One court case could break South Africa’s economy

If the government is allowed to expropriate land without compensation in South Africa, then the land might be free, but everyone in the country will pay the cost through a decline in living standards. 

The expropriation of land without compensation at market value will scare off investment, hobbling South Africa’s economic growth further.

In effect, it might be the final straw that breaks the camel’s back, with South Africa’s economy growing at an annual rate of 0.8% for the past decade. 

This is feedback from Sakeliga CEO Piet le Roux, who argues that market-based compensation is in everyone’s best interest. 

“We should all work very hard to contribute to making sure that market value is the compensation that is provided to the owners,” Le Roux told Newzroom Afrika. 

Le Roux was referring to the looming court case surrounding the expropriation without compensation of portion 406 of the Farm Driefontein by the City of Ekurhuleni in Gauteng. 

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.

“The cheapest way to expropriate land is at market value. If you go below market value, that is the most expensive way, as everybody pays a cost.”

“It means that everyone will be poorer, there will  be less development, and there will be social and political crises waiting for us.” 

As a result, it is important to ensure market-based compensation for expropriation by the state, regardless of the reason or purpose. 

“You have to start somewhere, and you start at market value. The City of Ekurhuleni started at zero and the company had estimations of market value,” Le Roux explained. 

“The City just says zero, so it is a politically-motivated decision. From Sakeliga’s perspective, it is crucial to maintain market value as the basis when the state decides to expropriate.” 

“Anything below market value is very expensive, because all property will then decrease in value and the owners of that property will share in that decrease.” 

Le Roux said this would also have ramifications for future investment, with companies and individuals unwilling to invest if their private property could be taken without the state paying market value. 

International impact

Le Roux not only warned of the chilling effect expropriation without compensation may have on international investment, but also the damage it will do to South Africa’s reputation. 

While the expropriation of property is a common practice globally, it is typically only initiated after other methods fail. Even then, property is purchased at market value after an extensive legal process. 

Freedom Front Plus leader Corné Mulder said that if the City of Ekurhuleni’s decision to expropriate land without compensation stands, it could set a legal precedent with severe consequences for South Africa. 

“The case raises serious questions about the ANC and President Cyril Ramaphosa’s truthfulness about the reality of expropriation without compensation,” Mulder said.

Ramaphosa said South Africa, like the United States, has always had expropriation laws to balance the need for public use of land with protecting property owners’ rights. 

“He openly denied that expropriation without compensation is taking place in South Africa to President Donald Trump,” Mulder said.

Mulder added that Ramaphosa was not playing open cards with President Trump regarding the issue of expropriation without compensation.

“The Freedom Front Plus will see to it that the US administration is thoroughly informed of the actual state of affairs,” he said.

“This serves as tangible proof that property rights in South Africa are by no means secure, regardless of the Constitution’s provisions.”

The Freedom Front Plus reminded President Ramaphosa of the conditions set by the Trump administration for restoring trade relations between South Africa and the US.

One such condition is that property may only be expropriated for market value following a proper legal process.

Economist and partner at Frans Cronje Private Clients, Bheki Mahlobo, said the issue of expropriation without compensation is central to why South Africa’s economy has stagnated. 

Policies such as this one make the country unattractive to investors who have the capital it needs to grow. 

“Currently, the most topical theme has been the relationship between South Africa and America, which is deteriorating,” Mahlobo said. 

“Fundamentally underpinning that decline in bilateral relations with the United States has been the issue of BEE and expropriation without compensation.”

“Certain individuals have benefitted from this regime and, at a broader scale, South Africa’s investment levels from other countries have declined,” Mahlobo said. 

“These countries, including the US, which has made the point most explicitly, have said that BEE is a form of taxation on the commitment of capital investment into the country. It is not only the Americans that are saying that.”