Land expropriation without compensation, no need to panic

South Africa continues to see sensational reports on the question of land expropriation without compensation and especially those around land grabs which seem to be rearing its head in various areas. Stuart Manning, CEO for the Seeff Property Group however, says that the question of land expropriation without compensation is a hot political topic and with the 2019 General Elections looming, it was expected that the ANC would make a move in this regard.

Following the adoption of a motion by Parliament in late May, the matter is now with Parliament’s Constitutional Review Committee who will consider whether to amend the Constitution and how it will be done.

Since then, there have been various media reports about the topic and these continue to surface, often creating confusion in the property market. Manning says that it is vital to note that it is very early in the process and there is no need to panic or pay attention to the sensational publicity on the topic. The process is still a long way off from being proclaimed into law and it would still need to pass through rigorous processes, he says.

We have also seen President Cyril Ramaphosa and the ANC come out strongly and reiterating that no land grabs in any form will be tolerated whatsoever and that any expropriation will be done within the confines of the laws and with the utmost care and in pursuance of economic growth and development and business and investor confidence.

Manning points out that SA has a very robust and progressive Constitution, regarded as one of the best in the world and all laws have to be in line with the constitution. Property rights are currently protected by Section 25, but there are many other safeguards and such a law is expected to be subjected to vigorous litigious tests. It would also be necessary to change the Land Restitution Act and there are currently no proposed or draft amendments to either this act, or the constitution.

Without detracting from the need for land reform and redistribution, Manning points out that constitutional and legal experts and economists have expressed doubt about whether such a law would pass the many other tests provided for by the Constitution.

The current proposal is around agricultural land and there are many concerns surrounding the mechanisms of expropriation and effect on the greater community, property owners and in particular, the financial and economic impact. He says that the banks for example, in addition to agricultural land bonds, also provide extensive loans to this sector hedged against crop yields and other assets. There is also the impact on the Futures Market to consider.

Also of great concern, is the fact that land expropriation and nationalisation has a poor record internationally and most experts believe that there is no case study of success to draw from. There are already concerns about current food insecurity and lack of success insofar as agricultural land reforms are concerned.

Some commentators have proposed that perhaps a hybrid approach in the form of a blended financing model and BEE in agriculture might be used to transform productive farmland, specifically land which is uninhabited, unused and unbonded, but again, given the lack of success thus far, this too would need a whole new approach.

In any event, Manning says that what is clear, is that government is still a long way off from a workable solution and the need for economic growth will have to drive any land reform. It is therefore vital for property owners, buyers and investors to note that it remains business as usual for property ownership, the property market and all legislative protection is still in force. Many areas are currently offering an outstanding selection of property and there is no need for buyers to wait.