BUSA SUBMISSION TO THE PORTFOLIO COMMITTEE ON PUBLIC WORKS REGARDING THE EXPROPRIATION BILL 28 JULY

Comments on the Expropriation Bill Areas of Disagreement CHAPTER 1: DEFINITIONS AND APPLICATION OF ACT BUSA is in agreement with the original formulation of the definition of “public interest” and disagrees with any proposals to amend the wording as follows: “includes the nation’s commitment to land reform, and to reforms to bring about just and equitable access to all South Africa’s natural resources and other related reforms in order to redress the results of past racial discriminatory laws or practices”. BUSA argues that the definition should be aligned to the constitution, which does not refer to just and equitable when referring to public interest. It is therefore absolutely important to ensure that the current Bill contains adequate safeguards against any abuse of the power to expropriate. 2

CHAPTER 5: COMPENSATION FOR EXPROPRIATION BUSA would like to emphasize the general point on Chapter 5 that in terms of global regulatory requirements, lenders are required to make use of market values as the basis against which mortgage loans are made. As a result, BUSA is in strong support of keeping 12 (1) (c) as is. The current Expropriation Act contains a similar provision on consequential loss and there is no valid reason for its exclusion as government has done in the current Bill. The Constitution’s list of the factors relevant to compensation is not exhaustive which means that the non-listed factors can also be taken into account in striking “an equitable balance between the public interest and the interests of those affected”. 3

CHAPTER 5: COMPENSATION FOR EXPROPRIATION Moreover, expropriation is a drastic measure which places an inordinately heavy burden on the shoulders of particular individuals. If justice is to be done to those affected, the full extent of their consequential losses must be taken into account, not disregarded With regards to 12 (2) (a), BUSA disagrees with the fact that a property that had been taken without the consent of the expropriated owner or expropriated holder should not be taken into account in determining the amount of compensation payable. 4

CHAPTER 5: COMPENSATION FOR EXPROPRIATION With regards to 13 (1), BUSA proposes that the interest rate payable on outstanding compensation should be the greater of the rate stipulated in the PFMA or the interest rate payable on the property by the expropriated owner. With regards to 17 (2), BUSA is concerned with the withholding of 20% of the amount or offer of compensation for the payment of municipality property rates or other charges contemplated in sections 19 and 20. There is no guarantee that the State will not delay even further by proposing ‘later’ dates for payment in its notice of expropriation. Theoretically, the owner will be able to contest these later dates in court, but again most people will find this unaffordable. 5

CHAPTER 5: COMPENSATION FOR EXPROPRIATION It is proposed that the compensation due to the owner must be paid in full 15 working days before ownership passes to the State, failing which the relevant notice of expropriation automatically becomes invalid and has no legal force. It is advised that the Bill be brought in line with the Constitution as it is neither just nor equitable for individuals to be deprived of property ownership and then still have to suffer further injustices by waiting long periods for the State to make payment long after expropriation. Payment delays by government are a notorious practice in South Africa which government itself has not managed to resolve. 6

CHAPTER 5: COMPENSATION FOR EXPROPRIATION Furthermore, the Bill has no penalty for late payments which is required given the current public sector inefficiencies. Without these penalties, people affected by any expropriation will suffer grave injustices as they may not be in a position to afford to go to court to get their monies timeously. Some have gone as far as recommending that the penalty for government’s failure to make timeous payments should be a notice of the expropriation becoming invalid and BUSA is in support of it. 7

CHAPTER 5: COMPENSATION FOR EXPROPRIATION In addition to, the compensation payable on expropriation should begin with market value, minus the four ‘discount’ factors listed in the Constitution (the history of the property, etc.) and also include damages for consequential loss (including moving costs and any loss of future income. The current Bill gives the owner a mere 60 days in which to sue, failing which he or she will be deemed to have accepted whatever compensation the State has offered. BUSA is of the view that these provisions contradict both common law and the Constitution. 8

CHAPTER 5: COMPENSATION FOR EXPROPRIATION Common law recognises the right to property as a key element in individual liberty. It thus bars the State from simply seizing property – even property suspected of being linked to serious crimes – without first obtaining a court order in the form of a search-and- seizure warrant. The Constitution adds to this common-law protection by laying down various requirements which have to be met before an expropriation can be valid. Greater clarification on this aspect required. 9

CHAPTER 6: DETERMINATION BY COURT, URGENT EXPROPRIATION AND WITHDRAWAL OF EXPROPRIATION BUSA disagrees with 22 (5) and is of the view that the holder of a right should be compensated first. With respect to urgent expropriations, the expropriating authority should propose a compensation amount, which the owner of the property could disagree with and if necessary, refer the matter to court. 10

CONCLUSION BUSA understands the need for expropriation but would like to urge government to do so with caution and in strict compliance with the Constitution, especially because expropriation itself places an inordinately heavy burden on the shoulders of particular individuals. Today, South Africa’s economy is faced with its greatest challenges in light of a depressed global macro environment and the 2015 Budget is constrained by the need to consolidate public finances, in the context of slower growth and rising debt. BUSA fully supports efforts made during the 2015 Budget to rebalancing fiscal policy to give greater impetus to investment, supporting enterprise development and infrastructure development 11

CONCLUSION In light of the above, South Africa cannot afford to adopt an Expropriation Bill that works against investment promotion and growth. In order for South Africa to raise the growth rate and create job, both the investment and business climates must be conducive. The Expropriation Bill in its current form threatens to further put a damp on the already low investment climate and deter future investments. The government has a constitutional responsibility to protect the property rights of all South Africans, individual and corporate 12