Perhaps the single biggest obstacle to developing infrastructure on a timely basis is acquiring the necessary land, particularly when this needs to be done on a compulsory basis. At the same time, there is a distressing tendency for governments to pass legislation without first adequately consulting the numerous parties likely to be impacted by it or learning from other governments’ experiences elsewhere.
Kudos, then, to the South African government’s Parliamentary Portfolio Committee on Public Works and Infrastructure for seeking input via its Dear South Africa programme on its Expropriation Bill (B23 – 2020) which will update the Expropriation Act 63 which dates back to 1975 in another era. No one pretends that this is easy; implementation and enforcement of the eventual law will be challenging; the scope for corruption is considerable; refinements to the process along the way will no doubt be necessary; but at least, they are trying.
Logie Group was approached for comment and offered some high – level pointers on the financial implications:
All governments need to have powers of eminent domain and the South African government duly does so in the 1996 constitution. But exercising these powers fairly calls for all of the following, some of which may need to be addressed beyond this bill:
The land in question needs to be identified. Are its boundaries clear? Has rightful ownership been established? Are all types of title included? (Freehold, leasehold, mineral extraction, water, wayleaves, maybe more). The Deeds Registry Act dates back to 1937. When title is informal (“unregistered” in SA), how informal is acceptable? Or can informal title first be formalised?
The rationale for expropriating that particular land needs to be explained. Why this particular route for a road, for example? (Projects need to be Properly Prepared – the other definition of PPP).
The Minister asks specifically about chapter 5 clause 12(3) of the draft bill which sets out when expropriation without compensation might be justified. This looks unduly broad in its scope and should apply only when the land effectively has a negative value. This is most likely to be the case when environmental clean – up is required. The cost of this can be estimated. (The bill mentions “heath, safety or physical risks” but only so as to deny any compensation at all).
An appeals process needs to be established. In this respect, the bill merely envisages a “competent court” but this needs to be (and be seen to be) independent and authoritative (i.e. specialist). Where possible, appeals need to be taken “offline” so as to not delay the actual purchase / development.
The amount of compensation on offer needs to also be explained. Calculating fair compensation is, of course, difficult especially at the beginning when there is little precedent to follow and where at the time no one may know what is a fair price. The bill presumes that compensation will be paid as cash up front but, alongside this, some form of risk sharing can also be offered. Properly structured, this could be fairer to both sides but the bill does not explore this.
A second reason for offering a structured alternative is that, when compensation is paid as cash up front, the total cost can quickly become unaffordable. Greater flexibility would make the cash component last longer. Examples of structured compensation include offering to swap the land with other land, sharing in profits once the land is redeveloped, etc. The bill should set out some guidelines for these.
Advising on how to manage government obligations such as these is what Logie Group does.
