Expropriation Bill: DPWI response to public submissions

Meeting report

Opening remarks

The Chairperson welcomed Members of the Select Committee, and all delegates and explained that the meeting would be to hear the Department of Public Works and Infrastructure's responses to oral and written submissions on the Expropriation Bill [B23-2020]. He proceeded to give the Department and the legal team a platform to present and respond to the revised and amended Bill. He indicated that the Department should reflect on the public hearings it had during the months of September and October.

Expropriation Bill: DPWI response to public submissions

Adv Uday Naidoo, Advocate of the High Court and Member of the Cape Bar, said the Committee received a document where he addressed selected topics arising out of the public submissions, but indicated that he could not cover everything in the meeting due to time constraints. What he attempted to do was to address the common themes in the written note. He stated that his leader was not available to attend the meeting due to work commitments abroad and if any comments from the Committee needed his input, Adv Naidoo would communicate such with him.

He indicated that it would be more fruitful to give the Committee an outline of the main issues identified and to engage the Committee on specific questions.

He indicated that because the Bill being addressed is complex, there are far more issues that were raised that still need to be considered and debated. He said it was important to outline how the mechanism in the Bill had changed compared to when it was a first draft before the National Assembly. It was also outlined in the presented notes where the entity dealt with the process and a court order on the issue raised by the Institute of Race Relations (IRR), which proposed that a court order should be obtained before expropriation occurs. He pointed out that during the first draft, it was an expropriating authority that not only determined the amount of compensation but also decided to expropriate a property before the courts. The idea was that an administrative decision would be taken and the affected person could take the matter to judicial review. Upon the “judicial review mechanism”, a court could approve or decide the amount of compensation. On reflection, he stated that it was clear that this was not the right method, and the Bill was changed so that it is more consistent with Section 25 (2) (B) of the Constitution and the amount of compensation is addressed first. Once the amount has been decided on, the expropriating authority would decide whether it wants to expropriate or not. He indicated that the expropriating authority needed to have all the relevant information at its disposal before a decision was taken to expropriate. The ways in which compensation can be decided, according to Section 25 (2) (B) of the Constitution, are three-fold. These are by an agreement between the expropriating authority and the expropriating persons. If there is no agreement, the only way compensation can be determined is through the court process where the court needs to either approve the amount of proposed compensation or decide on a different amount. According to the section, he mentioned that it does not rely on the expropriating authority’s power to simply decide compensation but it needs either to be agreed upon or get the approval of the court.

Adv Naidoo indicated that the Bill was redesigned to comport with Section 25 (2) (B) of the Constitution. This, however, does not mean that the amount of compensation can never be decided on before expropriation can occur. The Constitutional Court stated that, in general, it would be equitable for compensation to be settled before expropriating occurs and only in exceptional circumstances, as in the case of an emergency, can compensation be paid afterwards. What the Bill does is cater to this exceptional category of situations by allowing compensation to be determined after the expropriation has occurred. In the ordinary course, compensation is determined before expropriation. He added that this should address the bulk of the public's concerns regarding the idea that people may be expropriated of their property and not have the means to defend an expropriation. 

He indicated that there is another point which worried the public and that is if a member of the public was affected by an expropriation and wanted to approach a court either on the art of compensation or the decision to expropriate altogether. The question was whether the affected person would have to pay for the process and if this was fair. As far as determinations by the court on the amount of compensation, Adv Naidoo said the Bill has a special mechanism and highlighted that the answer could be found in Clause 19. He said that if an expropriating authority delivers on an intention to expropriate which contains an offer of compensation that the expropriating authority considers equitable, then the offer would have to be substantiated with reference to supporting documents. The idea is that before issuing a notice of intention to expropriate, the expropriating authority would have done its homework.

A person, whether an owner or a holder or other interested persons, upon receiving a notice of intention to expropriate, could consider the offer of compensation and decide to accept or not to accept it or to request further particulars to help decide. If there is no acceptance or disagreement, as catered for by the Bill, the party that does not accept the offer of compensation would dispute the amount of compensation offered, resulting in a non-agreement that is essentially synonymous with a dispute. For that reason, Clause 19 kicks in, which is the clause used to mediate or determine the amount of compensation by the court. Mediation is the first-tier level designed to consider agreement between the parties so it still falls within the first of the three ways compensation can be settled. To mediate, the parties would have an independent arbiter to facilitate an agreement and if this fails or if the parties decide not to mediate, the matter goes to court. He indicated that this can occur in two ways. One, the affected person could approach the court directly, in which case that person bears the onus to prove that the amount of compensation is not just equitable and that a different amount would be equitable. They would also bear the duty to initiate the process. Concerns were raised on whether placing that kind of administrative procedural and financial burden on an individual was fair, and to address this, the Bill has a special mechanism under Clause 19 (3). This mechanism allows the affected person to ask the expropriating authority to refer back to court, so instead of having to approach a court themselves, an affected person can inform the expropriating authority that they reject the amount of compensation offered and therefore ask the expropriating authority to initiate court proceedings. In this instance, the expropriating authority would have to bear the legal costs and the practical burdens of engaging the court's procedural mechanisms. However, during the course of the proceedings, if the judge is of the view that the expropriating authority’s offer is indeed just and equitable and that the bases on which the affected party disputed the amount offered were vexatious, then the court can make a cost order which is in its view appropriate. The cost order may require the disputing party to pay the expropriating authority’s costs and that would depend on the outcome of the case and also on the conduct of the affected parties before the court. The court has wide discretion in this regard to ensure that parties who cannot afford to go to court but want to dispute the amount of compensation could do so against the risk that this might raise spurious points of dispute which can delay the expropriation process. He indicated that this covers disputes on the amounts of compensation. 

He highlighted that he would explain how the Bill caters to disputes that arise from other issues such as whether the expropriation should be allowed, whether it is lawful, or whether there are other procedural or subjective elements which the expropriating authority fails to comply with. What the Bill does is ensure that affected parties have the right of access to the court at all times throughout the expropriation process and that is guaranteed in terms of Clause 19 (6). The clause stated that the mechanism which deals with court decisions on the amount of compensation does not detract from the abilities of affected parties to approach the court on any matter related to the application of the Act. If an expropriating authority, after the amount of compensation is determined, decides to expropriate and deliver a notice of expropriation, then the affected party can still approach the court to challenge that expropriation under Clause 19 (6). The clause may say that the public purpose relied on is not a public purpose authorised by legislation. He mentioned that one of the public commentators said that there should be a requirement that an expropriating authority should first consider whether there is state land available before expropriating property.

He highlighted that under Clause 5 (1), one of the obligations imposed on the expropriating authority before it delivers an intention to expropriate is to satisfy itself that it would be permissible to expropriate property. For example, to determine if the property is suitable, if there is a legitimate authorised public purpose, or if there is a lawful and permissible public interest. At this juncture, the consideration of alternative land would be irrelevant consideration which would affect the subjective non-arbitrability of the proposed expropriation. This is considered during the investigation, fact-finding, and evaluation stages.

He indicated that the following step would be the decision to expropriate in terms of Clause 8, which is distinct from the date on which the right to possession passes. When the property is expropriated, the expropriating authority requires full ownership except it does not yet have the right to acquire possession of the property. He mentioned that these two periods have to be staggered so that it gives the expropriated owner or holder an opportunity to make arrangements to give up possession. The idea is that one should never be dispossessed of one's property in the ordinary course before compensation has been determined and in the ordinary course before compensation has been paid. He said that some of the concerns expressed by the public were that one would have their property taken away and not have the means of challenging the expropriation. He added that this has been misguided on a proper reading of the Bill.

He noted that the Chairperson asked presenters to comment on the possibility of allowing an affected person to make a counter-offer to the amount of compensation offered in terms of the notice of intention to expropriate. He stated that the mechanism for allowing the counter-offer was in the third draft of the Bill, which specified that a person who might be expropriated could make an offer of compensation to the expropriating authority, and the expropriating authority could then accept or refuse the offer. The expropriating authority could then go back with a counter offer and the member of the public could then make further submissions on that counter offer. He highlighted that this was complicated and it dragged out the process unnecessarily. More fundamentally, it ignored the fact that by the time an expropriating authority believes that property is suitable for the public purpose or interest, authorised by its powering legislation to expropriate that property, it should already have an idea of what an amount of just equitable compensation should be. Doing it the other way round, as the Bill originally proposed, almost relieved the expropriating authority of the obligation to do its homework properly. This was not right for a number of reasons because there is an asymmetry of information between the expropriating authority, which has public resources to investigate and value property, and the resources that an individual has. An expropriating authority could exploit this imbalance in information at the expense of those who face expropriation and who lack the means to better substantiate an offer of compensation to an expropriating authority. He stated that the expropriating authority does its investigation under Clause 5, it makes an offer of just and equitable compensation under Clause 7 and the affected person then has an opportunity to accept, request further particulars, or dispute the amount of compensation. He said that he understood the Chairperson’s concerns in that the mentioned three options are inadequate because they should allow a fourth option which is for the affected person to make a counter offer to the expropriating authority. He said he understood why the Chairperson would advocate for such a decision because things should be settled by agreement before the process moves from agreement to dispute resolution. 

He highlighted that, as mentioned, Clause 19 covers dispute resolution. This clause deals with a determination of the amount of compensation via court but it also deals with the possibility of mediation which refers to the settlement of a disagreement through an agreement facilitated by an independent person. He said that the Committee should be reminded of the fact that if a person facing expropriation does not accept the amount of compensation, there is still another level at which agreement could be reached. This is through Clause 91 which is mediation provision. Mediation would be facilitated and would add an extra procedural component, but the facilitation aspect might protect the person facing expropriation better than if the person simply made a counter-offer to the expropriation authority and that is when assuming that the parties were in equal bargaining positions,

The first point which motivated not to have a clause dealing with counter proposals is that it adds a new step to a long expropriation process. The second is a very important point. Before an expropriating authority can consider expropriation, Clause 2 of the Bill makes it mandatory first to try and negotiate a purchase of a property in good faith and on reasonable terms with the owner or holder. He stated that this is the first opportunity for an owner or holder to engage with an expropriating authority on price and purchase. If there is no agreement on the price and principle of purchase, then can the expropriating authority consider expropriation for authorised public purpose or public interest. When it comes to the question of making a counter-offer, he said that it is wrong to consider that would be the first time a person/owner/holder could engage with the expropriating authority on price. The counter-offer would be predicated on engagement on price where it is almost an assumption that the owner or holder will lose their property by compulsory acquisition and all that remains is to make a counterproposal on the amount of just and equitable compensation which is different from making a counter proposal on a purchase price under Clause 2.   

He indicated that the third point states that an affected person’s range of information is going to be limited to what they perceive the market value of the property to be. From Clause 25 (3) of the Constitution, which is replicated to some degree in Clause 12 (1) of the Bill, market value is only one consideration that informs the amount of just and equitable compensation. Market value is not the determining factor when it comes to just and equitable compensation. As a matter of practicality, it may be easier to quantify market value than to quantify the history of the acquisition of the property. If a provision were to be built into this Bill to provide for counter-offers to be made, the nature of the Bill might be affected by a number of things.

He said that if the Committee wants to include a clause which deals with the possibility of making a counter-offer, paragraph 18 of the note suggests potential language. It would require Clause 7 (4) (A) of the Bill to make provision for a fourth option beyond agreement to request further particulars or rejection. If a counter-offer is to be made, then it should be substantiated with objectively verifiable information or knowledge; there should be evaluation reports which are necessary in the case of land. He stated that the Committee should consider written submissions on why the counter-offer is justifiable when the information on which the written submissions would be oral information, which is not evidenced by historical documentation or evaluation reports. He stated that a proposed clause in paragraph 18 of the can accommodate such and this can also be made applicable to urgent expropriations under Section 20.

He explained that the application section of the Bill has constrained the power of expropriation. Instead of saying that an expropriating authority may expropriate for public purpose and interest, the Bill puts it in the negative. He said that there must be an empowering provision for all expropriating authorities which will inform decisions to expropriate. The second constraint is the requirement that an expropriating authority may consider expropriation only when the negotiations for a property purchase have failed. The third constraint is a reiteration of what is contained in the definition of public purpose, which means that an expropriating authority does not have inherent discretion.

The proposal from the National Employees Association is that there should be another precondition on the exercise of power to expropriate and if there needs to be such a condition, it would fit under Clause 2. The condition may be that the expropriating authority needs to be satisfied that there is no state land available. He said that it occurred to him that instead of making it a precondition for the exercise of the power to expropriate, the Committee could require or encourage an expropriating authority to consider the availability of alternative state land under Clause 5. He said there are other factors that he thought relevant to put into the subsection, which was derived from a UN website regarding food security and expropriation. The reasons these were included are because of the range of relevant factors that would inform the suitability of an expropriation.

He explained that it would be very unfair for the Bill to state that a property is identified subject to all other relevant considerations as property that an expropriating authority or a court can give special consideration to as a candidate for no compensation because no control has been exercised over it. It would be unfair because there may be circumstances where an owner wants to exercise control but simply cannot or has taken measures to exercise control but those measures have failed. Sometimes, those measures may have been measures to involve the state and the state may have either failed to come to the party or been unable to assist.

He highlighted that the Centre for Social Justice proposed subjecting expropriations to a social-impact assessment. The details of the matrix remain unclear, but the proposal could be dealt with in subordinate legislation that addresses the suitability of the property for expropriation and the relationship between the suitability and the intended purpose. He added that this needs not be legislated in the Bill.

In conclusion, he stated that the advice could not cover all the topics raised during public consultation in the time available. However, the legal team is available to provide supplementary advice on other points raised, should the Department and Committee require it. He asked the Committee to request further submissions on the tax implications of the Expropriation Bill and to facilitate an intergovernmental discussion with finance and Treasury on the tax implications. He stated that a concern was raised and to get further information, in particular, from the Centre for Social Justice on what the social impact assessment matrix would entail for an evaluation of whether property is suitable for expropriation and, more broadly, whether the public purpose and public interest requirements are met when considering particular property for expropriation.

See attached for full presentation

The Chairperson acknowledged Adv Naidoo for that comprehensive response and he stated that it was enlightening, educative, and precise to the point.

Adv Naidoo said that the public comments were very good and that they raised other important points that were not covered. He gave an example in which the Minerals Council asked the question of what happens when certain rights are granted under the Mineral and Petroleum Resources Development Act (MPRDA) which are not registered but are required to be registered. He said that such rights do not fall under the definition of owner and they do not fall under the definition of holder of a right, therefore are in limbo. He questioned how the Bill is going to cover the rights that the Committee has to grapple with. He stated that it may be worthwhile to submit a further note on outstanding matters and other matters that the Department might like to consider more deeply. He said it may also be worthwhile to cover in writing the responses to questions that the Committee may have so that they have them on record and can always refer to them during deliberations.

Input by parliamentary legal services

Ms Phumelele Ngema, Legal Advisor, Parliamentary Legal Services, explained that in light of the proceedings and what has transpired, the State Law Advisor will possibly engage with the Committee after the negotiating mandate and then address everything that is inclusive of the oral and written submissions as well as the negotiating mandate. She said she would outline some distinctions between what Adv Naidoo has put forward and the considerations that the Committee may want to look at to effect some changes. She stated that she wanted to address three things that overlapped each other. These are Clause 2 (2), which is read together with Clause 2 (3), Clause 7, and the determination of the compensation amount in light of what Adv Naidoo pointed out in Section 25 (3). She stated that she would touch briefly on Clause 12 and 15, which deal with the determination of the compensation and the payment of the compensation.

She stated that she would also include the issue of urgent and temporary expropriation in the issues that Adv Naidoo has outlined from a legal perspective. She explained that under Clause 2 (2), before the Bill effected with changes by the National Assembly, the clause, subject to Section 20  states that power to expropriate may not be exercised unless the expropriating authority has, without success, attempted to reach an agreement with the owner or holder of the rights or property for the acquisition thereof. She added that Subsection 3 then extends to say that no expropriation must take place, not unless it complies with Sections 5 to 25 and 28 of the Bill. Subsection Clause 2 (2) states that the mentioned stands, not unless the expropriation is urgent or temporary. She pointed out that the Section 20 expropriation outlined refers to both urgent and temporary expropriation. She stated that there is no distinction between a temporary expropriation and an urgent expropriation, but the manner in which the Bill is drafted under Clause 20, speaks to one and the same thing. She clarified that in terms of Clause 27 of the Bill, there can be no urgent expropriation unless it is temporary, it is within prescribed timeframes and there is an involvement of the court should there be a need to extend the 12-month prescribed period.

She mentioned that what Clause 2 (2) is basically saying is that there must be an engagement that takes place prior to any expropriation. The engagement may only be limited and not be done if it is for purposes of urgent expropriation. It explains itself as to why, in an urgent expropriation, the engagement may not be possible.

Referring to Clauses 5, 7, 8, and 9, she said that these are the provisions that indicate that there has to be an engagement that takes place. Taking into account the issue of the counter-offer that the Chairperson was also worried about and considering all submissions made by stakeholders and the Department, she said that she had a main distinction to the view of Adv Naidoo. This was in respect of unpacking Section 25 (3) of the Constitution and the issue of determining the amount of compensation. It is stated that what is noted from the jurisprudence, and unpacking Section 25 (3), is that the Constitution provides that expropriation may take place, but it must be subject to an amount of compensation. The question raised in Sections 25 (2) and 25 (3) is whether the expropriating authority, being the executive, is able to be counted as the party that can determine the amount of compensation. She stated that her background on the Bill says that the expropriating authority does have the power to determine the amount of compensation. She mentioned that for the process to be kicked off, there has to be an initial determination because, even if it involves the court, the court will be deciding or approving something that is already in place.

Clause 7 (2) indicates that a notice of intention to expropriate must include an offer of compensation that the expropriating authority considers just and equitable and an explanation of how the amount was arrived at regarding supporting information. She highlighted that this kicks off the starting of engagements already demanded in terms of Clause 2 (2) and the investigation stage under Clause 5. Once Clause 7 is reached, which alludes to the notice of intention, some prior engagement has taken place and the involved parties have managed to get to some form of understanding or agreement. Should that then fail, judicial intervention would then come in to assist the involved parties under the determination made following Clauses 19 and 20. She highlighted that this was the first distinction of understanding between what she heard Adv Naidoo say as well as contrasting with what the Bill is currently giving to Parliament.

She noted the questions raised in reference to the other legislation. She indicated that Clause 28 is a provision that assists when there is a conflict or some confusion in light of the priority standing for the Bill, specifically dealing with expropriation matters and guiding everything related to expropriation in case specific related legislation does not deal with such details. She pointed out that the Bill will address every issue, which is why Clauses 22 and 23 indicate that nothing should be done for expropriation purposes without ensuring compliance with the provision.

She explained that the issue she wants to bring into preparation for Members when they take the Bill for deliberation to their respective provinces is the issue of just and equitable amounts for compensation. She said that she tried to use the same phrase of “just and equitable” used under Section 172 of the Constitution concerning the court's power in addressing constitutionality issues. She stated that the provision is used in similar, mirrored words as the one used under Section 25, and checking the jurisprudence, the courts have already given guidance to say that the term “just and equitable” is very broad. This then enables the court to give any kind of remedy that it sees as being justifiable after hearing the facts and understanding every consequence and circumstance of each case.

She highlighted that even if the 18th constitutional amendment was not approved, as Adv Naidoo pointed out, it only sought to express what is implicit. A new compensation amount is possible after the executive makes a determination after considering all the factors as set out in Section 25 and the factors outlined under Clause 12 of the Bill. She said that this settles the questions of constitutionality mainly based on Clause 12, the issue of new compensation, and the failure to pass the 18th constitutional amendment. She added that the existence of the two can be separated from the other, referring to the 18th constitutional amendment as well as Clause 12 of the Expropriation Bill. She clarified that a view was not being made that the Bill is unconstitutional, as some of the Members have indicated.

She noted that she already covered the issue of temporary and urgent expropriation, which is both addressed under Clause 20, and said that no separate provision speaks to the matter. She said that what might need to be corrected when looking at Clauses 7 and 20 is using the term ”temporary views” in terms of urgent expropriation, as it leads to confusion or the idea that there are two possibilities. She said that, in her understanding, the term was being used interchangeably.

She indicated that she would address the last issue without dwelling on the issue of mortgages and how parties have been impacted. The definition of delivery under Clause 22 is simply building up rather than giving empowerment in terms of the definition. She read out that the definition stated, “In relation to any document including delivery by hand post, registered post and by electronic communication as defined in Section 1 of the Electronic Communications and Transaction Act”. She explained that if the Act is unpacked in a manner chosen to draft Clause 22 after the interactions with the Committee and the National Assembly, Section 1 includes email correspondents and other forms of communication. This is why the definition was restricted in the manner it was done. However, Clause 22 unpacks the definitions. She stated that this would be relooked as directed by the Committee Members, the deliberations, and the negotiation mandates.

Discussion

Mr M Rayi (ANC, Eastern Cape) asked if the Committee received a presentation from Ms Ngema and appreciated her responses. His concern was that there were quite a number of new proposals from the Department, and he was not quite sure whether some were completely new proposals or just a reformulation of the process. He stated that new proposals that have not been subjected to public involvement cannot be considered, which would mean that the new proposals or amendments must first be subjected to public involvement. If there is reformulation and altering of the clauses, all the public stakeholders need to be considered.

He mentioned that in dealing with legislation of the sister committee, there was emphasis on gender neutrality, indicating that the clauses should be gender neutral. He stated that this might be a matter that the legal services should take up to ensure that all legislation, going forward, is gender-neutral.

He stated that the other issue was another new formulation that Adv Naidoo suggested concerning compensation, and he wondered whether this should also be subjected to public involvement. He indicated that the Bank Association made a proposal agreeing on the compensation and also suggesting that the properties to be considered were those that had been acquired illegally. He asked whether a reformulation would not place legislation in a corner where situations may arise in the future, that have not been catered for within the legislative framework.

The Chairperson stated that the issue of counter-offering is a matter that emerged from the briefing by the Department. From the elaboration by Adv Naidoo, he said that he got the sense that there is some form of retreat from the Department in terms of the processes. He asked for clarity on whether this was the case.

He mentioned that the assumption is that South Africa is a constitutional democratic country and that Sections 1 and 2 talk about the values of the Constitution, among other things. It speaks to the issues of transparency, the rule of law, and rationality. In relation to new compensations, he asked whether there was sufficient jurisprudence on nil compensation under Section 25 3 of the Constitution and the legislation.  

He stated that one of the issues that have always been raised against the amendment of the Constitution was that the Constitution itself, in terms of both Sections 1 and 2, does make provision for offence progression. He stated that there are various interventions by government in terms of land reform and the legislation passed under land reform. He pointed out an issue around the systems in place through which the Department will be able to identify if any state-owned land property is available and if the state authority is the expropriating authority. He added that there is an appreciation in terms of who can expropriate. He asked if it made sense for the state to be able to expropriate the land that belongs to itself because three spheres of governance constitute the state.

Ms S Bishoff (DA, Mpumalanga) said there needs to be further engagements with the banking sector, as the banks were troubled concerning certain sections. She stated that provinces needed to be given more opportunities to have such engagements with the banking sector - she would appreciate it if this would be addressed.

Responses

Adv Naidoo stated that he is not going to respond to Ms Ngema’s comments but would rather respond to the Committee’s comments and a private conversation would be held among legal drafters.

Responding to Mr Rayi, he stated that he jotted down four points. The first point was whether the counter-offer provision would entail a substantial amendment requiring further public consultation. Two, if the Department is putting the cart before the horse by not amending the Constitution, particularly Clause 25 (7), which deals with the cut-off date for land reform. Thirdly, if the Department should be drafting in gender-neutral language. Fourthly, whether the proposed change to the no compensation provision of Clause 12 (3), requires public consultation and whether illegally acquired properties should be included in the list.

Regarding the issue of counter-offers, he said that he checked in great detail whether the public raised counter-offers.

The Chairperson clarified that the issue of counter-offer was raised by the advocate representing the Department during the departmental briefing to the Committee. He stated that his question was whether the Department planned to retreat from the proposal made during the parliamentary briefing.

Adv Naidoo said that the clause he proposed in the note on counter-offers was taken from the A-list that served before the National Assembly and is not new.

On the second point, he said that two parts of Section 25 need to be highlighted as distinct parts. The first is the power to expropriate property which is not limited to land reform. It can be for many more purposes and is not limited to the June 1913 date for all purposes. The Constitution does limit the restitution of property under Section 25 (7) up to 19 June 1913. He stated that Parliament is creating an overarching bill that deals with the process and substance of expropriation. He stated that if the Bill goes through, it would still be possible for the National Assembly and the National Council of Provinces to amend Section 25 (7) to push the date back for restitution purposes and would not affect the Bill. He did not think the Bill depends on the date in Section 25 (7), which can always change. He said that the Bill will remain because it is an overarching legislation that deals with the mechanism of expropriation, and this is broader than just land reform.

On the third point, he emphasised that he completely agrees because this is the general way in which legislative drafting is moving around the world and the Department would not want to lag behind.

Fourthly, he responded that the nil compensation provision in the note does not require public consultation because it responds to the public concern that expropriation will necessarily follow if any of the circumstances are met.

He stated that expropriation is not to be used as a penalty for illegal activity. The justification for expropriation is the use of property for public purposes or in the public interest. Essentially, the justification is that there will be a direct benefit to the public or a section of the public from an expropriation.

He thought reflecting on the words “including but not limited to” in 12 (3) is important. He explained that Parliament has not merely said “including” and has not said “in these circumstances” and that the words stipulated emphasise that this is not a closed list. He added that he did not think that enumerating circumstances in A to E and Sub Clause 5 pins the legislation into a corner; rather, it signals to the expropriating authority and the court that these are important factors that should be given special weight in the equitable balance.

Responding to the Chairperson, he confirmed that the counter-offer point was raised in the Department’s submissions and it may well be that allowing for a counter-offer gives a person who might be affected by an expropriation agency that they would otherwise have to reach an agreement on the amount of compensation without having to declare a dispute. He said that he was not sure how fruitful the process would be without an intermediary because an individual person, in general, is likely to put forward the factors that they think would best influence the price upward. He said that if there are two stages at which a person can try and negotiate compensation mainly through a counter-offer, this might be a duplication.

Addressing the question of whether there was sufficient jurisprudence on nil compensation under Section 25 (3), he said that he has not found examples of a nil compensation case from the Constitutional Court or the Supreme Court of Appeal but there have been cases in the divisions of the High Court.

The Chairperson elaborated that the question was in two parts; new compensation and expropriation without compensation as prevalent in the international jurisprudence. He said that the point was informed by the knowledge that the processes focus on expropriation without compensation. However, there is a shift along the way because international jurisprudence makes more accommodation for expropriation without compensation.

Adv Naidoo said that referring to expropriation without compensation is in substance different from saying expropriation for compensating, the amount of which is nil. He explained that this entails a different reasoning process to get to the outcome. Expropriation without compensation means one does not need to consider whether it is just and equitable because it is permissible. Expropriation for nil compensation requires the expropriating authority to consider all the factors in Section 25 (3) and Clause 12 (1) to determine whether, on balance, nil compensation would be equitable. This would achieve an equitable balance between the public interest and the interests of those affected. He indicated that this process does not simply jump to the conclusion that compensation does not need to be considered, but it is the process of reasoning that matters because it is this process of reasoning that will be subjected to judicial review. He gave an example of land where the owner is not interested, which is rare. He said that the expropriating authority might need more money to get it into a condition fit for public use. He added that this means that there is a negative investment period for the public and it may well be that in such situations, expropriating for nil compensation ends up being just and equitable. He added that this is something the English Act regulates quite well.

He said the discussion on the value of property is not a discussion that would be held if the Constitution allowed for expropriation without compensation. The point is that there must be an evaluative tussle-up of various variables to arrive at an equitable outcome. Expropriation for nil compensation, which is a just and equitable amount, is not the same as expropriation without compensation.

Under South African law, he said that he did not know of any law that dealt with expropriation without compensation, and the closest case that he has come across is one in Gauteng local division in Johannesburg. In this particular case, it was a business venture versus the City of Ekurhuleni and the municipality was awarded an offer of compensation made in the amount of nil. The municipality offered an amount of nil, and the affected person asked the municipality for further particulars, which was in terms of the Restoration Act. The municipality refused, stating that all available information had been given to the affected person. The court had to decide whether the affected person had a case to order the expropriating authority to give further and better particulars and the verdict was no. This was because the municipality had given four reasons and there was nothing more that it could have offered. The court did not have to deal with the question of whether no compensation would be given, but in making its decision, one can infer that it did not have a constitutional quibble with no compensation, in principle, being ordered. The reason the municipality awarded nil compensation was that the applicant owed a debt to the municipality in the amount of R3.3 million. This meant that the municipality would have to rehabilitate the land and incur further costs to use it for public purposes identified.

Adv Naidoo said that the party involved was using the land for an unauthorised purpose, and indicated that he was not sure if this was good enough to expropriate with an amount of nil. He highlighted that paragraphs A and B are the most compelling paragraphs to say that the equitable balance between the public interest and the interest of those affected would be to pay the affected party nil because the public would have to bear the costs.

He indicated that the third point is the Labour Tenants Act and that he would need to check if there is sufficient case law on nil compensation.

He said that the point made by the Chairperson was a point of principle on which there is case law. Essentially, labour tenants have been on the land for many generations and have been providing labour to the owner of the land and they have been doing it for free. He said that this amounted to a form of free labour and exploitation of people’s poverty and race for the benefit that the current owner does not yield because they did not use the land. He said that the owner made a very strong argument under the Labour Tenant Act for expropriation in his favour, but whether the amount of compensation should be nil would have to depend on all relevant circumstances. In saying this, it is then not inappropriate for the Bill to say that the position of labour tenants is one that needs special regard because their circumstance in society is that they are acutely vulnerable because of systemic racial discrimination.

Addressing the fourth point of whether the Department has any views on whether the availability of state-owned land should be something that the Bill mentions, he commented and said that he did not have instructions in this regard but referred to his oral submissions. He said that the Committee may think that the availability of alternative land is something that should be assessed before the power of expropriation is even considered and if there is alternative land then there should not be power of expropriation. He indicated that this was the first option. The second option is that the expropriating authority should consider the availability of state-owned land before exercising the power of expropriation and should investigate and ensure that the expropriation is appropriate. Whether it is practical for the Department to make this happen, is something he could not answer because it needs a comprehensive, data-rich, accurate, and current register of all state-owned properties. He added that the Department is not in a position to require other organs of state to account to it on what their land holdings are. It would therefore depend largely on a cooperative governance principle to get the information, compile a database, and keep it current.

Responding to Ms Boshoff, he said that he raised one issue which he thinks input from the banking sector would be important, and that is on the nature of security limited real rights that are typically used to finance the acquisition of land through a mortgage, for example in business activities associated with land for farming. He said that the agricultural sector might also want to contribute its input on the subject as these alternative types of real security came predominantly from agents and organisations representing the agricultural sector. He added that the banking sector might also be able to identify other sectors that give property and against which property the banks get real security.

He said that there are some topics that Ms Ngema raised and that he was happy to engage with her on another platform.

The Chairperson stated that if the Department is happy regarding the response, then the Committee is also happy. He stated that the Committee was mindful that there are many stakeholders involved in the presentation but would engage with them on the negotiating mandate and also on the final mandate.

Mr Rayi stated that there was a point regarding the proposal made by Adv Naidoo, the solatium principle, which also deals with consideration, injuries, and other things. He said he wanted to check if there was a formal proposal regarding the amendment and whether it would require further public consultation.

Adv Naidoo said that the point about solatium is something he picked up in comments made by AfriForum or AgriSA and mentioned that extensive submissions were made on the omission of the solatium principle from the Bill. This was compared to the 1975 Act and questioned as to why a similar provision was not in the Bill. He said that he initially dismissed this, as he thought it was adequately covered by the Constitution Section 25 (3) and Section 12 (1) but on further reflection, he noted that the organisations have a point. He explained that this was something he thought about the previous day and therefore, was not included in his note. He added that there is no proposal on including a provision regarding solatium but if there were to be something to that effect, then it would ultimately amount to tempering down the effect of Clause 12 (2) (A) which says that the fact that the property was expropriated must not be considered in determining the amount of just and equitable compensation. He reminded the Committee that other jurisdictions deal with the amount of compensation for the expropriation separately from the amount to make good the human element of the loss. This means that these jurisdictions do make provisions for what would be called the solatium but this is done as a separate head of compensation and is limited to market value.

The Chairperson thanked Adv Naidoo for his responses and said the Committee would not mind responses in writing.

Ms Ngema asked to raise a point regarding the procedure which the Members raised. She stated that the new Rule 176 of the National Council of Provinces does provide an opportunity for public input. It states that the Committee can arrange its own business in a manner that facilitates public involvement in the process.

Mr Rayi said that before provincial requests are sent to the Committee, they are first sent to the legislature and he proposed to the Committee that they give them a one-week extension.

Ms M Moshodi (ANC, Free State) seconded the proposal made by Mr Rayi.

The Chairperson expressed gratitude to all Members and indicated that the Committee was giving other provinces a week-long extension on areas that need to be consulted on. He said that the Committee would use the next meeting to adopt minutes.

[The meeting adjourned.}