Anthea Jeffery: Land expropriation without compensation and (supposedly) within Constitution

It’s the political joker, and both the EFF and ever-increasingly the ANC, see land as this trump card. And it’s no secret the ANC lost ground, while the EFF gained it, at the most recent municipal elections, and a key argument was around land. Malema’s party wants it taken back without compensation, while the Zuma run ANC, called for compensation within the statutes of the Constitution. Until recently that was, whereby Zuma is now looking for ‘Constitutional’ ways to give land back without compensation. Anthea Jeffery is a constant thorn in the ruling party’s side, and below she unpacks the methods the ANC may explore on there quest. And in so doing she uncovers a loophole, which may ultimately impoverish more, and narrow the elite further in this quest for land expropriation. Another must read. – Stuart Lowman

By Anthea Jeffery*

Many South Africans doubtless breathed a sigh of relief earlier this week when ANC (and other) MPs rejected an EFF motion calling on Parliament to amend the Constitution so as to allow expropriation without compensation.

Dr. Anthea Jeffery is Head of Policy Research at the IRR and author of Patents and Prosperity: Invention + Investment = Growth + Jobs, published this week by the IRR and available on the IRR website.
Dr. Anthea Jeffery is Head of Policy Research at the IRR.

The ANC is now basking in widespread public approval for having thus faced the EFF down. Behind the scenes, however, it is still seeking to find ways to take land and other property without paying compensation and (supposedly) without breaching the Constitution.

This is what President Jacob Zuma seemed to have in mind last week when he said: ‘We are busy amending laws to enable…expropriation without compensation as provided for in the Constitution’.

There are two ways in which this objective could be fulfilled. First, the government could take land as ‘custodian’, rather than as owner. Second, the government could embark on ‘regulatory’ takings which would not count as ‘expropriations’ under a definition the ANC cannily included in the Expropriation Bill of 2015 in the closing stages of the parliamentary process.

Take first the custodianship option. Here, the ANC would rely on Chief Justice Mogoeng Mogoeng’s majority judgment in the Agri SA case in 2013. Here, the chief justice said that the state’s ‘assumption of custodianship’ (of an unused mining right) did not amount to expropriation because it did not make the state the owner of the right in issue. Added Chief Justice Mogoeng: ‘Whatever “custodian” might mean, it does not mean that the state has acquired and thus become the owner of the right concerned.’ This in turn meant that no expropriation had occurred and no compensation was payable, he ruled.

This case was, of course, based on its own particular facts and the Constitutional Court might decline to follow it in different circumstances. Three of the judges on the Court also took pains to caution against laying down ‘an inflexible general rule of state acquisition as a necessary requirement’ for expropriation.

Two of these judges also warned against the practical ramifications of Chief Justice Mogoeng’s ruling, saying it could lead to the ‘abolition’ of private property. No ‘legislative transfer from existing private property holders to others’ would then count as an expropriation if it was ‘done by the state as custodian of the country’s resources’, they cautioned.

The Constitutional Court of South Africa

In 2014 the ANC published a bill providing for all agricultural land to be vested in the custodianship of the state. This clause has been removed from a 2016 version of that bill – but the ANC might now, as Mr Zuma hints, be planning to put it back. If all agricultural land were thus to pass into the custodianship of the state, the Constitutional Court might follow the Agri SA judgment in finding that no expropriation had occurred – and no compensation was payable.

Take next the possibility of ‘indirect’ or ‘regulatory’ expropriation. Here, the state does not itself acquire the ownership of property, but its regulations deprive the owner of many of the normal powers and benefits of ownership.

This kind of taking will not count as an expropriation under the Expropriation Bill Mr Zuma has recently referred back to Parliament because of procedural defects in its adoption. This Bill defines expropriation as ‘the compulsory acquisition’ of property by the state – but there is, of course, no such ‘acquisition’ by the government in a regulatory taking.

South Africa’s President and ANC president Jacob Zuma

Regulatory takings are precisely what the ANC intends to bring about in the mining sector. Under the latest version of the Mineral and Petroleum Resources Development Amendment Bill of 2013 – which was adopted by the National Assembly in November 2016 and is now proceeding through the National Council of Provinces – the mining minister will have the power to ‘designate’ minerals as needed for local beneficiation. He will then also be able to stipulate what proportions of such minerals must be made available to local beneficiators at ‘mine gate’ or ‘agreed’ prices.

Even more stringent export and price controls are likely to be imposed on all minerals identified by the minister as ‘strategic’. The ANC already has a long list (adopted by it at Mangaung in 2012) of the minerals it regards as strategic. These range from coal and iron ore to platinum group metals, manganese, nickel, copper, and uranium.

Say, then, that the minister declares platinum a ‘strategic’ mineral. He could then also demand, for example, that all platinum mining companies supply 80% of the platinum they have extracted to local beneficiators at prices set by him, which are significantly below the global norm.

The state would not ‘acquire’ this 80% proportion. But its regulations would nevertheless deprive the relevant mining companies of much of the benefits that would normally flow from their ownership of it.

Such a regulatory taking would be regarded in most Western countries – and under most bilateral investment treaties – as an expropriation for which compensation based on market value must be paid. However, it would not satisfy the definition in South Africa’s Expropriation Bill because the platinum in question would not be compulsorily ‘acquired’ by the state. According to the Bill, there would be no expropriation – and so no compensation would be payable.

All shall be equal before the law: justice graffiti in Cape Town, South Africa.

Would the Constitutional Court endorse this narrowing of the usual meaning of expropriation? There is a risk, again based on the Agri SA case, that it would.  

By using the custodianship concept and embarking on ‘regulatory’ takings in mining and elsewhere, the ANC might thus achieve what Mr Zuma has spoken of: expropriation without compensation ‘as provided for in the Constitution’.

However, this is to take a very narrow view of what the Constitution requires. It would also drive a horse-and-cart through the property clause and the entire constitutional settlement. In addition, it would cause enormous damage to the economy.

A narrow elite would no doubt benefit hugely from this legalised looting, but all other South Africans would be greatly impoverished. Many might also find themselves hungry and having to scratch for a bare living. South Africa would avoid the violent lawlessness of Zimbabwe’s land grabs, but the economic ramifications of the ANC’s rape of property rights would be very much the same.

  • Anthea Jeffery is Head of Policy Research at the IRR. You can follow the organisation on Twitter @IRR_SouthAfrica.