Expropriation Bill not just about land, but all property, divergent groups warn MPs

“Expropriation is not restricted to farmland; it extends to all forms of property, including movable property and intellectual property,” said AfriForum strategy and campaign officer Ernst van Zyl on the first day of the parliamentary public hearings on the Expropriation Bill.

“Government has suggested in the past to take pension funds for infrastructure… that’s why the reference to public interest (as grounds for expropriation) is of concern.”

Van Zyl was talking about prescribed assets, or the government’s plan to force pension and other savings funds to invest money in specified projects and companies, including state-owned enterprises (SOEs). 

The ANC had introduced the possibility of prescribed assets in its 2019 election manifesto. However, Treasury has gone the route of amending Regulation 28 of the Pension Funds Act – public comment closed on 15 March on its draft amendment that, among other, specifies infrastructure and caps exposure at 45% across all classes. 

Wednesday’s Expropriation Bill public hearings red-flagged the definitions of property, public interest and public purpose. These inadequate definitions emerged as worrying not only because of prescribed assets, but also because of mortgages, which must continue to be paid even on an expropriated property, and the impact of unregistered rights on land ranging from mineral deposits to customary matters.

That’s why organisations as diverse as AfriForum, the Banking Association of South Africa (Basa) and the National House of Traditional Leaders, among others, coalesced around this issue, even as each had their own angle.

“The definition of property that can be expropriated should be restricted to tangible property. Intellectual property must be protected,” said Basa, on the vague property, public interest and public purpose definitions that created policy uncertainty.

Right now, if a bondholder’s property is expropriated, (s)he must continue to pay mortgage instalments because the bond holder, despite expropriation, remains liable for the whole debt. 

 “This represents a material dilution of property rights,” said Basa managing director Bongiwe Kunene, arguing for the reintroduction of a previous proposal that the state would make up the shortfall of mortgage debt and level of compensation.

“In its current form, the Expropriation Bill may discourage local and international investment and result in capital flight should investors incur losses due to expropriation at below market value. 

“Insecure property rights and policy uncertainty retard investment and economic development, critical to tackling unemployment, poverty and inequality.”

It wasn’t expressly stated in this presentation, but to the ad hoc committee on amending section 25 of the Constitution, which also held public hearings, Basa pointed out that banks’ exposure on land-based property mortgages was R1.613-trillion, excluding other types of loans. 

As many banking crises arose globally from the impact that the decline of land-based property had on market confidence, the association’s written presentation said it was “important that South African land reform initiatives, to the greatest extent possible, be implemented in a manner that limits any potential destabilisation of the financial markets whilst still balancing the need for the redress”.

As the Expropriation Bill stands now, Basa told MPs, it “opens the way for injudicious expropriation”, particularly as more than 230 state entities may expropriate property.

And as the Minerals Council of South Africa pointed out in its written presentation, SOEs can object to expropriation whereas individuals cannot. 

The preferential treatment for state entities to be able to reject expropriation was a potentially unconstitutional factor, the Institute of Race Relations (IRR) agreed.

The council’s written submission highlights how the term “land” has remained undefined in the bill, leaving it unclear whether land also included rights associated with it. 

“The term land parcel is defined, but it is used throughout the bill in a different context to and is distinct from the term land…”

In addition to the vague definition of public interest, which may well be unconstitutional as it stands now, the Minerals Council also flags as concerning the lack of protection of unregistered right, particularly as the process to register these under the Mineral and Petroleum Resources Development Act could take years. This was a grey area that needed to be clarified.

Clarification was also what the National House of Traditional Leaders (NHTL) called for in the Expropriation Bill’s definitions, because “in terms of the Bill, property is not limited to land and includes a right in such property. This definition can include mining rights, movable property and unregistered customary and other land use rights”.

Even trade union federation Cosatu, which unequivocally supports both the Expropriation Bill and the constitutional amendment of Section 25, has expressed dissatisfaction with government’s failures to implement policies and laws.