South Africa

This is what happens when you take land without paying for it

Daily Investor • 6 February 2025

South Africa’s new Expropriation Act states that the government can take land without paying for it in certain instances. This has been tried before, with devastating consequences.

The new Expropriation Act 2024 was published in the Government Gazette on 24 January 2025, after President Cyril Ramaphosa signed it into law.

The Act regulates the procedure for expropriating property for a public purpose or in the public interest.

It also identifies instances where “nil compensation may be just and equitable for expropriation in the public interest”.

Simply put, the Expropriation Act gives details on when the state or state organs can take land without paying for it.

“It may be just and equitable for nil compensation to be paid where land is expropriated in the public interest,” the Act states. This includes –

Where the land is not being used, and the owner’s main purpose is not to develop the land or use it to generate income but to benefit from the appreciation of its market value.

Where an organ of state holds land that it is not using for its core functions and is not reasonably likely to require the land for its future activities in that regard, and the organ of state acquired the land for no consideration.

Where an owner has abandoned the land by failing to exercise control over it despite being reasonably capable of doing so.

Where the market value of the land is equivalent to, or less than, the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land.

However, these are not the only reasons. The new Expropriation Act clearly states that expropriation without compensation is “not limited to” these instances.

Many stakeholders, including public interest groups, political parties, and the agricultural community, strongly opposed the new Act.

Even US President Donald Trump entered the debate, saying, “South Africa is confiscating land and treating certain classes of people very badly.”

Trump said he would cut off all future funding to South Africa until a full investigation into the issue has been completed.

What happens when you take land without paying for it

The opposition to the new Expropriation Act and expropriation without compensation is due to its devastating economic impact.

Property rights are a cornerstone of an economy, providing individuals with the security to invest in land, businesses, and other assets.

When property rights are at risk, a country quickly loses investment, and the economy suffers. In many cases, the economy will collapse.

A good example of the impact of taking land without paying for it comes from Zimbabwe, which, like South Africa, launched land reform after independence in 1980.

The Lancaster House Agreement redistributed farmland from white Zimbabweans to black Zimbabweans to empower the black African majority.

The agreement prohibited the forced transfer of land, and for the next 20 years, the Zimbabwean economy and agricultural sector did well.

However, this changed in 2000 after President Robert Mugabe began a more aggressive policy, which resulted in the taking of land without compensation.

What followed was expropriations marred by violence and intimidation, with farmers fleeing their land or face being killed.

The domestic banks, which held billions of dollars worth of bonds on liquidated properties, collapsed, and the country faced hyperinflation.

Agricultural output plummeted, leading to instances of starvation and famine among Zimbabwe’s population.

The government responded by printing excessive amounts of money to cover budget deficits, triggering hyperinflation.

By 2008, inflation reached an estimated 89.7 sextillion per cent, rendering the Zimbabwean dollar worthless.

Citizens resorted to bartering and using foreign currencies like the US dollar, which is still the case today.

Unemployment in Zimbabwe rose to 94%, forcing many citizens to flee to South Africa in search of work and a better life.

By 2009, Zimbabwe no longer had a functioning modern economy. Its once excellent education system collapsed and having electricity became the exception instead of the norm.

The country never recovered from the economic disaster, which started when the government condoned taking land without paying for it.

Today, there is essentially no currency in the country, and many Zimbabweans struggle to get or afford basic necessities.

Most Zimbabwean shops trade in rand or US dollars, but customers cannot get change and must buy products for the exact amount.

Simply put, Zimbabwe is a failed state. It went from a fantastic country and the breadbasket of Africa to a place where people struggle to survive.

It is, therefore, understandable that many stakeholders vowed to fight South Africa’s expropriation without compensation to avoid the Zimbabwe case repeating itself.