The following is an edited address I delivered at the Residential Investment & Development (Reside) Summit on 9 July.
Early in May, Dean Macpherson, the Minister of Public Works, sat on a stage at the NAMPO agricultural show and explained that the new Expropriation Act is nothing to be worried about.
He explained that not only is it an improvement over the old 1975 Act, but in fact it better protects private property for South African property owners than American law protects property for American owners.
Remarks like these – especially when they come from deployees of a party formerly of the opposition – unfortunately create unfounded reassurance for the state of property protection in this country.
We must be careful about allowing ourselves to be reassured about the risks of a policy by the policymaker, or those who seem sympathetic to them in the discourse. Rather trust what your own senses tell you.
But in the meantime, here follows the other side of the story from those who fancy themselves the Pollyannas of our time, many of whom, regrettably, have a vested commercial interest in having overly comfortable and reassured investors.
They have committed the cardinal sin of policy analysis by failing to see the forest for the trees. They exclusively consider the seemingly benign intentions of the Act, and pay no mind to how government and politics have in fact played out in this country over the past several decades.
The Expropriation Act is simply the latest in a long line of Acts of Parliament that undermine the right to property. It is also not the last Act that will do so, as we can probably expect a so-called “Redistribution Act” to be adopted in the next several years.
There are many problems with the Expropriation Act. Yes, it does have safeguards, and the Act is better with these safeguards than without them.
But these are not good safeguards, and they do not detract from the fact that the Act introduces a plainly and necessarily unconstitutional new concept into our property law:
Expropriation without compensation.
Yes, the minister and many lawyers will say it is not expropriation without compensation, but expropriation at nil compensation. We are assured that there is a difference between not being compensated, and “being compensated” at the so-called “amount” of R0.
If your lawyer, whether they are a senior counsel or have decades of experience, tells you that there is a difference between these phenomena, you need to fire them without delay.
Do not allow lawyers – and I am a lawyer, so I know my tribe – to gaslight you into believing that your own eyes and logic are lying to you.
The mechanism of expropriation without compensation of any fixed property, so-called “land” – that includes everything atop the land, whether rural or urban – can be utilised for any reason that the state deems to be in the public interest.
What is the “public interest”?
Well, other than that it must be related somehow to land reform, I cannot tell you, because “public interest” is something that will always be defined in the circumstances and left for a court to decide whether that definition was convincing.
The Constitution explicitly and unequivocally requires that an (1) amount, (2) of compensation, (3) be paid.
While R0 might be something you see in ledgers or account statements as a formalistic kind of placeholder, 0 can never qualify as an “amount” in the context of a constitutional expropriation provision.
Furthermore, the Constitution provides for “compensation,” not “consolation.” Compensation means, in law, that the person who has suffered harm, damage, or inconvenience – in this case the expropriated owner – must be put in the position they would have been had the harm, damage, or inconvenience not occurred. R0 can never, under any circumstances, “compensate” in this way.
Finally, and it should go without saying: R0 cannot be “paid.” Payment means a value transfer from one person to another. Nothing is not something that is transferable.
This all applies likewise to amounts of money that approximate R0. The Constitution is a constitution of substance over form. If it provides that one needs to compensated for a loss, that means substantively (not pretend-)compensated – so any “consolation” that an expropriated owner receives significantly below market value is also necessarily unconstitutional.
This is a bad law.
Do not take my word for it. Take the word of every society that has toyed with security of property, with the most recent best examples being Venezuela and Zimbabwe. Property confiscation is bad, and that is why constitutions contain provisions guarding against governments taking property without it coming at a real cost to the state.
Despite all this, some will still say the Act has plentiful safeguards, the courts are available, and nobody should be worried. But here’s the thing:
The Expropriation Act is the icing on an already existing cake that consists of, among other things, the 1998 National Water Act, which expropriated water property, the Mineral Resources Development Act of 2002, which expropriated mineral and petroleum property without compensation, and the horrendously misnamed Protection of Investment Act of 2015 which bluntly provides that foreign investors should not expect special protection for their property in South Africa, and that their stuff is as liable to political seizure in the name of land reform as the property that belongs to ordinary South Africans.
You might take each of these pieces of legislation and say that they are fairly innocuous and were adopted for what you might consider good reasons.
But, what you cannot do, is evaluate these pieces of legislation, together with the Expropriation Act, and conclude like some have that the South African government is friendly to private property rights.
And if you add the failed attempt to amend the Constitution just a few years ago to render the compensation clause of the property provision virtually ineffective, you also cannot say that this government is friendly to constitutional property rights.
The courts did not strike down any of these older pieces of legislation, with the Constitutional Court in 2013 countenancing the Minerals Act’s wholesale confiscation in extremely partisan political language.
Our courts, relative to this continent, are exemplary, but do not mistake Braamfontein for Washington DC, Santiago, Zürich, or Canberra.
You might agree with the goals of this government but you cannot deny reality and pretend that the protection of property is high on the incumbent regime’s list of priorities. It is not.
And in fact, with the formation of the so-called Government of National Unity, it seems that government has doubled down on destructive and misguided policies that increasingly chip away at ownership.
The Expropriation Act could have sat, unsigned, on Ramaphosa’s desk for a decade, as many unproclaimed laws have, and yet it was during the ostensibly calming and lower-temperature GNU that this existentially dreadful law was signed.
It is vitally important to understand that property rights are not being undermined for land reform, although it does happen in land reform’s name and the name of justice.
Our increasingly hostile political elite understands that property is power.
Power for civilians. Power for civil society.
Property is an important part of constitutionalism: the diffusion of power throughout society, rather than concentrating it in the hands of a select few politicians. The less property is in private control, the more power the state has to prosecute its agenda and safeguard corrupt interests. We saw this play out, again, in Zimbabwe and in Venezuela according to the very same playbook.
This is why the Free Market Foundation launched its Khaya Lam land reform initiative. The more South Africans have title deeds to their property, the more skin in the game of security of tenure they have.
The Constitution is very clear about how land reform in this country should happen. Restitution, not redistribution, and security of tenure, not undermined ownership.
The sponsors of the Expropriation Act say there is a “hunger for land” in South Africa. Yet, year after year, the South African Institute of Race Relations publishes its demographically representative surveys that show land reform is one of the least important policy priorities for ordinary South Africans.
Among registered voters, 29% identified unemployment as one of the two most important priorities they want government focused on, followed by illegal immigration, crime, corruption, and gender-based violence. Only 2.9% of surveyees ticked land reform as one of their two prioritised areas, and under 2% picked inequality. This is the latest IRR report, but has been confirmed over decades of surveys. There is no hunger for land among ordinary people.
What about the political class?
They do not believe their own lie. Millions of South Africans live in state housing and on state land as tenants, who are legally entitled to full ownership title. But government has dragged its feet for decades. Wandile Sihlobo recently explained that government has acquired some 2.5 million hectares in addition to the plenty of land it already owned, through its redistribution programme. That’s about twice the size of the Los Angeles metropolitan area.
In other words, since democracy, this government has acquired land that comprises an area some 40% larger than the Gauteng Province, and kept it in state hands.
Is this what “hunger for land” looks like?
One would imagine, if there were a populist clamouring for land that the political elite cared about, this land would have been transferred in ownership to deserving beneficiaries years ago. But no.
There is a desperate hunger for jobs and economic mobility in this country.
And that is why the Free Market Foundation’s Liberty First policy agenda sets out the practical policy reforms any government in this country could implement to stimulate economic growth and flourishing, through deregulation and respect for property and the rule of law.
Ironically, it is precisely for growth and jobs (what people say they want) that a polity requires strong and secure property rights (what government is undermining in the people’s name). Private property is the key pillar of economic development and prosperity, providing the necessary incentive structure for production and innovation.
This government is involved in a long process of chipping away at the constitutional dispensation we adopted in the 1990s, and our lack of vigilance has ensured that property rights are the low-hanging fruit in this process.
Any successful society understands that there are things the government simply may not do, again, constitutionalism. With the years-long process that first saw an attempted amendment of the Constitution and then the adoption of the Expropriation Act in spite of what the constitutional text clearly guarantees, South Africa is evidently not yet ready for success.
South Africa has arrived at a fork in the road.
One path is the path of flourishing, but part of flourishing means ironclad protections for property rights without political provisos.
The other path is ruin. Only ruin waits for us if we continue to chip away at property rights. Economic outcomes for Venezuela, Zimbabwe, Cuba, Sudan, Algeria – all the countries that are known internationally for poor protection for property – show us this without any doubt.
I am not saying that we need to panic.
Too often have those of us who warn against the road we are currently treading on been accused of “fearmongering.”
No, do not panic, because panic is a catalyst for inaction and passivity.
But do be alert and be active in trying to press South Africa back onto a more sensible path.
What does this mean in practice?
It does mean that you need to start thinking differently about the long-term prospects of your property. You have to start thinking about it politically, and in terms of how you can stateproof your property against abuse.
Allow me to re-introduce a word to our social lexicon: resist. Organise, coordinate, and resist political abuse.
If politicians want something, they will change the law and pervert what ordinary sounding words in the Constitution mean, to give themselves that thing.
Abstractions like the notion that the Constitution protects your interests must be seen as secondary considerations next to political reality.
So do not just ask lawyers, but ask risk specialists, political analysts, and perhaps more importantly, look to what big, foreign enterprises are doing.
If they are tripping over themselves to come to South Africa to exploit our massive potential, investing in real estate is probably a safe bet. If they are tripping over themselves to leave South Africa – regardless of what they might say the reason is – take care.
No, do not avoid investing, but adopt a thoroughly realpolitik and even Machiavellian attitude, especially in your dealings with the state and state-adjacent actors.
But you have to do even more than this.
We all want South Africa to work, not fail in the way that it will fail without secure private property rights. Speak out, or capacitate those of us, like the Free Market Foundation, to speak out and act on your behalf.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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