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28 July 2017 00:41 (South Africa)
Opinionista Ivo Vegter

Expropriation at the whim of a bureaucrat

  • Ivo Vegter
    IvoVegterBW
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

There are a lot of red flags in the Expropriation Bill of 2015, tabled by Public Works Minister Thulas Nxesi. The Institute of Race Relations took up the fight, and its recent rebuttal to the government’s high-powered legal advice on constitutional questions surrounding the bill lays bare the gravity of the likely consequences. Whether the consequences are unintended can be left as an exercise for the reader.

When Julius Malema was the rabble-rouser in charge of the African National Congress (ANC) Youth League, I had a theory that his most controversial proposals were trial balloons sent up on behalf of the ANC itself. This would serve two very useful purposes. First, it would spark public debate about radical policy positions that the ruling party could not be seen to support. Second, by comparison with the youth’s angry socialist rants, and informed by the public reaction, subsequent policy proposals by the adults in the ANC would seem like models of restraint.

By such subtle politics, policies that to any reasonable mind seem unrealistic or even dangerous, such as nationalising mines and banks or expropriating land without compensation, do end up on the public agenda.

Malema was unceremoniously kicked out of the ANC and its Youth League, and two years ago founded the Economic Freedom Fighters (a misnomer if ever there was one). He gained 25 seats in Parliament, but although his voice grew louder, his power diminished. As an opposition agitator, the threat that the ANC would follow the radical policies he espouses seemed slim.

Expropriation without compensation is unconstitutional,” Public Works Minister Thulas Nxesi told Parliament, shortly after the release of the Expropriation Bill of 2015. The Economic Freedom Fighters merely made “a populist statement” which “will just promote anarchy in the country”, he said, according to a report in the Independent Online.

This is technically true, and the bill does provide for compensation upon expropriation. It is also not inconsistent with previous statements by the minister and other government officials.

But things are seldom as simple as all that. It almost seems like the bill was written just to please Malema, or steal his thunder, and while this may be to the ANC’s political advantage, it would come at a grave cost to South Africa’s economy and constitutional democracy.

Writing for the Daily Maverick last year, Richard Spoor pointed out the many harmful implications of a related bill, the Property Valuation Act. As an experienced lawyer who acts as trustee and adviser to several land restitution trusts and communities, his analysis seems to me to be ideologically neutral. It is, however, pessimistic about the future of land claims, as well as the rights of buyers, the state, and sellers of land.

When the latest version of the Expropriation Bill was published earlier this year, Anthea Jeffery, the highly qualified head of policy research at the Institute for Race Relations (IRR), took to these pages to declare it just as unconstitutional as the 1975 Act it was intended to replace. Her view would in due course lead to a detailed submission (summary) by the IRR to the parliamentary portfolio committee on public works.

A reading of these documents clearly shows that there isn’t just a single flaw in the bill. As is so often the case, it is overly broad and overbearing. Fixing it will not be a simple matter of making a couple of amendments to the draft.

The Expropriation Bill allows any organ of state, down to the lowliest levels of bureaucracy, to expropriate property. The definition of ‘property’ is explicitly not limited to land. They may take property of any kind, for any reason that can be described as a public purpose or in the public interest.

It can effect such an expropriation by giving notice to the hapless owner, and offering them a price. Notably, it requires neither the negotiated agreement of the seller, nor the order of a court. The price is to be determined by the valuer-general, an office created by the Property Valuation Act, and will take into account not only market value, but also the purpose of the expropriation, the current use of the property, its history of acquisition, the extent of direct state investment in the property. All of these factors serve to discount the price from its market value.

If an expropriating authority intends to expropriate a property, it must serve the owner with a notice of intent to expropriate. In this case, the owner or other affected parties have 30 days to challenge the expropriation. However, if an expropriating authority decides to expropriate a property, it may serve a notice of expropriation, which can take immediate effect, and there is no explicit right to challenge such a notice. The practical difference between an intention to expropriate and a decision to expropriate is unclear, nor is there any indication that the former is required before the latter.

If their property becomes subject to expropriation, the former owner may challenge the amount of compensation in court. However, legal action has to be taken within 60 days, or the newly asset-less seller will be deemed to have accepted the compensation offered. According to Jeffery, the Constitutional Court has held that 180 days is a more appropriate time to allow to institute legal proceedings.

There are obvious constitutional issues at stake here, not to mention practical matters of fairness that ought to weigh heavily upon legislators. The bill appears to open the door to arbitrary expropriation with inadequate compensation and without adequate recourse to the courts. The discretion given to government bureaucrats is disproportionate, and invites maladministration and corruption.

Land reform generally involves restitution of rural land to communities dispossessed under Apartheid. However, this law could just as easily be used to appropriate residential or commercial property for some ostensibly public goal, and the goal could be as broad as declaring that another owner would more productively develop the property ‘in the public interest’. For that matter, the government could use this law to expropriate vehicles, weapons, cameras, or any other property, ‘in the public interest’.

At first, the public were given reassurances by Nxesi and his deputy, Jeremy Cronin, that there is no need to panic and South Africa was not about to descend into Zimbabwe-style land-grabs. The problem is, the minister would say that, and Cronin is a committed communist. Neither could have done much to allay public concern about the bill, especially among the rural land-owners it would affect the most.

Supporters of the bill would argue that land reform has proceeded too slowly, and that the government has, in some cases, spent too much on land it had to buy on behalf of land claimants. This is not an entirely unreasonable view, but it is also far from the whole picture. As Marianne Thamm reported yesterday, land restitution has had considerable success under the current model, despite the woefully under-resourced Land Claims Court.

Even if the intent of the bill were benign, former US president Lyndon B Johnson once said: “You do not examine legislation in the light of the benefits it will convey if properly administered, but in the light of the wrongs it would do and the harms it would cause if improperly administered.”

The IRR is a think tank with a credible anti-Apartheid history, professing classical liberal values. It proposed an alternative Expropriation Bill, designed to protect sellers and remedy the constitutional issues with Nxesi’s bill, without denying the government the powers it seeks to wield on behalf of land claimants – as the Constitution permits and government policy requires. In particular, it aims to restore proper judicial oversight over the executive, as South Africa’s Constitution demands.

Nxesi and Cronin took this submission seriously enough to commission Geoff Budlender, a high-profile senior advocate, to write a legal critique of the IRR bill. It says this opinion found the IRR’s bill to be constitutionally defective, while confirming that the Expropriation Bill passes constitutional muster.

The indefatigable Jeffery, however, begs to differ. She claims the Budlender opinion says nothing about the constitutionality or otherwise of the Expropriation Bill, and inasmuch as it is critiques the IRR’s counter-proposal, it is based on error and misrepresentation.

Her pointed and detailed rebuttal of the legal opinion Nxesi commissioned lays bare the seriousness of the constitutional issues at stake, as well as the potential for abuse – intentional or unintentional – of the Expropriation Bill. This rebuttal is very much worth reading in its entirety, but the IRR also provided a convenient five-page summary.

The world economy is being led off a cliff by China, as I anticipated years ago in these columns. South Africa’s economy is already performing far worse than its potential, according to the Institute for Security Studies, an independent think tank. The Banking Association says the Expropriation Bill will spook investors and hurt the economy, at a time when we need all the help we can get.

Whether this bill is a deliberate attempt to undermine property rights and advance the socialist agenda of the National Democratic Revolution, as the IRR maintains, or whether it is a well-intended law with unintended consequences, as more forgiving critics might suppose, it is in urgent need of revision.

Let’s hope Nxesi isn’t keen to follow the example of his colleague, Malusi Gigaba, who made a wide-ranging decision with dire consequences against the best possible advice, only to be forced to establish an inter-ministerial commission in a vain attempt to undo the disastrous consequences after the fact. Now would be a very good time to rewrite the Expropriations Bill. Perhaps the IRR’s proposed draft could be of some use. DM

  • Ivo Vegter
    IvoVegterBW
    Ivo Vegter

    Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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