GABRIEL CROUSE: Phiri is wrong about the Expropriation Act - Business Day

Gabriel Crouse

Should we be afraid of “nil compensation”? In his recent article in Business Day, ministerial spokesperson Chrispin Phiri says no.

It would be so much sweeter if Phiri were right, but he is flat wrong on the facts, making his “no worries” assessment unhelpful. If anything, when one of the nil compensation argument’s brightest champions shows himself to be so brazenly detached from reality, this heightens concern.

To start on the more technical side, Phiri claims the Expropriation Act “lists five conditions under which compensation may be nil, ensuring that expropriation is justified and not conducted recklessly”. There are several things wrong with that oxymoronic claim.

First, the act lists only four conditions, not five. Phiri’s mention of “five conditions” and his lengthy quotation thereafter shows that he was referring to an earlier version of the then-Expropriation Bill, which was amended.

People make mistakes, naturally, but Phiri goes out of his way to make a big fuss about “fearmongering and political narratives” from people who discuss the law “without referring to the actual text of the legislation”. Perhaps he should take his own advice on reading “the actual text”.

More substantively, Phiri is wrong to claim that the four listed conditions for nil compensation ensure that it will be “justified and not conducted recklessly”.  As an example, nil compensation is legislated for vacant land that is held primarily “to benefit from appreciation in its market value”, in other words, for the profit motive. (Phiri curiously left out the “appreciation” provision from his otherwise extensive quote of nil compensation conditions.)

Practically, that means land speculation has now been criminalised in SA, at pain of outright confiscation. Buying vacant land to resell at a profit is treated like buying and selling heroin, or illegal weapons. That is flatly unjust. The profit motive is not criminal and cannot justly result in one losing one’s property.

The precedent this nil clause sets is also reckless. How does it apply narrowly, for unoccupied second homes and crop-rotating farms, and broadly, for the property rights of anyone who aims to buy now to sell for more later? Phiri is encouraged to explain.

Third, he fails to mention that the new law’s provision for nil compensation is explicitly “not limited to” the four conditions mentioned in the Expropriation Act. That leaves the door recklessly open for officials to dream up new excuses to take away people’s land-based livelihoods.

Phiri also claims that “targeting such properties” for nil compensation “can contribute to urban renewal” without admitting that the state already has urban land — or how that is (not) working out.
Everyone knows the problems of hijacked buildings, especially that infamous state-owned hijacked building that burnt to the ground, killing 77 people, in Johannesburg in 2023. No-one seriously thinks the rainbow republic’s state is running most of its properties well. The thought that giving the state more will help is ash in the mouth to anyone familiar with our inner cities.

The same goes for rural land. I have seen tens of thousands of hectares of wasted state-owned rural land with my own eyes, with former farm workers begging for the government to go away and jobs to come back.

Phiri never mentions how other countries that have real economic growth, something SA has not seen since 2010, deal with idle or abandoned plots: tax and zoning. South Africans must pay “rates” on privately owned land, rural and urban, and capital gains and inheritance taxes above a threshold.

The exception is the state itself, whose millions of hectares of vacant, or unproductive, land stand idle for all the world to see. To liberate this land, the state should do what the white nationalists of apartheid were so afraid of: grant title to millions.

Beyond tax, there is international precedent for abandoned urban properties that have become more indebted than their value to be repossessed in lieu of the bad debt. No sweeping nil compensation clause is needed, or exists, in countries that do actual urban renewal.

The international context is key, as it shows how problems can be solved, and also how badly Phiri gets things wrong on international law. He claims that “the European court has found that expropriation without compensation is justified under exceptional cases. In the case of James & Others vs the UK, the same court held that a law “may call for less than reimbursement of the full market value”.

However, on the James case from the UK in 1986, Phiri fails to mention that people with leases of more than 50 years were allowed to buy the land underneath their properties for market value, while the buildings on top were not included in market value. That is because the court found the leaseholders already owned the “bricks and mortar” in “equity”, since tenants were responsible for building the original structures and maintaining them generically since the 1880s, a century before or even earlier.

That detail points to an important tension: the complicated relationship between “land” and “improvements”. The UK law dealt with that clearly. But the Expropriation Act does not say whether improvements on land also go for nil compensation, adding to the law’s reckless uncertainty.

Furthermore, the European court never sanctioned any particular case of nil compensation — contrary to Phiri’s claims — and if he disagrees he should publicly point out the specific case where he thinks this happened. This should be easy for him, since he writes that the “European court has found that expropriation without compensation is justified” and that the “notion of no compensation for a legitimate government action is well settled”.

We challenge Phiri to name one case. However, he might sooner publish the fifth, nonexistent, nil compensation clause of the Expropriation Act. In the meantime, 8-million South Africans cannot get a job in a country that has suffered under swelling antiprofit policy since 2007.

Crouse, a fellow at the Institute of Race Relations (IRR), is executive director of IRR Legal

https://www.businesslive.co.za/bd/opinion/2025-02-03-gabriel-crouse-phiri-is-wrong-about-the-expropriation-act/