The attempt last year to amend Section 25 of the Constitution represented a grave threat to whatever chances for future prosperity South Africa had.

In targeting for the first time a provision in the Bill of Rights, it set a terrible precedent by threatening constitutional protection. Some of its proponents even claimed that the Constitution in its current form would not prevent the ultimate policy goal, Expropriation without Compensation.

That the measure failed to pass deserves to be viewed with relief. But as we at the Institute of Race Relations have warned in the intervening period, this was at best a respite.

A Land Court Bill, currently before Parliament, seeks to place land (and land expropriation) matters into a specially created court. The Bill itself is intended to ‘promote land reform as a means of redressing the results of past discrimination and facilitate land justice.’  Its proposed design raises a very real danger of proceedings being loaded in favour of particular outcomes. For example, two lay assessors may be appointed to sit alongside a judge, and may overrule the latter on matters of fact. The Bill is silent on how the assessors will be appointed, and it is far from impossible that  activists hostile to land ownership would be in a position to preside over cases. On certain issues, such as whether ‘nil’ compensation should be awarded, or whether a given property has been abandoned, it is likely that the views of these assessors could be decisive.

   How to counter the Expropriation and Land Court Bills

In addition, there is the Expropriation Bill. President Ramaphosa has declared the government’s intention to pass the Bill into law this year. Dating back in its current iteration to 2019 (but with a policy lineage that extends back over more than a decade), it would establish a new regime for expropriation of property. Among other things, it defines expropriation – and so too, any entitlement to compensation – so as to require the state to take ownership of expropriated property.

This suggests that merely depriving an owner of something – without the state’s acquiring ownership in turn, as was the case with South Africa’s mineral resources under the custodianship provision of the Mineral and Petroleum Resources Development Act of 2002 – would not qualify as expropriation. This in turn would make a mass ‘custodial’ taking of a particular asset achievable without any requirement for compensation.

Move on property rights

Simply put, despite the Constitution holding for the moment, the mechanisms for proceeding with a move on property rights are being put in place.

At the same time, there has been a chorus of voices expressing harsh criticisms of the constitutional order, in part or as a whole. These voices include tourism minister Lindiwe Sisulu, KwaZulu-Natal premier Sihle Zikalala, former cabinet minister Ngoako Ramatlhodi as well as academics Professors Sipho Seepe and Eddy Maloka.

The basic assertion is that the malaise confronting South Africa arises from a lack of radicalism, this having been constrained by a timid compromise in the 1990s and the Constitution that embodied it.

Thus, Prof Maloka says that: ‘Our approach should not be piecemeal – about land, the judiciary, or this and that. Instead, we should be bold and decisive and overhaul the entire dispensation to align it with our times.’

Prof Seepe was more direct, attacking both the ANC and the state, claiming that ‘the post-1994 dispensation legitimised ill-gotten economic gains under apartheid.’ The ANC had been infiltrated, he went on to write, to the extent that it is ‘now embraced by even the most racist among our citizens’ (does this mean that the ANC is attracting large numbers of bigoted white voters..?), and ‘a state without any revolutionary content is a threat to our hard earned democratic dispensation.’

Sisulu denounced the judiciary as ‘mentally colonised’, while Zikalala proposed replacing the supremacy of the Constitution (and the law) with Parliamentary democracy. ‘We want to issue the call for us to debate whether it is not time to move away from absolute rule by the Constitutional Court to a situation where we have a parliamentary democracy in which the voice of the people who elected is supreme to all other voices,’ Zikalala declared.

Counterproductive

In a very real sense, this is an extension of the attempt to alter Section 25. It sees the constitutional order as the problem, not the counterproductive nature or impracticability of policy or its inept implementation. This is part populism, but arguably more fundamentally ideological.

Unsurprisingly, in all of this, land is a central motif. Thus, Minister Sisulu opines: ‘The land is where it all begins. And the law of the land makes or breaks.’ Prof Seepe asserts that land is fundamental to the true revolutionary posture whose absence he bemoans: ‘Land is at the core of any anticolonial struggle. Reclaiming the land would have been the first order of business. With the loss of the ideological narrative, Africans have no control of the future.’

In a similar vein, for Mr Ramathlodi, the Constitution is the culprit: ‘The essence of the 1913 Land Act retained under the New Constitution in section 25 must be reconsidered.’ 

Contained within all of this is the notion that with a more aggressive and assertive form of political mobilisation, with the removal on the limits on the state’s powers, veritable economic miracles are possible. (In 2018, President Ramaphosa claimed that EWC would turn the country into a Garden of Eden – an attempt at allegory that fell flat.) To quote Mr Ramathlodi: ‘In this regard, the developmental state must be activist and take out scissors to perform the necessary caesarean birth.’

Lyrical though that last comment is, it is also delusional. A good part of the reason for the disappointing outcomes of land reform – and support of small business, policing, education and so on – is precisely that the state is not up to the task. South Africa’s state is not developmental, although it certainly tries to be activist. The result, in practical terms, is a mixture of some dire laissez-faire neglect in some areas, and the constraints of an intrusive and often extortionate government apparatus in others.

Actually, in this respect Prof Seepe is partially correct when he says of the ANC that ‘instead of using the state as an instrument at the service of the poor, it does the opposite.’ But he fails to note that much of the blame for this can be placed squarely at the door of the ANC’s conscious decision to politicise the state administration in the 1990s, thereby preventing a meritocratic, professionalised civil service from emerging. In so doing, it destroyed the prospect of a developmental state.

Broad ideological thrust

Such actions were, however, in keeping with the broad ideological thrust of the ANC and with its National Democratic Revolution. One might describe them as the natural outgrowth of the revolutionary impulse.

South Africa’s future needs a good deal less ideology, and a good deal more pragmatism. This is readily apparent to anyone who cares to look, but is unfortunately not entirely clear to our political and intellectual elites.

The disparaging of the constitutional order is intrinsically a threat to property rights, and to land ownership, both on the part of those who own and those who aspire to do so. Indeed, a successful land reform programme holds value for all of us – but it will not be delivered by the ideologues and venal individuals who are using it to frame their arguments.  

The EWC agenda, and all that surrounds it, remains very much in place, and the present is no time for complacency.

South Africa has a globally competitive agribusiness sector and a highly developed value chain with well-established economic institutions and techniques. 

A large share of the 2017/18 maize crop has already been delivered to commercial silos, hence the weekly producer deliveries have slowed in the recent weeks. In the week of 05 October 2018, maize producer deliveries amounted to 31 986 tonnes, down by 62 percent from the previous week. About 55 percent of this was white maize, with 45 percent being yellow maize. 

South Africa is divided into a number of farming regions according to climate, natural vegetation, soil type and farming practices.

Prof. Ashok Chapagain has recently been appointed as senior professor in the department of agricultural economics in the faculty of natural and agricultural sciences at the University of the Free State (UFS).

Many people are worried about the uncertainty surrounding the discussion about land reform policy in SA. However, some allow the fear to get ahead of themselves. I have heard folks saying “farmers stopped planting” in SA, possibly due to uncertainty caused by land reform.

South African new-truck market has increased overall sales by 2.3% year-on-year for the first nine months of the year, defying a slew of negative economic indicators.

One major challenge that emerged this past week that directly impacts South Africa's agriculture is labour-related tensions at Transnet. The logistics utility declared a force majeure at its port operations last week, citing an illegal strike. There is a risk that disruptions could escalate this week. The weekend papers cited statements by the representatives of the South African Transport and Allied Workers Union (Satawu) and the United National Transport Union (Untu) that workers are demanding a wage increase of a minimum of 10%, slightly down from the initial demand of 13,5%. However, this is still far from the current offer by Transnet at 4%. Against this, Satawu said over the weekend that it has served Transnet with a 48-hour notice that its members will be striking from today. Disruptions to the flow of goods to and from other countries could negatively impact South Africa’s food, fibre and beverages sector, depending on its duration.

While agricultural production tends to be seasonal, South Africa has diverse agriculture, and there is large trade activity each quarter of the year. For example, exports of food, fibre and beverages in Q4 2021 amounted to $US2.8bn, 23% of the total value of exports in that year. Some of the products that dominated the export activity were citrus, maize, apples and pears, wine, grapes, nuts and berries, wool, soybean oil, apricots, cherries and peaches. Not all these exports were facilitated through Transnet. Still, the point is that the fourth quarter of each year is a high export activity quarter. Given that agricultural production has generally been resilient, we expect that there are substantial volumes of exports of various products scheduled for this month.

Similarly, South Africa imports a range of food products in the fourth quarter of the year. For example, in 2021, during this period, we saw imports of wheat, palm oil, rice, spirits, poultry meat, sunflower oil, and soybeans oilcake, amongst various products. The total imports of food, fibre and beverages in the last quarter of 2021 amounted to US$1,9 billion. In the same way, as the exports, labour-related disruptions would disrupt this import activity.

Importantly, we are not outlining these trade values to signal that this will be the direct loss if there is a strike. Instead, we are outlining the importance of trade in South Africa's food, fibre and beverages sector. Any costs would ultimately depend on the scale and timeframe of disruptions. The focus should be on supporting both parties to find common ground. Indeed, the whole logistics industry is the bloodline of South Africa's export-oriented agriculture or food, fibre and beverages sector.

In the export business, especially of high-value products, the reliability of South African suppliers is key in a highly globalized competitive world. Therefore, any potential prolonged delays would negatively impact the business activities of the South African suppliers to various markets in the world. Different agricultural groupings and commodity associations have already been vocal in the weekend newspapers about the possible negative impact of the Transnet strike on their businesses and the agricultural economy.

Aside from the immediate strike concerns, the logistics industry requires improvements, from roads, rail and ports, to support a growing agricultural sector. Road networks have deteriorated severely across South Africa over the recent past, weighing on agribusinesses and farming entities. Notably, some are using the capital resources which could have been allocated to business expansion, and thus long-term employment, to maintain and build roads. This is a public sector function and shouldn't be covered by private businesses. Similarly, there are long-standing challenges with rail and ports. Fortunately, on this part, Transnet has been working closely with agribusinesses, commodity associations and farmer groupings to refine their agricultural strategy that responds to the sector's needs and devise a long-term solution. This is crucial as South Africa already exports half of its agricultural produce. Any improvements in production going forward will have to be linked to potential export markets, and the logistics industry will be at the heart of this process.

In sum, the current labour disputes at Transnet are an important risk for South Africa's food, fibre and beverages sector. The fourth quarter of the year is as busy as any other quarter in terms of trade. Therefore, stoppages would negatively affect both imports and export activities. The actual costs of it, however, will depend on the duration of the strike. We hope a solution is found quickly between Transnet and the labour unions to minimize disruptions to trade.

 Weekly highlights

SA agriculture machinery sales paint a mixed picture in September 2022

After a solid run since the start of the year, South Africa’s agricultural machinery sales painted a mixed picture in September 2022. For example, tractor sales were up by 4% year-on-year (y/y), with 777 units sold. Meanwhile, the combine harvester sales were at 17 units, down 19% from September 2021. Still, a monthly decline in the combine harvester sales does not change the fact that agricultural machinery sales have been on solid footing since the start of 2020.

These strong sales over this period indicate a primary agricultural sector still in a reasonably better financial condition and continues to invest in movable assets. As we have previously argued, when farmers have a good year, allied industries benefit from spending the financial gains or the produce of the farming businesses. Agricultural machinery is one such industry that benefited from farmers' spending in 2020, 2021 and the first nine months of 2022.

The farmers, specifically grain and oilseed producers, expanded their area planted in the past two years and maintained a decent area in 2022. Weather conditions were favourable, specifically in the past two seasons, resulting in a large harvest for two consecutive seasons.

This was also when commodity prices remained elevated, supported by global events such as dryness in South America and Indonesia and rising demand for grains and oilseeds in China. Had it not been for higher global agricultural prices, the local grain and oilseed prices would have softened due to large harvests, and that would have weighed down the profitability. Therefore, these past few years' financial gains went to agricultural equipment improvement, among other farm activities. This year, the factors above continued to support grain and oilseed prices, along with the Russia-Ukraine war, which disrupted the supplies.

Importantly, this year the reasonably higher input costs and rising interest rates did not reduce farmers’ spending on machinery as we initially anticipated. In a way, this speaks also to the farmers’ confidence about the 2022/23 production season which has recently started.

Data releases this week

As always, we start the week with a global focus. On Tuesday, the United States Department of Agriculture (USDA) will publish its Weekly US Crop Progress data. In these data, our focus is on the US crop-growing conditions as the season progresses, and the harvest has started. This data also helps us form a view of the crop quality in the US. In the previous release, in the week of 02 October 2022, about 52% of the maize crop was rated good/excellent, which is the same level as the previous week. Importantly, this is down by 7% from the same week a year ago. This general decline is mainly explained by the drier weather conditions in some States over a few couple of months.

Moreover, about 20% of the crop had already been harvested, slightly behind last year's pace of 27% in the same week. Meanwhile, about 55% of the soybean crop was rated good/excellent, also unchanged from the previous week. This is down by 3% from the previous year's rating in the same week. In terms of the harvest, about 22% of the crop had already been harvested, compared with 31% in the same week last year.

In addition, on Wednesday, the USDA will release its monthly flagship report, the World Agricultural Supply and Demand Estimates report. This report will provide an updated view of the world grains and oilseeds supply and demand conditions, and notable adjustments on it could be "market moving". The USDA will release the US Weekly Export Sales data on Thursday.

On the domestic front, on Wednesday, SAGIS will release the Weekly Producer Deliveries data for 07 October 2022. This data will help us get insight into the size of the crop as harvesting has been recently completed in most regions of the country. In the previous release of the week of 30 September, about 13,6 million tonnes of maize had already been delivered to commercial silos, out of the expected harvest of 15,3 million tonnes. In the same week, about 2,1 million tonnes of soybeans had already been delivered to commercial silos out of the expected harvest of 2,2 million tonnes. Moreover, 831 876 tonnes of sunflower seed had already been delivered on the same day out of the expected harvest of 845 550 tonnes.

On Thursday, SAGIS will publish the Weekly Grain Trade data for 07 October 2022. In the previous release on 30 September 2022, which was the 22nd week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 128 998 tonnes. About 37% of this went to Taiwan, 31% to Mexico, 22% to Japan, and the rest to the Southern Africa region. This brought the total 2022/23 exports to 1,8 million tonnes out of the seasonal export forecast of 3,5 million. This is slightly down from 4,1 million tonnes in the past season due to an expected reduction in the harvest.

South Africa is a net wheat importer, and 30 September was the 53rd week of the 2021/22 marketing year. The total imports are now 1,6 million tonnes, far surpassing the seasonal import forecast of 1,5 million tonnes (and the 2020/21 marketing year imports of 1,5 million tonnes). The major wheat suppliers are Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the US. As we stated in our previous notes, if one looks into South Africa's wheat imports data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% yearly. Next week, the focus will be on the new marketing year of 2022/23.

Yes, land reform in South Africa is an urgent issue; the landless will almost certainly not be put off much longer for at least some movement in their direction.

Nearly a week has passed since South Africa’s 2018 jobs summit. The two-day gathering produced some useful agreements between the social partners: government, organised labour and business (essentially, big business).

It seems like the global agricultural observers have not fully factored in the possible effect of a weak El Niño in their grain production forecasts, specifically on South Africa.

October 16 marked World Food Day, commemorating the founding of the United Nations Food and Agriculture Organization in 1945. Across the world, this day offers an opportunity for countries to assess their food security conditions and efforts to boost agricultural production. One of the measures that some often use to evaluate the food security condition of each country relative to the world is The Economist's Global Food Security Index, which Corteva sponsors. This latest index ranks South Africa at 59 out of 113 countries, an improvement from the 70th position in 2021. This places South Africa as the most food-secure country in the African continent, followed by Tunisia at 62nd.

This improvement is commendable. When looking at the index scoring's technical position, it becomes clear why South Africa's food security ranking has improved. South Africa's scoring came in at 61,4, up from 57,8 in 2021. This shows that South Africa's progress in the Global Food Security Index is not merely because other countries have regressed, particularly since the start of the Russia-Ukraine war, which increased global food prices but that there has been an actual improvement in its own underlying conditions.

The Global Food Security Index comprises four subindices, namely; (1) food affordability, (2) food availability, (3) food quality and safety, and (4) sustainability and adaption. The affordability and availability subindices carry a combined weighting of two-thirds of the total index. The affordability subindex includes the change in average food costs, agricultural trade, food safety net programs, and funding for food safety net programs. Meanwhile, the availability subindex includes the sufficiency of supply, agricultural infrastructure, and political and social barriers to food.

In 2022, South Africa experienced a mild deterioration in the food affordability subindex of 7 points. Meanwhile, the rest of the other subindices improved significantly. This decline in the affordability subindex is unsurprising as the country has witnessed a broad acceleration in consumer food price inflation since the start of the year. South Africa's consumer food price inflation averaged 8,0% y/y in the first eight months of 2022, from 6,5% over the same period in 2021. Still, what is worth emphasizing is that this challenge speaks to the rising cost of food in an environment of generally high unemployment.

Notably, the rise in food prices is a global phenomenon and not unique to South Africa. The dryness in South America, which negatively affected the crops in the 2021/22 production season, combined with growing demand for oilseeds and grains in China, and higher shipping costs, and recently, the Russia-Ukraine war, are some of the factors that have underpinned the global food price inflation surge. This, in turn, lifted prices in South Africa, despite the large domestic agricultural harvests in the past three seasons.

Nevertheless, global food prices have come off the levels we saw in the months immediately after Russia invaded Ukraine. For example, in September 2022, the FAO's Global Food Price Index was down by 1% from the previous month. This marked a sixth monthly decline and was underpinned by the deterioration in the prices of vegetable oils, sugar, meat and dairy products. This means that affordability for all countries has far improved from the third quarter of the year. Still, the current price levels are higher than in 2021. For example, the FAO's Global Food Price Index is still 6% up from September 2021. Another key point to emphasize is that food prices were already elevated in 2021 due to disruptions in the supply chains, drought in South America, and increased demand for grains in China, amongst other factors.

A major issue to keep in mind when observing global agricultural indices, such as the Global Food Security Index, is that subjectivity can never be fully eliminated from the authors' judgment. Resource constraints can hinder objective data collection on the ground in each country, and they sometimes rely on blueprint models that might not be site specific. Sources of bias can stem from inconsistency in data quality, frequency and reliability across all countries. The weightings and rankings are also tricky because they must be tailored to suit different socio-economic contexts.

Still, the key message is that South Africa is in a better place regarding food security and leading the continent. This does not mean there should be complacency. South Africa will need to continue improving food security through expansion in agricultural production and job creation in various sectors of the economy. As we have previously stated, at a technical level, the ideas of expanding agriculture and agro-processing capacity to boost growth and job creation were well established as far back as in the National Development Plan in 2012. They were again highlighted in the 2019 National Treasury paper and, most recently, in the 2022 Agriculture and Agro-processing Master Plan.

These include expanding agricultural activity in the former homelands and government land, enhancing government-commodity organizations' partnerships in extension services, investment in the network industries (water, electricity and road infrastructure), port infrastructure, and state laboratories. Some interventions are more regulation-focused and therefore do not require significant capital spending by the government, although these still need institutional capacity building. Such regulatory interventions include modernizing regulations such as the Fertilizers, Farm Feeds, Seeds and Remedies Act 36 of 1947, with which many role players in agriculture continue to express dissatisfaction. The Agricultural Product Standards Act's enforcement to ensure that the Department of Agriculture, Land Reform, and Rural Development leads the implementation and does not assign it to third parties is another critical intervention that could be explored. Regarding regional focus, Limpopo, KwaZulu-Natal and the Eastern Cape, the most food-insecure provinces, also have vast tracts of underutilized land. These provinces should be a priority in agricultural development plans. With a commercial focus where conditions permit, agriculture improvement would help job creation and household food security in South Africa.

Weekly highlights

Kenya’s decision to open the door to GM maize is a good omen

In the first week of October 2022, Kenya lifted the ban on the cultivation and importing of genetically modified (GM) white maize. This change is in response to growing food insecurity in the country. Kenya has struggled with drought in the recent past and remains a net importer of maize. Still, this adjustment doesn’t mean the borders are automatically open, there will be an assessment of each GM trait by the Kenyan Biosafety Authority before actual imports and cultivation can occur. Assuming some of this scientific legwork has already been done, we could see imports start in the next few months or a year.

If the work can be completed in months, this could save Kenya some trouble. In the 2022/23 season, Kenya needs to import a substantial volume of maize, estimated at about 700 000 tonnes. This is roughly unchanged from the previous season, which also posted poor domestic production. In the 2021/22 season several sub-Saharan African countries, including Zambia, Tanzania, Zimbabwe and South Africa, had ample maize harvests. This made it easy for them to meet Kenya’s import needs, with Tanzania and Zambia leading the way. However, this year things are different. Tanzania’s maize harvest is down roughly 16% year on year to 5.9-million tonnes due to sparse rainfall at the start of the season combined with armyworm infestations and reduced fertiliser usage in some regions because of prohibitively high prices.

The fall in production and firmer domestic consumption mean Tanzania will have less maize to export. Tanzania’s available maize for export is about 100 000 tonnes. This is well below the previous season’s exports of 800 000 tonnes, which saved Kenya when the country was most in need of maize. The country in the region with the most abundant supply of maize at present is South Africa, whose maize exports for the 2022/23 season are forecast at 3,5-million tonnes. South Africa struggled to access the Kenyan market for many years because of its ban on imports of GM products. But this change in regulations offers a new opportunity for South African maize exporters (provided the Kenyan Biosafety Authority gets its ducks in a row soon).

In future, the liberalisation of the Kenyan seed market should benefit its farmers in the same way as in South Africa, Brazil and the US. In fact, the sentiment towards the cultivation and importation of GM crops is changing worldwide, partly because of the global food crisis and countries’ efforts to boost domestic production. For example, at the beginning of June the Chinese National Crop Variety Approval Committee released two standards that clear the path for cultivating GM crops. Now that this hurdle has been cleared, the commercialisation of GM crops in China is a real possibility. The EU is also reviewing its regulations on cultivating and importing GM crops, an essential step in a region that has long had an anti-GM stance.

South Africa was an early adopter of GM technologies. We began planting GM maize seeds in the 2001/2002 season. Before their introduction, average maize yields in South Africa were about 2,4 tonnes per hectare. This has increased to an average of 5,6 tonnes per hectare in the 2020/2021 production season. Meanwhile, the sub-Saharan African maize yields remain low, averaging below 2,0 tonnes per hectare. While yields are also influenced by improved germplasm (enabled by non-GM biotechnology) and improved low and no-till production methods (facilitated through herbicide-tolerant GM technology), other benefits include labour savings and reduced insecticide use, as well as enhanced weed and pest control. With Kenya struggling to meet its annual maize needs, using new technologies, GM seeds and other means should be an avenue to boost production in future.

Data releases this week

We start the week with a global focus, and today the United States Department of Agriculture (USDA) will publish its Weekly US Crop Progress data. In these data, our focus is on the US crop-growing conditions as the season progresses, and the harvest has started. This data also helps us form a view of the crop quality in the US. In the previous release, in the week of 09 October 2022, about 54% of the maize crop was rated good/excellent, which is the same level as the previous week. Importantly, this is down by 6% from the same week a year ago. This general decline is mainly explained by the drier weather conditions in some States over a few couple of months.

Moreover, about 31% of the crop had already been harvested, slightly behind last year's pace of 39% in the same week. Meanwhile, about 57% of the soybean crop was rated good/excellent, also unchanged from the previous week. This is down by 2% from the previous year's rating in the same week. In terms of the harvest, about 44% of the crop had already been harvested, compared with 47% in the same week last year. In addition, the USDA will release the US Weekly Export Sales data on Thursday.

On the domestic front, on Wednesday, SAGIS will release the Weekly Producer Deliveries data for 14 October 2022. This data will help us get insight into the size of the crop as harvesting has been recently completed in most regions of the country. In the previous release of the week of 07 October, about 13,7 million tonnes of maize had already been delivered to commercial silos, out of the expected harvest of 15,3 million tonnes. In the same week, about 2,1 million tonnes of soybeans had already been delivered to commercial silos out of the expected harvest of 2,2 million tonnes. Moreover, 832 610 tonnes of sunflower seed had already been delivered on the same day out of the expected harvest of 845 550 tonnes.

On Thursday, SAGIS will publish the Weekly Grain Trade data for 14 October 2022. In the previous release on 07 October 2022, which was the 23rd week of South Africa's 2022/23 maize marketing year, the weekly exports amounted to 58 514 tonnes. About 42% of this went to Japan, 40% to Taiwan, and the rest to the Southern Africa region. This brought the total 2022/23 exports to 1,9 million tonnes out of the seasonal export forecast of 3,5 million. This is slightly down from 4,1 million tonnes in the past season due to an expected reduction in the harvest.

South Africa is a net wheat importer, and 07 October was the first week of the 2022/23 marketing year. The total imports are now 44 406 tonnes, from Australia, Germany and Poland. The seasonal import forecast is 1,53 million tonnes, slightly down from 1,58 million tonnes in the previous season. In the 2021/22 season, the major wheat suppliers are Argentina, Lithuania, Brazil, Australia, Poland, Latvia and the US. As we stated in our previous notes, if one looks into South Africa's wheat imports data for the past five years, Russia was one of the major wheat suppliers, accounting for an average share of 26% yearly.

The Expropriation Bill guarantees that expropriation can only be used as a last resort after all other attempts to buy the property have failed. The extent of expropriation is therefore not determined by any political party’s land reform targets.

So much has been written and said regarding expropriation and the Expropriation Bill over the past number of years, and yet, there still seem to be many misconceptions about the bill and what it is trying to achieve.

The possibility of government or some organ of state taking private property against the will of the owner understandably instils fear in and resistance from individuals and companies. The state is powerful and the idea of the state targeting one’s property for expropriation leaves people feeling very vulnerable.

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Having said that, expropriation is internationally entrenched as a legitimate part of the functions of a state, and is recognised as such, even by the United Nations.

In the Encyclopaedia Britannica, “expropriation” is defined as follows: “expropriation implies legal process and just compensation for goods or property taken for public use, with judicial redress as a remedy for inadequate compensation. Expropriation is not ordinarily a method of supplying the common needs of the government but is directed toward the satisfaction of specific government objectives.”

 
Because expropriation is such a drastic intervention, its application is limited and its use qualified by international and national law. The right of the property owner to be adequately compensated for losses incurred by expropriation is recognised in international law and finds constitutional protection in many jurisdictions.

International context
Every government in the world can resort to expropriation as a means to acquire property for certain public purposes. The Food and Agricultural Organization (FAO) of the United Nations published a guide on international best practice for expropriation in 2009. In the document the FAO explains why expropriation or compulsory acquisition is important.

It states: “Sustainable development requires governments to provide public facilities and infrastructure that ensure safety and security, health and welfare, social and economic enhancement, and protection and restoration of the natural environment. An early step in the process of providing such facilities and infrastructure is the acquisition of appropriate land. That land may not be on sale at the time it is required. In order to obtain land when and where it is needed, governments have the power of compulsory acquisition of land: they can compel owners to sell their land in order for it to be used for specific purposes.”

Compensation and fair procedure lie at the heart of expropriation. The right not to be arbitrarily deprived of property and the right to fair compensation in the event of expropriation is protected in one form or another in international human rights instruments such as the United Nations’ Universal Declaration of Human Rights, the European Convention on Human Rights and the African Convention on Human Rights (African Charter on Human and Peoples’ Rights).

The modern approach to compensation is based on the principle of equality in the bearing of public burdens. This is a principle adopted by French, German and American law.

According to this approach, “where one or more individuals must bear a sacrifice (being the loss of property) for the common good, their individual and excessive burden should be compensated by the community (thus the State).”

The point of departure of the document is that forced acquisition of property is a necessary power for the state but that measures should be in place to prevent abuse. The guide requires, among other things, clear and transparent procedures for forced acquisition of property, and compensation that will ensure that the affected persons are not worse off after expropriation than they were before.

It further states that affected persons must not only be compensated for the loss of land but also for improvements made and for the disruption that accompanies expropriation. Subject to a few issues that have consistently been raised by Agbiz, the Expropriation Bill seems to incorporate these elements.

The South African Constitution
The Constitution deals with expropriation and compensation in section 25(3). Sections 25(2), (3) and (4) are of relevance and provide as follows:

“Property may be expropriated only in terms of law of general application–

(a) for a public purpose or in the public interest; and

(b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

(3) The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including–

(a) the current use of the property.

(b) the history of the acquisition and use of the property.

(c) the market value of the property.

(d) the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

(e) the purpose of the expropriation.

(4) For the purposes of this section–

(a) the public interest includes the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources.”

There was a failed attempt from 2018 to 2021 to amend section 25 of the Constitution. This means that section 25 remains as it is and that all expropriations and expropriation legislation must be compliant with these provisions. This is very important, as the test in section 25(3) for compensation requires that it must be just and equitable and also requires that the court is the final arbitrator in any disputes regarding expropriation and compensation.

The Valuer-General attempted to implement regulations regarding compensation that were not completely aligned with the Constitution and as a result had to settle a dispute in the Melmoth restitution claim in KwaZulu-Natal and lost a case regarding the Moloto community restitution claim in Gauteng.

The Valuer-General tried to reduce the concept of just and equitable compensation to a fixed formula and bring in a concept of “current use value”, which in many cases reduced the compensation amount offered to the landowner drastically.

The Land Claims Court found that: “In the absence of any other information and satisfactory evidence upon which just and equitable compensation can be assessed, this Court is constrained to conclude that market value is, in the circumstances of this case, just and equitable compensation as the landowners contend.”

The courts will only consider factors in coming up with just and equitable compensation where there is proof of the quantum of such factors and if it is justifiable to take such factors into consideration. In this case there was no concrete proof that “current use value” was a relevant factor.

Businesses and property owners understandably seek to pin compensation to predefined norms such as “market value” while radical calls have been made for a discounted value to be paid, including no compensation. Neither option aligns with international standards nor our own constitutional framework.

Compensation is a normative judgment that looks at the subjective circumstances of the owner in addition to the objective value of the property itself to strike a fair balance between the public interest and the owner.

Advantages of enacting the bill
Firstly, it must be emphasised that we do have a current Expropriation Act on the statute books and in many respects the bill is an improvement on the 1975 Expropriation Act. It provides for a uniform process that must be followed when property is expropriated and remedies many of the deficiencies contained in the current act.

For instance, it provides for extensive consultation with affected parties, including financial institutions that hold bonds over the affected property and persons who have rights to the land but are not landowners. It also provides for a series of offers and counter-offers in an attempt to promote agreement between the owner, bond holder and authority on the amount of compensation. Should it be impossible to reach agreement, then compensation must be decided upon by a court of law.

It also contains many checks and balances, including a provision that there must be an attempt to settle before the state decides to expropriate and an opportunity to object to the intention to expropriate. This is absolutely vital as it cements the role of expropriation as a last resort.

In many respects, this provision allays fears that the state could go on a large-scale expropriation drive akin to Zimbabwe or Venezuela that threatened food security.

In fact, this provision calls into question any economic modelling done to try to predict the impact that the Expropriation Bill could have on property prices, investments or food security as there is simply no way to determine how often expropriation will be used.

The bill guarantees that expropriation can only be used as a last resort after all other attempts to buy the property have failed. The extent of expropriation is therefore not determined by any political party’s land reform targets but rather by the degree to which landowners and the state hold out in negotiations or choose to make a genuine attempt at reaching a fair settlement.

South Africa’s Expropriation Bill poses a threat to property rights for the future

Simply put, there is no way to accurately predict the impact that expropriation will have because there is no way to predict how often it will be used.

Challenges posed by the bill:
Nil rand compensation
One of the concerns regarding the Expropriation Bill is that it provides in clauses 12(3) and (4) for the possibility of nil rand compensation in certain circumstances. The clauses are worded as follows:

“(3) It may be just and equitable for nil compensation to be paid where land is expropriated in the public interest, having regard to all relevant circumstances, including but not limited to–

(a) 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 appreciation of its market value;

(b) 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;

(c) notwithstanding registration of ownership in terms of the Deeds Registries Act, 1937 (Act No 47 of 1937), where an owner has abandoned the land by failing to exercise control over it;

(d) 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; and

(e) when the nature or condition of the property poses a health, safety or physical risk to persons or other property.

(4) When a court or arbitrator determines the amount of compensation in terms of section 23 of the Land Reform (Labour Tenants) Act, 1996 (Act No 3 of 1996), it may be just and equitable for nil compensation to be paid, having regard to all relevant circumstances.”

While there is certainly criticism to be levelled at this wording and some of the categories listed, it is still subject to the test of whether it is just and equitable. Awarding little or no compensation will have to be justifiable in an open and democratic society and the state will have to show exactly how and why it arrived at nil rand compensation.

It remains unclear what the impact will be of listed specific circumstances on compensation, but many of the country’s best legal minds have consistently argued that it is unnecessary and short sighted to list specific circumstances in a framework bill that will have wide application.

Any attempt to award nil compensation will have to be justified and a calculation would need to be made using the values afforded to all relevant factors to show how a nil rand value was arrived at.

The definition of expropriation
Constitutionally speaking, there are two concepts that are relevant when it comes to the taking of property, namely deprivation and expropriation. Deprivation is the wider concept, expropriation is a form of deprivation. Only expropriation attracts compensation. That is why the definition of expropriation is so important – if an action by government that has an impact on property falls outside the definition of expropriation, it will be regarded as a deprivation and no compensation will be payable.

The definition in the Expropriation Bill is very narrow and has a strong focus on the acquisition of the property by the state. It does not consider the loss that the property owner suffers. The definition reads as follows:

“‘Expropriation’ means the compulsory acquisition of property by an expropriating authority or an organ of state upon request to an expropriating authority, and ‘expropriate’ has a corresponding meaning.”

This definition may have the effect of excluding all instances where the state does not acquire the property but nevertheless limits the owners’ rights to such an extent that it becomes of no value. It opens up the possibility of all sorts of regulatory limitations on property with no compensation and of the state acquiring property on behalf of third parties, while now acquiring the property for itself.

It should be noted that this cannot be done at the discretion of an official but only through the enactment of laws or the implementation of a law that places limitations on the use and enjoyment of property by an owner.

Internationally, the concept of “expropriation” has been developed by the courts on a case-by-case basis over a considerable length of time. The majority of these jurisdictions have opted for the courts to retain the discretion as to when government action which encroaches upon an owner’s right to use and enjoy the property will amount to an expropriation. Ideally this should also be the case in South Africa.

The definition of expropriation should be scrapped from the bill to allow our courts to consider each case that comes before them on its own merits and decide whether the deprivation amounts to an expropriation or not.

Conclusion: the bill on balance
There is no doubt that South Africa needs a new Expropriation Act. It is important to note that the Expropriation Bill is merely a procedural bill, it grants no powers of expropriation to anyone other than the minister of public works and infrastructure and only for purposes connected to his/her mandate.

Powers to expropriate for various purposes already exist in more than 200 other pieces of legislation and these powers may be extended by legislation such as the proposed Redistribution Bill. Stopping this bill will not take away the state’s powers to expropriation as this originates directly from the Constitution. Should the bill fail to pass, the powers of expropriation will still exist but the processes, checks and balances in this bill will fall by the wayside.

It is very likely that there will be a lot of litigation over the nil rand compensation clauses and eventually jurisprudence will hopefully develop regarding what is just and equitable in this regard and what is not.

The definition of “expropriation” and how that will be applied and interpreted does remain a cause for concern. 

Annelize Crosby is Head of Legal Intelligence at Agbiz.

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