South African Land Expropriation: Is Compensation Required, and to Whom?

Joshua Raftis

Vol. 40 Associate Editor

On July 31st, South African President Cyril Ramaphosa announced that he would support amending the South African Constitution to allow for the expropriation of land without compensation. [1] An important question that this announcement raises is whether South Africa’s international obligations require the country to provide compensation for the private property that it seizes, and if so, to whom? History: When Apartheid ended in 1994, 87% of South Africa’s land was owned by white citizens, who in turn made up only 10% of the nation’s total population. [2] To address this disparity, the new South African government adopted a “willing buyer, willing seller” program. In theory, the government would pay fair market value to any white landowners who were willing to sell some or all of their property, which the government would then lease out to poor black South African farmers. [3] However in practice this program has largely failed its intended purpose, and as of 2017, roughly 72% of all of agricultural land in South Africa continued to be owned by the nation’s white minority. [4] Ramaphosa’s announcement comes after a particularly turbulent period in which wide scale protests, an economic recession, and a massive corruption scandal lifted him into the Presidency. [5] Upon assuming office Ramaphosa faced pressure to deliver comprehensive reforms not only from the streets, but also from the more progressive wing of his own party, and from the increasingly powerful far-left Economic Freedom Fighters Party. [6] As a result, in May of this year Ramaphosa supported the opening of an inquiry into revising Section 25 of the South African Constitution, which governs the process of expropriating property, to allow for expropriation without compensation. [7] However, it is an accepted principle of international law that a country cannot simply implement domestic legislation or amend its constitution to avoid its international obligations. [8] That being said, the amount of protection for private property afforded by International Law varies greatly between that offered to citizens of the expropriating state, and that offered to foreign nationals. In fact, the intersection between international law, and South Africa’s various Bilateral Investment Treaties (BITs) have created a three-tiered system of protection. On the bottom, South Africa’s farmers receive almost no protection. Slightly better off, new investors in South Africa will benefit from the requirement of providing “appropriate compensation” under customary international law. Lastly, long-term investors in South Africa will be the most protected under the terms of their various BITs, usually receiving full “prompt, adequate and effective” compensation. South Africa’s Farmers Lack Protection from Expropriation Under International Law The Universal Declaration of Human Rights provides that “everyone has the right to own property alone as well as in association with others” and that “no one shall be arbitrarily deprived of his property.” [9] However, there remains significant dispute over whether this is solely a prohibition on extrajudicial takings, or whether under certain circumstances compensation is required for government expropriation of property. For example, the American Convention of Human Rights states that “No one shall be deprived of his property except upon payment of just compensation,” [10] whereas the African Charter on Human and Peoples Rights limits the right to compensation to just “spoliation” or wrongful encroachments on property not in the furtherance of the public interest. [11] Attempting to bridge the divide, the United Nations Food and Agriculture Organization (FAO) issued a report in 2008 on best practices for land expropriation, which included providing compensation “based upon principles of equity and equivalence.” [12] That being said, the report intentionally refused to take a stance on the legality of compulsory expropriations with less than full compensation, simply stating that such state action was still highly controversial. [13] In practice there is wide diversity in how states provide compensation to their own citizens, ranging from systematic takings with failure to compensate in countries like Venezuela and Zimbabwe to countries like the United States, which has rigorous legal requirements for compensation. As a result, it cannot be said that there is any consistent State Practice or Opinio Juris surrounding the obligation of States to provide compensation after expropriating the property of a national. With this in mind, it appears that South Africa’s white farmers will be left with little recourse to receive compensation for their land, should their government decide to amend the nation’s constitution. Customary International Law Will Provide Some Protection to Foreign Investors: Foreign investors in South Africa benefit from a more robust range of protections under customary international law than South Africa’s farmers. States claim that international custom requires providing one of two differing standards of compensation. The first, as summarized in the “Hull Doctrine,” and generally supported by developed states, is that expropriation must be met with “prompt, adequate and effective” compensation. [14] The second standard, which is favored by developing states, is the much more fluid “appropriate compensation” standard. [15] It is worth pointing out that there are disputes about what “appropriate” means. For example, in INA Corporation v The Government of the Islamic Republic of Iran the Iran-US Claims tribunal maintained that ‘appropriate compensation’ should be interpreted as ‘fair market value,’ [16] whereas, the U.N. Conference on Trade and Development in 2012 issued a guidebook on expropriation which stated that, under the “appropriate compensation” standard, less than full compensation may be justified “when it is fair in the circumstances of the case.” [17] What is not disputed, however, is that under customary international law some form of compensation is required. Long-Term Foreign Investors Are Protected Under South Africa’s BITs: Perhaps more comforting to foreign landowners are the protections offered by the nearly fifty BITs that South Africa has entered into over the previous years. [18] These agreements provide protections above and beyond that of customary international law, including an enshrinement of the Hull Doctrine’s requirement of prompt, adequate, and effective compensation. [19] While South Africa’s previous administration had terminated many of its BITs, those BITs frequently contain Sunset Clauses, which continue to protect individuals who invested in South Africa while they were in place. [20] As a result, while pre-existing investors have been “grandfathered in” under the terms of their nation’s respective BITs, new investors will instead have to rely upon customary international law, and South Africa’s Protection of Investment Act, which ominously states that the expropriation of private property will be governed by Section 25 of the South African Constitution. This is the very same section that is currently up for revision. [21] Conclusion: Under the three-tiered system elaborated above it is likely that longstanding foreign land owners will be the most insulated from land expropriations by the South African government. This is because the terms of their corresponding BITs not only afford them full Hull-Doctrine levels of protection, but also provide a clear venue outside of South Africa where they can seek a remedy should South Africa refuse to provide any compensation. On the other hand, prospective foreign investors might be scared away from South Africa by the flexibility of the “appropriate compensation standard” and by the absence of a clear venue for arbitration under customary international law. Lastly, it is clear that South Africa’s own citizens will bear the brunt of any government land expropriation scheme, as their rights to compensation appear to begin and end with those enumerated in the South African Constitution.

[1]Qaanitah Hunter, ANC President Ramaphosa announces move to amend SA Constitution, Daily Maverick (Aug. 1, 2018), https://www.dailymaverick.co.za/article/2018-08-01-anc-president-ramaphosa-announces-move-to-amend-sa-constitution/. [2]Cherryl Walker & Alex Dubb, The Distribution of Land in South Africa: An Overview, in Fact Check No. 1: Land Reform, 1 (Rebecca Pointer ed.) [3] Ruth Hall, Land reform how, and for whom?: Land demand, targeting and acquisition in Another Countryside?, 63, 81 (Ruth Hall ed.) [4] A Conversation with Cyril Ramaphosa, Council on Foreign Relations (Sept. 24, 2018), https://www.cfr.org/event/conversation-cyril-ramaphosa. [5] Associated Press, Corruption scandal brings new president to South Africa, CBS News, (Feb. 15, 2018), https://www.cbsnews.com/news/south-africa-cyril-ramaphosa-president-jacob-zuma-african-national-congress/. [6] Andrew Harding, South Africans’ Anger over land set to explode, BBC (May 30, 2018), https://www.bbc.com/news/world-africa-44278164. [7] Peter Leon, Jonathan Ripley-Evans, et al., Expropriation of Land Without Compensation, Herbert Smith Freehills (July 25, 2018), https://www.herbertsmithfreehills.com/latest-thinking/expropriation-of-land-without-compensation. [8] Vienna Convention on the Law of Treaties art. 27, May 23, 1969, 1155 U.N.T.S. 331 [9] G.A. Res. 217 (III) A, Universal Declaration of Human Rights art. 17, (Dec. 10, 1948). [10] Org. of Am. States, American Convention on Human Rights art. 21, (Nov. 22, 1969). [11] Org. of African Unity, Charter on Human and Peoples’ Rights art. 14, (June 27, 1981). [12] Food and Ag. Org. of the United Nations, Compulsory Acquisition of Land and Compensation, at 23 (2008) [13] Id. at 11 [14] Alice Ruzza, Expropriation and Nationalization, P.2, Oxford Public International Law, (July 2017), http://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e1541. [15] G.A. Res. 1803(XVII) Permanent Sovereignty Over Natural Resources, P.4, (Dec. 14,1962) [16] INA Corp. v. Iran, 161 Iran-U.S. Cl. Trib. Rep. 385 (Aug. 13, 1985). [17] United Nations Conf. on Trade and Dev., Expropriation, at 41 (2012). [18] International Investment Agreements Navigator: South Africa, Investment Policy Hub, http://investmentpolicyhub.unctad.org/IIA/CountryBits/195, (last visited Oct. 29, 2018 11:40pm). [19] Dreyer Swart, Legal Protection of Foreign Investment in South Africa at 30, (June 2016) (L.L.M. Dissertation, University of Pretoria). [20] Id. at 61. [21] Id. at 57. The views expressed in this post represent the views of the post’s author only.