Vasco de Oliveira Incorporated | The amendment of Section 25 of the Constitution
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The amendment of Section 25 of the Constitution

10 Jan The amendment of Section 25 of the Constitution

The amendment of Section 25 of the Constitution: the ultimate determining factor on compensation when it comes to land expropriation

A decision was already taken exactly a year ago to amend the relevant constitutional provision, Section 25 of the Constitution of the Republic of South Africa, Act 108 of 1996. The National Assembly agreed to amend section 25 to make expropriation of land without compensation more explicit in the Constitution. The question is therefore no longer whether compensation will be payable or not, it is now a question of how and on what basis no compensation will be determined. This is now the task of the Ad Hoc Committee to Initiate and Introduce Legislation Amending Section 25 of the Constitution, chaired by ANC MP Mathole Motshekga.

The current wording of the Constitution provides for property to be expropriated only in terms of law of general application for a public purpose or in the public interest and subject to compensation, the amount of which and the time and manner of payment of which have been either agreed to by those affected or decided or approved by a court. The amount of compensation and the time and manner of payment must be just and equitable balancing both the interests of the public and those affected. There are currently several non-exhaustive circumstances and factors set out in section 3 of the Constitution to be taken into account when determining the amount of compensation such as the current use of the property; the history of the acquisition and use of the property; the market value of the property; the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and the purpose of the expropriation. The ultimate purpose of this section can be gleaned from 25 (4) of the Constitution which is essentially the nation’s commitment to land reform which brings about equitable access to all of South Africa’s natural resources.

This section is two-pronged in that one-part deals with the issue of expropriation of land to give effect to land reform. The second part of the section is the consideration of nil compensation for such expropriation.

There have been several committee meetings and parliamentary debates with the most recent proposals being made when amending this section. Three proposals were put forward by both Parliaments legal unit and a political party known as EFF as follows:

1. The first proposed amendment to subsections (2)(b) and (3) of Section 25 is as follows:

(2)(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: Provided that a court may determine that no compensation is payable in the event of expropriation of land for the purposes of land reform…

(3) Where compensation is payable, 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.

This proposal gives the court the ultimate power to determine whether no compensation will be payable and the second part of this proposal still remains consistent with the current provisions of the Constitution.

2. The second option involves the inclusion of a further subclause, which reads:

“(4A) Notwithstanding the requirement for compensation contemplated in subsections (2), (3) and (4), land may be expropriated without the payment of any compensation as a legitimate option for land reform in order to redress the results of past racial discrimination.”

The second proposal made takes away the courts powers and appears to give these powers to expropriating authorities as defined in the draft Land Expropriation Bill as “an organ of state or person empowered by this Act or any other legislation to acquire property through expropriation”. This inclusion is vaguely worded and does need some sort of structure to be added to it in order to give it a more limited meaning as the ambit of the provisions casts the net too wide. If this inclusion is added into the amendment as it is, it could wreak havoc as this will become an almost tyrannical disaster for South Africa’s property owners and banks when considering mortgaged properties – no person will pay for something that that they will not acquire hence mortgage bonds will remain unpaid.

These authorities can simply decide that no compensation will be payable as it will, according to them, be for “land reform”. There is no governing guideline or limiting factor to such a power. One must be wary that the Constitution refers to “property” and not just land so this is also another issue that needs to be taken into account by the Committee when wording the new amended section. The insertion of the subclause below does not assist with these issues, the proposed amended provisions still remain vague.

The Parliamentary legal unit also recommended that the following subclause be written into Section 25: “National legislation must set out the circumstances under which property may be expropriated without the payment of compensation.”

3. The EFF proposed that the following amendment be made to section 25:

“(1) The state, including Parliament, executive and judiciary carry an obligation to redress imbalances of the past through enactment of laws that will achieve redress and equitably redistribute all resources.

(2) Property may be expropriated without compensation (a) only in terms of a law of general application; (b) for a public purpose or in the public interest.

(3) The state should be custodian of all South Africa’s natural resources, inclusive of land, mineral resources and water, and relevant legislation should be passed to clearly define and contextualise state custodianship of natural resources.”

The EFF’s proposal goes into a completely different direction from what was intended by the amendment of this section and the intention of the amendment which was to only make the nil compensation element more explicit in the Constitution. EFF’s proposal seeks to completely nationalize all property in the country. Such an amendment to section 25 could never work as it will have an adverse impact our economy. It will result in the lack of investment into property. If the state becomes the custodians of the property then what use does one have for their title deed to their property? How could one build their immovable property wealth or have any form of security or investment on that basis if their biggest asset is taken away and now owned by the State? Businesses will be forced to take a loss which could result in them downgrading their businesses causing retrenchments. In a country with such a low employment rate, this could never help the economy in the long haul. Banks will also be affected; interest rates will increase significantly and the country’s ratings will diminish to worse than junk status. These are factors that the ad hoc committee must take into account when wording the new amended section 25 of the Constitution.

Despite the above proposals being made the section, amended or not, still provides that no property may be expropriated arbitrarily or for any reason other than in the public interest. The draft land expropriation bill does not at any point suggest deletions on any part of the Constitution. It instead requires more additions to be made to the section and it must be more explicit as to how and on what basis compensation is paid.

It must be borne in mind that the question before the ad hoc committee is not whether the Constitution should be amended to allow expropriation without compensation, but to draft a bill that amends the section to allow for expropriation without compensation.

The Ad Hoc Committee has committed itself to maintaining its mandate provided to it by the National Assembly and will proceed with initiating and introducing legislation amending section 25 of the Constitution and to have regard for the work done and recommendations contained in the reports of the Constitutional Review Committee and the previous Ad Hoc Committee on Amendment of Section 25 of the Constitution in the previous Parliament. They have committed to complete this task by 31 March 2020 but they have provided the public with a right of participation during December 2019 and early January 2020 to respond. There are currently complaints being lodged stating that the ad hoc committee failed to allow the public sufficient time to participate as the time period falls during the country’s holiday period when most people may not be able to provide their input and suggestions in respect of the amendment.

Be that as it may, the constitutional amendment will ultimately need to be passed by a two thirds majority in the National Assembly.

Vasco de Oliveira Incorporated

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