Absa Bank Ltd Submission on the Expropriation Bill(‘the Bill’)

Introduction Absa Bank Ltd(‘Absa’) would like to thank the Parliamentary Committee on Public Works for providing it with the opportunity to provide oral comments in addition to the written comments on the Bill. Absa supports Governments initiatives to adress the imbalances of the past through processes such as land reform, but we submit that such processes must be conducted in an economically responsible and constitutionally sound manner. Absa wishes to make the following comments:

Inclusion of “Public Interest” as grounds expropriation The Term ‘Public Interest’ is broadly defined in the Bill. Absa submits that in accordance with principles of fairness, the power of expropriation should only be exercised if it is both in the ‘public interest’ and for ‘public purpose’.

Inclusion of ‘movable property’ in definition of ‘Property’ The term Property is defined in the Bill as follows:"Property" includes a right in property and includes movable property. Section 2 of the Bill provides that an expropriating authority may only expropriate property in the public interest or for public purposes. In terms of the above, an Expropraiting authority will also have the right to expropriate movable property. The tenor of the Bill was to deal with the expropriation of land(immovabable property). Extending the ambit of the Bill to include movable property will not meet the objective of the Bill which is to ensure that there is equitable access to all South Africa's natural resouces.

Power to expropriate on behalf of a Juristic Authority Section 4 provides that the Minister may expropriate property on behalf of a juristic person provided that certain requirements are met. Clarity is required in the Bill regarding the limitation of the rights of the juristic person in terms of what it may or may not do with the property after expropriation and there are no control mechanisms for this purpose. We suggest that the Bill address this issue to avoid the ambit of the Bill being defeated.

Investigating and Gathering of information for purposes of Expropriation This section does not cater for an investigation into holders of registered rights such as Mortgage Bond and Notarial Leases etc. We suggest that the fact that there could be Mortgage Bond or Notarial Lease over the property also be taken into consideration in the investigation contemplated in Section 10.

Information that Authority may require the Advisory Board to provide Section 10(2)b) of the Bill, does not expressly cover the need for the Advisory Board to provide the Expropriating Authority with any information regarding mortgage bonds registered over the property in favour of any financial institution and consequently any monies owing to such financial institution under the loan agreement. Consequently any compensation determined by the expropriating authority may not be sufficient to cover monies owed to the Bank. This is a crucial consideration that should be taken into account.

objection should be lodged prior to the date of expropriation The Bill provides for publication or service of notices and the time period of at least 21 days within which objections or submissions may be lodged. Absa suggests that the Bill contain a section which states that no expropriation will take place until the period of 21days lapses before any expropriation can take place. Section 5(b) of the Bill provides for the expropriating authority to depart from the provisions of Section 11 where it is reasonable and justifiable. This could be to the detriment of the landowner or any holder of rights. Principles of fairness require that the Land Owner be given adequate notice to object to an action that may impact on his/her rights. It is therefore suggested that the Bill makes it clear that the period of 21 days for objection must lapse before any expropriation can take place.

Delivery of expropriation notice to mortgagees Section 11(1) of the Bill provides that if an expropriating authority contemplates expropriating a property, it must publish a notice to that effect and serve a copy thereof on all persons of whom it is aware whose rights may be materially and adversely affected by the contemplated expropriation. It is submitted that a mortgagee in respect of a property may be so affected if the property is expropriated. However, for sake of certainty, the Bill should expressly make provision for the delivery of such a notice to mortgagees.

the title deeds of property considered and/or identified for expropriation to be endorsed with Section 11 Notice Provision should be made for the title deeds of property considered and/or identified for expropriation to be endorsed with the notice contemplated in section 11(1) of the Bill and the expropriation notice (section 12). This will ensure that in the event that a new mortgage is to be registered in favour of a mortgagee, the mortgagee will prior to registration be aware that the property will be expropriated or that expropriation thereof is being considered.

monies owed to financial institutions arising from Mortgage Bonds registered over such property is not considered when considering the Basis on which compensation is to be determined Section 15(3) (a) and (b) of the Bill does not expressly stipulate that monies owed to financial institutions arising from Mortgage Bonds registered over such property should be a factor to be considered when determining the basis on which compensation is to be determined. It is submitted that this be included in Section 15.

Market Value is the most objective means of deter It is submitted that the market value of a property is the most reliable and objective means incorporating principles of being just and equitable when determining the compensation amount and should definitely bear more weight than any of the other factors. The Constitution of the Republic of South Africa requires that compensation for expropriation must be just and equitable, reflecting an equitable balance between public interest and the interests of those affected,having regard to all relevant circumstances. We firmly believe that people should not be divested of their property for consideration that differs substantially from the market value therof We submit that the amount of compensation to be paid to an expropriated owner or an expropriated holder should be just and equitable, but do not see the reason for the determination of the amount of compensation to reflect a balance between the public interest and the interest of the affected parties. Consequently, the “purpose of the expropriation” as contained in section 15(3) (a) (v) should not be deemed a relevant factor in determining the amount of compensation but should be used as a relevant factor in determining whether the decision to expropriate is correct.

Owner should be obliged to provide details of any mortgage bond and monies outstanding under loan facility advanced against such bond In terms of Section 17(1) of the Bill an owner may deliver a statement to the expropriating authority setting out what compensation it deems as acceptable. Once again this section does not oblige the owner to provide details of any mortgage bond and monies outstanding in terms of a loan facility advanced against such bond. This requirement by the owner to provide such details should be inserted in the Bill.

Consequence if compensation is insufficient to settle an outstanding loan Section 21 (1) provides that no amount of the compensation may be paid out to the owner if there is a mortgage bond registered over the property. In essence this section provides that such amount of the compensation required to settle the interests of the mortgagee must be paid to the mortgagee. It does not however address the consequence if such portion of the compensation or total amount thereof is insufficient to settle an outstanding loan. Section 21(2) only gives a mortgagee recourse to court to determine the terms of payment of such compensation, not recourse to re-determine the value of such compensation. It is submitted that the Bill address this issue.

Role of Courts In terms of the Bill the court can intervene regarding a dispute between the Expropriating Authority and the owner regarding a compensation amount. In the event that there is disagreement about Government’s determination of compensation,the only remedies available to a property owner is judicial review or approval. These processes do not offer sufficient protection to property owners. These procedures may also be in conflict with the constitution,which requires that compensation for expropriation be “determined or approved” by the court.

Conclusion As property of various kinds is utilised on a daily basis, by amongst others, financial institutions as security for debt, the rights of such security holders should also be protected by the Bill. It is crucial that the amount of outstanding debt secured by property to be expropriated be included as one of the factors to be considered in determining the expropriation consideration. Principles of fairness require that security holders eg Financial Institutions should have the right to challenge expropriation considerations where their interests are adversely affected when the determination is made.

HEADING: The ability to take sound security over property, especially immovable property is of utmost importance to financial in order to enable them to provide financing to their customers The provisions of the Bill will negatively affect security holders’ rights under their security or at the very least introduce risk with regard to the quality of such security. Financial institutions will therefore be less likely to provide financing to customers and may need to increase finance costs. This will impact negatively on the loan market and employment in the sector.

HEADING: If financing becomes difficult to attain, fewer people will be able to afford residential property and the financing of small business will be limited. Should there not be sufficient access to financing,it is forseeable that the impact on the agricultural sector, which is key to a sustainable nation, will be negative. The impact of the Bill in its current form will have serious effects not only on property owners and financial institutions but on the nation as a whole. It is submitted that if any property can be expropriated by Government at any time for almost any reason and without the owner receiving a fair and market-related price for such property, economic uncertainty and a lack of confidence in the country will be created.

HEADING: Absa would once again like to thank the portfolio Committee on Public Works for this opportunity to provide written and oral comments and would like to commend the committee for conducting this process in a fair and consultative spirit.

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