WHAT DOES THE NEW EXPROPRIATION ACT 13 OF 2024 MEAN TO LANDOWNERS IN SOUTH AFRICA, HOW IT WILL BE IMPLEMENTED AND HOW TO AVOID TRIGGERING THE SECTION RELATING TO NIL COMPENSATION?

Expropriation as defined by the Expropriation Act 2024 is the compulsory acquisition of property for a public purpose or in the public interest, by an expropriating authority, or an organ of state upon request to an expropriating authority. Expropriation is not a concept unique to South Africa.  Jurisdictions across the world have expropriation laws. In the United States the government may expropriate property for public purposes through the use of eminent domain. The United Kingdom has “compulsory acquisition” as their expropriation law, which allows expropriating authorities to acquire land for purposes of public interest needs. Similarly, countries such as China, Brazil, Switzerland and Germany also have expropriation laws which enable the government to acquire private property for public interest needs. 

What does the South African Constitution of 1996 (“the Constitution”) say about expropriation?

The Constitution is the supreme law of South Africa.  Law or conduct inconsistent with it is invalid and the obligations imposed by it must be fulfilled. Section 25 of the Constitution known as the ‘property clause’, deals with property rights and expropriation.  Section 25(1) protects private property rights and affirms that no one may be deprived of property except in terms of law of general application and no law may permit arbitrary deprivation of property. 

More specifically, the Constitution only permits expropriation for “public purposes” or if it is “in the public interest” and subject to compensation being agreed or approved by the court. To this effect section 25(2) states that:

 “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.”

In addition the Constitution requires that compensation provided must be just and equitable. To this end, section 25(3) states that:

“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—

1. the current use of the property;
2. the history of the acquisition and use of the property;
3. the market value of the property;
4. the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and
5. the purpose of the expropriation.”

For purposes of section 25 of the Constitution, public interest is defined so as to include the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources; and property is specifically not limited to land. This means intellectual property and immovable property may also be expropriated. A good example of this would have been during the Covid epidemic where private companies developed new medicine in an effort to treat the virus. If the government wanted to expropriate the intellectual property of the medicine in question in order to avail the medicine to the public then section 25 would apply in that circumstance.

The Expropriation Act of 2024 (“the 2024 Expropriation Act”)

The 2024 Expropriation Act defines “Property” as contemplated in section 25 of the Constitution. In terms of the definition section “property” includes immovable, movable and intangible property. Despite the provisions of any law to the contrary, an expropriating authority may not expropriate property or cause it to be acquired arbitrarily or for a purpose other than a public purpose or in the public interest. ‘‘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 in order to redress the results of past racial discriminatory laws or practices and ‘‘public purpose’’ includes any purposes connected to the administration of any law by an organ of state, in terms of which the property concerned will be used by or for the benefit of the public.

A) The process to be followed for purposes of expropriation in terms of the 2024 Expropriation Act:

Notice of intention to expropriate (Chapter 4 of the 2024 Expropriation Act)

Section 7(1) provides that if an expropriating authority intends to expropriate property, it must a) serve a notice of intention to expropriate on the owner, mortgagee and holder of a right known to it at the time and b) publish the notice of intention to expropriate under section 22(2).

Section 7 (2) (k) a notice of intention to expropriate must include an offer of compensation which the expropriating authority considers just and equitable and an explanation of how the amount was arrived at with reference to supporting information.

Section (7)(4)(a) a person responding to a notice contemplated in subsection (1) within 30 days of the service or publication of the notice, must deliver to the expropriating authority a written statement (i) stating whether he or she accepts the offer of compensation; (ii) requesting further particulars under section 14, or (iii) disputing, in terms of section 19 the amount of compensation offered.

B) How compensation will be determined (Chapter 5 of the 2024 Expropriation Act)

“Section 12. (1) The amount of compensation must be just and equitable reflecting an equitable balance between the public interest, the interests of those affected, including an owner, holder of a right a morgagee, having regard to all relevant circumstances, including—

1. the current use of the property;
2. the history of the acquisition and use of the property;
3. the market value of the property;
4. the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and
5. the purpose of the expropriation.

1. It may be just and equitable for nil compensation to be paid where land is expropriated in the public interest, having regard to all relevant circumstances, including but not limited to—

1. 1. where the land is not being used and the owner’s main purpose is not to develop the land or use it to generate income, but to benefit from appreciation of its market value;
   2. where an organ of state holds land that it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration;
   3. notwithstanding registration of ownership in terms of the Deeds Registries Act, 1937 (Act No. 47 of 1937), where an owner has abandoned the land by failing to exercise control over it despite being reasonably capable of doing so;
   4. where the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land.

1. When a court or arbitrator determines the amount of compensation in terms of section 23 of the Land Reform (Labour Tenants) Act, 1996 (Act No. 3 of 1996), it may be just and equitable for nil compensation to be paid, having regard to all relevant circumstances.
2. If the property is land, the expropriating authority must consider the amount of outstanding municipal property rates, taxes, levies and charges relating to the property when making an offer of just and equitable compensation.”

C) Investigation and valuation of the property for purposes of determining compensation

Section 5(1)(c) provides that the expropriating authority must consider all relevant circumstances when deciding whether to expropriate property and must ascertain facts relevant to calculating an amount of compensation that accords with section 12 (outlined above) and formulate an offer of just and equitable compensation for each person, who would be affected if the property were expropriated.

Section 5(2) (b) provides that subject to subsection (3), if the property is land, an expropriating authority may authorise in writing a valuer to enter upon the land and any building on such land and to do the necessary inspections and investigations for the purpose of valuing it.

D) What if the landowner does not agree with the compensation proposed and/or nil compensation proposed

Section 19. (1) of the 2024 Expropriation Act provides that, if the expropriating authority and a disputing party do not agree on the amount, time and manner of payment of compensation, they may attempt to settle the dispute by mediation, which must be initiated and finalised without undue delay by either party.

Subsection (2) provides that if the expropriating authority and disputing party do not settle the dispute by consensus or mediation, either party may, within 180 days of the date of the notice of expropriation, institute proceedings in a competent court for the court to decide or approve the amount, time and manner of payment of just and equitable compensation.

Conclusion

If you are a landowner it is accordingly important to ensure that your property does not fall into the categories listed in section 12(3) of the 2024 Expropriation Act because although there is a mechanism to dispute any proposed compensation and the Constitution may be on your side in some respects, the cost and effort of defending litigation with the State or taking legal action against the State is prohibitive. It is likely to be more beneficial to incur costs to ensure that your property, particularly vacant land does not fall under any one of those categories 

For example it may be prudent to fence your vacant land and/or lease out your vacant land and/or advertise it for rental so as to ensure that it does not fall within the nil compensation categories contemplated by the 2024 Expropriation Act rather than risking being forced to defend any legal action taken by the State or being forced to take legal against the State which is time consuming and expensive.

*The content of this article is provided for general informational purposes only and does not constitute legal advice the particular circumstances of your case may change the advice given.