The Expropriation Bill is not the threat the IRR thinks it is

Coenraad Bezuidenhout says the lack of investor confidence in SA has little to do with constraining legislation (outside of labour law)

SAIRR wrong on Anchen Dreyer and the expropriation bill

4 March 2016

Political parties and individual politicians need to be accountable for how they conduct themselves. It is in this spirit that I recently raised questions about why DA MP Anchen Dreyer seems to be providing political support to Solidarity and its associated organisations such as Afriforum, AfriSake and so on. It appeared such a pact had evolved over the course of time, judging by my otherwise overwhelmingly positive earlier experience as a party employee, as well as recent public events, and that this would be out of kilter with the expectations of many current and potential DA voters.

In terms of such recent events, I raised two recent incidents: Ms Dreyer’s presence at a Solidarity event and her support of what was seemingly a Solidarity position on the current Expropriation Bill. I raised the latter not because it is ideologically odious per se, but because I believed the position she took resembled the Solidarity organisation AfriSake’s position most closely, while also being fundamentally incorrect and based on a lacking understanding of the Bill in its current form, the 1975 Expropriation Act and the Constitution. With this Frans Cronje, CEO of the South African Institute of Race Relations (SAIRR), subsequently took issue. I now address his concerns.

I stand by the view that the Expropriation Bill cannot be viewed the anathema to investor confidence that the SAIRR, along with Ms Dreyer and AfriSake believes it is, on any rational basis. I believe their opposition to the bill is ideological and political, rather than because of any express concern for civil rights. I accordingly do not believe that the Bill “…in fact forms a key part of a raft of legislation and policy interventions which are aimed at weakening property rights and investor protections in South Africa”, in terms of which Mr Cronje presents questionable evidence.

This is not because of any particular naiveté. I could proffer fifteen years of very credible and relevant public affairs experience and numerous instances of public recognition for my work in supporting a conducive environment for business growth in South Africa. However, it would most probably interest Mr Cronje most that it is in the most recent book on the SAIRR’s list of publications, BEE: Helping or Hurting, that I am noted as “one of the few businessmen to speak out…” and credited for the salience of my warnings. It is perhaps also fitting to mention the author of the book is none other that the SAIRR’s lead on the Expropriation Bill, Dr Anthea Jeffery, who Mr Cronjé quotes extensively in his rebuttal.

To address Mr Cronje’s only discernible point of criticism Expropriation Bill itself, on the state taking property as “custodian” rather than as owner (ostensibly to avoid paying compensation at all for the property) I will in turn quote extensively from a recent article in Business Day by recognised North-West University expropriation law expert Prof Elmien du Plessis’ on the topic:

The 2013 Agri SA Constitutional Court action inspired [criticism] of the bill that it will enable the state to place land in its custodianship, taking it outside the realm of private property without payment of compensation, amounting to "expropriation without compensation". Careful scrutiny of the majority judgment reveals a finding that the state did not acquire the substance of the right, so on the specific facts, this did not amount to an expropriation. The court was careful to emphasise that it would "be inappropriate to decide definitively that expropriation is in terms of the (act in question) incapable of ever being established". The court did not therefore state categorically that every form of custodianship would meet this criterion.

To interpret it in any other way is problematic and dangerous.

It is worth noting that in her response Dr Jeffery did not address the substance of this argument. She merely repeated her baseless inference that the definition of expropriation in the Bill is intended to turn her (Dr Jeffery’s) version of the court’s majority finding into “a general principle of law”, which would supposedly allow such expropriation without compensation. No amount of repetition can snowball untruth into truth, so in this regard, either ignorance is to blame or the IRR has a motive it has yet to declare.

Mr Cronje further sites Dr Jeffery’s warning that should the Expropriation Bill and the Draft Preservation and Development of Agricultural Land Framework Bill (PD-ALF) be adopted, they would empower the Government to expropriate land without compensation through the supposed custodianship mechanism and then lease it back to whoever it sees fit, for whatever purpose. In exclusion, this is a fearsome narrative.

However, if we take a broader perspective, we find that with natural resources becoming scarce, there is a trend in foreign jurisdictions (most notably in Canada and the USA) to move away from strict private property to “custodianship”. While this move is often resisted by strict followers of private property, it is increasingly seen as an acceptable way of dealing with scarce and valuable resources, and to ensure that such resources are utilised to the benefit of all people, and not only to the benefit of few.

The PD-ALF is in fact aimed at ensuring that farmers use productive farmland for productive farming to ensure food security. This is an aim that should be applauded, lest South Africa be increasingly constrained by inefficient use of agricultural land while others flourish.

From an ideological perspective it may be understandable that the SAIRR would be averse to having the state as custodian of agricultural land (which, incidentally, is intended to be ranked according to quality). However, as it is only a draft bill, opportunities to propose mechanisms that would enable ensuring sustainable development and preservation of South Africa’s agricultural land still exist. Would this not be a more constructive course of action than fear mongering?

We need to, for instance, to ensure that valuable crop land is not used for game farming and so reduce food security, or that price bubbles created as unintended consequences of other policies, such as the Department of Energy’s proposed Renewable Energy Development Zones, do not negatively impact agricultural production. These are the problems that the IRR would be very well placed to help solving in leveraging consultations around the Draft Preservation and Development of Agricultural Land Framework Bill, rather than unnecessarily promoting it as an outright threat for ideological reasons.

If the state indeed leased land out to farmers “on such conditions as it thinks fit”, those conditions can be tested. Should those conditions deprive an owner of the property rights in an arbitrary manner, or not in terms of a law of general application, it will be unconstitutional. It should be noted that in terms of the PD-ALF, the farmer otherwise remains owner of the farm, and will merely be compelled to use the land in accordance with the category determined in intended legislation.

I have elsewhere addressed the concern that the definition of expropriation in the Bill could prevent regulatory takings from counting as expropriations. Mr Cronjé raises this in relation to the controversial Private Security Regulation Amendment Bill.

The fact is, the deprivation of ownership is safeguarded by the constitutional requirements that it must be done in terms of the law of general application (which the Private Security Regulation Amendment Bill might be), and it must not permit the arbitrary deprivation of property. Again, this discussion would have more to do with whether the Private Security Regulation Amendment Bill meets these joint criteria, rather than with the Expropriation Bill.

It is clear from their submissions made recently in Parliament that business does not view the Expropriation Bill as a land reform measure, and from their broader public engagements, that they strike a hopeful and optimistic tone and recognise the need for this legislative update. This counts for organised commercial agriculture as well.

In other words: investors do not fear this legislation as an outright threat to investor confidence, despite what the SAIRR says.

There are many reasons why investor confidence in South Africa has taken a knock in recent years. Those have mostly to do with political uncertainty, a lack of policy coherence and coordination, uneven services, erratic trade and political diplomacy and the high incidence of corruption. These are the very reasons why international grant-making institutions have taken a wait-and-see approach to South Africa and why outfits such as the SAIRR now probably find it necessary to scare their reduced donor community into victimhood in order to obtain funding.

Very little of any lack of investor confidence in South Africa have anything to do with constraining legislation (outside of our labour regime, that is), or the quality of our institutions. These good perceptions of our institutions has been vindicated recently when, flawed as some of them are, they kicked in to correct government’s course (admittedly not until much value was destroyed) after President Zuma’s recent replacement of former finance minister Nhlanhla Nene raised concern over accountability in the management of South Africa’s economy. These good perceptions are what is being undermined when the IRR mindlessly repeat banal threats of South Africa being on the slippery slope to becoming another Zimbabwe.

Entire planetary systems separate objective analysis from talking the economy down, and that is what the SAIRR, Ms Dreyer and the Solidarity-organisations have done in relation to the Expropriation Bill. It may be for political, ideological or financial reasons, or just because of pure ignorance, but it also comes at a time when South Africa’s economy can ill afford it.

In such challenging times the value of think tanks worth their salt is to offer expansive thinking, objective analysis and to be solution-oriented. The SAIRR did show it was perfectly capable to play such a role in relation to the heated current public debate around race, with its recent survey of race relations between ordinary South Africans. I remain hopeful they will find a similar orientation on any debates relating to the economy in general, and around the Expropriation Bill in particular.