Anthea Jeffery writes on the threat to property that is posed by the Valuer General, something that has been drowned out from all the noise around amending the Constitution.

Parliament’s December 2018 decision to amend the Constitution to allow expropriation without compensation (EWC) has been widely reported and is well known to most South Africans. Far less attention has been given to the work of the ad hoc committee appointed by the legislature to draw up the necessary amendment bill.

This committee recently recognised that the constitutional amendment will have to be postponed till after the 8th May general election. In the interim, it has invited a narrow group of experts to make recommendations to it on what the amendments should include. One of the most damaging recommendations has come from the state-appointed Valuer General, whose task is to value all property that has been targeted for ‘land reform’.

A formula to be used in carrying out these valuations was gazetted late last year, in regulations that took effect on 30th November 2018 (the Regulations). As acting Valuer General Pelekelo Mwiya told the ad hoc committee, this ‘fixed formula’ states that ‘value = current use value + market value, divided by two’. (Where relevant, historical acquisition benefits and state subsidies must then be subtracted from the initial total reached.)

As Mwiya stresses, the formula begins with ‘current use value’. The Regulations effectively define this as the difference between cash inflows and outflows on a single day: the date on which the valuation is carried out.  How this will work in practice is best illustrated by an example. 

Assume that certain well-located urban areas have been targeted for the building of four-storey flats, to be rented by the state to the poor, as part of overcoming apartheid’s spatial geography. An affected house might have a market value of R1 million, but its ‘current use value’ – in terms of cash inflows and outflows on the valuation date – is likely to be R0. Under the formula, this amount must be added to market value and the total divided by two. This gives the house a value of R0 + R1m, divided by 2. This comes to R500 000, or half its normal selling price. 

The definition of ‘current use value’ in the Regulations is out of sync with the property clause in the Constitution, which makes no reference to this criterion. Rather, Section 25 refers to the ‘current use of the property’ as a factor relevant to what compensation on expropriation would be ‘just and equitable’.

‘Current use’ is not defined in Section 25. In principle, however, it revolves around the extent to which farms, holiday homes, mining land, or other assets are being fully used, for instance.

‘Current use value’ in the Regulations is not the same as ‘the current use of the property’ in the Constitution. The Regulation’s notion of ‘current use value’ could presently be struck down for inconsistency with Section 25.

To circumvent this problem, the Valuer General – as he told the ad hoc committee earlier this month – wants the term ‘current use’ in the Constitution to be redefined as ‘current use value’, as set out in the Regulations. That would save his ‘fixed formula’ from legal challenge. It would also result in many owners receiving around half of market value if their property is targeted for land reform.

Many South Africans seem to believe that only farmland is likely to be targeted in this way. This is not so. The ANC has resolved to change apartheid’s spatial geography – and has already spoken of expropriating homes, shops, and other land along Johannesburg’s Rea Vaya routes in order to achieve this.

A recently gazetted claim to some 4 000 hectares of land in Centurion (near Pretoria) further confirms that land of all kinds – and in all kinds of places – may in time be identified for land reform. 

Under the fixed formula, all affected properties are likely to be valued at roughly half of market value. Moreover, where previous state subsidies or other ‘acquisition benefits’ are relevant, these amounts must be subtracted from the half-of-market value initially computed. This means ‘one could get to zero compensation’, as the Valuer General told the ad hoc committee.

The ANC has thus already found a way to bring compensation on expropriation down to 50% of market value in very many instances – and all the way down to zero in certain circumstances. However, the formula in its Regulations is presently unconstitutional. 

Hence, a key purpose of amending Section 25 could be to bring the Constitution into line with the Regulations, rather than the other way round. This would be fully in keeping with the ANC/SACP’s long-standing ideological determination to ‘eliminate’ existing property relations en route to a socialist and then communist nirvana

Dr Anthea Jeffery is the Head of Policy Research  at the Institute of Race Relations