Authored By: Maake Rector Khutso
University of Fort Hare
Abstract
The legacy of colonial and apartheid land dispossession is a key socio-economic problem that South Africa faces today. The government of South Africa enacted the Expropriation Act, which brings into consideration the much-debated zero compensation in specific cases as part of striving to bring about expedited land reform. In this article, the examination to be enforced is on the issue of whether Section 12(3) of the Expropriation Act can be subjected to a constitutional test in the wake of Section 25 of the Constitution of the Republic of South Africa, 1996. In particular, the analysis of the Eighteenth Amendment Bill failure, the difference between deprivation and expropriation according to the cases between First National Bank (FNB) and Agri SA, and the doctrine of fraus legis. The article will prove that the notion of zero compensation is constitutionally permissible when used in a strictly narrow sense.
Introduction
The fact that the 1913 Act created a reserve for black South Africans and denied them any chance of acquiring or leasing property outside their territory, which constituted a small part of the country, cannot be overemphasized, but it caused long-lasting bruises to the socio-economic development of the country. The establishment of constitutional democracy in 1994 necessitated the rectification of these wrongs pursuant to Section 25 (“Property Clause”) of the Constitution of the Republic of South Africa, 1996. In fact, Section 25 acknowledges property as an essential right, but the state is burdened with control over property as well as the reasonable action of land reform, which includes restitution of land in certain cases.
Despite the constitutional obligation to the land reform, the realization of the same since the year 1994 was pathetically low compared to expectations. By 2025, approximately 3.5 million hectares were compensated through measures, rather than handing over the areas to farmers with little change in rural people’s livelihoods. South Africans were unhappy with the willing-buyer, willing-seller model, and the topic of Expropriation Without Compensation (EWC) became a hot debate. The Constitution Eighteenth Amendment Bill on constitutionalizing EWC did not require a super majority in the National Assembly to pass, missing its light of day. Thus, the South African Parliament resorted to regular laws and enacted the Expropriation Act that replaces the 1975 one, bringing in the idea of zero compensation in Section 12(3).
This article aims to critically analyze the provision of the Expropriation Act, which is Section 12(3). Specifically, the question with which this article will be concerned is whether this provision contravenes the requirement of just and equitable compensation as stated by Section 25(3) of the Constitution, or whether it is an unlawful violation of property rights, a situation referred to as fraus legis in public law. This article argues that zero compensation is subject to a condition only when strictly applied to specific, rational circumstances, ensuring that the scales of justice balance the public interest in land reform against the fundamental rights of property holders. It does this by examining significant Constitutional Court jurisprudence, such as First National Bank (FNB), Agri SA, and Maledu.
Constitutional Framework: Section 25, the Property Clause
To figure out the constitutionality of the Expropriation Act, it is important to understand the structure of the Constitution in Section 25 first. Section 25 does not allow absolute property rights; it controls the ability of the state to intervene in relation to the rights of property. In the landmark case of First National Bank of SA Ltd t/a WesBank v. Commissioner, South African Revenue Service (FNB), the Constitutional Court confirmed a methodological approach to Section 25, making a distinction between the concepts of deprivation under Section 25(1) and expropriation under Section 25(2).
Ackermann J in FNB says that the interference with the use, enjoyment, or exploitation of private property is a deprivation. A deprivation is only constitutionally valid if it is enacted in terms of a law of diverse application and is not “arbitrary.” The law does not give sufficient reason for the specific deprivation or is procedurally unfair, which leads to arbitrariness. Deprivation is a subdivision of expropriation. To be an expropriation, deprivation must be of a nature that involves the state buying property to serve a public purpose or in the public interest and must be compensated.
Section 25(3) stipulates that compensation should be paid in a fair and reasonable amount, time, and manner that shows a fair balance between public interest and those who are affected. The five non-exhaustive factors included in this balancing act by the Constitution are: (a) the present use of the property; (b) the past use and acquisition of the property; (c) the value of the property in the market; (d) the degree of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and (e) the purpose of the expropriation. Importantly, market value is not the Such a constitutional configuration is necessarily conducive to compensation less than the market value in case the other considerations lean heavily towards the interest of the populace, especially in the land reform.
III. The Political Curve: The 18th Amendment to the Expropriation Act
The road leading up to the present Expropriation Act was a politically and legally controversial one. In February 2018, the National Assembly decided to set up an Ad Hoc Committee to start drafting legislation to correct Section 25 to make clear what was said to be implicit: that land could be expropriated without compensation to rectify historic injustices.
The process of involvement of the people in the Eighteenth Amendment Bill showed how polarized the nation was. Advocates claimed that the need to compensate was the main bottleneck that prevented redistribution of the land, citing that there was no need to buy stolen land. Opponents, on the other hand, predicted economic collapse, undermining the rule of law, and a danger to food security, and compared the move to the disastrous land grabbing in nearby Zimbabwe.
Finally, the National Assembly did not approve the Eighteenth Amendment Bill in December 2021. The governing African National Congress (ANC) was unable to get the necessary two-thirds majority, with the opposition parties, such as the Democratic Alliance (DA), opposed to the weakening of property rights, and Economic Freedom Fighters (EFF), opposed because the Bill did not go far enough, but wanted the state to own all the land.
In the wake of this constitutional stalemate, the government went back to regular legislation, and the Expropriation Act was completed. The Act aims to bring the statutory framework of expropriation (which had hitherto been set out by a statute of 1975 under apartheid) into line with the Constitution. The most controversial aspect is Section 12(3) that operationalizes the concept of zero compensation.
Analyzing Section 12(3): Is ‘Nil’ Compensation Just and Equitable?
Under the Expropriation Act, section 12(3) says that it is justified and fair that where land is expropriated in the public interest, zero compensation be paid, and all the circumstances are considered. The Act gives an exhaustive list of the situations in which zero compensation can be proper:
Where land is owned for pure speculative values (not developed or generating any income).
In cases where land owned by the state is not used for its essential operations and was taken without any fee.
In case of the landowner’s absence.
In circumstances where the value of the land in the market corresponds to, or is below, that of the current value of direct state investment or subsidies.
Where the condition or nature of the property introduces health, safety, or physical hazard.
Fraus Legis Argument
A major question of law is this: Is zero compensation a mere semantic jackknife of expropriation without compensation? The doctrine of fraus legis (acting in fraud of the law) is applicable in South African law, which says that the veil of form shall not be veiled over a transaction and that the true substance of a transaction shall be inquired into by the court. When an actor tries to follow the law indirectly when he/she cannot follow it directly, such an act is invalid.
These oppositionists claim that since the Constitution must involve payment of a certain amount of compensation, to scale the amount to zero (nil), it would be a logical contradiction and violation of the very fabric of the Constitution. According to Epstein, the requirement of just compensation means that the person who must contribute to a common improvement is not wiped out in the process, but since the state is paying zero (nil) Rands, the property is and will not comply with the constitutional requirement of compensation. Therefore, when fraus legis is applied to public law, it can be said that Parliament, which made no effort to alter and make it possible to take zero compensation in the Constitution, is illegally trying to reach the very same end through ordinary law.
Justification of Nil Compensation in Context
On the other hand, supporters of the Act claim that zero compensation is not a blanket policy of confiscation, but a result of strict application, on a case-by-case basis, of the factors under Section 25(3). If the Constitution demands equilibrium between the interests of the public and of the property owner, there are hypothetical cases where the mathematical or fair value of the interest of the property owner is zero.
Practical examples giving defense to this stand were given by Public Works Minister Dean Macpherson. One can think of the example of inner-city buildings of Johannesburg that no longer belong to any traceable owner (often, a foreign citizen) and have been arranged by criminal syndicates, in a matter of dire health and safety. The expense paid by the state to secure, clear, and rehabilitate such buildings can often exceed the value of the buildings in the market. In this case, the absentee owner would not be paid the market value, which would be unreasonable to the taxpayer. In this case, a court that decides that zero compensation is fair and is entirely in compliance with Section 25(3)(a) (using it at the present day) and Section 25(3)(c) (it should be market value and not state expenditure).
The other instance is the state-owned organizations, such as Eskom. In its implementation of transmission networks to solve the national electricity crisis, the state has been faced with individuals who join hands to buy the land at low costs, after which they will charge the government a lot of money in instances where the land is being used in the construction of the public infrastructure. When such land is expropriated at no compensation (or at a price which accurately stands for the purchase price of the land with fewer state subsidies), the weaponization of property rights against the public goods.
Interpretation of judiciary: Informal Right, Expropriation, Deprivation
Courts will be the final judge of the validity of Section 12(3). The jurisprudence of South Africa is already prepared in how such conflicts can be addressed with a sense of proportionality and protecting the vulnerable.
Agri SA v Minister for Minerals and Energy
In Agri SA, the Constitutional Court was involved with the shift of mineral rights of the individual proprietorship to the state custody found in the Mineral and Petroleum Resources Development Act (MPRDA). The applicant claimed that the MPRDA virtually took away their mining rights to coal. The Court, under the chairmanship of Mogoeng CJ, found that whilst the loss of the right to make sterilization of minerals was significant, it was not an expropriation of the mineral rights as the state did not acquire the rights to the minerals, but only took them under custody to distribute them justly.
This is an essential distinction of the Expropriation Act. When the state expropriates productive agricultural land by empowering under Section 12(3), without compensation, then transfers the property to a third party, it is quite likely that the courts would consider this to be an expropriation and the state (or a third party) is getting property. Nil compensation on productive, got lawfully would not pass the FNB arbitrariness test and would contravene Section 25(3).
Maledu v Itereleng Bakgatla Mineral Resources
The borderline between expropriation, economic progress, and historical dispossession was very well depicted in the case of Maledu. In this case, the Constitutional Court affirmed the rights of the Lesetlheng people, who could enjoy informal land rights in terms of the Interim Protection of Informal Land Rights Act (IPILRA). The respondents were a mining company that wanted to evict the community to continue with the mining of the platinum in the land, saying that their mining rights were superior to the community’s informal tenure.
The Court ruled that the award of mining rights does not nullify occupational rights under IPILRA. The mining company must have consulted with and sought the consent of the community, or otherwise, the state had to formally expropriate the land through the provisions of Section 55 of the MPRDA (which activates the compensation demands of Section 25 of the Constitution).Maledu strengthens the argument that the state could not override constitutional protections of property in the guise of economic development or reform. It highlights that the application of the Expropriation Act, even to zero compensation, should adhere to procedural fairness, the rule of law, and security of tenure of vulnerable communities.
International law and Economic implications
There is no vacuum in which the implementation of the Expropriation Act takes place. South Africa is a member of the international law, which most generally safeguards foreign investments against uncompensated expropriation. Traditional international law and other Bilateral Investment Treaties (BITs) provide that such expropriation of property owned by a foreigner must be followed by prompt, reasonable, and effective compensation.
Although South Africa has ended most BITs over the last few years, with the replacement of these agreements by the Protection of Investment Act 22 of 2015, the country still relies on Foreign Direct Investment (FDI) to jump-start its barren economy. South Africa was recorded to receive about USD 5.5 billion in FDI in 2023. The credibility of the state in capturing commercial wealth, or productive farms without compensation, is crippling investor confidence. Even the diplomatic consequences were already being felt when former American President Donald Trump made offensive comments about South African land reform policies, threatening to impose tariffs and cut aid.
In addition, the insecurity of property rights is extremely sensitive to the agricultural sector. Farming depends on debt finance, and the land is an asset to finance. When productive agricultural land is exposed to no compensation, the banking sector will be exposed to tons of unmanageable debt that may cause a systemic fiscal crisis and negatively affect national food security. Hence, Section 12(3) should only be construed by the courts in a restrictive manner so that it should not at any time be applied to farm productive land, burdened by debt, and where the owner has acted in bona fide (good faith).
VII. Conclusion
The Expropriation Act is a landmark step in the current fight of South Africa to redress the spatial and economic wrongs of its history. The addition of “nil compensation” under Section 12(3) is a radical act by the legislature meant to evade the political debacle which killed the Constitution Eighteenth Amendment Bill. But based on this analysis, it is not the case that zero compensation is a blank check to state confiscation.
Section 12(3) should be explained in terms of the FNB arbitrariness test and balancing act in the middle of Section 25(3) of the Constitution to pass constitutional scrutiny. Legislative semantics cautions against reliance on legislative semantics to reach unconstitutional purposes. Consequently, a situation in which no compensation is awarded can be just and fair only under very narrow, highly circumstantial, limited conditions, like those surrounding the possibility of the abandonment of unsafe buildings or the guarding against extortionate maneuvers against the government. It cannot be legitimately implemented to deprive bona fide owners of productive assets since such would contravene the rule of law, shatter the agricultural economy, and contravene international investment norms.
After all, it is not the weaponization of expropriation statutes that will ensure the success of the land reform program in South Africa, but it is the extinction of corruption, the enhancement of state capacity, and support to the beneficiaries in terms of post-settlement that is sufficient to make it effective. The Expropriation Act gives the state an even more dangerous weapon; the judiciary now has a duty to see that this weapon is wielded in the construction of a more just society and not used to demolish the constitutional principles upon which that society was founded.
Reference(S):
Primary Sources
Cases
Agri S. Afr. v. Minister for Minerals & Energy, 2013 (4) SA 1 (CC) (S. Afr.).
First Nat’l Bank of SA Ltd. t/a WesBank v. Comm’r, S. Afr. Revenue Serv., 2002 (4) SA 768 (CC) (S. Afr.).
Maledu v. Itereleng Bakgatla Mineral Res. (Pty) Ltd., 2019 (2) SA 1 (CC) (S. Afr.).
Statutes
Expropriation Bill B23B-2020 (S. Afr.).
Natives Land Act 27 of 1913 (S. Afr.).
Afr. Const., 1996.
Secondary Sources
African Dev. Bank, Country Focus Report 2025: South Africa (2025).
Epstein, Richard A., Takings: Private Property and the Power of Eminent Domain (1985).
Paradza, P., Sustainable Food Systems and Land Reform in South Africa, Frontiers in Sustainable Food Systems (2026).
Van Staden, Martin, Fraus Legis and the Constitution Eighteenth Amendment Bill, 24 Potchefstroom Elec. L.J. 1 (2021).
Online Sources
BBC News, South Africa’s Land Expropriation Law Explained (Jun. 1, 2025).
Global Arbitration News, Protection of Foreign Investments in South Africa (Jul. 1, 2020).
Parliament of the Republic of South Africa, National Assembly Fails to Pass Constitution Eighteenth Amendment Bill (Dec. 9, 2021).
Parliamentary Monitoring Group, Consolidated Report on Public Hearings (Mar. 2, 2021).
