An unpalatable trade-off

 South Africa: The  Expropriation Bill an unpalatable trade-off

There are all too often no perfect solutions to the problems that confront us, merely trade-offs that provide an imperfect way forward. 

We do what we can with the tools and in the circumstances that present themselves. Sometimes, it’s simply not possible for a course of action to produce desirable results in different areas. Recognised and acted upon, this is foundational to good policy. 

Such an approach, though, is frequently anathema to those responsible for policy. A professional political class has every incentive to present society’s challenges as being open to simple and uncomplicated resolution. Follow a proposed path, and things will fall into place with a minimum of inconvenience for society – or at least for that part of society to whom the leadership seeks to appeal.

It was intriguing to see that the idea of trade-offs or ‘balancing’ was the basis for a parliamentary question. Public Works and Infrastructure Minister, Patricia de Lille, was asked, with reference to the recently completed submissions on the Expropriation Bill, what actions she would take to balance the need for land redistribution whilst safeguarding the legitimate property rights of private citizens in the country?

How, in other words, would the Expropriation Bill and the agenda behind it be reconciled with private property rights and the critical role they play in underwriting economic success?

This would be good for everyone, according to the Minister. ‘The Bill brings certainty to South Africans and investors because it clearly outlines how expropriation can be done and on what basis.’

She went on to claim that the Bill established a regime that was constitutionally compliant and procedurally just to all – and to disparage those who ‘twist logic and the ‘meanings of words’ to suggest otherwise.

Well, she would say that, wouldn’t she? Minister De Lille is a seasoned politician and this is how she is piloting this legislation. 

So, the Bill – and by extension the Expropriation without Compensation agenda – is presented as an unqualified good. For everyone. Far from undermining the country’s future, it will underwrite it.

The reality is rather less salutary. Yes, in a way it provides ‘certainty’, though understand that ‘certainty’ has become a weasel word to justify nearly any course of policy action. The Bill sets out the steps to be followed when expropriation takes place, but in doing so prescribes a process heavily tilted towards the state. 

No limits

The Bill requires the measures – which do indeed include negotiations – to settle on terms for expropriation amicably with the owner. But if this fails, the state may move to expropriation, issuing a notice to this effect, wherein it will set out the dates on which ownership and the right to possess the property will pass to it. This could involve mere weeks or even days, since the Bill sets no limits on this other than that the date when ownership is transferred may not predate the service of the notice.

Recourse to the courts is indeed provided for – although it is worth remembering that just prior to the pandemic, the African National Congress indicated that it wanted the constitutional amendment to vest expropriation powers in the executive to the exclusion of the courts, and it remains to be seen how this will play out. 

But note that a challenge to the quantum of compensation offered does not affect the date of transfer. ‘Any delay in payment of compensation to the expropriated owner or expropriated holder … or any other dispute arising will not prevent the passing of the right to possession to the expropriating authority…unless a court orders otherwise.’

The state will get what it wants, when it wants it, and a court challenge may need to be made after the asset has already been taken. Court challenges are in any event expensive, all the more so when seen against the loss of an asset. The onus of proof will likely rest on the erstwhile owner. For most people in this unfortunate position, the Bill will create substantial pressures to settle and take what is on offer. As I have argued before, it is not unreasonable to believe that this is the intent behind them.

Does this amount to an ‘old-style land grab’, to use the minister’s words? Perhaps it would be better to see it as a tool for any contemplated ‘new-style asset grab’. As the minister is no doubt aware, the Expropriation Bill is not only about land, but about all assets; land may be an immediate target, but it will not be the only one. For a fiscally stressed state – and one in which patronage has become a key source of political capital – a quick and easy means to take private assets may be a crude lifeline. If real estate looks enticing, savings and pension funds may look even more so.

Indignantly, the minister declared: ‘It makes no sense that a democratic government will revert to apartheid-style practices of taking homes or business premises away from people.’

Really? Over the past few months there have been a disconcerting number of reports – none of which seem to have been rebutted – of black farmers, the beneficiaries of land reform, who have found themselves effectively dispossessed by bureaucratic fiat. These include successful farmers in Mpumalanga whose holdings formed part of the 700 000 hectares that government decided to ‘release’ for redistribution, as well as other (perhaps more concerning) cases where land reform beneficiaries have been instructed to move to make way for other operators who sport political connections. (The IRR has been in contact with some of the affected parties and will have more to say soon.)

Reality of governance

Whether this is a case of official lack of interest and incompetence, or corruption matters little – what these farmers have experienced is a reality of governance in South Africa, and the risk that comes with according the state the discretion and powers that this Bill implies.

And in this is the deeper trade-off that the Bill and the policy drive around it means for South Africa. Legislation that empowers the state over its citizens – motivated by ideological suspicion of private property and a delusional belief in the developmental capacity of the South African state – can be had at the cost of South Africa’s future prospects. 

While those in power may be willing to make this trade-off, South Africa’s people should not.   

IRR warns MPs on Expropiation Bill

The Institute of Race Relations (IRR) has told MPs that South Africa’s land reform problems stem largely from inefficiency, corruption and an absence of secure ownership, and the Expropriation Bill now before Parliament will not provide solutions.

This point was made in a presentation to Parliament’s portfolio committee on public works and infrastructure on the Bill by IRR head of policy research, Dr Anthea Jeffery, this week. 

Jeffery also pointed out that the Bill covered far more than land, as was commonly thought. 

The threat to property covered ‘homes, pensions, business premises, mining rights, shares, and unit trusts – all of which will fall within the Bill’s definition of ‘property’ – and all of which will be vulnerable to expropriation for ‘nil’ or inadequate compensation’, she said. 

Contrary to government reassurances, the Bill was thus not limited to land reform, Jeffery pointed out, and it would not solve land reform problems, ‘which stem largely from inefficiency, corruption, and an absence of secure ownership’. 

In a statement yesterday, Jeffery pointed out that, rather than contributing to land reform, the Bill threaten the property rights of all South Africans: from the 9.8 million people with home ownership (7.8 million of whom are black) to the roughly 18 million individuals with customary law plots, and the estimated 17 million people who belong to pension funds. It would also harm all business owners, both large and small. 

“At the same time,” said Jeffery, “the economic fall-out from the Bill will further hurt the 11 million individuals now unemployed by reducing investment, limiting growth, and stalling any post-lockdown recovery.”

Jeffery argued that three ‘core amendments’ were required. 

‘First, the bill must make it clear that a prior court order – which confirms the validity of the expropriation and decides on the just and equitable compensation to be paid –must be obtained before a disputed expropriation can proceed. 

“Second, the bill must require that the full amount of compensation be paid prior to the transfer of ownership to the state. And third, the compensation payable must include damages for all losses resulting from the expropriation. Such damages would include moving costs, any loss of income, and any outstanding balance on a mortgage bond which the compensation paid would otherwise not be enough to cover.’  

Added Jeffery: “South Africa needs new expropriation legislation that is fully compliant with the Constitution, but the current Bill does not meet that test. The IRR’s alternative bill, by contrast, will bring the Bill into line with the Constitution, with international best practice, and with the economic imperative to increase prosperity for all.”

Banks alarmed about land expropiation

 Land expropriation without compensation could pose a significant risk to the banking sector.

That’s the warning from the Banking Association of South Africa, according to eNCA last night.

The association has told Parliament that market uncertainty around land rights has led to a marked decrease in the value of land-based property.

Basa says that there’s a reduced appetite from property buyers, which could destabilise the banking sector.

Banks have a R1.6-trillion exposure to land-based property in the form of mortgages.

The association says if a property that a bank has taken security over is expropriated, it could have a crippling effect on the borrower and the bank.

https://dailyfriend.co.za/2021/03/26/