Expropriation Act: Why its critics are right to be concerned

Key topics:.The Act risks limiting property rights without compensation.Land reform should focus on urban property rights.Economic growth depends on secure property ownership..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Michael Morris.The most impressive feature of two pieces recently published by the Mail & Guardian − on what both appeared to suggest was the unduly anxious and overblown reaction of its critics to the signing of the Expropriation Act – is just how successful they were in alerting us to the grave dangers of this legislation..I am referring to economist Wandile Sihlobo's analysis in "Agriculture: No need to panic over the Expropriation Act", and the thoughts of various figures in the development space in "'Expropriation Act will create development opportunities'" (both published on 3 February)..This is a complex topic which books have been devoted to – and much detailed research and argumentation by, among others, the organisation I work for, the Institute of Race Relations (IRR)..For all its complexity, it is possible (and necessary) to settle two fundamental questions immediately – in opposing the Act, is the IRR objecting to the very idea of expropriation, and is SA unique in having promulgated expropriation legislation? No, and no..Reasons for concern.Yet, there are considerable reasons for concern, which the IRR has been spelling out for years. It does seem ironic that one central concern is most eloquently described by Wandile Sihlobo himself..He writes: "I must agree that the definition of expropriation remains a concern and we will need to watch how it is applied and interpreted by the courts. This definition could exclude all instances where the state does not acquire the property but nevertheless limits the owners' rights to such an extent that it becomes of no value.".Sihlobo goes on: "It opens up the possibility of all sorts of regulatory limitations on a property, with no compensation, where the state does not acquire the property but rather limits the use and enjoyment of it by the owner or any other party with a right to the land — a lessee, mortgager or occupier, for example.".We are at one with Sihlobo on this grave risk and applaud him for bringing attention to it..As it happens, we believe South Africa is in urgent need of real "land reform" – chiefly where most (and more and more) people live, which is the cities..Transformational objectives.Whatever transformational objectives may be pressing in the agricultural sector, highest among them must be preserving and expanding the scope for feeding South Africa's rapidly urbanising but far from even comfortably off population at affordable levels. Black and white farmers are already doing this, often against the odds. They need every assistance – which must certainly include removing the threat to their property rights..In the city, the desperate need is to meet the desire for stable, safe lives and for opportunities to prosper, to live better, to believe tomorrow will be better than today. Yet, we know that if city dwellers have no stake in the economy, their vulnerability will remain tragically comparable to the lives of their apartheid-era forebears. Without the basic unit of optimism and agency – property rights – people are subject, dependent, vulnerable, and despairing. It is a universal law..Read more: The land illusion: South Africa's property rights crisis .Last year's Nobel laureates in the economic sciences – Daron Acemoglu, Simon Johnson and James Robinson – have, as the citation sets it out, "demonstrated the importance of societal institutions for a country's prosperity. Societies with a poor rule of law and institutions that exploit the population do not generate growth or change for the better.".In their 2012 book Why Nations Fail, Acemoglu and Robinson return repeatedly to the proposition that property rights underpin success, while their absence – always – spells failure..Which brings us to the second piece, and the supposed "developmental opportunities" the new Expropriation Act promises, as various others set out in "'Expropriation Act will create development opportunities'"..One can only admire the optimism of Rainmaker marketing director Stefan Botha who "said the law should not change the demand for development"..He is quoted as saying: "It would seem likely that this [Act] would not impact any land-owners who have intent to develop and uplift, and we thus don't see this impacting the forecasts of developers or their ability to do what they do best.".He clearly has not consulted Wandile Sihlobo on that central worrying element of the law..Historical land inequalities.Ubuntu Design Group founder and CEO Wandile Mthiyane said he believed the Act was "a crucial step" in addressing South Africa's historical land inequalities..He is quoted as saying; "The fact remains that white South Africans, who make up less than 10% of the population, own approximately 72% of the country's land, while black South Africans, who are the majority, directly own only 4%.".These figures are trotted out so often that even supposedly respectable researchers believe the formulation. It is a little more complicated, as the IRR has had to explain time and again..The 72%-4% figure refers to freehold land held by individuals and registered at the deeds office, and accounts for only about 31% of the country. As colleague Terence Corrigan points out: "Most land is held by trusts (24%), the state (22%), companies (19%), community-based organisations (3%) and co-ownership schemes (1%).."Revealingly, the 72%-4% focus erases the modest land reform successes that have been achieved, since this tends to happen through community rather than individual schemes. It also bypasses acknowledging that land to which black people have historically had access – the former homelands – has been state property and remains so three decades after the transition.".Read more: Trump, EWC, private property rights – how SA got so out of step with the world.And, to further complicate matters, these numbers above exclude the formal houses owned by some 8.8 million black South Africans (consider that the total white population is just over 4.5 million), often without their having title deeds..Nevertheless, Mthiyane goes on: "This law creates a legal framework for equitable land reform by allowing the government to expropriate land in the public interest, especially land that is abandoned, environmentally hazardous or held purely for speculation.".Dire economic implications.Mthiyane also needs to consult Sihlobo (quite apart, perhaps, from contemplating the idea of criminalising the profit motive, and the dire economic implications of doing so)..Finally, Ongama Mtimka, acting director of the Raymond Mhlaba Centre for Governance and Leadership at Nelson Mandela University, argues that one "positive aspect" of the law is that it allows the state to expropriate bad buildings if property owners refuse to sell or renovate them..I imagine there might be considerable public sympathy for this line of reasoning, but Mtimka does introduce a perplexing element when he says: "In Nelson Mandela Bay, there's a beachfront that is underdeveloped because Transnet is holding land and is not moving when it comes to allowing the city to have waterfront development.".Does he really mean the state should expropriate state property? Or is it any desirable property that could be deemed "underdeveloped"? One wonders, might the Nelson Mandela University campus qualify, here?.I wouldn't want to put the idea into any fevered mind, but – Google it – imagine the money to be made from a Khayelitsha Riviera. All you'd need to do is remove perhaps twenty or thirty thousand people presently living along the sun-kissed False Bay coast, and claim a public developmental interest … something about "transformation", perhaps..Doing any such thing would be very difficult if all the people of Khayelitsha (some do) had reliable property rights, pretty much like the rights that we in the suburbs have (though these, too, are now contaminated by the risks highlighted by Sihlobo). But few of them do..Simple justice.In sum, then, an Expropriation Act that fails to set down unambiguous, and limited, conditions for taking people's property, explicitly grounding the procedure on the simple justice of market-related payment in compensation for taking property for a genuine public purpose, is a peril to us all, but chiefly to those millions of South Africans who, in 2025, are still without property rights..Allowing the state to rob others of their rights will not correct the deficiency, only deepen it..Read also:.Expropriation Act fallout: SA institutions sound alarm over threats to property rights and economySouth Africa's Expropriation Bill poses a threat to property rights – Terence CorriganStability in SA depends on legal property rights.*IRR head of media Michael Morris was a newspaper journalist from 1979 to 2017, covering, among other things, the international campaign against apartheid, from London, and, as a political correspondent in Cape Town, South Africa's transition to democracy. He has written three books, the last being Apartheid, An Illustrated History, and has an MA in Creative Writing from UCT. He writes a fortnightly column in Business Day..This article was first published by the Dailyfriend and is republished with permission.

Expropriation Act: Why its critics are right to be concerned

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