Land reform – and the law of unintended consequences
- Richard Spoor
- 07 Jul 2014 08:36 (South Africa)
“...The Law of Unintended Consequences, stronger than any written Law. Whether or not what you do has the effect you want, it will have three at least that you never expected, and one of those is usually unpleasant.”
Robert Jordan, The Path of Daggers
The purpose of the new Property Valuation Act is ostensibly to facilitate and accelerate land reform, by regulating the manner in which the price of land, to be acquired for land reform, is determined.
Government has long argued that the slow pace and high cost of land restitution is in large part attributable to the application of the “willing buyer willing seller” principle, which implies agreement between the State and the landowner on the price to be paid for the claimed land.
Under the new Act, the price that the State will pay for land to be acquired for land reform purposes will be determined by the Valuer-General. There will therefore be no need to negotiate and to agree on the price with the landowner. This then will ensure that the State does not pay inflated prices for land and that the delays that are associated with protracted negotiations over price are obviated, or so it is assumed.
It is certainly the case that the State routinely pays above market price for land and that disagreement with land owners over price causes delay. Restitution would proceed a lot more quickly if landowners simply accepted whatever price was offered them.
However, rather than facilitating and accelerating the land restitution process, the new Act is very likely to have the opposite effect.
To understand why this is, it is necessary to understand how the land restitution process works in practice.
The Restitution of Land Rights Act contemplates a process where land claims are adjudicated in the Land Claims Court. If the claim is upheld and the Court directs that the land be restituted to the claimant, then the State is obliged to acquire the land from the owner and to transfer it to the claimant.
If the Court has ruled in favour of a claimant, the State is not obliged to reach any agreement with the land owner on price; it may simply expropriate the land. If the owner disputes the fairness of the compensation offered by the State, it can challenge the compensation amount in Court, but the expropriation itself will stand.
The State has no power to expropriate land that has been claimed unless the owner has either admitted the claim or the Court has ruled for the claimant and directed that the land be restituted.
The Constitution authorises the State to expropriate property only if it is for a public purpose or in the public interest. It is clearly not in the public interest that the State expropriate land and restitute it to a land claimant on the strength of an untested and unproven claim, by that claimant, that he is entitled thereto.
In practice only a tiny proportion of land claims, probably less than 1%, are ever determined by the Land Claims Court; the rest are settled outside of the Court by agreement between the State and the landowner.
If the State and the landowner reach agreement on the purchase price and the other conditions of sale, the State will buy the land, in order to restitute it to the claimant. If the State and the owner cannot agree on terms, then the claim is not settled and it must be adjudicated by the Court.
The reason why nearly all land claims are settled outside of the Court is simple; the majority of landowners are willing to sell if the price is right and the State, more often than not, is willing to pay that price.
This doesn’t mean that landowners are free to extort any price they wish out of the State. Neither party has an interest in being unreasonable. No landowner relishes the prospect of protracted and expensive litigation against litigants who are funded by the State. The Land Claims Commission also has an interest in settling claims if it has none in litigating them. Neither stands to benefit if the claim is adjudicated by the Court.
The examples that we have seen see where the State has paid grossly inflated prices for land have more to do with fraud and corruption, involving state officials, valuers and land owners, than they have to do with unreasonable demands by land owners.
This pragmatic arrangement, whereby the overwhelming majority of land claims are settled on a “willing buyer willing seller” basis, is now threatened by the new Property Valuation Act.
The mandate of the Valuer-General is to value land to be acquired by the State for land reform (which includes land restitution) purposes. The market value of the land is only one of several considerations that he must take into account when determining its ‘value’. The other considerations he must take into account, which include the history of the land, its use and the purpose of acquisition, tend to mitigate for a ‘value’ lower than market value.
Once the Valuer-General has determined a value, there is no scope for the State to pay more than that amount for the land. The State is bound. For the land owner it is a case of take it or leave it. This will almost certainly mean that fewer land claims are settled by agreement and that many more will have to be litigated to a conclusion.
The adjudication of land claims in the Land Claims Court is a complex, slow and expensive business.
The State lacks the capacity to prosecute more than a tiny fraction of land claims through the Court.
Of those land claims that are currently before the Court, the majority have likely not been progressed at all in the last several years. Stasis is the norm. The Land Claims Court is the place where land claims go to die.
It is anticipated that some 397,000 new land claims will be lodged over the next five years.
These land claims must either be settled by agreement or they must be adjudicated in the Land Claims Court. If they are not settled we have a potentially serious problem.
At present the Land Claims Court has one permanent judge and five acting judges. If each of them adjudicated one land claim each working day (which is impossible) it would take more than 300 years to finalise all the anticipated claims.
By effectively abolishing the “willing buyer willing seller” principle, the Property Valuation Act will result in a significant decrease in the number of land claims that are settled and a corresponding increase in the number of claims that must be referred to Land Claims Court for adjudication. This will dramatically slow down the pace of land restitution.
The Property Valuation Act also threatens to undermine the unstated (and technically unlawful but very important) land redistribution function of the Restitution Act.
There are many meritorious land claims. Examples include the land claims relevant to the forced removals carried out under the Group Areas Act in District 6 and Sophiatown and the removal of African communities from Tenbosch in 1954, under the Native Trust and Land Act. The great majority of these good claims have been settled over the last 15 years.
There are, however, a great many land claims that are of doubtful, or are of little or no merit at all. With the reopening of the land claims process, we can expect that tens of thousands more of such bad and doubtful claims will be filed.
There exists no mechanism in the Restitution Act to sift out the good land claims from bad, except by final adjudication in the Land Claims Court.
The Restitution Act does not require the Land Claims Commission to satisfy itself as to the merits of any land claim; its duty extends only to satisfying itself that the claim is not frivolous or vexatious, otherwise, if the minimum formalities are complied with, the claim must be accepted and efforts must be made to settle it or to have it adjudicated by the Court.
While the latest amendments to the Act include a provision that makes it an offence to submit a fraudulent land claim, this is likely to be of little consequence.
Thanks to the application of the “willing buyer willing seller” principle, doubtful land claims have been just as likely to be settled as good land claims and indeed thousands of doubtful land claims have been settled over the years.
In one sense this might be considered to be a fraud on the taxpayer, who foots the bill, but it should be borne in mind that if the doubtful land claims had not been settled, then a lot less land would have been transferred to black ownership. In practice the Restitution Act has been less about restitution than it has been about the redistribution of land.
This is just as well, because the State has no alternative land redistribution policy or programme in place that is capable of redistributing land to black South Africans on the scale that this has been achieved through the Restitution Act.
This unofficial but important land redistribution component to the Restitution Act is now also threatened by the Property Valuation Act.
If the values that are determined by the Valuer-General are not acceptable to land owners, they will be far more likely to contest the claims, especially the bad and doubtful claims.
The contested claims will then not be settled and will drag on for years or decades. If those contested claims do ever reach the Court, very many will likely be dismissed because they are either bad, impossible to prove or just ineptly prosecuted.
It is fairly likely that that this was not the intention, but the consequences which are most likely to flow from the new Property Valuation Act are anger, frustration and increasing political polarisation around the sensitive issue of land. This is almost certainly not good for any of us. DM