“Market value is not the constitutional standard” is a common argument in the discourse around compensation for expropriated property. And it is correct. But most immediately assume that this implies below market value compensation as a possibility. Instead, mere market value is not the constitutional standard: above market value – obviously, really – has to be.
Section 25(3) of the Constitution provides that the determination of the amount of compensation and the time and manner of the payment of that compensation must account for “all relevant circumstances,” but at least the following factors:
- 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.
It is immediately evident that expropriation for “nil” compensation is inherently unconstitutional, given the requirements of the “payment” of an “amount” of “compensation.” I have dealt with this in detail before.
However, there is still an important conversation to be had about why people assume that the factors listed in section 25(3) imply – or even necessitate – a downwards adjustment of compensation from market value. Such a reading is a profoundly counter-constitutional one.
When we read the very next provision (the section 26 right to have access to adequate housing) in the Constitution, which says nobody may be evicted from their home without a court having considered “all the relevant circumstances,” rarely does anyone argue that these circumstances must militate in favour of a weaker protection of the very right in question.
Of course they would not argue that, because that would make the provision, as one protecting the right to have access to adequate housing, at odds with its own purpose.
Similarly, sections 25(2) and (3) regulate the power of expropriation in favour of property owners. The right to compensation, in particular, is a right in favour of property owners. There is no such thing as a right in a constitutional bill of rights that is a right in favour of the state at the expense of legal subjects. The purpose of these provisions is to protect owners against state abuse.
To be clear, constitutions do recognise and bestow state power, but it is an old principle of interpretation that such provisions must be explicit (not implied) and must be construed narrowly (not generously), especially where those powers tend to clash with the interests of legal subjects. This applies doubly in the case of a bill of rights.
To simplify: unless section 25 said, clearly, that “compensation may be below market value,” market value necessarily becomes the floor – not the ceiling – of compensation in cases of expropriation.
Let me sketch this out in a different manner.
Jurisprudential context
In South Africa, we have this thing called the Constitution.
What is a constitution? It is a (usually) written instrument that defines and limits state scope and power. If this is not its function, there is no need for a written constitution. We could just have gone with parliamentary sovereignty instead, where the state does as it pleases. No, we chose constitutional supremacy. So, the Constitution bounds, binds, circumscribes, and limits state power. This is its context and its very characteristic nature, and may never be ignored.
Then we have the Bill of Rights.
What is a bill of rights? It is an instrument, usually in a constitution, that elevates protection for legal subjects over and above the inherent and implicit protections that they gain through the formal working of the constitution. It is an added layer of protection on top of the constitutionally bounded scope and power of the state. The Bill of Rights is there for legal subjects. If it were simply a list of additional empowerments for the state, this list would have been contained elsewhere in the Constitution.
Then we have section 25.
What is section 25? It is a provision in the Bill of Rights that recognises and protects the right to property. It identifies property, among the other rights protected in the Bill of Rights, as one in need of special protection from state predation, given South Africa’s history of scant respect for property rights. The right to eat bacon and eggs in the morning is not explicitly singled out as a right in need of special constitutional protection, for example, which shows that some heightened degree of importance has been attached to the right to property, among others.
Then we have section 25(2) and (3).
What are sections 25(2) and (3)? These are subsections of section 25 that zone in on the state’s inherent power of expropriation, defines it, and limits and circumscribes it. Among other protections, it specifically identifies that the state may not expropriate property in exchange for nothing, and that when it does expropriate property, it must “pay” an “amount” of “compensation.” Knowing that governments would otherwise seek to make property seizure as inequitably easy for themselves as possible, the Constitution sets out the standards it must meet.
Then we have the English language.
What is the English language? It is a complex of letters that form words and contexts that ultimately culminate in meaning. In particular, in the context of a Constitution, and a Bill of Rights, and a property provision, and a compensation provision in a property provision, the English language tells us that “pay” means that the legal subject being expropriated receives (in substance, in reality) something; “amount” means this something is a quantity (in substance, in reality) of money; and “compensation” means this money repairs (in substance, in reality) the harm, damage, and inconvenience that the legal subject has or would suffer as a result of the expropriation.
Property confiscated without compensation is a constitutional non-starter, but anything below market value already sheds doubt on whether “compensation” per se as a constitutional standard has been met. Has the owner been placed in the position they would have been had the expropriation not taken place? For a payment at below market value – more than likely not.
Tension between market value and “just and equitable”?
Terence Corrigan recently quoted remarks by attorney Thomas Karberg on compensation.
Among other things, Karberg claims – in defence of the unconstitutional provisions in the Expropriation Act – that, “Property owners will receive just and equitable compensation for expropriated land, rather than being paid the market value.”
Karberg, in other words, sets up “just and equitable” and “market value” as concepts in some kind of tension with one another. And, as alluded to, he is far from the only commentator to do this.
Ignore for a moment that Karberg and others tend to totally ignore the fact that “compensation” is a (legal) word with (legal) meaning.
But compensation must obviously be just (“justice,” as in, that which is due or deserved) and equitable (“equity,” as in, that which is fair and not discriminatory).
That those who shout the loudest in favour of expropriation without compensation pretend to be on the side of the just and equitable standard is preposterous. Because this standard, in a constitutional dispensation – as opposed to a mere market value standard – is that often compensation must exceed market value, and (very) rarely, it could be slightly below market value.
Recent state subsidies to the same owner could, in theory, justify a downwards deviation from market value. But every other explicitly listed item in section 25(3) of the Constitution would tend to drive the compensation quantum upwards from market value.
This follows logically, justly, and equitably. After all:
- Current use of the property. If the property is presently used productively, the amount of compensation must not simply represent the current market value of the property but also potential future earnings from the property. If the property is not used productively, market value is the floor of compensation (at least for this factor).
- History of the acquisition of the property. If the property was historically dispossessed, then the state’s interest in acquiring the property is one of basic (that is, imperative) justice. And the value of justice is infinitely large. There is no reasonable amount that the state should be unwilling to pay to set right the inequity it has come to correct. (To imply the state must confiscate the property from the present owner whose hands are clean is the epitome of a perversion of justice.)
- Purpose of the expropriation. This is potentially the most important factor. If there is a very important purpose underlying the expropriation – like the aforementioned imperative of justice, or even a key piece of infrastructure that must be built on the property – it follows that the amount of compensation must be higher than market value. The greater the demand for something, and the greater the urgency of acquiring that something, the higher its price logically trends. If you really really need or want something that belongs to me, you really really need to pay for it. If, however, the purpose of the expropriation is not urgent or not particularly important, then, at least, a prolonged negotiation around market value is called for. But perhaps more significantly: why is the state trying to involuntarily seize property from a legal subject if it is not important?
Contrived debate
To some readers, this whole debate might seem ridiculously contrived. And that is because it is. The state, academics, many lawyers, and even the supposed “reformers” of the Democratic Alliance in Cabinet, are playing a long game of trying to convince South Africans that 2+2=5.
In any constitutional democracy that respects human rights, lawyers will immediately tell you that constitutional property provisions exist to protect owners from state abuse. It is only, bizarrely, in South Africa’s democracy that our lawyers try to spin our property protections in favour of the very state it is meant to protect property owners from.
Elsewhere – and even quite recently in South Africa itself – people understood what “compensation” meant in general and in legal terms in particular. When one is compensated, the damage done to that person is repaired. But, because the African National Congress and its ingenious media machine have changed the narrative, suddenly even lawyers pretend to not remember what it means to be compensated. (Jeremy Cronin, a whole deputy minister, once said that a handshake and a “thank you” from the state to an expropriated owner could qualify as “compensation.” Good Lord!)
As always, ordinary South Africans should resist these sophisticated attempts at gaslighting. Words have meaning, particularly in a constitutional, moreover bill of rights, context.
If the government gets away with expropriation without compensation or expropriation at below market value, it would not be because the Constitution allowed it, but because South Africans acquiesced to it.
[Image: https://www.flickr.com/photos/ccdoh1/850885587/]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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