘custodianship’ of this resource was now vested in the state. However, said Chief Justice Mogoeng, ‘the assumption of custodianship’ did not amount to expropriation because it did not make the state the owner of the right in issue. Added the chief justice: ‘Whatever “custodian” might mean, it does not mean that the State has acquired and thus become the owner of the rights concerned.’ [Agri South Africa v Minister of Minerals and Energy, CCT/51/12, 18 April 2013, para 71] This in turn meant that no expropriation had occurred and that no compensation was payable. [Ibid, para 72] What the Pretoria High Court had seen as a meaningless distinction between the state’s powers as ‘owner’ or ‘custodian’ thus became, in the main judgment at least, an issue of major legal and monetary importance.

However, Chief Justice Mogoeng also stressed that his ruling was based on the particular facts before him, including the fact that Sebenza had been unable to convert its old-order right, not because the MPRDA did not make provision for this, but rather because of its ‘precarious financial position’. [Ibid, para 72] He also said: ‘A one-size-fits-all determination of what acquisition entails is not only elusive but also inappropriate… A case-by-case determination of whether acquisition has in fact taken place presents itself as the more appropriate way of dealing with these matters,…[as] acquisition is likely to assume many variations.’ [Ibid, para 64]

The chief justice further went on to say: ‘It would…be inappropriate to decide definitively that expropriation is, in terms of the MPRDA, incapable of ever being established…. I accept that a case could be properly pleaded and argued to demonstrate that expropriation did take place. That avenue…must be left open, particularly when regard is had to the express provision made for expropriation in item 12 of Schedule II to the MPRDA’. [Ibid, para 75]

Two of the Constitutional Court judges in the case handed down a separate (concurring) judgment in which they cautioned against the approach taken in the main judgment. In this judgment, handed down by Judge Johan Froneman, the two noted that there was no prior Constitutional Court case ‘dealing with the nature of change brought about by vesting the natural resources of the country in the state as custodian of those resources’. In addition, they said, ‘the main judgment [by Chief Justice Mogoeng) did not address the issue squarely’. [Ibid, para 101]

Judge Froneman also stressed that previous relevant Constitutional Court cases had ‘laid down no requirement of state acquisition as an inflexible requirement for expropriation’. He warned against any such development, saying: ‘It would be inadvisable to extrapolate an inflexible general rule of state acquisition as a necessary requirement’. [Para 102]

Added Judge Froneman: ‘If private ownership of minerals can be abolished without just and equitable compensation – by the construction that when the state allocates the substance of old rights to others it does not do so as the holder of those rights – what prevents the abolition of private property of any, or all, property in the same way? This construction in effect immunises, by definition, any legislative transfer from existing private property holders to others, if done by the state as custodian of the country’s resources, from being recognised as expropriation. This is done without a thorough examination of what the entirely new legal concept of state custodianship holds for our law, or whether the transfer will be just and equitable. In that way, one of the crucial aspects of our historical compromise, the equitable balancing between the protection of existing property rights and the public interest under Section 25, is bypassed. I find that unfortunate.’ [Ibid, para 105]

Another Constitutional Court judge in the Agri SA case, Judge Edwin Cameron, added that he ‘shared the caution’ expressed by Judge Froneman.  Said Judge Cameron: ‘Acquisition by the state is, in my view, a general hallmark of expropriation. But not necessarily and inevitably so. Whether an expropriation contemplated by Section 25 has occurred is – as the main judgment finds – a context-based inquiry demanding a case-by-case approach. I therefore agree with [Judge] Froneman that it is inadvisable to extrapolate an inflexible general rule of state acquisition as a requirement for all cases.’ [Ibid, para 78]

As these passages highlight, Chief Justice Mogoeng’s judgment was based solely on the particular facts before him, while both he and the other judges on the court were reluctant to lay down a sweeping new rule on the meaning of expropriation.  The Agri SA judgment is thus not enough to validate a definition of expropriation which so narrows the normal meaning of the term and could deprive millions of black and white South Africans of any compensation for the loss of their homes, business premises, customary plots, farms, or other assets.

The definition now included in the Bill also seeks to exclude any ‘indirect’ or ‘regulatory’ taking from counting as an expropriation. An indirect or regulatory taking arises where the state does not itself acquire ownership, but its regulations nevertheless deprive the owner of many of the usual benefits and powers of ownership.

A regulatory taking will arise, for example, if the state enacts legislation requiring all foreign companies in the private security industry to transfer 51% of their assets or equity to South Africans. It will also arise if new legislation requires all mining companies to sell the minerals they produce at ‘developmental’ prices, set by the mining minister, rather than at market prices. In both instances, the state will not acquire ownership of the companies or the minerals, but their existing owners will be deprived of many of the usual powers and benefits of ownership.

The new definition in the Bill seeks also to prevent such regulatory takings from counting as expropriations. However, this too is contrary to the normal meaning of expropriation, as Judge Froneman pointed out in the Agri SA case when he said that ‘foreign jurisprudence recognises that expropriation may take place even if the [relevant] rights or property have not been acquired by the state’. [Ibid, para 103] In addition, Chief Justice Mogoeng’s judgment in that case should not be seen as justifying such a narrowing of the normal meaning of expropriation, for his ruling was based on a very different factual situation.

Overall, the Bill’s attempt to narrow the definition of expropriation so as to exclude both the assumption of custodianship and regulatory takings from counting as expropriations, is contrary to the usual meaning of expropriation. It is not in fact in line with the Agri SA judgment and cannot be seen as being justified by this ruling. It also makes a mockery of Section 25, which as the Constitutional Court ruled in 2002 in the FNB case, is aimed at ‘both protecting private property rights, as well as serving the public interest…, and also at striking a proportionate balance between those two functions’. [First National Bank of SA Ltd t/a Wesbank v South African Revenue Service; First National Bank of SA Ltd, ta Wesbank v Minister of Finance, [2002] ZACC 5; 2002 (7) BCLR 702 (CC), at para 50] The definition is also inconsistent with other guaranteed rights, including the right to administrative justice, and is clearly unconstitutional. 

The deputy minister of public works, Jeremy Cronin, himself earlier expressed reservations about the definition, saying that he was ‘open to either a reformulation’ by the National Council of Provinces or to the deletion of the definition. In Mr Cronin’s view, ‘seeking to define expropriation in the Bill is both redundant and open to unintended consequences’. [Jeremy Cronin, letter to Business Day, 15 March 2016] Unfortunately, however, the National Council of Provinces failed to consider the need for the definition to be changed to bring it into line with the Constitution, even though this was one of the amendments proposed to it.

At the very least, the current definition should be omitted. If a definition is to be included – which may now be important to provide legal certainty and predictability – it should be worded in a comprehensive way, as set out in Appendix 1.

Preliminary requirements for expropriation
According to the Bill, an expropriating authority must start with various preliminary requirements before issuing a notice of expropriation. First, the expropriating authority must negotiate with the owner and try to buy the property from him or her on reasonable terms. [Section 2(2), Bill]

If negotiations fail to produce agreement, the expropriating authority must investigate the suitability of the property for the purposes it has in mind, consult with the relevant municipality and government departments, and find out what rights tenants and other third parties might have in the property. [Section 5, Bill] (The matter of third-party rights is examined below.)

During its investigation, an expropriating authority may send suitably skilled inspectors to examine the property and, if necessary, ‘survey, dig, or bore into it’. However, these inspectors may not enter the property without either the consent of the owner or an order of court. [Sections 5 (2) (3), Bill]

The Bill thus recognises that an order of court is required for the relatively small matter of empowering an inspector to enter the property. (It also requires an order of court before a temporary expropriation may be extended, for a total period that may not exceed 18 months.) [Section 22(7), Bill] However, it denies that an order of court is needed before a permanent expropriation is carried out. Instead, it allows an expropriating authority to serve a notice of expropriation on the owner and thereby take ownership and possession on the specified dates and against the owner’s will. This anomaly in the Bill’s provisions is irrational and unreasonable, and should be cured by requiring that a prior order of court must also be obtained before a notice of expropriation may be served (see the amendments proposed in Appendix 1).

Moreover, at no point in these preliminary processes is the expropriating authority called upon to demonstrate to the owner – let alone the courts – that the proposed expropriation is constitutional. Yet the expropriation cannot pass constitutional muster if it is not in fact for public purposes or in the public interest; if the compensation offered is not truly just and equitable in all the relevant circumstances; and unless all other relevant constitutional requirements have been met. Where the property to be expropriated includes a person’s home, a court order is also needed (under Section 26(3) of the Constitution) to sanction the eviction of the owner or rights holder from his or her home. [Sections 25, 33, 34, 26 (3), Constitution of the Republic of South Africa, 1996]

To remove the anomaly earlier identified and ensure respect for all these constitutional guarantees, the expropriating authority must seek and obtain a court order confirming that a proposed expropriation meets all relevant constitutional requirements before it issues a notice of expropriation. Allowing the state to expropriate before it has obtained such a court order, as the Bill seeks to do, makes a mockery of the relevant constitutional protections.

Notice of expropriation
Under the current wording of the Bill, once an expropriating authority has completed these preliminary steps, it may serve a notice of expropriation on the owner (and on all the holders of unregistered rights that are known to it). This notice must describe the property, give reasons for the expropriation, and state the amount of compensation offered. It must also specify the ‘date of expropriation’, this being the date on which ‘the ownership of the property described in the notice…vests in the expropriating authority’. [Sections 8(3) (e), 9 (1), Bill] On this specified date – and regardless of the owner’s objections – ownership passes to the state automatically and by operation of law.

The notice of expropriation must also stipulate ‘the date on which the right to possession of the property will pass to the expropriating authority’. [Section 8(3)(f), Bill] On this date, the ‘right to possession’ will also pass to the expropriating authority, again automatically and by operation of law. [Section 9(2), Bill] The expropriated owner is entitled to the use and fruits of the property until possession passes, but must also take care of it and prevent its value deteriorating. [Section 9 (3) to (5), Bill]

According to the Bill, the date of expropriation ‘must not be earlier’ than the date the notice of expropriation was served on the owner. [Section 1, Bill] However, since no other time period is stipulated, there is nothing in the Bill to prevent ownership passing to the state the day after the service of this notice. [See Section 1, Bill] Nor is there anything in the Bill to prevent the passing of possession very soon after the transfer of ownership. Hence, if the notice of expropriation is served on the owner on the first day of a particular month, ownership could pass within a week and possession within a fortnight.

These provisions are contrary to Section 25 of the Constitution, which puts the onus on the expropriating authority to show that all the requirements for a valid expropriation have been met before ownership passes to the state. Since the right to property is an essential element in liberty (see The constitutionality of the Bill, below), a remedy which is made available only after a notice of expropriation has already been served cannot suffice. In addition, the harm done by an unwarranted expropriation cannot easily be undone, which makes these provisions of the Bill all the more irrational and unreasonable.

These provisions in the Bill also contradict Section 34 of the Constitution, which gives everyone the right to have a legal dispute (such as whether an expropriation is indeed valid) decided by the courts before that expropriation takes effect. They further contravene Section 33, which gives everyone the right to just administrative action and requires any such action to be ‘reasonable’ and ‘procedurally fair’. Where the expropriated property is, or includes, a person’s home, these provisions also contravene Section 26(3) of the Constitution, which says that ‘no one may be evicted from their home without an order of court made after considering all the relevant circumstances’. 

To cure any such unconstitutionality, the Bill must be amended to state that an expropriating authority, in the event of an unresolved dispute, must obtain a court order authorising the expropriation (and any eviction of people from their homes) before it serves a notice of expropriation on the owner or others. The necessary wording is set out in Appendix 1.

Objections to the compensation offered
If the owner objects to the amount of compensation offered in the expropriation notice, he must explain in writing to the expropriating authority what amount he claims instead, and must do so within 20 days. [Section 14(1), Bill] The expropriating authority then has 20 days to respond by offering a different (or the same) amount of compensation. [Section 15(1), Bill]

The provisions of Section 21 were amended by the portfolio committee on public works during the parliamentary process. Hence, they now begin with the following sub-section: ‘If the expropriating authority and the expropriated owner…do not agree on the amount of compensation, they may attempt to settle the dispute by mediation.’ [Section 21(1), Bill] This is an important addition, but is not enough in itself to ensure consistency with the Constitution.

Section 21 then goes on to say: ‘If the expropriating authority and the disputing party are unable to settle the dispute [in this way], or if the disputing party did not agree to mediation, the expropriating authority must refer to the matter to a competent court to decide or approve just and equitable compensation, provided that nothing in this section alters the ordinary civil onus’. [Section 21(2), Bill] A further sub-section adds that: ‘Sub-section 2 does not preclude a person from approaching a court on any matter relating to the application’ of the Bill. [Section 21(3), Bill]

Despite the positive changes made, these provisions still seek to confine expropriated owners and rights holders to contesting the amount of the compensation offered. This raises doubts as to whether the Bill itself allows court challenges to the validity of an expropriation, or to an eviction which has not been authorised by a court order.  The problem now lies in Section 21(2), read together with the definition of ‘disputing party’ in Section 1. This definition limits the meaning of ‘a disputing party’ to an owner or rights holder who ‘does not accept the amount of compensation offered’.  The narrow ambit of this definition is not affected by the wording of Section 21(3), which makes no reference to it. In combination, these provisions still reflect an unconstitutional attempt to prevent the courts from adjudicating on the validity of expropriations or the unauthorised eviction of people from their homes.

The definition of disputing party is thus inconsistent with Section 25 of the Constitution.  It is also inconsistent with Section 34, which gives everyone the right to have legal disputes (including disputes as to the validity of expropriations and evictions) decided by the courts after a fair and public hearing. It further infringes Section 33 of the Constitution (the right to just administrative action), because it effectively allows an expropriating authority to act as judge and jury in its own cause in deciding for itself on the validity of an expropriation and in carrying out an unauthorised eviction.

Sections 21(2) and (3) also seek to delay any process of adjudication until after a notice of expropriation has been served, and ownership and possession may already have passed to the expropriating authority. These clauses also seek to shift the onus of proof from the expropriating authority on to the expropriated owner or rights holder, who is seemingly expected to prove that the amount of compensation offered is not just and equitable, or that relevant constitutional requirements for a valid expropriation have not been met.

If the expropriated owner (or rights holder) fails to discharge the onus thus placed on him, he will, of course, lose the case. He will then have to pay not only his own (no doubt substantial) legal costs, but also those of the expropriating authority. This is a major risk. Even if the expropriated owner wins the first court battle, the expropriating authority – which is likely to have deeper pockets than most individuals or companies – will thereafter be able to take the matter on appeal. Fighting the appeal will increase the owner’s own legal costs. If he loses the appeal, again he will have to pay not only his own (much increased) legal costs but also those incurred by the expropriating authority.

The overall financial implications of such litigation are so severe that most people will not be able to risk going to court. Instead, they will find themselves under enormous pressure to accept the validity of the expropriation, along with whatever compensation the expropriating authority has offered. This is enough to make a mockery of various constitutional guarantees, including the right to have the compensation payable on expropriation ‘decided or approved by a court’.

Sections 21(2) and (3) are thus in breach of Sections 34, 25, and 33 of the Constitution. Moreover, if the expropriated property includes a person’s home, from which he is evicted when the expropriating authority takes possession of the property, then these provisions are also inconsistent with Section 26(3) of the Constitution.

Section 21 thus needs to be amended to comply with all relevant constitutional provisions. The wording required is set out in Appendix 1.

Date of payment of compensation
According to the Bill, ‘the expropriated owner (or holder) is entitled to payment of compensation by no later than the date on which the right to possession passes to the expropriating authority’. [Section 17(1), Bill] However, another clause in the Bill still allows the expropriating authority to avoid this obligation via the simple expedient of ‘proposing a later date or dates’ for payment. In these circumstances, the owner must either agree to these date(s), or the matter must be referred to the courts for decision. [Section 17 (4), Bill] However, if the expropriating authority has stipulated a later date for payment and is waiting for a court to authorise this date – a process which, given clogged court rolls, could take months or years – it is unlikely in practice to pay on the date it takes possession.

Given the costs and time involved in litigation, most owners (or rights holders) will again have little choice but to agree to payment being deferred. In addition, the Bill expressly states that ‘any delay in making payment…will not prevent the passing of the right to possession to the expropriating authority…unless a court orders otherwise’. [Section [17(3), Bill] This means that the expropriating authority will generally suffer no penalty for failing to pay on time and will have no incentive to avoid late payment. In addition, few owners or rights holders are likely to receive any interest on any outstanding amounts owed to them, as the poorly phrased provisions of the Bill will generally exclude this possibility. [Section 13, read together with Section 17, Bill] These provisions are so skewed against the owner or rights holder that they cannot be accepted as ‘just and equitable’, within the meaning of Section 25 of the Constitution.

To bring this aspect of the Bill into line with the Constitution, the expropriating authority must be obliged to pay the compensation due before it takes ownership of the property on the date of expropriation stated in the notice of expropriation. Payment at this earlier point in time is also needed to strike an equitable balance between the public interest and the interests of those affected. Moreover, to ensure that payment is indeed made timeously, an effective sanction against late payment is needed. The notice of expropriation should thus become invalid if payment is not made on ten days before the date of expropriation. The amendments needed to bring about these changes are set out in Appendix 1.

The rights of third parties
The Bill recognises that third parties may have rights in property that is targeted for expropriation.  Accordingly, an expropriating authority may expropriate not only the owner but also the holders of all other third-party rights. It may also do so in the same notice of expropriation, which must be served on all relevant rights holders and must offer each of them ‘just and equitable’ compensation. [Section 8(5)(a) and (b), Bill] (The Memorandum on the Object of the Bill errs in saying that separate notices are required.) [Para 6.1, Memorandum]

According to the Bill, the impact of expropriation varies according to whether these third-party rights are mortgage rights or unregistered rights, among other things.

Mortgage rights
If the expropriated property is mortgaged to a bank, the mortgage is automatically terminated on the date of expropriation stated in the notice of expropriation. On that date, ownership passes to the expropriating authority [Section 9(1), Bill] and any registered mortgage simultaneously comes to an end.  The compensation payable must then be paid out in accordance with an agreement reached between the expropriated owner and the bank on how the amount is to be apportioned between them. If no such agreement has been reached, the expropriating authority may deposit the compensation money with the Master, who will in time pay out the money in keeping with any relevant court order. [Section 18, Bill]

Some of these provisions echo the current Expropriation Act, which also provides for the automatic termination of any mortgage bond when ownership of the property passes to the state.  However, under the Act there is little danger that the amount of compensation (market value, plus an amount to make good all financial loss resulting from the expropriation) will be less than the amount owing to the bank. The situation under the Bill is different. Since compensation will generally be less than market value, the amount payable could well be less than the outstanding loan.

If the Bill is enacted in its current form, banks will become more reluctant to extend mortgage finance, for they will know that houses and other properties that might in time be expropriated may not be sufficient collateral for loans. This will make it more difficult for prospective home owners – very many of whom are likely to be black South Africans – to secure mortgage bonds in the future.

The situation is also unfair to the expropriated owner, who will still have to pay the bank any outstanding balance on his mortgage bond.  In practice, this need to repay the bank could make it impossible for him to replace the home, business premises, or other property that he has lost through no fault of his own.  Provisions which put expropriated owners in such a difficult situation do not strike ‘an equitable balance between the public interest and the interests of those affected’ (as required by Section 25) and are inconsistent with the Constitution.

Unregistered rights
Unregistered rights include the rights of tenants to occupy residential and business premises under lease agreements, the rights of farm workers and other farm residents to live on commercial farms, and the customary land-use rights of the 16.5 million or so people currently living on land held in customary tenure. 

Under the Bill, all unregistered rights are ‘simultaneously expropriated’ on the date that ownership passes to the expropriating authority. [Sections 9(1)(b), 8(5), 11, 12, Bill] This will apply to farm workers or other farm residents, all of whose unregistered rights of residence on a commercial farm will automatically be expropriated when ownership of that farm passes to the expropriating authority. Farm residents will also lose their rights to possess their farm homes when possession of the farm passes to the expropriating authority. Though farm residents will supposedly have rights to compensation under Section 12, in practice the formula in that section will again offer them little.

Under the Bill, an unregistered rights holder, such as a farm resident, is entitled to ‘just and equitable’ compensation. This is an important step forward in buttressing the rights of farm workers, but it does not go far enough. The compensation to which farm residents will be entitled on expropriation must be based on market value, less the four discount factors, as stated in Section 12 of the Bill. [Section 12(1), Bill] But what is the market value of a farm resident’s unregistered residence right? This is clearly limited and will be difficult to quantify. It may also be further reduced via the discount factors.

Yet farm workers who are evicted in this way will face many financial losses. They will have to find new homes and new means of livelihood. They will have to pay moving costs. They could suffer other losses, such as the value of livestock they can no longer keep. Farm residents should thus be entitled to an amount to make good such losses, all of which are a direct result of the expropriation of their unregistered rights. But Section 12 does not make provision for this, which means that the compensation they will receive will not be ‘just and equitable’ as required by Section 25 of the Constitution.

Section 12 must thus be amended to allow expropriated farm residents, and other holders of unregistered rights, to claim amounts to make good all the direct losses they suffer as a result of an expropriation. This is allowed by the current Expropriation Act of 1975, but excluded by the Bill. Unless the Bill is amended to include this factor in Section 12, both farm workers and other holders of unregistered rights will receive very little compensation on the expropriation of the properties on which they live, work, trade or otherwise do business.

However, if farm residents and other holders of unregistered rights are to be allowed to claim for resulting losses, there is no reason why expropriated owners should not be able to claim for such losses too. Expropriated owners will also have to find alternative residential or business premises, which may be more costly than the ones they previously had. They will also have to pay their moving costs. In the case of business premises, they will also lose their normal income until they can obtain new premises and start their businesses up again. In addition, if their new premises are less convenient to customers, they are likely to lose much of their existing clientele.

If compensation is truly to be ‘just and equitable’ in all the circumstances, then expropriated owners and rights holders should be able to claim amounts to make good all the direct losses they suffer as a result of expropriation. The Bill should be amended to allow this, and the relevant wording that would be needed is set out in Appendix 1.

Constitutionality of the Bill’s provisions relating to rights holders
The Bill overlooks the fact that any expropriation of third-party rights must also comply with all relevant constitutional provisions. Hence, under Section 25 of the Constitution, the expropriation of a mining right, a servitude, a lease, a farm residence right, or a customary land-use right must (objectively) be ‘for public purposes’ or ‘in the public interest’. The compensation paid to these rights holders must also be truly ‘just and equitable’ in all the circumstances.

Holders of mining rights, servitudes, leases, farm residence, and customary land-use rights also have guaranteed rights of access to the courts (under Section 34) and to just administrative action (under Section 33). Where residential rights are in issue – as they are for tenants leasing houses or flats, for farm residents living on commercial farms, and for people living on customary land-use plots – all these rights holders also have the right not to be evicted without court orders authorising this. The holders of registered and unregistered rights should thus also have the protection of an amended Section 21, as set out in Appendix 1.

Expropriation by the minister of public works
Chapter 2 of the Bill deals with expropriation by the minister of public works (the minister). The Bill gives the minister the power to expropriate either for a public purpose or in the public interest. [Section 3(1), Bill] It also gives him the power to expropriate ‘upon the written request’ of an organ of state ‘other than an expropriating authority’, provided that this organ of state satisfies him that it needs ‘particular property for a public purpose or in the public interest’. [Section 3(2), Bill]

The powers thus given to the minister are unnecessary, for the Bill already empowers all organs of state to expropriate property. Hence, all organs of state – including the minister himself – qualify as ‘expropriating authorities’ in any event. These provisions of the Bill, in laying down different rules for ‘ministerial’ expropriations (as opposed to others), are sure to generate confusion and legal uncertainty.

According to Chapter 2, the minister may expropriate only ‘property which is connected to the provision and management of the accommodation, land and infrastructure needs of an organ of state’. [Section 3(3), Bill]  The minister’s power to expropriate is expressly made ‘subject to the provisions of Chapter 5’ of the Bill, [Section 3(1), Bill] which deals with the amount of compensation and the time when it must be paid. This wording raises doubts as to whether ministerial expropriations are subject to the other chapters in the Bill, particularly Chapter 3 (‘Investigation and valuation of property’), Chapter 4 (‘Intention to expropriate and expropriation of property’), Chapter 6 (‘Mediation and determination by court’), and Chapter 7 (‘Urgent expropriation’). 

As presently written, the Bill could allow the minister to brush aside all the requirements set out in all chapters other than Chapter 5. Among other things, this could bar an owner or rights holder who suffers a ministerial expropriation from having a dispute over the validity of such an expropriation, or of the compensation payable, referred to the courts. This is objectionable and clearly unconstitutional, for any ministerial expropriation must of course comply with all relevant constitutional guarantees.

Since there is no need for the minister to have his own and seemingly different expropriation powers, Chapter Two should simply be deleted, as shown in Appendix 1.

Trumping effect of the Bill
According to a memorandum on the objects of the Bill, part of the Bill’s purpose is to ‘ensure uniformity in the way that organs of state undertake expropriation’. This is important, the memorandum says, because there is such an ‘array of authorities’, within all spheres of government, that ‘have the power to expropriate through various pieces of legislation’. [Department of Public Works, Memorandum on the Objects of the Expropriation Bill, 2015, p1] What this also means, however, is that the Bill will override all the limitations on expropriation now contained in other statutes.

The Bill has several trumping provisions. It recognises, in Section 2(3), that an expropriating authority may expropriate property under ‘any other law of general application’, but stresses that this must be done in compliance with its core provisions. It also requires that any existing law dealing with expropriation must be ‘interpreted in a manner consistent with its terms’, particularly as regards the compensation payable. To reinforce this point, the Bill further states that its provisions must ‘prevail in the event of a conflict’ between it and any other existing law dealing with expropriation. [Sections 2(3), 29 (1), Bill]

The Bill thus seeks to ensure that its own, often unconstitutional, provisions will apply to any future expropriation by any organ of state, irrespective of what other legislative safeguards may currently be available.  Given the Bill’s trumping powers, it is vital to ensure that all of its provisions are brought fully into line with the Constitution, so as to prevent a host of unconstitutional takings under various other laws.

The unconstitutionality of the Bill
Many of these relevant issues have already been flagged in our analysis of the provisions in the Bill. However, the key reasons why it is inconsistent with the Constitution are summarised here (and also, for the president’s convenience, in the accompanying Synopsis of this submission).

The Bill is clearly unconstitutional. Crucially, the Bill allows any expropriating authority, once it has completed some simple preliminary steps, to take ownership (and other rights) by the simple expedient of serving a notice of expropriation on the owner (or rights holder). Ownership of the property in question will then pass automatically to the expropriating authority on the ‘date of expropriation’ identified in the notice, which could be very soon. All unregistered rights, such as customary land use rights, leases, and the rights of farm residents to live on commercial farms, will automatically be expropriated at the same time, while various registered rights could be expropriated too.

The Bill thus empowers an expropriating authority to take property by notice to the owner – and leaves it to those stripped of ownership and possession to contest this in the courts thereafter, if they can afford to do so. The Bill also seeks to put the onus of proof on the expropriated owner (or rights holder), who will have to pay the expropriating authority’s legal costs (as well as his own) if he fails to discharge this onus.

Effectively, this allows an expropriating authority to resort to ‘self-help’ when it embarks on an expropriation. Yet this is contrary to fundamental common law principles of liberty, and is also now barred by the Constitution.

For hundreds of years, the common law has had special rules to protect both the liberty and the property of the puny individual from the enormous power of the state. At common law, thus, an individual cannot generally be arrested by the police or other officials – even if he is suspected of having committed a crime – without a prior order of court in the form of a warrant for his arrest. At common law, too, an individual’s property cannot generally be entered upon or seized by the police or other officials – even though that property may well have been used in committing a crime – without a prior court order in the form of a search-and-seizure warrant.

It is because of this strong common-law protection for property that most legislation giving investigative powers to the police and others clearly states that they may enter onto private property only if they have the consent of the owner or have obtained a prior court order in the form of a search warrant. They also make it clear that property cannot be seized and taken away without a prior court order that justifies this seizure too. Provisions of this kind are standard in all such legislation. They are always included to protect the puny individual, whose home and other assets are essential to his well being and who would otherwise be vulnerable to having the property he has worked so hard to acquire taken from him by the powerful state.

Two provisions in the Bill reflect and incorporate this common law protection for property. The first of these clauses says that an inspector sent to investigate a property with a view to its expropriation may not enter that property unless he has the owner’s consent or has obtained a prior court order authorising his entry. [Section 5(3), Bill] The second clause states that a temporary expropriation may not be extended (for a total period of up to 18 months) unless the expropriating authority first obtains a court order authorising this. [Section 22(7), Bill]  However, when it comes to the far more serious matter of a permanent expropriation, the Bill denies that a prior court order is required. This denial is, of course, contrary to the common law principles of liberty which the Bill recognises as binding in situations that are far less damaging to the owner.

Since 1996, moreover, the common law’s protection for property rights has been significantly buttressed by the Constitution, which now lays down a number of important requirements for a valid expropriation in Section 25 (the property clause). The Constitution also guarantees access to the courts (under Section 34), and gives all South Africans the right to just administrative action (under Section 33). In addition, Section 26(3) of the Constitution prevents people from being evicted from their homes without a court order authorising this.

Under Section 25 of the Constitution, an expropriation must, among other things, be carried out for public purposes or ‘in the public interest’. It must also be accompanied by ‘just and equitable’ compensation, which must ‘reflect an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances’. If these guarantees are to have any practical significance, the expropriating authority must be able to prove that an intended expropriation complies with all these requirements. It must also provide this proof before it proceeds with an expropriation. Otherwise, the relevant requirements will be severely weakened, if not set at naught.

Leaving it to the expropriated owner or rights holder to try to disprove the validity of the expropriation after it has already taken place is simply not good enough. This is especially the case when many expropriated owners and holders will battle to afford the necessary court challenge. In addition, those who find themselves evicted from their homes, businesses, and other assets through an expropriation which is in fact invalid will suffer an emotional trauma and economic loss that even a subsequent court order in their favour (assuming they can afford the litigation required to obtain this), cannot easily put right.

Hence, if an expropriating authority issues a notice of intention to expropriate particular property, if the owner or rights holder rejects either the compensation offered or the overall validity of the proposed expropriation, the expropriating authority must then go to court on the matter. It must seek and obtain a court order which confirms the validity of the expropriation, decides what compensation is just and equitable in all the circumstances, and rules on when that compensation must be paid. The onus of proof in such proceedings must lie on the expropriating authority, which must satisfy the court that the proposed expropriation meets all relevant constitutional requirements. Moreover, if the proposed expropriation will result in the eviction of anybody from their home, then the expropriation authority must also satisfy the court that this eviction should be authorised in all the circumstances.

Once the expropriating authority has obtained a court order confirming the validity of the expropriation, deciding the compensation payable, and authorising any eviction likely to result from it, then only may the expropriating authority serve a notice of expropriation on the owner and other rights holders.

Since this is clearly what Sections 25 and 26 of the Constitution require, all provisions in the Bill which purport to absolve the expropriating authority from requiring a prior court order in cases of dispute are inconsistent with the Constitution and invalid.

Also important is Section 34 of the Constitution, which gives everyone the right to have any legal dispute decided in a fair public hearing before a court. This provision is obviously aimed at allowing such disputes to be resolved by the courts, through the application of the relevant legal principles to the facts of the particular case. Under the Bill, however, this necessary process of deliberation and adjudication will rarely be available. Instead, an expropriating authority can simply serve a notice of expropriation under which ownership and possession will automatically pass to it long before a court has had the opportunity to decide whether such outcomes are constitutionally justified. In most instances, the dispute will never go to court at all, because expropriated owners will lack the money required for litigation and will be too caught up in trying to find new homes, business premises, or other assets to be able to contemplate court action.

Also relevant is Section 33 of the Constitution, which gives everyone the right to just administrative action, which must (among other things) be ‘reasonable’ and ‘procedurally fair’. These requirements are not met when the expropriating authority – which bears the responsibility for upholding them and for showing that they have been upheld – can simply take ownership and possession via its notice of expropriation and then pay an amount of compensation (which may in fact be far from just and equitable) only many months later.

Even more inconsistent with the Constitution is the definition of expropriation that was inserted into the Bill late in 2015, without adequate public consultation. This definition is clearly intended to absolve the expropriating authority in many cases from having to pay compensation or follow the Bill’s (limited) procedural steps for expropriations. In particular, the state will be able to slough off all constitutional and other requirements for a valid expropriation whenever it:
• takes custodianship, rather than ownership, of property; and/or
• introduces regulations giving rise to indirect expropriations.

This definition, in seeking to allow such uncompensated takings, is inconsistent with Section 25 of the Constitution, and the careful balance this clause was intended to strike between upholding existing property rights and providing redress for past injustice.  The definition has its origins in Chief Justice Mogoeng’s ruling in the Agri SA case in 2013. However, that judgment, with its various cautionary notes against laying down any general rule, is not enough to give constitutional validity to a definition which contradicts the established meaning of expropriation and has such major negative ramifications for the guaranteed property rights of all South Africans. 

This definition makes a mockery of the property clause in the Constitution (Section 25). It is also inconsistent with the rights to administrative justice (Section 33) and access to court (Section 34). It must therefore be deleted or substantially amended by the National Council of Provinces, as the deputy minister of public works, Jeremy Cronin, has previously recommended.

Limited public consultation and a flawed process in the National Council of Provinces

Also relevant to the constitutionality of the Bill is the limited opportunity for public consultation that has been provided. The period allowed for public consultation by the portfolio committee on public works in the National Assembly was unreasonably short, while the new definition has never been debated in the National Economic Development and Labour Council (Nedlac), or made available to proper public scrutiny. In addition, the Bill has not yet been referred to the National House of Traditional Leaders for comment, as required by the Traditional Leadership and Governance Framework Act of 2003, even though the Bill has major implications for both customary law and the customs of traditional communities.

The process whereby the National Council of Provinces (NCOP) adopted the Bill was also fatally flawed. Not enough opportunity was provided for public consultation, while fundamental objections to the unconstitutionality of the Bill were brushed aside, along with relevant procedural requirements for its adoption.

The Expropriation Bill was adopted by the National Assembly in February 2016. Because the Bill affects all the provinces, provincial legislatures were supposed to play an important part in its adoption by the NCOP under Section 76 of the Constitution. As the Constitutional Court has stressed, the Section 76 procedure is intended to ensure to ensure that the provinces fully and effectively play their role in the law-making process. [Stephen Segopotso Tongoane v Minister for Agriculture and Land Affairs and others, [2010] ZACC 10, at para 71]

The NCOP procedure is supposed to begin with public consultations on the bill in question, to be organised by the relevant portfolio committee in each provincial legislature. Based on the public comments received, each portfolio committee adopts a ‘negotiating mandate’ on the bill. These negotiating mandates may propose amendments, and are sent to the relevant select committee of the NCOP for its consideration.

This select committee of the NCOP must review the negotiating mandates and any amendments they propose. In the light of the select committee’s deliberations, provincial legislatures then issue their ‘final mandates’. These instruct their provincial delegations on how to vote when the select committee meets again to decide on the bill’s adoption or rejection.

After this, each provincial legislature must give its provincial delegate a ‘voting mandate’ telling it how to vote on the bill when the NCOP convenes in plenary session. However, if no important issues arise when the select committee votes on the bill, the final mandates already received serve as voting mandates at the NCOP plenary.

The process is supposed to give provincial legislatures ample opportunity to make significant inputs into bills with major ramifications for their regions. In the context of the Expropriation Bill, however, virtually every part of the NCOP process has been flawed.

Provinces were late in drawing up their schedules for public hearings on the Bill, while these meetings were often poorly advertised. In the Eastern Cape, the schedule was drawn up only on 15th April for public hearings that ran from18th to 20th April. In the Free State, venues for public hearings were shifted after the initial ones had been advertised. In Gauteng, venues were poorly publicised, while in the Northern Cape little notice of public hearings was provided.

In Gauteng, the IRR (for one) made both written and oral submissions warning against the unconstitutionality of the Bill and the harm it will do to investment, growth and jobs. But the Gauteng portfolio committee simply brushed aside these major problems. Instead, it noted only one concern: the Bill’s wide definition of property. However, this point was a minor one with little substance, as the Bill’s definition of property comes directly from the Constitution.

In other provinces, many important concerns were raised in the public consultation process, inadequate though it was. Many of these concerns were also reflected in the negotiating mandates issued by these provinces. The Western Cape, in particular, put forward many important amendments, including a key proposal saying that the definition of expropriation needed to be brought into line with the Constitution.

However, when the NCOP’s select committee on economic and business development met in Cape Town on 3rd May to consider these negotiating mandates, it gave short shrift to the amendments proposed. The acting chair summarily dismissed almost all the changes, including those put forward by the Western Cape, as ‘cosmetic’, ‘unnecessary’ or ‘already included in the Bill’. (The official minutes of the meeting, however, gave no inkling of the way in which proposed amendments had thus been bulldozed aside, but the IRR’s detailed notes of the proceedings show clearly how this was done.)

Some of the provincial amendments proposed were important and could have reduced the likely damage from the Bill. However, the only change agreed was a minor amendment (from the Eastern Cape), urging that a couple of deadlines be extended by brief periods.
Five of the negotiating mandates were also invalid because they had been issued too late. Since the NCOP select committee had only four valid negotiating mandates before it on 3rd May, the Bill should then have lapsed. Instead, it was allowed to proceed despite the objections of the Democratic Alliance (DA).

Much the same happened at the final mandate stage. The NCOP’s select committee was supposed to meet on the morning of 10th May to vote on the Bill in accordance with the final mandates it had received. But only three final mandates had arrived in time, of which one (from the Western Cape) rejected the Bill. Another five final mandates came in well after the scheduled meeting, while the Free State’s one did not arrive until very much later.
However, the chair of the select committee sidestepped the problem of the missing final mandates by postponing the meeting until the following day. By then eight final mandates had come in, but five of them were still late, having arrived only after the relevant deadline.

In addition, under the Mandating Procedures of Provinces Act of 2008, final mandates must be conferred by ‘provincial legislatures’. Yet few of the nine provincial legislatures met for this purpose, further eroding the validity of their final mandates.

Again, however, these procedural problems were swept aside and the select committee – at its delayed meeting on 11th May – simply nodded the Bill through with the minor changes earlier outlined. Yet the Constitutional Court, in the Tongoane and other cases, has stressed the importance of proper procedural compliance.

Since no major points were raised at the select committee’s meeting, the final mandates counted as voting mandates when the NCOP met in plenary session on 17th May. Despite the DA’s objections, the NCOP plenary simply endorsed the Bill with the same minor changes. These amendments were so insignificant that the National Assembly had no difficulty in accepting them, which means that the Bill, in theory, is now ready for the president’s assent.

However, proper NCOP processes were sacrificed to the goal of pushing the Bill through Parliament before it rose in preparation for the local government goal. Public comments on the Bill were barely sought at all, while the salient criticisms that were nevertheless received were simply brushed aside. Relevant procedural requirements for valid negotiating and voting mandates were also overlooked. Yet proper public consultation and full procedural compliance are needed, as the Constitutional Court has stressed. This alone, with respect, gives the president compelling reason to decline to send the Bill into law.

Conclusion

The Department of Public Works claims that the Bill will bring the current Expropriation Act of 1975 into line with the Constitution, but this is simply not so. On the contrary, the Bill is just as unconstitutional as the current Act.

The Constitution’s founding provisions also clearly state that the Constitution is ‘the supreme law of the Republic’, and that it must be respected and upheld at all times by all branches of the government. Parliament should therefore not have adopted the Bill in its present form because so many of its provisions are inconsistent with the Constitution.

The president also has an over-arching obligation to ‘uphold, defend and respect the Constitution as the supreme law’ at all times. Moreover, if he ‘has reservations about the constitutionality’ of a bill, he is obliged, under Section 79(1) of the Constitution, to ‘refer it back to National Assembly for reconsideration’, rather than give his assent to it. [Sections 1(c), 83(b), 79(1), 1996 Constitution]

The IRR thus respectfully petitions the president to use his powers under Section 79(1) to refer the Bill back to the National Assembly for this reason.

At the same time, the 1975 Act needs to be replaced by a constitutional alternative. In reconsidering the Expropriation Bill, the National Assembly must bring the Bill into line with what the Constitution requires. To assist it in this task, the IRR has drawn up a list of necessary amendments to specific clauses in the Bill. This list is attached as Appendix 1. The purpose of these amendments is primarily to:
a) bring the definition of expropriation into line with the Constitution;
b) put the onus on an expropriating authority to prove that an intended expropriation complies with all relevant  constitutional provisions;
c) require an expropriating authority, whenever a dispute arises, to obtain a prior court order confirming the constitutionality of a proposed expropriation before it issues  a notice of expropriation;
d) allow expropriated owners and rights holders to obtain compensation for direct losses resulting from expropriation (such as moving costs and loss of income), as such compensation is necessary to bring about ‘an equitable balance between the public interest and the interests of those affected’, as the Constitution requires;
e) ensure that those expropriated receive the compensation due to them before ownership (or other rights) pass to the expropriating authority; and
f) remove the unnecessary, contradictory, and unconstitutional powers of expropriation specifically conferred on the minister of public works in Chapter 2 of the Bill.

South African Institute of Race Relations NPC    27th May 2016

IRR TV

South African Institute of Race Relations NPC (IRR)
Petition to the President of the
Republic of South Africa
regarding the
Expropriation Bill of 2015 [B 4D-2015]
Johannesburg, 27th May 2016

Contents of this petition:       

Introduction, page 2
Shortcomings in the current Expropriation Act of 1975, page 4
Unconstitutional provisions in the Bill, p5
A narrow definition of ‘expropriation’ and ‘expropriate’, page 5
Preliminary requirements for expropriation, page 8
Notice of expropriation, page 9
Objections to the compensation offered, page 10
Date of payment of compensation, page 12
The rights of third parties, page 13
  Mortgage rights, page 13
  Unregistered rights, page 14
  Constitutionality of the Bill’s provisions relating to rights holders, page 15
Expropriation by the minister of public works, page 15
Trumping effect of the Bill, page 16 
The unconstitutionality of the Bill, page 16
Limited public consultation and a flawed process in the
  National Council of Provinces, page 20
Conclusion, page 22

Introduction
This petition to the President of the Republic of South Africa is made by the South African Institute of Race Relations NPC (IRR), a non-profit organisation formed in 1929 to oppose racial discrimination and promote racial goodwill. Its current objects are to promote democracy, human rights, development, and reconciliation between the peoples of South Africa.

Property rights, including the rights of individuals to own land, houses, and other assets, are vital to democracy, development, upward mobility, and rising prosperity for all. That is why the racially discriminatory laws that earlier barred black South Africans from owning land and many other assets were so profoundly unjust.

Since these restrictions began to crumble in 1975 – and were finally abolished by the National Party government in 1991 – black ownership of houses, land, and other assets has grown exponentially. To speed up this process, South Africa needs an annual growth rate of 7% of gross domestic product (GDP) – which would double the size of the economy every ten years – coupled with an upsurge in investment and employment. However, these advances will not be possible if the Bill is enacted in its current form. The Bill could also reverse the gains that have already been made in extending the benefits of private property ownership to millions of black South Africans.

Under the Bill, the 8.6 million black, coloured, and Indian people who own their homes will be just as vulnerable to the expropriation of their houses as the 1.1 million whites with home ownership. Some 16.5m black people with customary land use rights – and especially those living near major cities – could see these unregistered rights expropriated by municipalities and their land turned over to RDP housing or other purposes.  Some 2.8m black people living on commercial farms could also lose their unregistered residence rights, yet will receive very little compensation for their resulting losses.

The many black South Africans who have already bought some 2 million hectares of farming land on the open market since 1991 could likewise see their farms expropriated by any organ of state at any tier of government. So too could all the black people with leases or other rights over the 7 million hectares of land thus far transferred under the land restitution and redistribution initiatives. In all instances, those affected will be left without adequate compensation and with little effective redress for the loss of their homes, business premises, customary plots, or other vital assets.  Often, these will be their only assets – built up by them over a lifetime of endeavour.

Though some improvements have been made to the Bill since it was published for public comment in 2015, the Bill still remains unconstitutional.  The problem, in a nutshell, is that the Bill still empowers an expropriating authority, after completing some simple preliminary steps, to take ownership and possession of property by serving a notice of expropriation on the owner. Though disputes over the compensation payable must now, in the absence of successful mediation, be referred to the courts, the Bill still seeks to limit the right to dispute the validity of an expropriation. In addition, the Bill tries to put onus of proof in any such proceedings on the expropriated owner or holder of a right. 

However, if the Constitution is to be meaningful in protecting the property rights of all South Africans, the onus of proof must lie on the expropriating authority to prove that all relevant constitutional requirements for a valid expropriation are met. The expropriating authority must also discharge this onus – and obtain a court order confirming that it has done so – before it issues a notice of expropriation. In addition, where an intended expropriation will result in the eviction of an owner or rights holder from his or her home, the prior court order thus obtained must also authorise this eviction, as required by Section 26(3) of the Constitution.

Also of great concern is the unconstitutional definition of expropriation that has belatedly been included in the Bill. This seeks to allow an expropriating authority to take custodianship (rather than ownership) of property without having to pay any compensation at all. It also seeks to deprive South Africans of all constitutional protections against regulatory or indirect expropriations. This definition makes a mockery of the property clause in the Constitution (Section 25), which (as the Constitutional Court stated in the FNB case in 2002) is aimed at ‘both protecting private property rights, as well as serving the public interest…, and also at striking a proportionate balance between those two functions’. [First National Bank of SA Ltd t/a Wesbank v South African Revenue Service; First National Bank of SA Ltd, t/a Wesbank v Minister of Finance, [2002] ZACC 5; 2002 (7) BCLR 702 (CC), at para 50] The definition is also inconsistent with the rights to administrative justice (Section 33) and access to court (Section 34).

No legislation can lawfully be enacted if it contains provisions inconsistent with the Constitution. As the Constitutional Court stressed in the Certification case in 1996: “Under our constitutional democracy, the Constitution is the supreme law. It is binding on all branches of government and no less on Parliament… Parliament ‘must act in accordance with, and within the limits of, the Constitution’”. [Certification of the Constitution of the Republic of South Africa, 1996, 1996 (10) BCLR 1253 (CC), at para 109]

Also relevant to the constitutionality of the Bill is the limited opportunity given to the public to comment on its terms. A scant 18 days was initially allowed by the portfolio committee on public works for public comment on the Bill, which is too short a period for meaningful deliberation and consultation on the impact of its provisions. Though the deadline for comment was then extended by some seven weeks, few additional submissions were made in this period, which means the extra period meant little in practice.
In addition, the definition of expropriation was added only in late 2015, when the Bill was already before the portfolio committee. This means that it was never discussed at the National Economic Development and Labour Council (Nedlac), or made available for public comment.

The National Council of Provinces (NCOP) and the various provincial administrations represented within it have also failed to provide adequate opportunities for public consultation. The various provincial legislatures failed to advertise clear and realistic deadlines for the making of written submissions. Some also omitted to issue sufficiently timeous invitations, with clear details of venues, to those who wanted to make oral submissions. This also made it difficult for the public to make its views on the Bill known. However, adequate public consultation is essential to constitutionality, as the Constitutional Court has stressed.

In addition, the process for adopting the Bill by the NCOP was fundamentally flawed. Fundamental objections to the unconstitutionality of the Bill were simply brushed aside, while a significant number of proposed provincial amendments were given short shrift, instead of being properly considered. Moreover, many negotiating and final mandates from the nine provinces were received by the select committee only after the relevant deadlines had passed. In addition, few provincial legislatures met to confer their final mandates on their provincial delegations, as required by the Mandating Procedures of Provinces Act of 2008.

The Bill also has major ramifications for all land held in traditional or customary tenure. Both traditional leaders and individuals who hold unregistered customary land use rights could have their rights taken by municipalities or other organs of state for inadequate (or no) compensation. Traditional leaders thus requested last year that all land held in customary tenure be exempted from the operation of the Bill, but this request was refused. [City Press 9 August 2015]

The State Law Advisers have nevertheless advised that ‘it is not necessary to refer the Bill to the National House of Traditional Leaders’ because it ‘does not contain provisions pertaining to customary law or the customs of traditional communities’. [Para 15.6, Memorandum on the Objects of the Expropriation Bill of 2015]

This opinion overlooks the fact that the Bill is likely to result in the loss of significant amounts of customary land rights if municipalities or other organs of state decide to expropriate, or take custodianship, of land in such tenure. Any such development will have enormous ramifications for both customary law and the customs of traditional communities. The Bill should therefore be referred to the National House of Traditional Leaders for its comments before the president gives his assent to it, as required by the Traditional Leadership and Governance Framework Act of 2003. [Section 18(1), Traditional Leadership and Governance Framework Act of 2003]

Shortcomings in the current Expropriation Act of 1975

The ruling African National Congress (ANC) has long noted that the current Expropriation Act of 1975 is at odds with the Constitution in two respects. First, the Act does not allow expropriation ‘in the public interest’, whereas the Constitution does. Second, the Act leaves out four factors listed in the property clause (Section 25) of the Constitution as relevant to the compensation payable on expropriation. These four factors are often called the ‘discount’ factors because the monetary value assigned to them may be deducted from the market value of the property.

Under Section 25, compensation on expropriation must be ‘just and equitable’ in the light of all the relevant circumstances. Factors expressly listed as relevant include market value, along with the ‘discount’ factors, which are: [Section 25(3), Constitution of the Republic of South Africa, 1996 (Constitution)]
• the current use of the property;
• the history of its acquisition;
• the extent of any direct state subsidy in its acquisition or capital improvement; and
• the purpose of the expropriation.

The ANC is correct in highlighting these two contradictions between the Act and the Constitution. However, it overlooks the most important contradiction of all. Provisions allowing the state to take ownership of property by notice to the owner could not be legally challenged in 1975, when the current Expropriation Act was adopted and the principle of parliamentary sovereignty applied. However, they are now clearly in conflict with South Africa’s Constitution. Instead of recognising this fundamental weakness, the Bill repeats these contentious provisions and seeks to give them new life.

Unconstitutional provisions in the Bill
Provisions in the Bill which are clearly inconsistent with the Constitution are highlighted below:

A narrow definition of ‘expropriation’ and ‘expropriate’
According to the Bill, ‘“expropriation” means the compulsory acquisition of property by an expropriating authority or an organ of state upon request to an expropriating authority’ and ‘“expropriate” has a corresponding meaning’.

This definition of expropriation was inserted into the Bill by the portfolio committee of public works in the final stages of the parliamentary process before the National Assembly. Hence, it was never discussed at the National Economic Development and Labour Council (Nedlac) or opened up to public consultation.

To most people, the new definition looks harmless enough, for it describes expropriation, in essence, as the compulsory ‘acquisition’ of property by the State. The significance of this wording can be understood only in the light of the main Constitutional Court judgment in the Agri SA case in 2013.

This case began when a company, Sebenza (Pty) Ltd, found it lacked the funds needed to convert an unused old-order mining right it had bought in 2001 for R1m into a new-order mining right under the Mineral and Petroleum Resources Development Act (MPRDA) of 2002. This Act, which took effect in 2004, vested all mineral resources in the ‘custodianship’ of the State. It also required unused old-order rights to be converted within a year, failing which they would ‘cease to exist’. Since Sebenza could not afford the application fee for this conversion, the mining right for which it had paid R1m duly came to an end, prompting it to sue for compensation.  Agri SA, a lobby group for commercial farmers, many of whom had earlier owned unused old-order rights to the minerals beneath their land, took over the claim and brought it before the Pretoria High Court. [Agri South Africa v Minister of Minerals and Energy and Another (55896/07) [2011] ZAGPPHC 62; [2011] 3 All SA 296 (GNP); 2012 (1) SA 171 (GNP); 2012 (1) BCLR 16 (GNP) (28 April 2011)]

The High Court found that Sebenza had lost all the competencies of ownership it had previously enjoyed, while the MPRDA had given the mining minister substantially similar rights. The State had thus acquired ‘the substance of the property rights’ that Sebenza had previously owned, and it made no difference that the State’s competencies were termed ‘custodianship’ rather than ‘ownership’. Expropriation had indeed occurred and compensation of R750 000 was payable. [Business Day 4 May 2011; Pretoria High Court judgment, supra, para 96]

The Constitutional Court then overturned this ruling. The main judgment was penned by Chief Justice Mogoeng Mogoeng, who agreed that Sebenza had suffered a ‘compulsory deprivation’ of its mining right and that the ‘custodianship’ of this resource was now vested in the state. However, said Chief Justice Mogoeng, ‘the assumption of custodianship’ did not amount to expropriation because it did not make the state the owner of the right in issue. Added the chief justice: ‘Whatever “custodian” might mean, it does not mean that the State has acquired and thus become the owner of the rights concerned.’ [Agri South Africa v Minister of Minerals and Energy, CCT/51/12, 18 April 2013, para 71] This in turn meant that no expropriation had occurred and that no compensation was payable. [Ibid, para 72] What the Pretoria High Court had seen as a meaningless distinction between the state’s powers as ‘owner’ or ‘custodian’ thus became, in the main judgment at least, an issue of major legal and monetary importance.

However, Chief Justice Mogoeng also stressed that his ruling was based on the particular facts before him, including the fact that Sebenza had been unable to convert its old-order right, not because the MPRDA did not make provision for this, but rather because of its ‘precarious financial position’. [Ibid, para 72] He also said: ‘A one-size-fits-all determination of what acquisition entails is not only elusive but also inappropriate… A case-by-case determination of whether acquisition has in fact taken place presents itself as the more appropriate way of dealing with these matters,…[as] acquisition is likely to assume many variations.’ [Ibid, para 64]

The chief justice further went on to say: ‘It would…be inappropriate to decide definitively that expropriation is, in terms of the MPRDA, incapable of ever being established…. I accept that a case could be properly pleaded and argued to demonstrate that expropriation did take place. That avenue…must be left open, particularly when regard is had to the express provision made for expropriation in item 12 of Schedule II to the MPRDA’. [Ibid, para 75]

Two of the Constitutional Court judges in the case handed down a separate (concurring) judgment in which they cautioned against the approach taken in the main judgment. In this judgment, handed down by Judge Johan Froneman, the two noted that there was no prior Constitutional Court case ‘dealing with the nature of change brought about by vesting the natural resources of the country in the state as custodian of those resources’. In addition, they said, ‘the main judgment [by Chief Justice Mogoeng) did not address the issue squarely’. [Ibid, para 101]

Judge Froneman also stressed that previous relevant Constitutional Court cases had ‘laid down no requirement of state acquisition as an inflexible requirement for expropriation’. He warned against any such development, saying: ‘It would be inadvisable to extrapolate an inflexible general rule of state acquisition as a necessary requirement’. [Para 102]

Added Judge Froneman: ‘If private ownership of minerals can be abolished without just and equitable compensation – by the construction that when the state allocates the substance of old rights to others it does not do so as the holder of those rights – what prevents the abolition of private property of any, or all, property in the same way? This construction in effect immunises, by definition, any legislative transfer from existing private property holders to others, if done by the state as custodian of the country’s resources, from being recognised as expropriation. This is done without a thorough examination of what the entirely new legal concept of state custodianship holds for our law, or whether the transfer will be just and equitable. In that way, one of the crucial aspects of our historical compromise, the equitable balancing between the protection of existing property rights and the public interest under Section 25, is bypassed. I find that unfortunate.’ [Ibid, para 105]

Another Constitutional Court judge in the Agri SA case, Judge Edwin Cameron, added that he ‘shared the caution’ expressed by Judge Froneman.  Said Judge Cameron: ‘Acquisition by the state is, in my view, a general hallmark of expropriation. But not necessarily and inevitably so. Whether an expropriation contemplated by Section 25 has occurred is – as the main judgment finds – a context-based inquiry demanding a case-by-case approach. I therefore agree with [Judge] Froneman that it is inadvisable to extrapolate an inflexible general rule of state acquisition as a requirement for all cases.’ [Ibid, para 78]

As these passages highlight, Chief Justice Mogoeng’s judgment was based solely on the particular facts before him, while both he and the other judges on the court were reluctant to lay down a sweeping new rule on the meaning of expropriation.  The Agri SA judgment is thus not enough to validate a definition of expropriation which so narrows the normal meaning of the term and could deprive millions of black and white South Africans of any compensation for the loss of their homes, business premises, customary plots, farms, or other assets.

The definition now included in the Bill also seeks to exclude any ‘indirect’ or ‘regulatory’ taking from counting as an expropriation. An indirect or regulatory taking arises where the state does not itself acquire ownership, but its regulations nevertheless deprive the owner of many of the usual benefits and powers of ownership.

A regulatory taking will arise, for example, if the state enacts legislation requiring all foreign companies in the private security industry to transfer 51% of their assets or equity to South Africans. It will also arise if new legislation requires all mining companies to sell the minerals they produce at ‘developmental’ prices, set by the mining minister, rather than at market prices. In both instances, the state will not acquire ownership of the companies or the minerals, but their existing owners will be deprived of many of the usual powers and benefits of ownership.

The new definition in the Bill seeks also to prevent such regulatory takings from counting as expropriations. However, this too is contrary to the normal meaning of expropriation, as Judge Froneman pointed out in the Agri SA case when he said that ‘foreign jurisprudence recognises that expropriation may take place even if the [relevant] rights or property have not been acquired by the state’. [Ibid, para 103] In addition, Chief Justice Mogoeng’s judgment in that case should not be seen as justifying such a narrowing of the normal meaning of expropriation, for his ruling was based on a very different factual situation.

Overall, the Bill’s attempt to narrow the definition of expropriation so as to exclude both the assumption of custodianship and regulatory takings from counting as expropriations, is contrary to the usual meaning of expropriation. It is not in fact in line with the Agri SA judgment and cannot be seen as being justified by this ruling. It also makes a mockery of Section 25, which as the Constitutional Court ruled in 2002 in the FNB case, is aimed at ‘both protecting private property rights, as well as serving the public interest…, and also at striking a proportionate balance between those two functions’. [First National Bank of SA Ltd t/a Wesbank v South African Revenue Service; First National Bank of SA Ltd, ta Wesbank v Minister of Finance, [2002] ZACC 5; 2002 (7) BCLR 702 (CC), at para 50] The definition is also inconsistent with other guaranteed rights, including the right to administrative justice, and is clearly unconstitutional. 

The deputy minister of public works, Jeremy Cronin, himself earlier expressed reservations about the definition, saying that he was ‘open to either a reformulation’ by the National Council of Provinces or to the deletion of the definition. In Mr Cronin’s view, ‘seeking to define expropriation in the Bill is both redundant and open to unintended consequences’. [Jeremy Cronin, letter to Business Day, 15 March 2016] Unfortunately, however, the National Council of Provinces failed to consider the need for the definition to be changed to bring it into line with the Constitution, even though this was one of the amendments proposed to it.

At the very least, the current definition should be omitted. If a definition is to be included – which may now be important to provide legal certainty and predictability – it should be worded in a comprehensive way, as set out in Appendix 1.

Preliminary requirements for expropriation
According to the Bill, an expropriating authority must start with various preliminary requirements before issuing a notice of expropriation. First, the expropriating authority must negotiate with the owner and try to buy the property from him or her on reasonable terms. [Section 2(2), Bill]

If negotiations fail to produce agreement, the expropriating authority must investigate the suitability of the property for the purposes it has in mind, consult with the relevant municipality and government departments, and find out what rights tenants and other third parties might have in the property. [Section 5, Bill] (The matter of third-party rights is examined below.)

During its investigation, an expropriating authority may send suitably skilled inspectors to examine the property and, if necessary, ‘survey, dig, or bore into it’. However, these inspectors may not enter the property without either the consent of the owner or an order of court. [Sections 5 (2) (3), Bill]

The Bill thus recognises that an order of court is required for the relatively small matter of empowering an inspector to enter the property. (It also requires an order of court before a temporary expropriation may be extended, for a total period that may not exceed 18 months.) [Section 22(7), Bill] However, it denies that an order of court is needed before a permanent expropriation is carried out. Instead, it allows an expropriating authority to serve a notice of expropriation on the owner and thereby take ownership and possession on the specified dates and against the owner’s will. This anomaly in the Bill’s provisions is irrational and unreasonable, and should be cured by requiring that a prior order of court must also be obtained before a notice of expropriation may be served (see the amendments proposed in Appendix 1).

Moreover, at no point in these preliminary processes is the expropriating authority called upon to demonstrate to the owner – let alone the courts – that the proposed expropriation is constitutional. Yet the expropriation cannot pass constitutional muster if it is not in fact for public purposes or in the public interest; if the compensation offered is not truly just and equitable in all the relevant circumstances; and unless all other relevant constitutional requirements have been met. Where the property to be expropriated includes a person’s home, a court order is also needed (under Section 26(3) of the Constitution) to sanction the eviction of the owner or rights holder from his or her home. [Sections 25, 33, 34, 26 (3), Constitution of the Republic of South Africa, 1996]

To remove the anomaly earlier identified and ensure respect for all these constitutional guarantees, the expropriating authority must seek and obtain a court order confirming that a proposed expropriation meets all relevant constitutional requirements before it issues a notice of expropriation. Allowing the state to expropriate before it has obtained such a court order, as the Bill seeks to do, makes a mockery of the relevant constitutional protections.

Notice of expropriation
Under the current wording of the Bill, once an expropriating authority has completed these preliminary steps, it may serve a notice of expropriation on the owner (and on all the holders of unregistered rights that are known to it). This notice must describe the property, give reasons for the expropriation, and state the amount of compensation offered. It must also specify the ‘date of expropriation’, this being the date on which ‘the ownership of the property described in the notice…vests in the expropriating authority’. [Sections 8(3) (e), 9 (1), Bill] On this specified date – and regardless of the owner’s objections – ownership passes to the state automatically and by operation of law.

The notice of expropriation must also stipulate ‘the date on which the right to possession of the property will pass to the expropriating authority’. [Section 8(3)(f), Bill] On this date, the ‘right to possession’ will also pass to the expropriating authority, again automatically and by operation of law. [Section 9(2), Bill] The expropriated owner is entitled to the use and fruits of the property until possession passes, but must also take care of it and prevent its value deteriorating. [Section 9 (3) to (5), Bill]

According to the Bill, the date of expropriation ‘must not be earlier’ than the date the notice of expropriation was served on the owner. [Section 1, Bill] However, since no other time period is stipulated, there is nothing in the Bill to prevent ownership passing to the state the day after the service of this notice. [See Section 1, Bill] Nor is there anything in the Bill to prevent the passing of possession very soon after the transfer of ownership. Hence, if the notice of expropriation is served on the owner on the first day of a particular month, ownership could pass within a week and possession within a fortnight.

These provisions are contrary to Section 25 of the Constitution, which puts the onus on the expropriating authority to show that all the requirements for a valid expropriation have been met before ownership passes to the state. Since the right to property is an essential element in liberty (see The constitutionality of the Bill, below), a remedy which is made available only after a notice of expropriation has already been served cannot suffice. In addition, the harm done by an unwarranted expropriation cannot easily be undone, which makes these provisions of the Bill all the more irrational and unreasonable.

These provisions in the Bill also contradict Section 34 of the Constitution, which gives everyone the right to have a legal dispute (such as whether an expropriation is indeed valid) decided by the courts before that expropriation takes effect. They further contravene Section 33, which gives everyone the right to just administrative action and requires any such action to be ‘reasonable’ and ‘procedurally fair’. Where the expropriated property is, or includes, a person’s home, these provisions also contravene Section 26(3) of the Constitution, which says that ‘no one may be evicted from their home without an order of court made after considering all the relevant circumstances’. 

To cure any such unconstitutionality, the Bill must be amended to state that an expropriating authority, in the event of an unresolved dispute, must obtain a court order authorising the expropriation (and any eviction of people from their homes) before it serves a notice of expropriation on the owner or others. The necessary wording is set out in Appendix 1.

Objections to the compensation offered
If the owner objects to the amount of compensation offered in the expropriation notice, he must explain in writing to the expropriating authority what amount he claims instead, and must do so within 20 days. [Section 14(1), Bill] The expropriating authority then has 20 days to respond by offering a different (or the same) amount of compensation. [Section 15(1), Bill]

The provisions of Section 21 were amended by the portfolio committee on public works during the parliamentary process. Hence, they now begin with the following sub-section: ‘If the expropriating authority and the expropriated owner…do not agree on the amount of compensation, they may attempt to settle the dispute by mediation.’ [Section 21(1), Bill] This is an important addition, but is not enough in itself to ensure consistency with the Constitution.

Section 21 then goes on to say: ‘If the expropriating authority and the disputing party are unable to settle the dispute [in this way], or if the disputing party did not agree to mediation, the expropriating authority must refer to the matter to a competent court to decide or approve just and equitable compensation, provided that nothing in this section alters the ordinary civil onus’. [Section 21(2), Bill] A further sub-section adds that: ‘Sub-section 2 does not preclude a person from approaching a court on any matter relating to the application’ of the Bill. [Section 21(3), Bill]

Despite the positive changes made, these provisions still seek to confine expropriated owners and rights holders to contesting the amount of the compensation offered. This raises doubts as to whether the Bill itself allows court challenges to the validity of an expropriation, or to an eviction which has not been authorised by a court order.  The problem now lies in Section 21(2), read together with the definition of ‘disputing party’ in Section 1. This definition limits the meaning of ‘a disputing party’ to an owner or rights holder who ‘does not accept the amount of compensation offered’.  The narrow ambit of this definition is not affected by the wording of Section 21(3), which makes no reference to it. In combination, these provisions still reflect an unconstitutional attempt to prevent the courts from adjudicating on the validity of expropriations or the unauthorised eviction of people from their homes.

The definition of disputing party is thus inconsistent with Section 25 of the Constitution.  It is also inconsistent with Section 34, which gives everyone the right to have legal disputes (including disputes as to the validity of expropriations and evictions) decided by the courts after a fair and public hearing. It further infringes Section 33 of the Constitution (the right to just administrative action), because it effectively allows an expropriating authority to act as judge and jury in its own cause in deciding for itself on the validity of an expropriation and in carrying out an unauthorised eviction.

Sections 21(2) and (3) also seek to delay any process of adjudication until after a notice of expropriation has been served, and ownership and possession may already have passed to the expropriating authority. These clauses also seek to shift the onus of proof from the expropriating authority on to the expropriated owner or rights holder, who is seemingly expected to prove that the amount of compensation offered is not just and equitable, or that relevant constitutional requirements for a valid expropriation have not been met.

If the expropriated owner (or rights holder) fails to discharge the onus thus placed on him, he will, of course, lose the case. He will then have to pay not only his own (no doubt substantial) legal costs, but also those of the expropriating authority. This is a major risk. Even if the expropriated owner wins the first court battle, the expropriating authority – which is likely to have deeper pockets than most individuals or companies – will thereafter be able to take the matter on appeal. Fighting the appeal will increase the owner’s own legal costs. If he loses the appeal, again he will have to pay not only his own (much increased) legal costs but also those incurred by the expropriating authority.

The overall financial implications of such litigation are so severe that most people will not be able to risk going to court. Instead, they will find themselves under enormous pressure to accept the validity of the expropriation, along with whatever compensation the expropriating authority has offered. This is enough to make a mockery of various constitutional guarantees, including the right to have the compensation payable on expropriation ‘decided or approved by a court’.

Sections 21(2) and (3) are thus in breach of Sections 34, 25, and 33 of the Constitution. Moreover, if the expropriated property includes a person’s home, from which he is evicted when the expropriating authority takes possession of the property, then these provisions are also inconsistent with Section 26(3) of the Constitution.

Section 21 thus needs to be amended to comply with all relevant constitutional provisions. The wording required is set out in Appendix 1.

Date of payment of compensation
According to the Bill, ‘the expropriated owner (or holder) is entitled to payment of compensation by no later than the date on which the right to possession passes to the expropriating authority’. [Section 17(1), Bill] However, another clause in the Bill still allows the expropriating authority to avoid this obligation via the simple expedient of ‘proposing a later date or dates’ for payment. In these circumstances, the owner must either agree to these date(s), or the matter must be referred to the courts for decision. [Section 17 (4), Bill] However, if the expropriating authority has stipulated a later date for payment and is waiting for a court to authorise this date – a process which, given clogged court rolls, could take months or years – it is unlikely in practice to pay on the date it takes possession.

Given the costs and time involved in litigation, most owners (or rights holders) will again have little choice but to agree to payment being deferred. In addition, the Bill expressly states that ‘any delay in making payment…will not prevent the passing of the right to possession to the expropriating authority…unless a court orders otherwise’. [Section [17(3), Bill] This means that the expropriating authority will generally suffer no penalty for failing to pay on time and will have no incentive to avoid late payment. In addition, few owners or rights holders are likely to receive any interest on any outstanding amounts owed to them, as the poorly phrased provisions of the Bill will generally exclude this possibility. [Section 13, read together with Section 17, Bill] These provisions are so skewed against the owner or rights holder that they cannot be accepted as ‘just and equitable’, within the meaning of Section 25 of the Constitution.

To bring this aspect of the Bill into line with the Constitution, the expropriating authority must be obliged to pay the compensation due before it takes ownership of the property on the date of expropriation stated in the notice of expropriation. Payment at this earlier point in time is also needed to strike an equitable balance between the public interest and the interests of those affected. Moreover, to ensure that payment is indeed made timeously, an effective sanction against late payment is needed. The notice of expropriation should thus become invalid if payment is not made on ten days before the date of expropriation. The amendments needed to bring about these changes are set out in Appendix 1.

The rights of third parties
The Bill recognises that third parties may have rights in property that is targeted for expropriation.  Accordingly, an expropriating authority may expropriate not only the owner but also the holders of all other third-party rights. It may also do so in the same notice of expropriation, which must be served on all relevant rights holders and must offer each of them ‘just and equitable’ compensation. [Section 8(5)(a) and (b), Bill] (The Memorandum on the Object of the Bill errs in saying that separate notices are required.) [Para 6.1, Memorandum]

According to the Bill, the impact of expropriation varies according to whether these third-party rights are mortgage rights or unregistered rights, among other things.

Mortgage rights
If the expropriated property is mortgaged to a bank, the mortgage is automatically terminated on the date of expropriation stated in the notice of expropriation. On that date, ownership passes to the expropriating authority [Section 9(1), Bill] and any registered mortgage simultaneously comes to an end.  The compensation payable must then be paid out in accordance with an agreement reached between the expropriated owner and the bank on how the amount is to be apportioned between them. If no such agreement has been reached, the expropriating authority may deposit the compensation money with the Master, who will in time pay out the money in keeping with any relevant court order. [Section 18, Bill]

Some of these provisions echo the current Expropriation Act, which also provides for the automatic termination of any mortgage bond when ownership of the property passes to the state.  However, under the Act there is little danger that the amount of compensation (market value, plus an amount to make good all financial loss resulting from the expropriation) will be less than the amount owing to the bank. The situation under the Bill is different. Since compensation will generally be less than market value, the amount payable could well be less than the outstanding loan.

If the Bill is enacted in its current form, banks will become more reluctant to extend mortgage finance, for they will know that houses and other properties that might in time be expropriated may not be sufficient collateral for loans. This will make it more difficult for prospective home owners – very many of whom are likely to be black South Africans – to secure mortgage bonds in the future.

The situation is also unfair to the expropriated owner, who will still have to pay the bank any outstanding balance on his mortgage bond.  In practice, this need to repay the bank could make it impossible for him to replace the home, business premises, or other property that he has lost through no fault of his own.  Provisions which put expropriated owners in such a difficult situation do not strike ‘an equitable balance between the public interest and the interests of those affected’ (as required by Section 25) and are inconsistent with the Constitution.

Unregistered rights
Unregistered rights include the rights of tenants to occupy residential and business premises under lease agreements, the rights of farm workers and other farm residents to live on commercial farms, and the customary land-use rights of the 16.5 million or so people currently living on land held in customary tenure. 

Under the Bill, all unregistered rights are ‘simultaneously expropriated’ on the date that ownership passes to the expropriating authority. [Sections 9(1)(b), 8(5), 11, 12, Bill] This will apply to farm workers or other farm residents, all of whose unregistered rights of residence on a commercial farm will automatically be expropriated when ownership of that farm passes to the expropriating authority. Farm residents will also lose their rights to possess their farm homes when possession of the farm passes to the expropriating authority. Though farm residents will supposedly have rights to compensation under Section 12, in practice the formula in that section will again offer them little.

Under the Bill, an unregistered rights holder, such as a farm resident, is entitled to ‘just and equitable’ compensation. This is an important step forward in buttressing the rights of farm workers, but it does not go far enough. The compensation to which farm residents will be entitled on expropriation must be based on market value, less the four discount factors, as stated in Section 12 of the Bill. [Section 12(1), Bill] But what is the market value of a farm resident’s unregistered residence right? This is clearly limited and will be difficult to quantify. It may also be further reduced via the discount factors.

Yet farm workers who are evicted in this way will face many financial losses. They will have to find new homes and new means of livelihood. They will have to pay moving costs. They could suffer other losses, such as the value of livestock they can no longer keep. Farm residents should thus be entitled to an amount to make good such losses, all of which are a direct result of the expropriation of their unregistered rights. But Section 12 does not make provision for this, which means that the compensation they will receive will not be ‘just and equitable’ as required by Section 25 of the Constitution.

Section 12 must thus be amended to allow expropriated farm residents, and other holders of unregistered rights, to claim amounts to make good all the direct losses they suffer as a result of an expropriation. This is allowed by the current Expropriation Act of 1975, but excluded by the Bill. Unless the Bill is amended to include this factor in Section 12, both farm workers and other holders of unregistered rights will receive very little compensation on the expropriation of the properties on which they live, work, trade or otherwise do business.

However, if farm residents and other holders of unregistered rights are to be allowed to claim for resulting losses, there is no reason why expropriated owners should not be able to claim for such losses too. Expropriated owners will also have to find alternative residential or business premises, which may be more costly than the ones they previously had. They will also have to pay their moving costs. In the case of business premises, they will also lose their normal income until they can obtain new premises and start their businesses up again. In addition, if their new premises are less convenient to customers, they are likely to lose much of their existing clientele.

If compensation is truly to be ‘just and equitable’ in all the circumstances, then expropriated owners and rights holders should be able to claim amounts to make good all the direct losses they suffer as a result of expropriation. The Bill should be amended to allow this, and the relevant wording that would be needed is set out in Appendix 1.

Constitutionality of the Bill’s provisions relating to rights holders
The Bill overlooks the fact that any expropriation of third-party rights must also comply with all relevant constitutional provisions. Hence, under Section 25 of the Constitution, the expropriation of a mining right, a servitude, a lease, a farm residence right, or a customary land-use right must (objectively) be ‘for public purposes’ or ‘in the public interest’. The compensation paid to these rights holders must also be truly ‘just and equitable’ in all the circumstances.

Holders of mining rights, servitudes, leases, farm residence, and customary land-use rights also have guaranteed rights of access to the courts (under Section 34) and to just administrative action (under Section 33). Where residential rights are in issue – as they are for tenants leasing houses or flats, for farm residents living on commercial farms, and for people living on customary land-use plots – all these rights holders also have the right not to be evicted without court orders authorising this. The holders of registered and unregistered rights should thus also have the protection of an amended Section 21, as set out in Appendix 1.

Expropriation by the minister of public works
Chapter 2 of the Bill deals with expropriation by the minister of public works (the minister). The Bill gives the minister the power to expropriate either for a public purpose or in the public interest. [Section 3(1), Bill] It also gives him the power to expropriate ‘upon the written request’ of an organ of state ‘other than an expropriating authority’, provided that this organ of state satisfies him that it needs ‘particular property for a public purpose or in the public interest’. [Section 3(2), Bill]

The powers thus given to the minister are unnecessary, for the Bill already empowers all organs of state to expropriate property. Hence, all organs of state – including the minister himself – qualify as ‘expropriating authorities’ in any event. These provisions of the Bill, in laying down different rules for ‘ministerial’ expropriations (as opposed to others), are sure to generate confusion and legal uncertainty.

According to Chapter 2, the minister may expropriate only ‘property which is connected to the provision and management of the accommodation, land and infrastructure needs of an organ of state’. [Section 3(3), Bill]  The minister’s power to expropriate is expressly made ‘subject to the provisions of Chapter 5’ of the Bill, [Section 3(1), Bill] which deals with the amount of compensation and the time when it must be paid. This wording raises doubts as to whether ministerial expropriations are subject to the other chapters in the Bill, particularly Chapter 3 (‘Investigation and valuation of property’), Chapter 4 (‘Intention to expropriate and expropriation of property’), Chapter 6 (‘Mediation and determination by court’), and Chapter 7 (‘Urgent expropriation’). 

As presently written, the Bill could allow the minister to brush aside all the requirements set out in all chapters other than Chapter 5. Among other things, this could bar an owner or rights holder who suffers a ministerial expropriation from having a dispute over the validity of such an expropriation, or of the compensation payable, referred to the courts. This is objectionable and clearly unconstitutional, for any ministerial expropriation must of course comply with all relevant constitutional guarantees.

Since there is no need for the minister to have his own and seemingly different expropriation powers, Chapter Two should simply be deleted, as shown in Appendix 1.

Trumping effect of the Bill
According to a memorandum on the objects of the Bill, part of the Bill’s purpose is to ‘ensure uniformity in the way that organs of state undertake expropriation’. This is important, the memorandum says, because there is such an ‘array of authorities’, within all spheres of government, that ‘have the power to expropriate through various pieces of legislation’. [Department of Public Works, Memorandum on the Objects of the Expropriation Bill, 2015, p1] What this also means, however, is that the Bill will override all the limitations on expropriation now contained in other statutes.

The Bill has several trumping provisions. It recognises, in Section 2(3), that an expropriating authority may expropriate property under ‘any other law of general application’, but stresses that this must be done in compliance with its core provisions. It also requires that any existing law dealing with expropriation must be ‘interpreted in a manner consistent with its terms’, particularly as regards the compensation payable. To reinforce this point, the Bill further states that its provisions must ‘prevail in the event of a conflict’ between it and any other existing law dealing with expropriation. [Sections 2(3), 29 (1), Bill]

The Bill thus seeks to ensure that its own, often unconstitutional, provisions will apply to any future expropriation by any organ of state, irrespective of what other legislative safeguards may currently be available.  Given the Bill’s trumping powers, it is vital to ensure that all of its provisions are brought fully into line with the Constitution, so as to prevent a host of unconstitutional takings under various other laws.

The unconstitutionality of the Bill
Many of these relevant issues have already been flagged in our analysis of the provisions in the Bill. However, the key reasons why it is inconsistent with the Constitution are summarised here (and also, for the president’s convenience, in the accompanying Synopsis of this submission).

The Bill is clearly unconstitutional. Crucially, the Bill allows any expropriating authority, once it has completed some simple preliminary steps, to take ownership (and other rights) by the simple expedient of serving a notice of expropriation on the owner (or rights holder). Ownership of the property in question will then pass automatically to the expropriating authority on the ‘date of expropriation’ identified in the notice, which could be very soon. All unregistered rights, such as customary land use rights, leases, and the rights of farm residents to live on commercial farms, will automatically be expropriated at the same time, while various registered rights could be expropriated too.

The Bill thus empowers an expropriating authority to take property by notice to the owner – and leaves it to those stripped of ownership and possession to contest this in the courts thereafter, if they can afford to do so. The Bill also seeks to put the onus of proof on the expropriated owner (or rights holder), who will have to pay the expropriating authority’s legal costs (as well as his own) if he fails to discharge this onus.

Effectively, this allows an expropriating authority to resort to ‘self-help’ when it embarks on an expropriation. Yet this is contrary to fundamental common law principles of liberty, and is also now barred by the Constitution.

For hundreds of years, the common law has had special rules to protect both the liberty and the property of the puny individual from the enormous power of the state. At common law, thus, an individual cannot generally be arrested by the police or other officials – even if he is suspected of having committed a crime – without a prior order of court in the form of a warrant for his arrest. At common law, too, an individual’s property cannot generally be entered upon or seized by the police or other officials – even though that property may well have been used in committing a crime – without a prior court order in the form of a search-and-seizure warrant.

It is because of this strong common-law protection for property that most legislation giving investigative powers to the police and others clearly states that they may enter onto private property only if they have the consent of the owner or have obtained a prior court order in the form of a search warrant. They also make it clear that property cannot be seized and taken away without a prior court order that justifies this seizure too. Provisions of this kind are standard in all such legislation. They are always included to protect the puny individual, whose home and other assets are essential to his well being and who would otherwise be vulnerable to having the property he has worked so hard to acquire taken from him by the powerful state.

Two provisions in the Bill reflect and incorporate this common law protection for property. The first of these clauses says that an inspector sent to investigate a property with a view to its expropriation may not enter that property unless he has the owner’s consent or has obtained a prior court order authorising his entry. [Section 5(3), Bill] The second clause states that a temporary expropriation may not be extended (for a total period of up to 18 months) unless the expropriating authority first obtains a court order authorising this. [Section 22(7), Bill]  However, when it comes to the far more serious matter of a permanent expropriation, the Bill denies that a prior court order is required. This denial is, of course, contrary to the common law principles of liberty which the Bill recognises as binding in situations that are far less damaging to the owner.

Since 1996, moreover, the common law’s protection for property rights has been significantly buttressed by the Constitution, which now lays down a number of important requirements for a valid expropriation in Section 25 (the property clause). The Constitution also guarantees access to the courts (under Section 34), and gives all South Africans the right to just administrative action (under Section 33). In addition, Section 26(3) of the Constitution prevents people from being evicted from their homes without a court order authorising this.

Under Section 25 of the Constitution, an expropriation must, among other things, be carried out for public purposes or ‘in the public interest’. It must also be accompanied by ‘just and equitable’ compensation, which must ‘reflect an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances’. If these guarantees are to have any practical significance, the expropriating authority must be able to prove that an intended expropriation complies with all these requirements. It must also provide this proof before it proceeds with an expropriation. Otherwise, the relevant requirements will be severely weakened, if not set at naught.

Leaving it to the expropriated owner or rights holder to try to disprove the validity of the expropriation after it has already taken place is simply not good enough. This is especially the case when many expropriated owners and holders will battle to afford the necessary court challenge. In addition, those who find themselves evicted from their homes, businesses, and other assets through an expropriation which is in fact invalid will suffer an emotional trauma and economic loss that even a subsequent court order in their favour (assuming they can afford the litigation required to obtain this), cannot easily put right.

Hence, if an expropriating authority issues a notice of intention to expropriate particular property, if the owner or rights holder rejects either the compensation offered or the overall validity of the proposed expropriation, the expropriating authority must then go to court on the matter. It must seek and obtain a court order which confirms the validity of the expropriation, decides what compensation is just and equitable in all the circumstances, and rules on when that compensation must be paid. The onus of proof in such proceedings must lie on the expropriating authority, which must satisfy the court that the proposed expropriation meets all relevant constitutional requirements. Moreover, if the proposed expropriation will result in the eviction of anybody from their home, then the expropriation authority must also satisfy the court that this eviction should be authorised in all the circumstances.

Once the expropriating authority has obtained a court order confirming the validity of the expropriation, deciding the compensation payable, and authorising any eviction likely to result from it, then only may the expropriating authority serve a notice of expropriation on the owner and other rights holders.

Since this is clearly what Sections 25 and 26 of the Constitution require, all provisions in the Bill which purport to absolve the expropriating authority from requiring a prior court order in cases of dispute are inconsistent with the Constitution and invalid.

Also important is Section 34 of the Constitution, which gives everyone the right to have any legal dispute decided in a fair public hearing before a court. This provision is obviously aimed at allowing such disputes to be resolved by the courts, through the application of the relevant legal principles to the facts of the particular case. Under the Bill, however, this necessary process of deliberation and adjudication will rarely be available. Instead, an expropriating authority can simply serve a notice of expropriation under which ownership and possession will automatically pass to it long before a court has had the opportunity to decide whether such outcomes are constitutionally justified. In most instances, the dispute will never go to court at all, because expropriated owners will lack the money required for litigation and will be too caught up in trying to find new homes, business premises, or other assets to be able to contemplate court action.

Also relevant is Section 33 of the Constitution, which gives everyone the right to just administrative action, which must (among other things) be ‘reasonable’ and ‘procedurally fair’. These requirements are not met when the expropriating authority – which bears the responsibility for upholding them and for showing that they have been upheld – can simply take ownership and possession via its notice of expropriation and then pay an amount of compensation (which may in fact be far from just and equitable) only many months later.

Even more inconsistent with the Constitution is the definition of expropriation that was inserted into the Bill late in 2015, without adequate public consultation. This definition is clearly intended to absolve the expropriating authority in many cases from having to pay compensation or follow the Bill’s (limited) procedural steps for expropriations. In particular, the state will be able to slough off all constitutional and other requirements for a valid expropriation whenever it:
• takes custodianship, rather than ownership, of property; and/or
• introduces regulations giving rise to indirect expropriations.

This definition, in seeking to allow such uncompensated takings, is inconsistent with Section 25 of the Constitution, and the careful balance this clause was intended to strike between upholding existing property rights and providing redress for past injustice.  The definition has its origins in Chief Justice Mogoeng’s ruling in the Agri SA case in 2013. However, that judgment, with its various cautionary notes against laying down any general rule, is not enough to give constitutional validity to a definition which contradicts the established meaning of expropriation and has such major negative ramifications for the guaranteed property rights of all South Africans. 

This definition makes a mockery of the property clause in the Constitution (Section 25). It is also inconsistent with the rights to administrative justice (Section 33) and access to court (Section 34). It must therefore be deleted or substantially amended by the National Council of Provinces, as the deputy minister of public works, Jeremy Cronin, has previously recommended.

Limited public consultation and a flawed process in the National Council of Provinces

Also relevant to the constitutionality of the Bill is the limited opportunity for public consultation that has been provided. The period allowed for public consultation by the portfolio committee on public works in the National Assembly was unreasonably short, while the new definition has never been debated in the National Economic Development and Labour Council (Nedlac), or made available to proper public scrutiny. In addition, the Bill has not yet been referred to the National House of Traditional Leaders for comment, as required by the Traditional Leadership and Governance Framework Act of 2003, even though the Bill has major implications for both customary law and the customs of traditional communities.

The process whereby the National Council of Provinces (NCOP) adopted the Bill was also fatally flawed. Not enough opportunity was provided for public consultation, while fundamental objections to the unconstitutionality of the Bill were brushed aside, along with relevant procedural requirements for its adoption.

The Expropriation Bill was adopted by the National Assembly in February 2016. Because the Bill affects all the provinces, provincial legislatures were supposed to play an important part in its adoption by the NCOP under Section 76 of the Constitution. As the Constitutional Court has stressed, the Section 76 procedure is intended to ensure to ensure that the provinces fully and effectively play their role in the law-making process. [Stephen Segopotso Tongoane v Minister for Agriculture and Land Affairs and others, [2010] ZACC 10, at para 71]

The NCOP procedure is supposed to begin with public consultations on the bill in question, to be organised by the relevant portfolio committee in each provincial legislature. Based on the public comments received, each portfolio committee adopts a ‘negotiating mandate’ on the bill. These negotiating mandates may propose amendments, and are sent to the relevant select committee of the NCOP for its consideration.

This select committee of the NCOP must review the negotiating mandates and any amendments they propose. In the light of the select committee’s deliberations, provincial legislatures then issue their ‘final mandates’. These instruct their provincial delegations on how to vote when the select committee meets again to decide on the bill’s adoption or rejection.

After this, each provincial legislature must give its provincial delegate a ‘voting mandate’ telling it how to vote on the bill when the NCOP convenes in plenary session. However, if no important issues arise when the select committee votes on the bill, the final mandates already received serve as voting mandates at the NCOP plenary.

The process is supposed to give provincial legislatures ample opportunity to make significant inputs into bills with major ramifications for their regions. In the context of the Expropriation Bill, however, virtually every part of the NCOP process has been flawed.

Provinces were late in drawing up their schedules for public hearings on the Bill, while these meetings were often poorly advertised. In the Eastern Cape, the schedule was drawn up only on 15th April for public hearings that ran from18th to 20th April. In the Free State, venues for public hearings were shifted after the initial ones had been advertised. In Gauteng, venues were poorly publicised, while in the Northern Cape little notice of public hearings was provided.

In Gauteng, the IRR (for one) made both written and oral submissions warning against the unconstitutionality of the Bill and the harm it will do to investment, growth and jobs. But the Gauteng portfolio committee simply brushed aside these major problems. Instead, it noted only one concern: the Bill’s wide definition of property. However, this point was a minor one with little substance, as the Bill’s definition of property comes directly from the Constitution.

In other provinces, many important concerns were raised in the public consultation process, inadequate though it was. Many of these concerns were also reflected in the negotiating mandates issued by these provinces. The Western Cape, in particular, put forward many important amendments, including a key proposal saying that the definition of expropriation needed to be brought into line with the Constitution.

However, when the NCOP’s select committee on economic and business development met in Cape Town on 3rd May to consider these negotiating mandates, it gave short shrift to the amendments proposed. The acting chair summarily dismissed almost all the changes, including those put forward by the Western Cape, as ‘cosmetic’, ‘unnecessary’ or ‘already included in the Bill’. (The official minutes of the meeting, however, gave no inkling of the way in which proposed amendments had thus been bulldozed aside, but the IRR’s detailed notes of the proceedings show clearly how this was done.)

Some of the provincial amendments proposed were important and could have reduced the likely damage from the Bill. However, the only change agreed was a minor amendment (from the Eastern Cape), urging that a couple of deadlines be extended by brief periods.
Five of the negotiating mandates were also invalid because they had been issued too late. Since the NCOP select committee had only four valid negotiating mandates before it on 3rd May, the Bill should then have lapsed. Instead, it was allowed to proceed despite the objections of the Democratic Alliance (DA).

Much the same happened at the final mandate stage. The NCOP’s select committee was supposed to meet on the morning of 10th May to vote on the Bill in accordance with the final mandates it had received. But only three final mandates had arrived in time, of which one (from the Western Cape) rejected the Bill. Another five final mandates came in well after the scheduled meeting, while the Free State’s one did not arrive until very much later.
However, the chair of the select committee sidestepped the problem of the missing final mandates by postponing the meeting until the following day. By then eight final mandates had come in, but five of them were still late, having arrived only after the relevant deadline.

In addition, under the Mandating Procedures of Provinces Act of 2008, final mandates must be conferred by ‘provincial legislatures’. Yet few of the nine provincial legislatures met for this purpose, further eroding the validity of their final mandates.

Again, however, these procedural problems were swept aside and the select committee – at its delayed meeting on 11th May – simply nodded the Bill through with the minor changes earlier outlined. Yet the Constitutional Court, in the Tongoane and other cases, has stressed the importance of proper procedural compliance.

Since no major points were raised at the select committee’s meeting, the final mandates counted as voting mandates when the NCOP met in plenary session on 17th May. Despite the DA’s objections, the NCOP plenary simply endorsed the Bill with the same minor changes. These amendments were so insignificant that the National Assembly had no difficulty in accepting them, which means that the Bill, in theory, is now ready for the president’s assent.

However, proper NCOP processes were sacrificed to the goal of pushing the Bill through Parliament before it rose in preparation for the local government goal. Public comments on the Bill were barely sought at all, while the salient criticisms that were nevertheless received were simply brushed aside. Relevant procedural requirements for valid negotiating and voting mandates were also overlooked. Yet proper public consultation and full procedural compliance are needed, as the Constitutional Court has stressed. This alone, with respect, gives the president compelling reason to decline to send the Bill into law.

Conclusion

The Department of Public Works claims that the Bill will bring the current Expropriation Act of 1975 into line with the Constitution, but this is simply not so. On the contrary, the Bill is just as unconstitutional as the current Act.

The Constitution’s founding provisions also clearly state that the Constitution is ‘the supreme law of the Republic’, and that it must be respected and upheld at all times by all branches of the government. Parliament should therefore not have adopted the Bill in its present form because so many of its provisions are inconsistent with the Constitution.

The president also has an over-arching obligation to ‘uphold, defend and respect the Constitution as the supreme law’ at all times. Moreover, if he ‘has reservations about the constitutionality’ of a bill, he is obliged, under Section 79(1) of the Constitution, to ‘refer it back to National Assembly for reconsideration’, rather than give his assent to it. [Sections 1(c), 83(b), 79(1), 1996 Constitution]

The IRR thus respectfully petitions the president to use his powers under Section 79(1) to refer the Bill back to the National Assembly for this reason.

At the same time, the 1975 Act needs to be replaced by a constitutional alternative. In reconsidering the Expropriation Bill, the National Assembly must bring the Bill into line with what the Constitution requires. To assist it in this task, the IRR has drawn up a list of necessary amendments to specific clauses in the Bill. This list is attached as Appendix 1. The purpose of these amendments is primarily to:
a) bring the definition of expropriation into line with the Constitution;
b) put the onus on an expropriating authority to prove that an intended expropriation complies with all relevant  constitutional provisions;
c) require an expropriating authority, whenever a dispute arises, to obtain a prior court order confirming the constitutionality of a proposed expropriation before it issues  a notice of expropriation;
d) allow expropriated owners and rights holders to obtain compensation for direct losses resulting from expropriation (such as moving costs and loss of income), as such compensation is necessary to bring about ‘an equitable balance between the public interest and the interests of those affected’, as the Constitution requires;
e) ensure that those expropriated receive the compensation due to them before ownership (or other rights) pass to the expropriating authority; and
f) remove the unnecessary, contradictory, and unconstitutional powers of expropriation specifically conferred on the minister of public works in Chapter 2 of the Bill.

South African Institute of Race Relations NPC    27th May 2016

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