Know Your Property Rights

Private Property South Africa
Lea Jacobs

While most of us have kept our eyes firmly on the Protection of State Information Bill, another Bill, which is guaranteed to significantly change the lives of some South Africans and one that could have an extremely negative affect on future foreign investment in this country, is slowly but surely making its way into becoming law.

There is little doubt, regardless of what government says, that if passed in its current form, the Expropriation Bill could have wide-reaching consequences for both those who currently own property in South Africa and those who are considering investing in this country.

In a nutshell, the Bill, if passed, will give the Minister of Public Works sweeping powers to expropriate private property, both moveable and immoveable. Unfortunately, as some have correctly noted, the current document is worded to permit expropriation of a lot more than the odd house or farm.

Manus Booysen, a lawyer with Webber Wentzel who was quoted in The Times, warned that the Bill would have serious implications for property rights. He said that property was so broadly defined in the bill that it would include moveable assets such as vehicles and works of art. He noted that the document refers to “a right in, or to, property”. "This means that shares in a company, as well as various rights in property - including intellectual property rights and incorporeal property - could be expropriated under the bill."

As far as compensation is concerned, Booysen said that there was no guarantee that owners would receive a fair market value.

While the governments’ Deputy Minister of Public Works, Jeremy Cronin, believes that the Bill makes sense in the context of South Africa’s historical reality, not all politicians agree with him. The Democratic Alliance says that the Bill is legally unsound and will be disastrous for land reform and the economy.

Dr Anthea Jeffrey from the South African Institute of Race Relations recently stated in a press release that although the Bill is better than its 2008 predecessor in one key way - allowing the courts to decide the compensation payable for expropriated property - in many other ways the Bill remains as bad as the previous one.

According to Jeffrey the Bill still:

• extends the power to expropriate from the Minister of Public Works to government departments and other state entities at all three tiers of governance;

• applies to property of all kinds; not only land, but also business premises, mining rights, patents and shares;

• allows an ‘expropriating authority’ to take ownership and possession of property before paying any compensation at all;

• states that compensation becomes payable only when the amount has been agreed with the State or decided by the courts; and

• puts great pressure on the expropriated owner to accept the amount of compensation offered by the State, rather than remain without the benefit of either the property or its value in money.

The fact that an owner whose land has been expropriated can take the case to court to fight the order will bring little comfort to those who cannot afford the hefty costs involved in such a legal battle.

Given the level of corruption that already exists, Cronin must surely be aware of the potential for abuse by crooked government officials. The reassurance that expropriation can still be challenged in court if, in Cronin’s own words, the expropriation is just to enrich somebody’s cousin, isn’t exactly encouraging. In short: why license the ammunition if you are not going to fire the gun?

“Overall, the Bill reduces the compensation payable under the current Expropriation Act of 1976, which is based on market value, supplemented by damages for all resulting loss,” says Jeffrey. It also greatly expands the scope for expropriation, increasing the chances of the State resorting to this drastic measure.”

Sadly, if the past is anything to go by, government is going to dig its heels in and push for this life-changing, damaging piece of legislation to become law. While it remains to be seen how rumours about the Bill will affect the property market in this country, one thing is for sure: foreign investors who have seen similar scenes played out in other parts of Africa are more than likely going to take their hard-earned money elsewhere.

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