Nurturing the land: Is it necessary to amend s 25 of the Constitution for land reform?

August 1st, 2018

By Kevin Hopkins and Carl Adendorff

The Constitutional Review Committee recently called on the public to comment on whether s 25 needs to be amended to allow for the expropriation of land without compensation. This article encapsulates our views.

The structure of s 25

For the purposes of the discussion, we have focused on s 25(2) to (5):

‘(2) 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.

(3) 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 –

(a) the current use of the property;

(b) the history of the acquisition and use of the property;

(c) the market value of the property;

(d) the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

(e) the purpose of the expropriation.

(4) For the purposes of this section –

(a) the 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; and

(b) property is not limited to land.

(5) The state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.’

The first point to be noted from the quote above is that whatever policy the government ultimately adopts in pursuit of its land reform programme will have to be implemented by legislation (see
s 25(5)). The second point to be noted is that all legislation – including land reform legislation – must comply with all of the provisions in the Bill of Rights, including s 25.

We have to look at the constitutional requirement to compensate. Section 25(2)(b) expressly provides that an expropriation must be done ‘subject to compensation’. For many, this is the stumbling block to any land reform legislation designed to allow the state to expropriate without compensating. However, it is important to read the obligation to compensate with s 25(3), which deals with how the amount of compensation must be calculated. According to s 25(3), the amount of compensation payable must be ‘just and equitable’ and compensation will be just and equitable if it reflects the –

  • current use of the property;
  • history of the acquisition and use of the property;
  • market value;
  • extent of state investment; and
  • purpose of expropriation.

Thus, the Constitution requires nothing more than that the owner of the land being expropriated receives whatever compensation is – in the totality of circumstances – just and equitable. It need not be market value and it need not be based on the willing buyer, willing seller principle.

If one imagines the amount be represented as a continuum, then ‘zero’ compensation will be on the one side whereas ‘market value’ will be on the other end. The Constitution gives the state the right to compensate a private property owner any amount along the continuum provided that, whatever the amount may be, it is just and equitable in the circumstances regard being had to the five considerations in s 25(3)(a) to (e). It, therefore, seems that there will be times when the Constitution requires that only a nominal amount of compensation needs to be paid in very special circumstances.

Finally, s 25(8) provides that:

‘No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of section 36(1).’

The effect of s 25(8) is that even if the state violates s 25(2)(b), perhaps by paying no compensation where a nominal amount is just and equitable, the state nevertheless has an opportunity to justify its violation. That is so because s 25(8) expressly provides that any departure from the requirements of s 25(2)(b) must be done in accordance with the provisions of s 36(1) of the Bill of Rights. Section 36(1) provides that the state can limit a person’s rights in the Bill of Rights –
s 25 included – if the ‘limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors including –

(a) the nature of the right;

(b) the importance of the purpose of the limitation;

(c) the nature and extent of the limitation;

(d) the relationship between the limitation and its purpose; and

(e) less restrictive means to achieve the purpose.’

So, the state has an opportunity to expropriate land without compensation if it can justify doing so in the manner contemplated by s 36(1).

Thus, looking at the structure of s 25, the following is apparent –

  • the state may only expropriate private property if it compensates the owner;
  • the amount of compensation may vary from anywhere between zero and market value depending on what is just and equitable in the circumstances;
  • a nominal amount of compensation may be regarded as just and equitable in some circumstances; and
  • even where a nominal amount of compensation is required, the state may nonetheless elect not to pay anything at all in which case the owner’s right will be limited, but the limitation could still be lawful if it is a reasonable and justifiable limitation in the circumstances.

No need to amend s 25

For these reasons, the state will be able to expropriate certain types of land under certain conditions without paying compensation. The factors set out in
s 25(3) make it clear that, conceptually, there will be times when nominal compensation will be just and equitable.

Section 25(3)(a) makes the ‘current use of the property’ a relevant consideration when determining what amount of compensation is just and equitable. Clearly a large scale commercial farming operation must be treated completely differently to a portion of land that has never been worked, never been used, and has no planned use in the foreseeable future.

Section 25(3)(b) makes the ‘history of the acquisition and use of the property’ relevant as well. Land that may have been acquired in an unlawful manner or in a manner which, even if lawful once-upon-a-time, occurred under an immoral law must be treated differently to a piece of land recently acquired by a purchaser who paid market value for the land in a post-Apartheid free market society.

Section 25(3)(c) makes the ‘market value of the property’ relevant to the extent that a successful commercial operation worth many millions of rands must be treated differently from a vacant piece of unworked land where the value is considerably lower.

Section 25(3)(d) makes the ‘extent of direct state investment and subsidy in the acquisition’ and ‘the beneficial capital improvement of the property’ relevant meaning that land acquired by a particular family during the Apartheid years, which was financed by the soft loans of the state-owned Land Bank must be treated differently to a piece of land recently purchased where the acquisition was financed through a commercial bank at a competitive market-related interest rate. Land on which the owner has spent considerable amounts of money doing capital improvements to the land like working it, fertilizing it, planting crops, installing irrigation systems, erecting fences, building roads, constructing homes and out buildings, such as dairy farming equipment or grain silos must be treated differently to land that has never been used by anybody and where the owner has spent no money at all doing anything to it.

Section 25(3)(e) makes the ‘purpose of the expropriation’ relevant meaning that an expropriation being done in furtherance of a carefully thought out land reform programme designed to give access to land to landless people must be treated very differently to an expropriation where the state wants the land to build a harbour that will be used as a commercial port or for some other important infrastructure that the state will use to upgrade the economy.

Thus, having regard to the s 25(3) factors, the state will clearly not be able to implement a policy of expropriation without compensation by targeting viable commercial agricultural operations or farms that were recently acquired by the owner where those farms are heavily bonded with commercial banks or land that has been worked and where the owner has spent large sums of money doing capital improvements to the land, and the like. However, a policy of expropriation without compensation may work if the state carefully identifies land that, for example, was historically acquired in an unjust manner or where the state has heavily subsidised the owner’s acquisition of that land or where the land is currently not being used and there are no immediate plans to use it or where the owner has not invested in the land nor done any capital improvements on the land.

In our view, the factors enumerated in s 25(3) can usefully serve the state when it develops its land reform policy. They will discipline the state into thinking carefully about land reform, and ensure that Zimbabwe-style takings do not occur (where large commercial farming operations were hand-picked for the taking in a manner that severely compromised that nation’s food security and completely undermined investor confidence). But, if the South African government is guided by the s 25(3) factors then, in our opinion, there are greater prospects of food security being enhanced (because unproductive land will now become productive) and investor confidence will not be undermined (because those who invest in property will not feel insecure in their investments) and the agricultural sector will be enhanced rather than threatened (because more people will be working more land and there may be greater agricultural output than there was before).

We stress, however, that absent an amendment to s 25, the state will not acquire blanket power to take whatever land it wants, wherever it wants, without compensating. Its right to take without compensating will be limited to special cases.

Unintended consequences of an ill-thought amendment

An amendment to s 25 will be catastrophic. Section 25 protects property. Section 25(4)(b) of the Constitution makes it clear that ‘property is not limited to land’. Thus, if s 25 is amended to allow the state to expropriate property without compensation then the state will effectively be empowered to take more than just land without incurring a concomitant obligation to pay compensation.

In order to appreciate the catastrophic consequences of such an amendment, one must first appreciate the meaning of the term ‘property’ as it appears in s 25 of the Constitution. Thus in –

  • First National Bank of SA Ltd t/a Wesbank v Commissioner, of South African Revenue Service and Another 2002 (4) SA 768 (CC) it was held that movable property, such as motor vehicles, would constitute property for the purposes of the protection offered by s 25;
  • Laugh It Off Promotions CC v SAB International (Finance) BV t/a SABMark International (Freedom of Expression Institute as Amicus Curiae) 2006 (1) SA 144 (CC) it was accepted that intellectual property like trade marks and copyright are property for the purposes of the protection offered by s 25;
  • Phumela Gaming and Leisure v Gründlingh and Others 2007 (6) SA 350 (CC) it was held that goodwill is property and protected by s 25;
  • Law Society of South Africa and Others v Minister for Transport and Another 2011 (1) SA 400 (CC) it was accepted that medical costs, loss of earning capacity and loss of support are a bundle of rights, which fall within the meaning of property as used in s 25; and
  • National Credit Regulator v Opperman and Others 2013 (2) SA 1 (CC) it was held that a person’s right to the restitution of money paid on the basis of an unjustified enrichment claim, constituted property within the meaning of s 25 and was protected by s 25 of the Constitution.

Therefore, s 25 of the Constitution protects property, which includes just about anything of economic value, including both movables and immovables, corporeals and incorporeals, real rights and personal rights, intellectual property rights, claims with a monetary value, and the like. People and companies would understandably be unwilling to invest in a country where their investments are at risk of being taken by the state. Foreigners would be too scared to start businesses here or to build factories or even invest on our stock exchange. South Africa (SA), like most states in the world, is dependent on foreign investment. But if s 25 is amended to allow the state to take any property, at will, without having to compensate the owner, we can expect to lose a great deal of foreign investment.

Legislation can do the work needed

As stated above, no amendment to s 25 is needed. Carefully thought out legislation can do the job, but the legislation must be constitutionally compliant. It must be rational. The rationality of legislation can be tested by a rational review inquiry, which entails a two-part analysis. In the first part, one asks what the legitimate purpose behind the legislation is and then, in the second part, one asks whether such legislation is reasonably capable of achieving its stated purpose. If it is capable of achieving its purpose then the legislation is rational, but if not, the legislation will be irrational and consequently unconstitutional.

It is important that in a rational review inquiry, one correctly identifies government’s purpose. An incorrect categorisation of the purpose will affect the outcome of the inquiry. What then is government’s legitimate purpose behind seeking to enact land reform legislation that will enable it to expropriate without having to pay compensation? Government has, itself, told us in a number of media statements, beginning with the State of the Nation Address given by President Cyril Ramaphosa and repeated frequently thereafter, that the purpose of expropriating land without compensation is to achieve equitable access to land for all of SA’s people in a manner that will not compromise food security, threaten the agricultural sector, or harm the country’s economy. If that is government’s purpose then any legislation, in order to be rational, must not allow expropriations that could compromise food security, threaten the agricultural sector, or harm the country’s economy. This will effectively remove from the expropriation-radar commercially viable farming operations that produce food and employ large numbers of people.

We mention the issue of rationality only because it is clear to us that government can implement a policy of expropriation without compensation via legislation but that such legislation will have to be very carefully thought out so as not to unconstitutionally infringe on s 25, nor fail a rational review test. All of this can, we submit, be achieved through carefully thought out legislation.

Kevin Hopkins BA LLB (Rhodes) LLM (Wits) is an advocate in Johannesburg and Carl Adendorff BProc LLB (UJ) Dip in Forensic Auditing and Criminal Justice (UJ) is an attorney at Adendorff Theron Inc in Nelspruit.

This article was first published in De Rebus in 2018 (Aug) DR 22.

De Rebus