July 8, 2016

#LandGrabsInSA: Land ruling 'to rattle investors'

A landmark Land Claims Court judgment is set to change the handling of claims going forward, triggering warnings that investor confidence could be affected

" This judgment confirms that the government does not always have to pay the market value..."
Land claims have historically been a contentious issue and now the court has put paid to the idea that the market value of a property is the key factor to be considered.

This week Judge Thembeka Ngcukaitobi ruled in favour of Msindo Msiza, who had been embroiled in a 12-year legal battle with the Department of Rural Development following its failure to reach an agreement with the landowner on the farm where he worked and lived with his family.

Msiza, 60, had claimed 45ha of land of the 352ha farm that was bought by Dee Cee Trust in 1999 for R400,000.

Handing down judgment, Ngcukaitobi ordered that the state pay the landowner R1.5-million within 90 days and register the property in Msiza's name. This was despite the state's willingness to settle the claim at the market value of R1.8-million.

"Despite the willingness of the state to pay the market value of the property, I am not satisfied that the market value of the land, as agricultural [land], is just and equitable and reflects an equitable balance between the public interest and the interest of those affected by the expropriation," said Ngcukaitobi.

Constitutional law experts said the judgment could pave the way for the Constitutional Court to clarify how land claims should be handled, if the matter is referred to that court on appeal.

Section 25 of the constitution spells out factors to be considered in land expropriation. Previously, factors such as current use of the property, the history, the extent of direct state investment and the purpose of the expropriation were often considered secondary to the price of the property.

Farming and economic experts said the judgment would raise alarm bells for foreign investors and local landowners.

Theo de Jager, Chairman of SACAU (Southern African Confederation of Agricultural Unions) and president of PAFU (Pan African Farmers Union), said farmers might be reluctant to make infrastructure investments, such as dams and irrigation, if they believed they would not be compensated in a land claim.

The government had pushed for the Expropriation Bill to speed up land reform but, he said, this ruling would do the opposite and slow down the process.

"Farmers will challenge the validity of land claims far more because if they sell to the government they know they will not get the market value compared with if they had sold their property privately."

Free State University agricultural economist professor Johann Willemse, who lecturers on land evaluation, said one could not focus on the value of the bare land only.

"You must take investments in the property into account, especially when on average 40% of the value of the land comes from investments, such as infrastructure."

But he said he doubted the ruling would have a major effect on evaluations and expropriation negotiations, adding that: "People have a good idea of what is a fair value for land. That's all everyone is looking for - fair compensation."

Reacting to the judgment yesterday, University of KwaZulu-Natal professor Warren Friedman said: "The constitution lists five factors to be considered when dealing with land expropriation, but in the past 20 years, we have seen the market value being mostly considered by the court.

"The government has been paying out for market value through the willing buyer, willing seller policy. This was because it was easier to calculate the market value than the other factors. In most cases the market value was expensive. This judgment confirms that the government does not always have to pay the market value."

Legal Resources Centre lawyer Thabiso Mbhense, who represented Msiza, said: "We have been fighting for this for a long time and are happy with the outcome. This will help the state to determine the value of expropriated land."

The government recently extended the land claims deadline to 2019, giving residents who failed to make claims a chance still to do so.