Earlier this year, the South African parliament adopted a motion to investigate a possible amendment of section 25 of the Constitution, which protects property against expropriation without fair compensation set by a court of law. The plan is to do away with compensation completely, provided the confiscation is in the “public interest” – which in practice means it is justified in the interests of rectifying the big disparity in land ownership between blacks and whites.
Of crucial importance is the constitutional status is of the proposed change to the property clause.
The South African Constitution in section 1 incorporates as a founding principle the rule of law, in short, the principle that ensures that ordinary citizens are protected against the arbitrary use of power by government.
The rule of law is the principle that guarantees that citizens are governed by objective law, and not by the whims of people. The notion of impartial and objective, as opposed to arbitrary or discriminatory, use of government power is of its essence.
The rule embodies the principle of due process, or procedural fairness. Thus, no step may be taken by government that has the effect of interfering with the vested rights of any citizen, without affording that citizen a fair opportunity to challenge the proposed decision by presenting countervailing evidence and argument.
The controversial question, and the subject of debate among lawyers, is whether the rule of law principle extends to the protection of basic human rights such as life and liberty, and human dignity – or in this case, property.
The importance of this question is that as a “founding provision,” the rule of law requires a majority vote of 75 percent of the National Assembly before it can be repealed or amended. Any amendment to the property clause that clashes with the rule of law, will thus require such a 75 percent majority vote. The African National Congress (ANC) government is unlikely to muster such a vote, on its own or with help.
Section 25 provides that any expropriation shall be “subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.”
Assuming the parties do not agree on the price, it follows then that as matters stand, the price must be set by a court following due process. This provision is an embodiment of two principles of the rule of law, namely that of separation of powers, and due process.
Firstly, it is a manifestation of separation of powers in that courts are given power to adjudicate upon the price, which must be fair. Any amendment that removes that power from the court and vests it in the executive, would arguably breach the separation of powers doctrine and thus the rule of law. Likewise, it will breach the due process principle, which requires that disputes arising from the interpretation or application of law are to be resolved by courts that are independent of the legislature, the executive and other parties. Courts are seen as fair because they are objective and not arbitrary, and almost by definition follow due process.
A possible counter-argument is that a court will still have to determine whether any expropriation, which necessarily will be without compensation, would be in the public interest. In other words, the court may decide that precisely because the confiscation is without compensation, it will not be justified. That would arguably leave its discretion intact.
There are therefore powerful legal arguments in favor of and against the contention that a 75 percent vote will be required to revoke or amend section 25 of the Constitution. The final arbiter of this question will be the Constitutional Court.
Whether the court will come down on the side of the existing right to property, remains an open question. One factor is that there is strong public opinion aligned against the repeal of section 25, especially internationally and among businesses and investors. The court has in the past shown itself not to be immune to such influences. For example, it revoked the death penalty which was an all-round popular political decision when it was taken around the time of the transition to democracy in the early nineties. The court has also come out in support of decisions of the Public Protector, South Africa’s ombud-like Constitutional watchdog, whose ambiguously circumscribed powers have been the subject of much legal and political debate.
The point is that the court has sometimes stepped into the breach in making decisions which have been investor-friendly in their effect. Its support of equality before the law, support for holding South Africa’s rogue former president accountable in a court of law, its various endorsements of democratic and human rights, and its opposition to arbitrary decision-making all found favor with foreign and domestic investors. Unfortunately, some other decisions have been less enthusiastically received, such as those supporting black economic empowerment and employment equity (i.e., affirmative action), government intervention in the housing market, and the endorsement of the notorious Mineral and Petroleum Resources Development Act of 2003 (MPRDA). The latter effectively amounted to expropriation of mining rights, which under earlier laws were owned by the proprietor of the land to which they applied. The MPRDA means that such rights no longer inure to the owner, but, as explained by the Constitutional Court, “its commencement had the effect of freezing the ability to sell, lease or cede unused old order rights until they were converted into prospecting or mining rights with the written consent of the Minister for Minerals and Energy (Minister). It also had the deliberate and immediate effect of abolishing the entitlement to sterilise mineral rights, otherwise known as the entitlement not to sell or exploit minerals.”
The court held that the government was the custodian of all mineral rights, and any party could apply for the right to prospect on, and if successful, mine on the property in question. The court’s order was that the Act did not breach section 25 of the Constitution, as it did not constitute the acquisition of ownership by the government, such acquisition being an essential ingredient of expropriation as envisaged by section 25. In both the majority and minority judgments the judges were moved by the political objective of the act to redress economics injustices caused by apartheid, without expressing any concern for the importance of property, more in particular mining rights on property, to a properly functioning market economy.
It is of huge concern that the court seemed to show so little concern for the right of property. The essence of the right to property is that no outsider may interfere with, or deprive the owner of the enjoyment or exploitation of the property. Among other things, the court confirmed that no property owner any longer had the right to decide to “sterilize” mineral rights on his land, i.e., leave the land undisturbed at his option. With that, the right to undisturbed enjoyment of property was fatally compromised, effectively gutting the right in the case of any land that is conceivably the repository of minerals for which prospection can be undertaken. The decline of mining since 2002 is a matter of record.
So we should be concerned. The right to property is crucial to the functioning of the modern market economy. To give a sense of this, here is a table showing the average scores (by quartile) for the criterion “no expropriation without adequate compensation” allocated by the 2017/18 Rule of Law Index of the World Justice Project, which evaluated 113 countries, compared with their average per capita GDPs. The highest level of protection is in the first quartile, and the lowest in the fourth.
Countries with a high level of protection of property against expropriation clearly have more economic growth by far. Of course, private property alone will not ensure growth. But almost without fail, countries with high levels of private property protection also have generally free markets. The very definition of a free market is one based on private property and voluntary exchange of goods and services.
All is not lost. Significantly, the World of Law Justice Project and similar international bodies regard protection of property against expropriation without compensation as a human right, and integral to the rule of law. Courts of a number of jurisdictions regard such human rights as an axiomatic cornerstone of the rule of law.
Judge Edwin Cameron (one of the judges in the MPRDA case) has recently implied that he was concerned about the proposed amendment. He lay the blame in respect of section 25 at government’s door, for not using the existing powers under section 25 to expropriate land with compensation, which need not even be at market value. Judge Cameron is a voice of more nuanced reason in the Court. There are others. Whether they will sway what, judging by the MPRDA judgment, seems to be a majority leaning in the other direction, remains to be seen.
There is another way out, namely a political one. The new president, Cyril Ramaphosa, is a very ambitious, pragmatic and business-minded leader. He seems determined to make the economy work. He is one of the most skillful negotiators in public life. As a former business leader of enormous means, he could be under no illusion about the importance of the right to private property to the investment climate of the country. It is doubtful that the decision by parliament to institute a commission to investigate the amendment of section 25 to do away with compensation for expropriation, was his idea. The decision was taken by the National Executive Committee of the ruling party, a body consisting of several hundred party delegates from the various provinces, in December 2017. The same meeting also elected Ramaphosa, by a narrow margin, as the new leader of the party, to replace Zuma as party leader. Ramaphosa’s position is precarious. In his inaugural address as president of the country, he simply had to confirm the property decision.
Even so, Ramaphosa is bound to shore up his power base in the party in the next year. He has already stated that any amendment would not undermine agricultural productivity or endanger food security, and will aim merely to return land to original owners. He has invited a broad discussion on the proposal. He may well succeed in tying it up in procedural and substantive conditions or burying it in bureaucratic and legal tangles between now and the 2019 election. And possibly make it disappear altogether as it is overtaken by other priorities – or, who knows, even an outbreak of common sense.
Frans Rautenbach is a labor lawyer with a particular interest in legal policy, based in Cape Town, South Africa. He is the author of the book “South Africa can work”.