Policy Perspective: Expropriation should not become a self-fulfilling prophecy

Iwas recently given the opportunity to present an analysis of the Expropriation Bill and the amendments to Section 25 of the Constitution to an influential stakeholder in the agriculture sector.

The Expropriation Bill sets out the detailed procedure that all expropriations will need to follow, while the amendment to Section 25 of the Constitution clarifies that just and equitable compensation can be nil where land is expropriated in the public interest.

These are highly emotive issues and the debate has conjured up strong responses from stakeholders across the political spectrum. This is understandable, but unfortunately much of the debate has drifted away from the bills’ actual content and become the proxy for a larger debate on social justice and transformation in the agriculture sector.

Neither bill prescribes that expropriation will take place without compensation. They merely state that nil compensation is theoretically possible if exceptional circumstances are present to the extent that a court believes it will be just and equitable to both parties.

THE DETAILS

The Expropriation Bill then attempts to add clarity to the circumstances that a court must look at when deciding whether or not it may be just and equitable to award no compensation.

For instance, has the land been abandoned? Is the land being used productively, or was it bought purely in the hope that it could be resold at a higher price?

These are circumstances that a court must consider, but nil compensation will not necessarily be justified where one or more circumstances are present.

Ultimately, a court must look at all relevant circumstances and arrive at an amount that is just and equitable.

LITTLE CAUSE FOR ALARM

As a result, my presentation’s central theme was to ‘cut through the noise’ and assess, as coldly and clinically as possible, the real impact that these bills are likely to have on the land market and compensation.

My argument was that nil compensation is possible, but extremely unlikely, as truly exceptional circumstances would need to be present.

Where an agricultural property was not obtained through the discriminatory practices of the past and is used productively by a bona fide farmer who seeks to empower his or her workers, or invests in transformation initiatives or joint ventures, there should be little cause for alarm. The law will only permit no compensation in truly exceptional circumstances.

Furthermore, if voluntary land reform initiatives such as joint ventures, the Agricultural Development Agency and blended finance truly take off over the next few years, there may be little need to expropriate property.

SENTIMENT VERSUS REALITY

The biggest threat relates to sentiment around nil compensation, as its actual application may be very limited.

My presentation to the agricultural stakeholder was well received, but a question from the floor really got me thinking: if expropriation without compensation gets hyped up and the sentiment drowns out the reality, will people not act accordingly? If landowners are scared, will they try to get rid of their assets, thereby driving prices down? If investors are scared, will they not stop investing? Will sentiment become the reality?

This reminds me of a line from George Orwell’s classic novel, 1984, which reads: “[…] if all others accepted the lie which the Party imposed – if all records told the same tale – then the lie passed into history and became truth.”

The nil compensation provisions in the Expropriation Bill and the Constitutional Amendment Bill may harm investor confidence and sentiment, but we must take care not to inflate this risk to the extent that it becomes a self-fulfilling prophecy.

To this end, we can lean from Orwell’s novel once more: “There was truth and there was untruth, and if you clung to the truth even against the whole world, you were not mad.”’

Whether we like it or not, sentiment has a significant impact on decisionmaking, and sentiment is influenced by public opinion. Public opinion does play a role in influencing policymaking, but it also affects sentiment which, in turn, affects decision-making.

Where policies or bills pose a threat to South Africa’s economy, it is necessary to place them under the spotlight. However, context is key, as it may well lead to real decisions being taken.

Theo Boshoff is the head of legal intelligence at Agbiz, but writes in his personal capacity. Email him at theo@agbiz.co.za.