The government expropriated a R30 million property without any compensation

South Africa’s first case of expropriation without compensation for a government housing project is heading to court.

The City of Ekurhuleni in Gauteng province has expropriated a 34-hectare property called portion 406 of the Farm Driefontein without compensation.

This case tests the limits of Section 25 of the Constitution as the city government refuses to pay any compensation for the land.

Six years after the initial notice of expropriation in February 2019 the matter is now scheduled for court-directed mediation in October and an 18-day trial in February 2026.

At the time of expropriation, the owner was applying for development rights, and the property was valued at no less than R30 million.

However, this is merely the lower end of the scale. Independent valuations since then have ranged as high as R64 million.

“If market-related compensation is not restored, the case will herald an economic, political, and social crisis in South Africa,” Sakeliga said.

Since losing possession of its property in 2019, the former owner, Business Venture Investments 900, had gone to extraordinary lengths to seek an amicable resolution to overturn the offer of nil compensation.

However, with all other avenues exhausted and millions already spent in legal fees, lost development opportunity, and management time, it is now preparing for trial.

In addition to the owner’s attempt at recourse, Sakeliga is taking legal, political, diplomatic, and business-coordination measures to prevent the expropriation without compensation.

“The case demonstrates what the ANC and other advocates of the new Expropriation Act of 2024 intend to achieve,” Sakeliga said.

They argue the ANC’s aim is the extensive expropriation without compensation of both agricultural and urban land.

This is achieved through a reliance on a combination of arbitrary decisions and lawfare, couched in language of public interest.

The state’s emerging modus operandi can be broadly summarised as follows:

• First, a state entity identifies land the expropriation of which could somehow be claimed as being “in the public interest” (e.g. for housing projects or land redistribution).

• Based on this alleged “public interest” the state entity then denies that any compensation is payable and unilaterally takes possession of the properties.

• With ownership transferred, the state entity then refuses to engage further the former owners, on whom now rests the onus to challenge the compensation decision with years of litigation, millions in legal fees, and unwanted public exposure.

In the Driefontein case, the city said “believes its offer of nil compensation is just and equitable and was arrived at after having shown that the equitable balance favours the interest of the public.”

Based on a “substantive consideration of social justice and the lived experiences of those who are landless and subjected to inhuman living conditions in informal settlements,” it concluded that market value has no bearing on the matter.

It even alleged that the owner suffered “no financial loss as a result of the expropriation” and that, because the land was supposedly held for speculative purposes, it did not qualify for compensation.

Since the test case was conceived when the Expropriation Act of 1975 was still in effect, the owner invoked its provisions to secure compensation.

However, in response to the owner’s claim for compensation, the City filed a counterclaim, seeking an order that the 1975 Act is unconstitutional and that Section 25 of the Constitution of South Africa permits expropriation without compensation.

“If the Driefontein expropriation without compensation is left to stand, it would have far-reaching consequences,” Sakeliga said.

Economically, valuations for all similar properties would have to be adjusted downward, constituting a loss to all direct and indirect interests in such properties.

As loan-to-value ratios of collateralised property decline, ripple effects will be felt throughout financial markets.

Uncertainty of property ownership has wide-ranging and deeply harmful effects on land stewardship, development, and trade, with knock-on harms to all productive economic and social land use.

Politically, one should expect severe strain on the current coalition government, as well as within political parties in the coalition or those aspiring to be in future local and national coalitions.

Moreover, foreign political scrutiny will escalate sharply, causing a crisis of legitimacy in the international arena.

Socially, allowing this expropriation without compensation to stand would quickly invite other state entities in South Africa to attempt the same and worse, and would embolden the organisers of illegal land invasions to unprecedented degrees.