EWC: Is this what the govt is planning?

Terence Corrigan writes on a leaked constitutional draft apparently in circulation

There are times when circumstances require taking risks. These are times in which dangers exist in acting, but even more profound ones may arise in failing to act.

This is the case today, as South Africa’s political elite and its government drive towards adopting a regime of Expropriation without Compensation (EWC). Its implications stand to have a potentially more extensive, more disruptive and more destructive impact on the country’s future prospects than just about anything undertaken since the advent of democracy.

Not only will they reverberate through the economy – they are doing so already – but given that this drive has already manifested itself in a demand for an amendment to the Bill of Rights, through the country’s civil liberties as well.

The Institute of Race Relations has received a document purporting to be a draft of the proposed Constitutional amendment. This issue was prominently foregrounded last year when Parliament undertook a consultation process to investigate whether the Constitution should be changed to enable EWC. Unsurprisingly, although contrary to the clear weight of opinion, it declared that it should.

What this would look like was unclear, but – probably because of the evident damage that the whole ‘debate’ was having on the country – government and the ruling party sought to play down the implications of the change. The amendment would, for example, only ‘make explicit that which is implicit’ in the Constitution.

Resolution of the matter was postponed until after the election.

If the draft we have been given is genuine, there may be a reason for this. For the changes it envisages are profound indeed, and there is no guarantee that they would be warmly welcomed by the public at large. Disclosed before the election, they may have set off a great deal of concern and dissatisfaction, even among the African National Congress’ (ANC’s) constituency.

The draft at issue would effectively rewrite Section 25 of the Constitution. Several broad observations can be made. The first is that the amended Section 25 is substantially longer than the existing one (eleven subsections as opposed to nine), and is altogether more detailed in the requirements it imposes on the state. This includes establishing new institutions, and possibly committing to new policies. This may signify an attempt to use the constitutional amendment process to pre-ordain the legislation to be enacted and its administrative architecture.

A second observation is that while Section 25 in its existing form is heavily influenced by the imperatives of land reform, it is formulated so as to make it generally applicable to all forms of property – the first three subsections do not mention land specifically, and establish the broad principles of ownership and for deprivation of property as a whole. In contrast, the amended version is substantively a clause about land. Its opening phrase (subsection 1) is ‘Land in South Africa’, followed by a series of points setting out the broad parameters of landholding in South Africa. While the amended version does note that ‘property is not limited to land’, it is clear that this document was written with an unambiguous emphasis on land and land reform.

So what does it propose?

The main features are clear. The most notable change is that all land will belong ‘to the people of South Africa’, and that it must be ‘administered by the state as custodian of all land on behalf of and for the benefit of the people of South Africa’. People’s entitlements to a decent standard of living (and to land to achieve this) are affirmed. State action is mandated to achieve the latter, including through the establishment of a Land Administration Commission, a Land Reform Agency and a Land Fund. The outlines of conditions for expropriation are set out (retaining the current principle that it may not be arbitrary), and permitting Expropriation without Compensation under certain conditions. The existing restriction of claims for restitution and redress to events after 19 June 1913 is removed, presumably making possible claims that predate this, provided they arose from ‘racially discriminatory laws or practices’. An extensive set of considerations is put forward to decide on compensation, along with the (rather confusing) rudiments of a formula for applying it.

This suggests that one of the more acute fears – a mass custodial taking and the ending of private ownership in land – is very much on the cards. This is despite attempts by some in the ANC and in government to downplay such a possibility. However, this has not been uniformly rejected by all in the ANC, and has been vocally championed by the Economic Freedom Fighters. It has also been proposed by the government’s land audit.

The institutions proposed might be understood as a response to the administrative malaise in land reform (another measure proposed in the State Land Audit). Whether the Constitution is the appropriate platform to require their establishment is questionable. It is perhaps noteworthy than there is no requirement in this document for a unified land law, a measure widely called for – although the lack of such a requirement would not necessarily preclude an intention to introduce it elsewhere.

The proposed amendment would also seem to mandate a land tax of some description – ‘land rights holding charges’. Once again, this mirrors proposals in the land audit. The implication of this seems to be that while no one would be able to own land, those occupying it would be required to pay a form of rent for doing so.

The stress on expropriation and the specification of EWC are somewhat jarring. Having taken custodial control of all land, EWC in land would seem – on the face of it – to be superfluous. This is especially so given that the relevant subsection is written explicitly in reference to land. It lists one of government’s duties as ‘expropriating without compensation and reallocating land that is:

Not used according to its designated land use regulation;

Used for speculation, rent-seeking and other unproductive purposes, and

Acquired or used unlawfully.’

However, EWC may be intended here to provide an avenue for the government to seize total control of properties – by confiscating user rights, for example – while absolving itself of any obligation to compensate. It is also unclear what ‘speculation’, ‘rent-seeking’, or ‘unlawful’ acquisition might refer to.

Furthermore, in dealing with the compensation payable in the event of expropriation, the amended version talks about finding an ‘equitable balance’ between a set of identified factors – ten of them – but then declares that ‘the final compensation must include (e) and (h) but exclude all other values including (a) and (i).’ As regards the first two, (e) refers to the purchase price of the property, or the value of any remaining mortgage on it, while (h) speaks of everyone’s right to appropriate the improvements he or she has made on it.

Within the latter group of eight factors, (a) refers to the custodial nature of South Africa’s envisioned landholding, while (i) refers to ‘state ownership of land value increments that are attributable to’ such things as infrastructure development and population growth. The other factors that are listed as relevant to compensation – but which are ultimately to be excluded from consideration – embrace all five criteria now included in Section 25, among them market value and the ‘current use’ of the property.

So a third observation is that parts of the amended version make little practical sense.

It is interesting to note that much of what appears in this document echoes comments made by Masiphula Mbongwa, Director General for the War Against Poverty in the Department of Rural Development and Land Reform, at Davos earlier this year. In response to concerns from delegates about South Africa’s future, he indicated that the intention was:

A) to include s25(4) of our Constitution (which defines property as ‘not limited to land’) in the expropriation law;

B) to introduce a National Land Act that is like our National Water Act 36 of 1998; our National Environment Management Act 108 of 1998; and our Mineral & Petroleum Development Resources Act 28 of 2002.

C) An amended s25 of the Constitution to

a. vest land in the people of SA;

b. affirm the rights of everyone;

c. have a land value tax on s25(3) land values;

d. have a statutory entity for land administration systems; and

e. remove the 1913 restitution cut-off date.

Elements of the proposed revision certainly match what he set out. On the other hand, the contradictions within the draft suggest that this has not been adequately thought through. Perhaps it is an untidy amalgam of various proposals. Shoddy drafting would not be without precedent (a decade ago, the critically important Companies Act was at the centre of a storm when around 100 errors – many of simple expression and grammar – were identified).

If this is indeed genuine, and represents the intention of the ANC and the government, it raises troubling questions about the direction of policy. It suggests a recommitment to a dirigiste path that – in view of the pathologies within the state – has no chance of driving growth and promoting prosperity. It would also be the next round of betrayal of the country’s people, who evince a strong attachment to the idea of property ownership, but have all too frequently been denied this by government policy.

Of course, if this is of no standing, perhaps a hoax or the unrepresentative reflections of a lowly civil servant, it should be easy to refute. We hope that the government will do so.

Terence Corrigan is a project manager at the Institute of Race Relations. Readers are invited to take a stand with the IRR by sending an SMS to 32823 (SMSes cost R1, Ts and Cs apply).