Expropriation without compensation: A cause for concern?


By dr. Hard British

The controversial expropriation bill was recently passed by the National Assembly and must now be signed by the state president.

The most notorious aspect of this new legislation is that it will provide for the expropriation of property for no (zero) compensation. However, this issue covers only a small part of the bill. The rest of it involves a revision of the outdated expropriation act of 1975. This act sets out, among other things, the procedures and requirements for expropriation.

The thought that property can be taken away without compensation is cause for concern, but how serious is the danger? To answer this question, an overview of the new legislation is provided in order to understand how expropriation works and to highlight where compensation (or the lack thereof) will fit in. Herewith a concise summary of the new legislation.

The bill defines an expropriation as the compulsory acquisition of property for a public purpose or in the public interest. The state therefore acquires property without the owner’s approval.

Expropriation is a general competence of almost all governments worldwide and it is often used when, for example, the state needs land to build a new road. Under the bill as well as the Constitution, land reform is considered to be in the public interest and the state may therefore expropriate land for reform purposes. The proponents of expropriation without compensation (OSV) like to raise it as a solution to the supposed lack of sufficient land reform, which of course also makes it a very political issue.

It is important to note that the state cannot just appear out of the blue to expropriate your land. On the contrary, a long and complex process must be followed, even if ASD does not come into question. The process set out in the bill is more complex and involves more steps than those in the existing 1975 law. In fact, in my view, the new legislation will make the task of expropriating property more difficult rather than easier.

The bill stipulates, among other things, that, except for urgent expropriations, no property may be expropriated before the state has first attempted to acquire the property by way of an agreement according to reasonable conditions. In other words, the state must first try to acquire the property under an ordinary contract of sale. Only when such an attempt fails, the state may begin the expropriation process.

The first step in the expropriation process is the preparation phase during which the state must collect information regarding all the circumstances and consult various stakeholders. After the necessary information has been collected, a notice of the intention to expropriate must be sent to the owner and other rights holders. This notification must also be in the government Gazette and be published in a local newspaper. Note that at this time the state may not yet officially decide to expropriate. It is simply the intention to expropriate what is made known.

The above notice must contain specific information, including a compensation offer together with an explanation of how the amount was calculated. The owner then gets a chance to respond to the notice by accepting or disputing the compensation offer. The state must then consider this input and make a decision. It is important that the state may only decide to expropriate after the compensation amount has been agreed upon or it has been validated or determined by a court. This is an important protection mechanism for owners.

After a decision has been taken to expropriate, an expropriation notice must be served on the owner and other interested parties. This notice must contain specific information, including the compensation amount as agreed or approved or determined by the court. Ownership will vest in the state on the date of expropriation, as set forth in the notice. The date on which the compensation must be paid will also appear in the notice.

As far as compensation is concerned, the bill states, in wording that is consistent with section 25(3) of the Constitution, that the compensation amount must be fair and just. Along with this, a fair balance must be achieved between the public interest and the interests of affected persons, taking all relevant circumstances into account. An enclosed list of factors is then provided: 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 investment and subsidy by the state in respect of the acquisition and improvement of the property; and the purpose of the expropriation.

In the most controversial part of the bill, it is subsequently declared that all relevant circumstances considered, it may be fair and just to pay “zero” compensation. A list is then provided of circumstances in which zero compensation may be fair and just:

  • Where the land is not utilized and it is not the owner’s main objective to develop the land or earn income from it, but only to benefit from the growth in market value (speculation);
  • Where a state organ has acquired land without payment, but does not use it;
  • Where the owner of the land has waived; and
  • Where the market value is equal to or less than the current value of the direct investment and subsidy by the state in respect of the acquisition and improvement of the property.

The above list is not closed and it is therefore possible that the state may also expropriate land without compensation under other circumstances. However, the payment of zero compensation will only be valid if zero is a fair and just amount under the circumstances. In most cases where land is used in ordinary ways, for example, I cannot see how the state will be able to rely on this new legislation to expropriate it without compensation. A much more radical law, as well as extensive amendments to the Constitution, will be required to get such expropriations past the courts.

The section in the bill on ASD is definitely a step in the wrong direction, but fortunately it is not a very big step. Hopefully this development is mere political noise in an election year and will have little real impact at grassroots level. Only time will tell. However, if owners are faced with expropriation, they are advised to approach legal experts for advice and support during the process.

  • Dr. Reghard Brits is a part-time lecturer in private and commercial law at Akademia.