At the weekend the ANC released discussion documents in preparation for its fifth national policy conference due to take place midway through this year.
Expropriation without compensation does not appear in the document on economic transformation. Instead, it emphasises a stable policy environment to foster inclusive growth. Given the large number of conflicting statements about land reform and expropriation without compensation, this document will surely be hotly contested in the coming months.
The initial contents of the draft policy document largely support the current policy direction but one proposal sticks out. Land reform features prominently in the policy document but it does not call for expropriation without compensation. Instead, it proposes a codification of “just and equitable compensation for the acquisition of land for land reform purposes”. But this poses several conceptional difficulties.
First, the Constitution does not prescribe “just and equitable” compensation specifically for land reform. A crucial distinction must be made between the state’s obligation to effect land reform on the one hand and the state’s ability to expropriate. The state’s three-pronged strategy of land restitution, redistribution and security of tenure stem directly from the Constitution but it does not go as far as to say how the state must acquire property.
Therefore, landowners who sell their property to the state for the purposes of land reform are not automatically bound to just and equitable compensation but to whatever purchase price the seller agrees to, because the nature of the transaction is no different to that of a private sale, even if it is to the state. Just and equitable compensation only becomes relevant to land reform if the state chooses to expropriate land, a power that has existed for decades but has seldom been used.
Second, the calculation of compensation cannot be reduced to a rigid formula or equation. Section 25 (3) of the Constitution states that compensation must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including:
- The current use of the property;
- The history of the acquisition and use of the property;
- The market value of the property;
- The extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and
- The purpose of the expropriation.
The factors listed in the Constitution can assist a court in arriving at a conclusion but they are by no means conclusive. The word “including” indicates that this is not a closed list. Other factors could be used to determine a just and equitable amount, as long as they are relevant, given the circumstances.
For example, if the owner has to incur moving costs because their home has been expropriated, or if a bank has to incur costs to deregister a notarial bond, those costs could well be taken into consideration even if they are not listed.
An attempt to codify just and equitable compensation based on the listed factors is problematic because one cannot create a logarithm that accounts for all the possible unlisted factors a court may deem relevant, given the circumstances. Likewise, it is impossible to formulate how much weight should be attached to each factor as its applicability will differ depending on the circumstances of each case.
Finally, balancing the rights and interests of affected parties is by its very nature a normative exercise that requires a value judgment. Hence it is appropriate that the Constitution has entrusted the courts with this function in the event that the parties can’t reach agreement on their own.
The challenge with codification is that it might attempt to ascribe a mathematical formula to normative factors that must be based on the unique circumstances of each case.
Theo Boshoff is the head of legal intelligence at the Agricultural Business Chamber