Expropriation without compensation (EWC)
Expropriation is illegal under international law and in South African law.
Expropriation is defined broadly under customary international law and most bilateral investment treaties to cover both “direct” and “indirect” expropriations.
When the state takes control of property, this is referred to as a ‘direct’ expropriation. An ‘indirect’ expropriation does not entail the state acquiring ownership and can take the shape of ‘custodial’ or’regulatory’ takings.
A ‘custodial’ taking occurs when the state assumes custody of property. Mr Shivambu emphasizes that the government has previously done this in the case of all water resources (under the National Water Act of 1998) and all mineral resources (under the MPRDA).
A’regulatory’ expropriation occurs when the state’s policies impose losses on an owner – for example, by imposing price limits on minerals that prohibit them from being sold at market value – but the government makes no move to seize ownership of the assets in question.
Compensation is required under international law for both direct and indirect expropriations. Section 25 of the Constitution (the property provision) follows suit, and in the lack of legislation to the contrary, should be interpreted in accordance with international law.
The true intent of the EWC and Expropriation Bills
The true intention of the EWC and Expropriation Bills is to pave the way for:
the transfer of all land to the state’s custodianship without compensation, as proposed by Mr Shivambu and Mr Mantashe; and
the implementation of prescribed asset and other rules, also without compensation for resulting losses, that will require pension funds, banks, life insurance companies, and other institutions managing R16 trillion in savings to invest in Eskom, other failing SOEs, and the government’s ‘infrastructure’ bonds.
The EWC Bill will pave the way for state custodianship of land by allowing for no compensation to be paid for land and “improvements thereto” in circumstances set out in future legislation by Parliament.
Once the Constitution has been changed in this manner, a bill vesting all land and improvements in the state’s custodianship could be enacted. A court would have to rule on whether or not ‘zero’ compensation should be awarded in this case, but Chief Justice Mogoeng’s erroneous Agri SA judgement would be used to help secure that outcome.
The Expropriation Bill will open the way not only for state custody, but also for regulatory takings against the asset management industry (and many others too). Its main contribution to these goals is its broad definition of property, which is “not restricted to land,” and its narrow meaning of “expropriation.”
The Expropriation Bill defines ‘expropriation’ as the state’s “compulsory acquisition” of property. This term plainly takes after Chief Justice Mogoeng’s decision in the Agri SA case. It is also obvious that the payment of compensation is supposed to be limited to instances of “direct” expropriation, in which the state takes ownership of assets.
No compensation will be payable for the indirect expropriations that will occur when the state acquires custodianship of all land – or when it sets legislation giving it control (but not ownership) of the country’s huge pension and other savings fund.
