Property Rights on the Line
Legislation under consideration by Parliament could pose a serious threat to South African ownership of property. Dave Steward, executive director of the FW de Klerk Foundation, answers the complicated questions we all should be asking.
THE FW DE KLERK FOUNDATION
The FW de Klerk Foundation’s Centre for Constitutional Rights promotes the values, rights and principles of the Constitution. The foundation opposes racism from any quarter. It monitors developments that may affect intercommunity relations, participates in national debates on racial and cultural issues, and assists people in claiming their constitutional rights. The foundation makes submissions to Parliament and to Chapter Nine bodies, and defends the Constitution in the courts. www.fwdeklerk.org
The Parliamentary portfolio committee is considering a new expropriation bill. How could this have a marked effect on property rights in SA?
The new expropriation bill would extend the power to expropriate property – and this is not limited to land – in “the national interest”, to government and to parastatals, at national, provincial and municipality might offer you X for your home. However, you may be under the impression that the home’s actual value is two or three times more than that. You could challenge the compensation offered in the courts, but would have to vacate your property by a date stipulated by the municipality. Then you might be without the full value of your principal asset for years while your case proceeds through the courts. Because litigation is expensive and the outcome uncertain, you would therefore be under considerable pressure to accept the initial below-market-value offer of compensation.
What would be the knock-on effect of this bill?
We are also worried about the new concept of custodianship in some of the legislation before parliament. The Preservation and Development of Agricultural Land Bill declares that the Minister of Agriculture, Forestry and Fisheries is the ‘custodian’ of all agricultural land. This gives him extensive powers to interfere in landowners’ rights to utilise and develop their land as they see fit.
Also, the state may be trying to establish a principle that if property owners are deprived of their property in circumstances where the state does not assume ownership of the asset – but merely custodianship – there might be no requirement to pay any compensation.
In addition, government has repeatedly stated its intention of proceeding with potentially ruinous proposals for land reform – including the termination of the right of foreigners to own agricultural land, and the limitation of agricultural land holding to three arbitrary and illogical sizes: small farms of 1,000ha, medium-sized farms of 2,500ha, and large farms of 5,000ha. This could have serious implications for food production because 70% of South Africa’s fresh food is produced on about 100 farms – and nearly all of them are larger than 5,000ha.
All of this would go hand in hand with the introduction of the 50/50 scheme. Here farmers would be required to give half their farms to their workers without compensation, where the farm would be managed as a collective between the farmer and the workers.
The property rights of farmers have been further undermined by more than 50,000 new land claims that have already been submitted in terms of the 2013 Restitution of Land Rights Amendment Act.
When will this come into effect, and what could it do to the South African residential, commercial or agricultural land market?
Some of the legislation – like the Restitution of Land Rights Amendment Act – has already come into effect. Other bills are now making their way through Parliament, and there are those like the Regulation of Land Holdings Bill that must still be presented to Parliament. If they are all adopted in their present form, they will have a very negative impact – particularly on the agricultural property market – and create uncertainty for all property owners
Why this legislation now, and why is the government taking action to undermine property rights?
This is part of what the government, in virtually every major speech, calls “the radical implementation of the second phase of the National Democratic Revolution”. It has its roots in the 1956 Freedom Charter, which, among others things, calls for “the national wealth of our country to be restored to the people” and for “the mineral wealth beneath the soil, the banks and monopoly industries” to be “transferred to the ownership of the people as a whole”. It states that “all the land shall be re-divided among those who work it”.
According to the ANC’s Strategy and Tactics documents, “a critical element of the programme for national emancipation is the elimination of apartheid property relations”, which will require “the deracialisation of ownership and control of wealth, including land”.
The 2011 Green Paper on Land Reform calls for “agrarian transformation”, which is “a fundamental change in the relations (systems and patterns of ownership and control) of land, livestock, cropping and community”. In July this year, Deputy President Ramaphosa said “the economic transformation we are undertaking is aimed at fundamentally changing the structure of our economy and patterns of ownership”.
What could the long-term consequences be?
There has never been a successful economy or a free society that has not recognised property rights. The assault on property rights would have a catastrophic impact on the economy and on all South Africans, particularly the poor. It would accelerate foreign and local disinvestment and South Africa would be downgraded to junk-bond status. This would cause further disinvestment and a further weakening of the rand. It would make it very difficult for the government to raise the loans it needs to bridge the budget deficit, and to fund infrastructure development. The assault on property rights would also seriously threaten the Constitution and race relations.
What action does the FW de Klerk Foundation propose?
All South Africans who believe in the Constitution, free-market principles and property rights should support a strategy to oppose anti-property legislation. The legislation should be opposed at every step of the parliamentary process by opposition parties, NGOs and by companies that feel their interests are threatened. Affected parties should refer to the legislation of the Constitutional Court. Citizens should be informed about the contents and intentions of the legislation and the threat that it poses to their own property rights. They should support the property rights of black South Africans and use all their constitutional freedom to defend their interests.
What can property professionals and the public do to prevent this scenario?
Property professionals should inform themselves about the nature of the legislative threat to property rights and the ideological context in which it is taking place. They should support and join civil society initiatives to oppose these threats – including organisations such as the FW de Klerk Foundation, the Institute of Race Relations, the Free Market Foundation and the Helen Suzman Foundation. They could work for the extension of property rights to South Africa’s eight-million black home owners by helping them to register title deeds. And they should support fair and workable proposals for land reform, such as those proposed by AgriSA.
KNOW YOUR BILLS
Understand the legislation that could have a significant impact on property owners.
THE REGULATION OF LAND HOLDINGS BILL…
…will prohibit foreigners from owning agricultural land, but will allow them leasehold rights for a minimum period of 30 years. The bill will place a cap on the size of farms: small farms would be capped at 1,500ha; medium-sized farms at 2,500ha and large farms at 5,000ha. Land holding above these limits could be expropriated for redistribution.
THE PRESERVATION AND PROTECTION OF AGRICULTURAL LAND BILL…
…introduces the concept of custodianship into the ownership of agricultural land. The Department of Agriculture, Forestry and Fisheries would become the custodian of all agricultural land. If landowners are deprived of their property in circumstances where the state acts as custodian of the property on behalf of claimants, expropriation will not be deemed to have taken place, so there will be no compensation. This bill also places severe restrictions on the manner in which landowners can make use of agricultural land.
THE RESTITUTION OF LAND RIGHTS AMENDMENT ACT 2014…
…extends the window for restitution claims until 30 June 2019. The claims create more uncertainty for targeted farmers and make it difficult for them to raise working capital. By April 2015, 55,893 new claims had already been submitted.
In addition, THE PRIVATE SECURITY INDUSTRY REGULATION AMENDMENT BILL, THE PROMOTION AND PROTECTION OF INVESTMENT BILL and THE MINERAL AND PETROLEUM RESOURCES DEVELOPMENT BILL have far-reaching implications for local and foreign property ownership.