New land reform Bill - dangerous or not?
Experts are at odds over the new investment Bill - some say it will scare off foreign investors while others have decried the uproar.
While some pundits say that a recently tabled Bill could quietly further land expropriation with no compensation could threaten foreign investment, others believe the view is exaggerated.
A group of academics and lawyers have warned that if a Bill that has already been closed for public comment is passed in its present form, the government will be able to expropriate property from private citizens and companies without any compensation, which could lead to jittery investors.
The Promotion and Protection of Investment Bill of 2013 – often referred to as the investment Bill – was gazetted in November last year. It received pushback from the likes of the American Chamber of Commerce and the German ambassador to South Africa, who argued it spelled out negative implications for foreign investors. Some experts are now saying that it is “an expropriation Bill by another name” – an aspect that has been largely overlooked by commentators thus far.
Anthea Jeffery, head of special research at the South African Institute of Race Relations, said on Sunday that the Bill “could see property of many kinds taken by the state ... for land claimants and without any compensation to its former owners.”
According to Jeffery, under the investment Bill, the “rights of domestic property owners will be much reduced”. Currently, land-owners whose property is expropriated by government are protected by the Expropriation Act of 1975. The Act entitles property owners to full compensation for their property – the state is required to immediately pay 80% of the market value of the land, and the balance must be paid with interest.
Jeffery said that under the investment Bill expropriated owners will receive less than market value and will have no right to damages for consequential loss.
‘Deprivation of property’
“The danger stems from a key clause in the Bill ... stating that various actions do not amount to acts of expropriation,” said Jeffery. These include instances where the government’s actions result in the “deprivation of property” but where the state does not actually take ownership of the land, nor does it destroy the economic value of the investment.
Under the new Bill, if the state simply acts as the custodian in the expropriation of property, it is not required to compensate the original land owners. In other words, if it simply passes the land from one owner to another, without actually owning it in the interim, the state would not be required to reimburse the original owner.
But key to the argument of the analysts involved is the assumption that the new law would come to replace the current Expropriation Act over time.
Deborah Carmichael, director in banking and finance at law firm ENS Africa, pointed out that the new investment Bill is not intended to replace or repeal the current legislation.
“Once the Bill becomes an Act it must be read ‘not in a manner that conflicts with other pieces of legislation’, ” she said. “It will need to be read in conjunction with the Expropriation Act. Land expropriation is not done in a cursory or willy-nilly manner.”
In Carmichael’s opinion, the wording of the Bill did not spell out anything “explicit” for land owners. “The Bill addresses compensation in a cursory manner but attempts to address this issue by legislatively enshrining ‘appropriate’ compensation,” she said.
Currently, a clause in section 25 of South Africa’s Constitution is designed to protect South African citizens from having land taken away from them without pay. From this perspective, the new argument could be seen as alarmist.
But Jeffery referred to a majority judgment made by the Constitutional Court in April last year, penned by Chief Justice Mogoeng Mogoeng. A private company, Sebenza Pty Ltd, was forced to give up a coal mining right under the Mineral and Petroleum Resources Development Act of 2002.
Since the deprivation of ownership had not been matched by the acquisition of the ownership by the state, the chief justice ruled that no expropriation had occurred. A key provision in the investment Bill “echoes this judgment”, according to Jeffery.
Land, EFF and the ANC
Political newcomers Economic Freedom Fighters (EFF) have made the notion of land expropriation without compensation one of its key concerns. The party believes that all land should be “transferred to the ownership and custodianship of the state in a similar way [to] ... the [mineral Act],” it says in an official document.
“This transfer should happen without compensation and should apply to all South Africans, black and white.”
At the May parliamentary swearing-in ceremony, EFF MP Andile Mngxitama told the Mail & Guardian that if the ANC supported them on land expropriation, the party would be willing to work with them.
“We would work with anyone on the basis of our key questions ... We [EFF] need a two-thirds majority to amend section 25 of the Constitution, commonly known as the property clause. This is what we are here for ... We will do everything to change the property clause, so we have the expropriation without compensation. If there is any chance that we can find each other to amend the property clause, for which we need a two-thirds majority, we will absolutely do anything,” said Mngxitama.
In his parliamentary response to President Jacob Zuma’s State of the Nation Address last week, EFF leader Julius Malema lambasted the president for not having made greater strides in land distribution. “Mr President ... you promised to distribute 30% of the land in this very year,” he said.
‘Fair productive value’
Malema was referring to a target set by government in 2009 – that 30% of the land that was historically in the hands of “white commercial farmers” would be redistributed by 2014.
In 2012, Zuma outlined a revised five-step landreform proposal that suggested the state buy land back at 50% of its market value, rather than the full amount that is currently required.
This, said Zuma, would be closer to a “fair productive value”. Farmers who agreed to sell their land at the proposed rate would receive black economic empowerment status.
But according to fact-checking organisation AfricaCheck, “far less than 10%” of the land earmarked for redistribution has been transferred to date.