Expropriation without compensation - an unruly horse

EXPROPRIATION without compensation will be legally difficult and economically disastrous.

Section 74(1) of the Constitution is not often referred to in the daily lives of South Africans. In essence, it provides that the foundational values of the new order cannot be amended unless the proposed amendment enjoys the support of 75% of the National Assembly and six of the provinces in the National Council of Provinces.

The vague resolution of the ANC at Nasrec to support expropriation without compensation is going to bring the foundational values of the Constitution into sharp focus in the deliberations around the legality and wisdom of giving legislative effect to the ANC’s resolution. This attention to Section 74(1) is because the rule of law is a foundational value.

It is a primary element of the rule of law that the system in place in any given constitutional democracy should include respect for property rights. The South African Constitution regards the rule of law as “supreme”.

The National Accord, which preceded the adoption of the Constitution, was premised upon upholding the rule of law, not “rule by law” which is what was in place under apartheid and was not the way in which to aspire to a society in which the inherent human dignity of all is respected, the achievement of equality is promoted and guaranteed human rights are enjoyed by all.

The rule of law is sacrosanct in our dispensation. It is also compliant with the internationally accepted definition of the rule of law which the World Justice Project has devised and refined as the basis for its most useful “Rule of Law Index”. In the definition the following words appear:

“The laws are clear, publicized, stable, and just; are applied evenly; and protect fundamental rights, including the security of persons and property.”

In short, security of property rights is a basic tenet of the rule of law everywhere on the planet.

Property clause not properly understood

One of the most hard fought sections in the Bill of Rights is the “property clause” - Section 25. It is also the second longest section of the Bill of Rights (after the part so beloved of, and well used by, the president which deals with the rights of arrested, detained and accused persons).

Section 25 is not well understood and has not been put to optimal use in the striving for a better life for all in the new SA. A misconception that it envisages the “willing buyer, willing seller” policy of the ANC has wide currency.

This interpretation is simply not correct.

Resorting to the wording of the section, a salutary approach reveals the deal that was made at the birth of the new SA:

1. No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.

2. Property may be expropriated only in terms of law of general application-

a. for a public purpose or in the public interest; and

b. subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

3.  The amount of the compensation and the time and manner of payment 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-

a.  the current use of the property;

b.  the history of the acquisition and use of the property;

c.   the market value of the property;

d.  the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

e.   the purpose of the expropriation.

4.   For the purposes of this section-

1.  the public interest includes the nation's commitment to land reform, and to reforms to bring about equitable access to all South Africa's natural resources; and

2. property is not limited to land.

5. The state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.

Delicate balance

It can been seen from any fair reading of the text that a delicate balance was devised, one in which the interests of the dispossessed masses and the minority dispossessors are catered for so that “equitable access to all SA’s natural resources”, not just land, can be achieved.

This approach is unexceptionable; properly implemented it would preserve the fealty of the country to the rule of law and would also address the longing for land that some of the poor majority still have, despite the rapid urbanisation of the country and the willingness of an increasing number of citizens to make do with life in the cities, where land, lots of land, is not the issue as much as adequate access to housing.

Earlier this year the ANC in Parliament refused to support a move by the Economic Freedom Fighters (EFF) to secure the amendment of the Constitution that is required to effect expropriation without compensation or EWC as it has rapidly become known, given the penchant for three-letter acronyms that renders technical language unintelligible to the uninitiated. The EFF’s initiative failed.

Now, at its Nasrec conference, the ANC has plumped for EWC. The change of heart is obviously attributable to the fear that as an election issue EWC, a populist call if ever there was one, would secure increased support for the EFF and perhaps even bring about a hung Parliament in which the red berets would hold the balance of power and become the king-makers.

The difficulties are many and varied. From a technical perspective an amendment to the Bill of Rights requires a two-thirds majority, while an amendment to the core values of the Constitution requires a 75% majority. The rule of law is one of the core values and respect for and security of property rights is an essential element of the rule of law.

These considerations imply that unless the ANC national executive committee (NEC) finds a way to get the camel through the eye of the needle, it may find itself on the receiving end of constitutional challenges that impugn any but the most carefully worded amendment of Section 25 of the Bill of Rights.

Business Unity South Africa, AfriForum, Agri-SA and the opposition parties in Parliament are already sharpening their knives for the challenges ahead.

Sheer leftist lunacy

From an economic perspective EWC is sheer leftist lunacy. Ask any Zimbabwean, even the new president. Especially the new president. Under Mugabe’s land policy Zimbabwe declined from being the bread basket of Africa to being one of its worst basket cases.

The economy tanked, the value of the currency became so ludicrously weak that it was abandoned. The middle class fled and the poor lost their jobs in droves. Today a subsistence economy prevails in Zimbabwe and its new leaders yearn to open it for business.

Will the ANC learn from or copy the mistakes made by ZANU-PF and other liberation movements in Africa whose popularity at the polls wanes? Zambia went through the doldrums as a one-party state and has matured into a multi-party constitutional democracy under the rule of law.

SA is already in the shape and form of governance that is able to attract foreign investment and encourage local investment. Tinkering with Section 25 could upset this felicitous state of affairs, to the detriment of the poor more so than to those whose property is expropriated.

SA's 'investment strike'

Already there is an “investment strike” in SA, one which sees about R1.5trn washing around on local balance sheets in cash or near cash form.

The necessary trust in government that builds the confidence to invest these huge amounts cannot be built on the rocky foundation of EWC. Indeed, as the ANC has acknowledged, food security, sustainable farming and the economy will all have to be taken into account if the EWC amendment is not going to bring about a Zimbabwean type of outcome.

And, in a sense, as a largely agricultural economy, Zimbabwe is more resilient than SA in times of economic hardship because the poor are not urban dwellers and are able to subsist on maize, eggs and the odd chicken in the lean years.

In contradistinction, a flight of capital induced by EWC will leave the urban poor in SA up the creek without a paddle, a job and even food. Subsistence farming is not an option for them; revolution of a kind not covered by the NDR is a likely outcome.

When the NEC of the ANC has done its homework, has listened to the submissions made in the public participation process and has been given proper legal advice, it is likely to come to the conclusion that the best interests of the country are served by the retention of the status quo and that expropriation with compensation is more likely to render the economic development of SA sustainable than EWC ever will.

The introduction of EWC would hole the Land Bank below its waterline.

Way to win votes

If the ANC ends up putting its own interests above those of the country, then EWC will be used to win votes in 2019. Whether this stratagem will be sufficient to save the ANC from electoral defeat remains to be seen.

Most probably, 2019 will be the last democratic election for many a long year and SA, with EWC, will descend into failed statehood, another African kleptocracy in which those dreams deferred in the constitutional settlement of 1994 become the nightmares of uhuru in the all too near future.

SA without EWC has every prospect of cleaning up its act, clearing out the corrupt in high places, boosting the confidence of investors both local and foreign, and putting the flop that the Zuma years have been behind it.

Everyone who cares for the future of the country is encouraged to lobby the NEC of the ANC not to follow through with the idea of EWC; it undermines the rule of law, it is contrary to the spirit of the Constitution and it will be an economic disaster of the kind we have already experienced through the presence of many in the Zimbabwean diaspora who have left the land they love to settle in SA.

Clear and dispassionate thought applied to the notion of EWC leads to its rejection as a viable policy option.

Paul Hoffman SC is a director of Accountability Now and the author of Confronting the Corrupt. Views expressed are his own.

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