Much has already been said about the highly anticipated Expropriation Act (“the Act”) which has recently been signed into law. There has been a great deal of speculation around its economic effects, practical implications and political timing generally, leading Trump to announce on X (formerly Twitter) that the USA would be “cutting off all future funding to South Africa until a full investigation of this situation (likened by him to confiscating of land) has been completed”. In reaction, the DA has subsequently launched review proceedings in the Western Cape High Court.
Given the hype, there is a natural temptation to sensationalise the Act and its effects: Will it bring about the radical transformation envisioned by some, or will it trigger chaotic land seizures as feared by others? There has been enough said on both sides and this piece does not seek to add to either stance. Rather, it seeks to offer a sober analysis of the Act’s key provisions, its scope, effect, and the contentious issues that may ultimately be tested in court to understand the reality of the situation from a legal perspective.
It starts with the Constitution
Expropriation is not a novel concept in our legal framework; the Act merely replaces outdated legislation to better align with constitutional values and principles. But there are some significant differences. To understand these changes fully and the new Act’s scope and effect, one must first consider section 25 of the Constitution and its effect on the Act. After all, the Act’s success or failure in fulfilling expropriation within a constitutional framework will be determined within this legal context.
At the outset, the Constitution prohibits the arbitrary deprivation of property, which, put simply, means that any such deprivation cannot be without cause, reason or justification. It then goes on to provide for expropriation of property under two conditions: it must be for a public purpose (like building public infrastructure) or in the public interest (which expressly includes land reform), and it must be subject to compensation where the amount, timing and manner in which payment is made is either agreed between those affected, or it must be decided or approved by a court.
Two things are notable here: firstly, expropriation is subject to compensation and secondly, determining the details of such compensation must either stem from agreement between the parties on the one hand or from judicial determination on the other. This would be the end of any argument for the contentious concept of “nil compensation” were the Constitution to end there. But it does not. It goes on to provide a further, perhaps more defining factor for determining compensation – it 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 including market value, which is one of at least five factors that must be taken into account when determining whether compensation is just and equitable. The Constitution is therefore framed to protect existing property rights, but it has never guaranteed full market value compensation for expropriation.
What is important to note here is that (i) the power to expropriate exists without the Act – the Constitution alone provides this; and (ii) the Act must be interpreted within the normative framework of the Constitution and where it fails, it will be constitutionally invalid. It starts and ends with the Constitution.
The scope and effect of the Act
Within this context, the scope and effect of the Act includes the following notable features:
“Property” for purposes of expropriation is not limited to land: Although the focus is placed on land, and understandably so given its value and history within the South African context, the Constitution does not limit “property” to land. In turn, expropriation is not limited to land. Intangible rights, including intellectual property and mineral rights, are capable of being expropriated and are likewise reflected in the Act. This is not new and has been the case since the inception of our constitutional dispensation.
However, the power to expropriate without compensation is limited to land: While the Act permits expropriation without compensation, which we will discuss below, it is important to note that this is not applicable to property that is not land. Intellectual property and mineral rights, for example, are therefore safe from expropriation without compensation in terms of the Act.
Expropriation without compensation is also limited to doing so for a public interest: In practice, therefore, this will largely be for purposes of land reform. In instances where expropriation occurs for a public purpose, the Act does not allow for nil compensation.
Attempts to agree must precede expropriation: The power to expropriate may not be exercised unless the expropriating authority has without success attempted to reach an agreement with the owner for the acquisition thereof on reasonable terms. What is reasonable will depend on the circumstances of each case.
The power to expropriate includes the power to acquire a right to use property temporarily if it is urgently required: This temporary use may not exceed 12 months (extended to 18 months on application to the court), is only applicable if suitable property held by the government is not available and may only arise where a disaster is declared in terms of the Disaster Management Act or where a court grants an order that an expropriating authority is entitled to use property temporarily. The owner must be compensated for the temporary use.
However, there are some concerns surrounding the power to expropriate for temporary use: First, the expropriating authority is permitted to depart from various procedural aspects, which has an effect on the substantive rights of affected parties. For example, there is expressly no obligation on the expropriating authority to consider any objections or submissions by interested parties if the degree of urgency so requires. This means that affected parties are unable to challenge the intended temporary expropriation and must turn to the courts as their only form of recourse, which may have an effect on the procedural fairness of a decision to expropriate temporarily.
In addition, while the expropriating authority must make an offer of compensation to the owner, the offer does not need to include an explanation on how the amount was arrived at with reference to supporting information, as is the case with expropriation in the normal course (in terms of the Act). Where there is a dispute on compensation, they may attempt to settle by mediation or approach the court to determine compensation, including the timing and payment thereof, but from a practical perspective, this may place the owner at a disadvantage in circumstances where (i) the owner no longer has the right of use of the property; and (ii) has not yet been compensated for it as a result of it being before the courts. While the owner could make use of the urgent procedures before the court, it is unlikely that the owner’s economic considerations would warrant departure from the court’s normal rules.
Secondly, while the owner is entitled to compensation for damage or repair of the property “to a reasonable standard”, where the property is damaged as a result of such temporary use, the damages or repair may not make up for any loss to the market value of the property.
The Act has, in part, aligned compensation practices with the Constitution: The old Expropriation Act (of 1975), which the current Act has now repealed, provided that compensation must be calculated at market value based on the willing-buyer-willing-seller principle. However, as illustrated above, the Constitution makes it clear that market value is only one of at least five factors to be taken into account when determining whether compensation is “just and equitable” in the circumstances, assessed on a case-by-case basis.
Section 12(1) of the Act has now aligned with the Constitution to ensure that compensation is determined along these constitutional lines, taking into account 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.
However, the Act has now also fleshed out what would be considered “just and equitable” compensation: While this goes beyond the five factors expressly listed by the Constitution, the Constitution makes it clear that consideration of what is just and equitable compensation was never limited to the five factors. What is just and equitable, however, will always be weighed against the Constitution.
This includes the more controversial extension is found in section 12(3) of the Act, which provides for the possibility of expropriation without compensation: Arguably the most contentious provision of the Act, it is important to note that the concept of nil compensation is not explicit in the Constitution and attempts to make it so have failed. It is also important to note that the expropriating authority is still obliged to strike an equitable balance between the public interest and the interest of the affected parties. In addition, the five factors listed in the Constitution (and all other relevant factors) still need to be considered in any determination of compensation, including whether nil compensation is applicable in terms of the Act.
The Act has moved away from some aspects of the proposed constitutional amendment, which provided that a court would determine that an amount of compensation would be nil. Instead, it provides that the expropriating authority holds that discretion under certain circumstances. These circumstances include:
Where the property is not being used, and the owner’s main purpose is not to develop the land for use or use it to generate income but rather to benefit from the appreciation of the property’s market value.
Where an organ of state is not using the property for its core functions and is not reasonably likely to require it for future activities and it acquired the property for no consideration.
Where the owner has abandoned the property by failing to exercise control despite being reasonably capable of doing do.
Where the market value of the property is equivalent to or less than the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the property.
The rationale for departing from the proposed constitutional amendment is unclear, but it may be necessary to test whether a decision that nil compensation is just and equitable should at the very least be subject to judicial oversight. This is particularly so given its effect of significantly limiting an owner’s property rights (which should be monitored against the constitutional standards set out above) and the fact that no guidance is provided to the expropriating authority when exercising the discretion.
What is certain is that section 12(3) of the Act will likely face judicial scrutiny (as various stakeholders, including the DA, have indicated). There are several ways in which this may occur:
When determining the constitutional validity of a law, the courts may impose a rationality test to determine whether there is a connection between a legitimate State purpose and the means chosen to achieve that purpose. This is an objective rather than a subjective test.
Where a provision limits a right in the Bill of Rights (like the property right in the Constitution), the limitation will be adjudicated against section 36 of the Constitution, which provides that a right may be limited if it is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom. This entails a two-pronged test to firstly determine whether the impugned provision limits a person’s right and if so, whether the limitation is justifiable.
While the provision as a whole will likely face such judicial review, certain factors may attract more attention than others. One key issue is the reasonableness of limiting an owner’s right to compensation, which may be precarious in circumstances where the property is not being used or developed to generate income but rather to benefit from appreciation of the market value. This concern is especially significant when asset appreciation forms a central part of investment decisions.
Notwithstanding this, the Act is highly procedural and parties are open to review a decision at each step: In other words, it will take time to give effect to any anticipated expropriation, including investigations, consultations with municipalities, notice periods, submissions, objections, mediations and the like. It will not happen overnight and each decision would be capable of being reviewed or challenged.
In conclusion: The Act is neither a revolution nor a land grab, but testing is necessary
The Act neither appears to be the revolutionary catalyst for large-scale land reform that some have championed nor the forerunner of Zimbabwe-style land seizures that others fear. Instead, save for some aspects which require testing, it in large part represents a legally constrained mechanism for expropriation that must operate within the constitutional framework, particularly the provisions of section 25.
However, uncertainty remains, particularly around the discretionary powers granted to the expropriating authority, the procedures for temporary use and the criteria for determining nil compensation. These issues are almost certain to face judicial scrutiny, and the courts will play a crucial role in clarifying how the Act is applied in practice. The Act may well require amendment to address the possibility of unfettered discretion and/or arbitrary exercise of power.
Ultimately, while the Act provides a framework for expropriation, its real impact will depend on how it is implemented, challenged, and interpreted in the years to come. There is a sense that, provided that South Africa remains steadfast in its pursuit of the rule of law and maintains an independent judiciary, the Act can, for the most part, be implemented within the current constitutional framework. For now, South Africa finds itself at a legal and political crossroads – one where the balance between land reform, property rights, and economic stability will be continuously tested.
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