Profile - Reader3082332

Expropriation abuse ‘must be punishable’

Crisis: The Bank­ing As­so­ci­a­tion of SA says ex­pro­pri­a­tion with­out com­pen­sa­tion could spark a fi­nan­cial crisis and lead to pri­vate lenders not pro­vid­ing loans with land-based prop­erty as se­cu­rity.

The expropriation bill, which would allow for the seizure of private property for the first time in SA in a bid to speed up land reform, should include civil and criminal consequences for officials who misuse it, says think-tank and advocacy organisation the Centre for Development and Enterprise.

The expropriation bill, which would allow for the seizure of private property in a bid to speed up land reform, should include civil and criminal consequences for officials who misuse it, says think-tank and advocacy organisation the Centre for Development and Enterprise (CDE).

The bill, which is intended to be used concurrently with other legislative changes, such as an amended section 25 of the constitution, is not as radical as some would claim, but it remains flawed, the CDE said in its submission to parliament.

“Implemented as it is drafted, the expropriation bill will not result in very dramatic changes in SA’s property or expropriation regime,” the CDE submitted.

“Having said that, one of the challenges in responding to the bill is that the quality of governance has declined dramatically over the past decade, and there are far too many cases of power and authority being abused for personal gain or for purposes that are not in the public interest,” the CDE said.

Expropriation is a legal route in many countries, and in SA there is a push to change the law to speed up land reform, allowing restitution of land to communities who were dispossessed in the 20th century.

Submissions on the bill were concluded at the end of February, after an extension. Investors rattled by the push to expropriate land without compensation will know the details of the proposed amendment to the constitution by the end of May.

The contentious issue of speeding up land reform has been polarising, amid calls for economic redress for apartheidera abuses and economic opportunities, while critics have said the problem with the pace of land reform is the government’s capacity, and the bill may spook investors.

The bill should include criminal and civil sanctions, holding officials liable in their personal capacities in cases where they intentionally furnish false or misleading information in the course of effecting an expropriation, the CDE said.

It has proposed other amendments to the bill, including limiting it to explicit cases of land reform and removing language that allows for no compensation when the owner is holding it in anticipation of an increase in future value.

“Holding land in anticipation of future increases in its value is an entirely legitimate and useful economic function,” the CDE said.

Agri SA, the largest representative group of rural landowners in SA, has also called for the removal of the clause providing for no compensation where land is held for speculative purposes, saying this will undermine property rights.

Agri SA also noted that efforts to fast-track land reform through asset seizures in countries such as Zimbabwe and Venezuela led to a rapid deterioration in the economic contribution of the agricultural sector and resulted in millions of economic and political refugees.

The Banking Association of SA (Basa), the industry body representing all registered banks in the country, has warned that there is no recourse for rights holders who dispute expropriations, such as those holding mortgages, except the courts.

Turning to the courts could “exacerbate public uncertainty in an area that is both highly emotional and sensational”, Basa said. Basa representatives also told parliament that expropriation without compensation could spark a financial crisis, destabilise the banking sector and lead to private-sector lenders withdrawing from providing loans in which landbased property is offered as security. The CDE said: “The bill was a workable attempt to balance competing interests, but only if expropriation is fair, legal and rare, and if expropriation for nil compensation is rarer still.

“The fears among property owners and those who worry about the effect of expropriation on the country’s reputation as an economy open for investment should be understood, however, in the context of legitimate concerns about the country’s current quality of governance and the risk that these powers will be abused.” /With Bekezela Phakathi

ONE OF THE CHALLENGES IN RESPONDING TO THE BILL IS THAT QUALITY OF GOVERNANCE HAS DECLINED DRAMATICALLY