The recommendation for criminal charges is particularly applicable to Mr Anoj Singh and Mr Koko, who by false pretences led Eskom, through the officials who processed the R659 million payment, to believe that the R659 million payment was in the nature of pre-payment for coal, as was the R1.68 billion pre-payment, later converted into a guarantee, when in truth and fact they knew that the prepayment and the guarantee were needed to enable the Guptas to complete and save the sale of share transaction.
Section 25 of the South African Constitution strikes a delicate balance between the interest of existing property owners and the interests of society as a whole. Because property is a social good, because the majority of South Africans were denied the right to acquire property and because many South Africans were dispossessed of their property during the colonial and apartheid eras, section 25 of the Constitution makes it clear that expropriation of property is permissible to effect land redistribution or to achieve some other public purpose or for the public interest.
But because many property owners use their land productively, paid market value for the property, owe money on bonds taken out to pay for such property or need access to property for housing purposes, section 25 prohibits the arbitrary deprivation of property as well as the expropriation of property without payment of just and equitable compensation which has either been agreed upon or which has been decided by a court of law.
Like other rights in the Bill of Rights, property rights are therefore not absolute. But what happens if the state needs to expropriate a persons property for the purpose of either land reform or for some other public purpose like building a road or a dam, but the property owner refuses to agree on the selling price at which the property is to be expropriated.
Currently, the provisions of the Expropriation Act – an Act which was adopted by the apartheid government — states that the amount of compensation and the time and manner of payment need not be determined before expropriation takes effect. Transfer of ownership and possession of the affected property may therefore take place before that determination. The obligation to pay compensation is a condition of expropriation, but not a prerequisite for its operation.
In other words, the law as it stands does not require the state to follow a “willing-buyer willing-seller” policy and the state may expropriate property even when the seller has not yet agreed to sell or, indeed, is refusing to sell at the price offered by the state — provided that a seller may always approach a court who has the final say on the appropriate selling price.
Today the Constitutional Court, in the case of Haffejee NO and Another v Ethekwini Municipality, handed down judgment in a case in which it had to decide whether the provisions of the Act which allows for expropriation (even before a price has been agreed upon by the parties or the court has made a final determination on the price) is constitutionally valid. The constitutionality of other aspects of the Expropriation Act was not challenged, so the judgment today deals with a fairly narrow legal issue.
The court, in a unanimous judgment authored by justice Johan Froneman, pointed out that the starting point for constitutional analysis, when considering any challenge under section 25 for the infringement of property rights, must be section 25(1). The interpretation of the section must promote the values that underlie an open and democratic society based on human dignity, equality and freedom. International law must be considered and foreign law may be considered and pre-constitutional expropriation law must be approached circumspectly. The historical context in which the property clause came into existence should also be kept in mind when determining the scope of section 25.
The court pointed out that allowing compensation to be fixed only after expropriation has occurred “burdens the property owner and triggers repellent memories of pre-constitutional arbitrary dispossessions”. At the same time, making the fixing of an expropriation price a pre-condition for expropriation would burden the State unduly. After analysing the wording of section 25, the Court decided that the latter consideration should weigh more heavily than the former. It thus found that the challenged provision of the Expropriation Act complied with the requirements of section 25 and summarised the findings of the court as follows:
(a) The provisions of section 25(2)(b) do not require that the amount of compensation and the time and manner of payment must always be determined by agreement or by the court before expropriation under section 25(2);
(b) Generally the determination of compensation, in accordance with the provisions of section 25(3), before expropriation will be just and equitable;
(c) In those cases where compensation must be determined after expropriation, this must be done as soon as reasonably possible, in accordance with the provisions of section 25(3);
(d) Eviction following expropriation may not take place unless agreed upon between the parties to the expropriation or in the absence of agreement, under court supervision; and
(e) In disputed cases of eviction the courts must grant orders that ensure just and equitable outcomes in accordance with the provisions of sections 25(3) and 26(3) of the Constitution.
In this case, the owners of the property to be expropriated rejected an offer to expropriate the property at the market value of that property. The property in dispute originally formed part of a larger property, which had been earmarked for expropriation by the Municipality for the purposes of a canalisation programme. Its objective was to minimise the effects of flooding of the river. By refusing the offer of a market related price, the owners of the property were obviously hampering the implementation of this programme.
The case did not deal with the question of what would constitute a just and equitable price for the property. In cases where a property owner fails to agree on the selling price, a court will have to determine the selling price taking into account all the relevant circumstances. However the judgment confirms that a property owner would not be able to delay the expropriation of property indefinitely or for a very long time by refusing to accept a reasonable offer for that property.
As the principles quoted above demonstrate, the court was nevertheless aware that a property owner needed protection to prevent unreasonable delays in the payment of the expropriation price and to prevent unreasonable evictions from the property. A court will always have the final say in such matters to ensure that the property owner whose property is expropriated is protected from abuse.
The judgment also reminds us that the debate about the need for amendments to the Constitution to speed up land reform is not informed by a proper understanding of the relevant constitutional provision. An amendment would only be necessary if the principle requiring just and equitable compensation for expropriated property is to be abolished, something which very few people have suggested.