Cyril Ramaphosa says government can use new expropriation law to take buildings without paying

President Cyril Ramaphosa said they can use South Africa’s new Expropriation Act to take abandoned buildings in cities’ central business districts without paying.

Ramaphosa made these comments following a visit to the Gauteng province, where he conducted an oversight mission ahead of the G20 Summit.

The President slated the state of Johannesburg, where the G20 Summit will be held, which is rapidly collapsing.

“It is a painful sight to go through the city centre and see the deterioration,” he said, adding that the situation can be fixed.

“Today, you have many abandoned buildings. Buildings that have either been hijacked and are not paying rates and taxes.”

He said these abandoned and hijacked buildings could become investment vehicles where South Africans can be accommodated.

“These abandoned buildings, where the owners have run away, should be subjected to the law we have just passed, expropriation, even without compensation,” he said.

“These buildings should be taken and turned into living accommodation,” adding that this strategy aligns with the constitution and the Expropriation Act.

Ramaphosa did not provide details on what caused many buildings in the Johannesburg city centre to become abandoned or hijacked.

This is the first time Ramaphosa clearly stated that the Expropriation Act could be used to take properties other than land without compensation.

To date, many people have focused on the Expropriation Act’s use to take farms without paying market-related prices for them.

However, many experts warned that the law can be applied to any property, including buildings or companies.

Ramaphosa’s latest comments confirmed that the government intends to use the Act to take various properties, potentially without payment.

This aligns with the warning from political scientist Frans Cronje, who said the Act allows the government to take any property and pay less than its market value.

He said this was the biggest threat the Expropriation Act poses and that land expropriation and nil compensation are red herrings.

The government explained that this Act aligned expropriation legislation with the Constitution and outlined how and on what basis expropriation can be conducted.

The state and most other stakeholders focussed on land expropriation with nil compensation to “promote inclusivity and access to natural resources”.

However, this is not the main threat. “You see media reports about the land reform act, referring to the Expropriation Act. It is nothing of the sort,” he said.

The new expropriation legislation will allow the state to seize any fixed or movable property for less than its market value.

“When you do that, you gravely weaken property rights. This is a big move away from the previous Act,” he said.

The previous Act compensated owners whose property was expropriated based on market value and for financial loss.

“A valuation expert would value the property, and the court would agree on how much you would be paid,” he explained.

“With the previous Act, property rights were secure because market values are an objective measure to judge compensation.”

However, the new Expropriation Act dilutes market value considerably. It adds other subjective factors, like national interest.

“Something like national interest can mean anything in the calculation on how much someone must be compensated for their property,” he said.

Under the new Expropriation Act, it is impossible to say how much a person will be paid if their property is expropriated.

“It is maddening that the discussion around the Expropriation Act is centred around land and nil compensation,” he said.

“The core problem and heart of the Expropriation Act is hardly understood across South Africa’s economy.”

New Expropriation Act’s impact on South Africa’s economy

Cronje said the Expropriation Act would, in practice, prevent South Africa from attracting the new investment it needs to raise the ratio of fixed capital formation to GDP.

Cronje added that black economic empowerment (BEE) is essentially an upfront tax on capital entering the country, further deterring foreign investment.

“In a country like South Africa, fixed investment to GDP should be between 25% and 30%. Today, it is sitting at 15%,” he said.

He said the Expropriation Act, which deteriorates property rights and BEE, means South Africa will not raise the fixed investment number to 25%.

This, in turn, will hamper economic growth, which will not reach 4% to 5% from the current rate of between 1% and 2%.

“We will not increase the rate of job creation to a point where South Africa can significantly reduce unemployment,” he said.

Cronje said when the President of the United States warns a country that their stance on property rights and BEE will make them unsuccessful, they should hear him out.

He said most South African organisations criticised President Donald Trump’s warnings instead of engaging positively with the United States.

“Many organisations turned on the United States, telling them they don’t know what they are talking about and that they are not interested in hearing them out any further,” he said.

South Africa’s Ministry of International Relations and Cooperation responded by saying that Trump’s order lacks factual accuracy.

It added that the order fails to recognise South Africa’s profound and painful history of colonialism and apartheid.

“We are concerned by what seems to be a campaign of misinformation and propaganda aimed at misrepresenting our great nation,” it said.

Cronje said these responses showed why South Africa is in a dismal economic situation, with record unemployment and poor economic growth.

South Africa’s failure to recognise the severely negative impact of things like the Expropriation Act is immensely damaging the country.