Abuse of Expropriation Bill’s tools inevitable in poorly governed SA

The Centre for Development and Enterprise (CDE) has an enviable record of policy analysis. While we at the Institute of Race Relations (IRR) may have differences with its positions from time to time, SA would be a better and more prosperous place if its work had a greater influence on policy.

However, on the Expropriation Bill, as outlined by CDE director Ann Bernstein, it is mistaken (“Expropriation Bill is not as bad as portrayed, but the crux lies in implementation,” April 11).

In truncated form, her argument is that while concerns about the legislation are valid, they are overblown and the main problem will lie in its implementation. “There exists,” she continues, “a real risk that despite the bill not making the vast changes to the existing legal provisions that some claim, its passage will inaugurate a period of far more aggressive, more frequent use of expropriation by the 250plus state entities that already had these powers under the old legislation.”

This is a kernel of the issue, but not the only one. As the CDE recognises in its submission on the bill, there has been a “dramatic” decline in the quality of governance in recent years; it is “hard not to worry” about the powers conferred in the bill being abused.

Indeed, the submission recognises abuse as inevitable.

To remedy this, the CDE proposes including provisions that prevent the legislation from being interpreted to mean that what the state can afford will be used to set compensation, setting clear limits on what qualifies as “land reform” and holding officials personally criminally liable if expropriation is undertaken for corrupt or criminal purposes.

These are naive suggestions given the extent of corruption, malfeasance and disregard for the rule of law present in the government and they do not deal with the true scale of the threat this bill represents.

Yes, the state of governance makes abuse unavoidable, and it is likely to be at a scale that will inflict great damage on SA’s investment prospects.

We have seen this in the eviction of black farmers from their state-owned holdings —a matter of direct relevance to this bill. And, of course, the pillaging of Covid-19 resources during the pandemic is a sobering reminder of this reality.

Indeed, we would argue that the bill incentivises these by weighting the process in favour of the state. For example, in the event of a dispute over compensation the state can nevertheless take possession of the property; this stands to exert a great deal of pressure on the owner to settle.

But the dangers in the bill as it exists go considerably beyond simple venality. The pull of politics and ideology is strong.

It should not be forgotten that for more than a decade there has been a succession of moves on property rights, each seeking to expand the discretion of the state over private assets. The Expropriation Bill is geared towards advancing this agenda.

As we have pointed out before, a key operative concept here is custodianship. This is the taking of an asset class, which the state will then hold “on behalf of the country’s people”. This is the situation obtaining in respect of water and mineral rights. To understand this, it is necessary to look at a 2013 case before the Constitutional Court (Agri SA vs minister for minerals & energy).

A majority of the court’s judges held that the taking of property (here, mineral rights) should not necessarily constitute expropriation. As the judgment put it, “whatever ‘custodian’ means, it does not mean that the state has acquired and thus has become the owner of the mineral rights concerned”.

Without expropriation having taken place, no compensation is necessary. In a sense, the property right simply vanishes. While the court limited its judgment to the facts before it, this has set out a tempting path to state control — if not technically ownership, though the difference would be contrived and largely irrelevant to the owner who has lost his or her assets.

The very definition of expropriation in the bill harks back to this: “The compulsory acquisition of property by an expropriating authority or an organ of state upon request to an expropriating authority”. Note that it stresses the relationship between the property and the “expropriating authority”, not the deprivation suffered by the (former) owner.

Rather than piecemeal takings, the custodianship approach would allow the state to fundamentally upend property rights in entire categories of assets, largely insulated from challenge. The most obvious candidate for this would be land.

Indeed, the idea of a mass custodial taking has frequently been floated, including in an iteration of the 2014 Preservation and Development of Agricultural Land Framework Bill, in the recommendations of the state land audit, and by a government official on no less a podium than the World Economic Forum in Davos in 2019.

Combine that power with some hardline ideological positioning — which is not averse to economic damage — and the raw venality that is all too frequently on display in the country, and the formula for disaster is clear.

Moreover, we have cautioned that this is ultimately not likely to be limited to land. The ambitions of SA’s political elite, and the scale of patronage machines, are unlikely to be satisfied with this. The bill itself is concerned with property in general, and once legal frameworks and precedents are established we fear other assets will be coveted.

The CDE has said, rightly, that expropriation should be “fair, legal and rare”. This is sage advice. The bill might offer a formula that is legal, but if it is implemented in its current form it is unlikely to be either fair or rare.

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THE CUSTODIANSHIP APPROACH WOULD ALLOW THE STATE TO UPEND PROPERTY RIGHTS IN ENTIRE ASSET CATEGORIES