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No need to panic about land expropriation proposals

12 Mar 2018

Government's plans to expropriate land without compensation should not deter prospective buyers from investing in residential property, legal professionals say.

Although a motion was passed in Parliament to forge ahead with these moves, the process is still only a bill and not an act of Parliament, and so will first need to pass through "the various procedures and checkpoints before it becomes law that is binding".

This is according to law firm Goldberg & De Villiers Incorporated which adds that all laws must be in line with the constitution.

"Expropriation of property without compensation directly contradicts Section 25 of our constitution," the firm states.

President Cyril Ramaphosa's State of the Nation address (Sona) highlighted the possibility of land expropriation without compensation, and while many fixed-property owners assumed this would only apply to agricultural land, others point out that it could in fact apply to all types, including residential.

But Goldberg & De Villiers maintains that any mechanisms of expropriation will also need to consider all stakeholders, which includes the greater community, the property owner, and the financier of property, which in the case of residential property, is most likely to be the banks holding the mortgages.

"To expropriate residential property without compensation to the holder of the mortgage would undermine the business confidence in the property sector, which contradicts many of the key points of the Sona.

"In addition, it would be necessary to change the Land Restitution Act, and presently there are no proposed amendments (or even draft amendments) to either this act, or the constitution."

But the real problem with the land expropriation, according to Berry Everitt, chief executive of the Chas Everitt International Property group, is that it does not seek to speed up the transfer of land to any individual or group of owners, but puts more land in the hands of the State, which he says has an "extremely poor track record when it comes to land reform and redistribution over the past 24 years".

"Most South Africans understand and support the urgent need to address historic injustices and achieve a much more equitable distribution of land, property ownership and wealth.

"But unfortunately, this motion has come with no plan attached about how the gross inefficiencies and corruption that have dogged the process so far will be addressed and fixed - or what the State intends to do differently going forward, using the considerable power and resources it already has at its disposal."

Therefore, Everitt says, the motion could easily create the impression that it is just the first move in a longer- term plan to nationalise all property in South Africa, and for everyone from farmers to flat-dwellers to have to lease their land from the State.

This would destroy one of the pillars of the economy because banks would no longer be able to use land as security.

"There would also be no underlying security for home loans, so anyone who wanted to buy a home would need to pay the full purchase price in cash. This would deprive millions of ordinary South Africans of the only opportunity that most of them have to build up their personal wealth and financial security for their families."

Consequently, Everitt says, he does not believe that nationalisation is the intention of the governing party, or that there is any need to panic in reaction to the expropriation motion - "not least because President Ramaphosa has emphatically stated several times that expropriation without compensation will only be supported when it poses no threat to agricultural production, food security or the financial institutions".

The land expropriation without compensation motion has not only earned critical national attention, but also international attention, says Dr Anthea Jeffrey, head of policy research at the South African Institute of Race Relations (IRR). The Wall Street Journal warned that seizing private property "has produced misery everywhere it has been tried. South Africans don't need more of that".

South Africans do not want it either, Jeffrey says.

"Comprehensive opinion polls commissioned by the IRR have repeatedly shown that most black South Africans have little interest in land reform. In the IRR's 2016 field survey, only 1% of black respondents (down from 2% the previous year) said that ' more land reform' was the 'best way to improve lives'.

"By contrast, 73% of black people saw 'more jobs and better education' as the 'best way' for them to get ahead."

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