South Africa Land-Price Court Ruling Seen Deterring Investment

  • Ruling sees market value not considered in land expropriation
  • Anything that hurts property rights is negative: economist

A ruling by a South African judge saying the state must pay a landowner less than the ground’s market value in an expropriation claim may deter further investment by farmers, a Barclays Africa Group Ltd. economist and the biggest industry lobby group said.

A Land Claims Court judge ruled this week that the Department of Rural Development must pay a farm owner 1.5 million rand ($102,000) for 45 hectares (111 acres), less than the 1.8 million-rand market value of the ground over which a worker lodged a claim, the Johannesburg-based Times reported Friday.

The claimant, who lived and worked on the land, had been in a 12-year legal battle with the department after it failed to reach an agreement with the landowner, it said. The government had been willing to pay the owner the market price, it said.

South Africa’s National Assembly in May passed legislation that would allow the government to expropriate property without having to pay compensation at market prices. The Expropriation Bill allows the state to seize property in the public interest or for public use and pay the owner “just and equitable” compensation. The state wants to change land-ownership patterns that were skewed in white people’s favor during apartheid rule, which ended in 1994.

“It will put the agricultural sector in dire stress, you will stop seeing growth,” said Ernst Janovsky, the head of agribusiness at Johannesburg-based Barclays Africa, said by phone Friday. “Anything that breaks down security values, property rights, is a deterrent” for investment, he said.

Policy Uncertainty

Spokespeople at the Department of Land Reform weren’t immediately able to comment on Judge Thembeka Ngcukaitobi’s ruling when contacted by phone.

Both South Africa’s Constitution and the new bill require that just and equitable compensation be made, Annelize Crosby, a legal adviser at the AGRI SA lobby group, said by phone. In arriving at the amount to be paid, the market value and the extent of state subsidies are among factors that must be considered, she said.

Market value “can be easily established,” she said. That the judge arrived at an amount other than market value doesn’t in itself indicate a trend because each case would be judged on its own merits. Still, farmers “have been frustrated” by the policy uncertainty, Crosby said.

The law would force banks to raise mortgage costs or reduce or withhold loans, the Banking Association of South Africa said in a written submission to Parliament’s Public Works Committee, which held hearings last year.

“Farmers are concerned that they may invest and if they get expropriated for whatever reason, that they will not be able recover what they have invested,” Crosby said.

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