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Real estate experts baffled by ANC’s expropriation pronouncements ahead of #sona2020

As South Africa continues to reel under the most devastating economic privation the country has experienced in its 26 years of democratic rule, property and legal experts are confounded by the ANC’s pronouncements on land expropriation that will undoubtedly cause further erosion of investor confidence immediately ahead of the President’s 2020 State of the Nation Address.

The ANC’s National Executive Committee caused the massive brouhaha at its first lekgotla of the year, announcing after the meeting that it intended to exclude the judicial system from all decisions regarding land expropriation without compensation. 

Instead, and in direct contradiction to the precepts of the South African Constitution, it proposed ring-fencing these decisions within the executive. 

Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty says given the already rock-bottom foreign investor confidence in the country, the ANC’s announcement defies both logic and sense.

“The South African economy is losing billions of rands as the power utility staggers from one crisis to the next at precisely the same time as our national airline has effectively imploded.

“We’re teetering over the precipice of international junk status and the last thing this country needs is a neon sign telling foreign investors that any investment in fixed assets in South Africa could be stripped on a whim without compensation or recourse in the courts. 

“We’re effectively hanging out the ‘closed for business’ sign at precisely the moment when we most need the government to be stepping up to the plate.”

Joff van Reenen is Lead Auctioneer and Director of High Street Auctions, South Africa’s top real estate auction company that works primarily with investment funds, REITs, multi-national corporates and financial institutions to reorganise, streamline or strategically grow their portfolios across industrial and commercial investment properties, as well as development land. 

Van Reenen says: “This time last year the President noted in the State of the Nation Address that the state through the Department of Public Works has a property portfolio of more than 93 000 buildings and more than 1.9 million hectares of land.

“He vowed at the time that land will be released from this portfolio to address the issue of human settlements. 

“The government is by far the largest land owner in South Africa and has for decades had within its power the ability to address much of the human settlement issues in South Africa, yet seems determined to press ahead with its plan to effectively invalidate one of the three pillars of constitutional access which has been guaranteed to all citizens.

“Much of our company’s clientele resides abroad and we’re already fielding uncomfortable questions on this issue that we are unable to answer in any satisfactory manner. The ANC’s decision to pursue this course of action defies logic when it’s prevailing message to the electorate is that we’re committed to attracting international investment into the country.”

After the ANC’s lekgotla last month President Cyril Ramaphosa said in a statement: “We are encouraged that the Lekgotla endorsed the recommendation that the power to determine the quantum of compensation for land expropriation should reside in the executive.”

Specialist property attorney David Dewar agrees that the ANC’s lekgotla announcement is both worrying and – in his view – unconstitutional. 

“The courts can simply not be excluded from this. The decision also has the effect of violating international treaties that the ANC signed on behalf of South Africa, protecting property rights. The decisions taken at the lekgotla will hurt our reputation internationally. 

“There are a number of fairly complicated legal arguments to be made as to the constitutionality of removing judicial access from the land issue, but The Constitutional Court probably sets it out best on its website, www.concourt.org.za.”

Dewar refers specifically to the court’s explanation of its function within the government, which is quoted as follows: “A crucial function of a constitution – and one of the classic features of democracies – is the division of power among the three pillars of government.

“Constitutions protect democracy by separating state power into three arms. The legislature (parliament, the provincial legislatures and local councils) makes the laws and monitors the executive; the executive (the president, deputy president and ministers) makes policy, proposes laws and implements laws passed by the legislature; and the judiciary tries cases and administers justice.

“The judiciary is unique in that it is not elected but is independent. This means no one can interfere in the work of the Constitutional Court and the other courts in the country.

“In practice this means each arm of the state keeps watch over the power of the others. The courts can judge the actions of the legislature and the executive but cannot pass laws. The legislature can make laws but cannot hand down judgments or take executive action.

It’s not easy to keep these in balance. Often the challenge is to ensure that the executive does not wield its authority without being contained by the other branches.”

Dewar says government would be better placed to manage the land it already has in hand, so that the issue of housing and access to land is addressed in a constitutional manner that is fair, equitable and does not challenge the rights of the citizenry.

“Almost all the land that has been expropriated so far has been kept by government; claimants are allowed to use it but they do not own it, cannot use it to leverage finance and cannot sell it if they are not good farmers, nor can they lease it to a good farmer. 

“That cannot be seen a redistribution nor addressing the land issue. It’s a disaster. 

“There are better and more constitutional options than what the ANC is presenting. This much power should not be in the hands of one arm of government; we have separation of powers in The Constitution for a reason, to protect the rights of citizens.

“The courts need to be able to review and oversee this process or we will find ourselves in a situation where a democratically elected government has become the very entity that undermines the rights of its own populace.”

“As the president confirmed in SONA last year, the government is the biggest land owner in SA. Why not give away that land to the people, charge rates for it, move the cost of maintaining it into private hands, so the land moves from being a cost to country to something that can generate income for the state? This would mean that no expropriation without compensation would be needed. Our rights as citizens would remain intact and the objectives of the constitution would be honoured.”

 

 

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