Willing seller – the only way

The ANC’s policy decision to do away with the willing-buyer, willing-seller principle has caused dismay in the agricultural sector. But Dr Theo de Jager, deputy president of Agri SA, argues that this attempt by the government to save the faltering land reform process is doomed to fail.

Willing seller – the only way
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At the ANC’s national conference in Mangaung, the party reaffirmed its 2007 resolution to scrap the willing-buyer, willing-seller principle in a bid to speed up land reform. It claimed that, in line with Section 25 of the Constitution, it would be replaced by the ‘just and equitable’ principle. But this is not that easy to do. Our Constitution at no point refers to the willing-seller principle. It makes mention only of the just and equitable principle. This is in Section 25, which deals with property rights and covers forced acquisitions such as expropriation. The relevant portion states:

“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:

  • the current use of the property;
  • the history of the acquisition and use of the property; 
  • the market value of the property; 
  • the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and 
  • the purpose of the expropriation.”

What this means is not, as so many ANC leaders over the last few months have been quoted as saying, that farmers will be stripped of their choice to sell or not, as if a shortage of farms on the open market is slowing down land reform. It only means that the government will now make more use of expropriation in the process of acquiring land for restitution and redistribution purposes, and it does not want to pay market prices for that land.

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Justice prevails
The willing-seller principle is enshrined in the Expropriation Act 63 of 1975. It serves as the measurement of market value, compelling a judge to ask what price a hypothetical willing seller would accept from a hypothetical willing buyer in an arm’s length transaction. This is the price that the government does not want to pay. The government has used expropriation for land reform (restitution) purposes only twice since 1994: once when the Lutheran Church would not accept its offer for a farm near Barkly West

in the Northern Cape, and once in Limpopo to save a farm in an insolvent estate near Hoedspruit from being auctioned.
After 1996, in terms of the new Constitutional dispensation and as confirmed by the Constitutional Court in the case of Du Toit versus the Minister of Transport, the Expropriation Act had to be interpreted in the light of the provisions of Section 25 of the Constitution, which provides for factors in addition to market value to be taken into account. However, the end result is still required to be just and equitable.

Expropriation is a much quicker, more straightforward way to acquire land, and landowners’ interests are better served when a court of law decides on process and price than when these are determined according to the whims of public officials. This is seemingly why officials of the Department of Rural Development and Land Reform (DRDLR) have avoided expropriation; it offers them no opportunity for their own gain or for bullying landowners into accepting 50% to 60% of the state’s own valuation on a farm. Market value prevails with expropriation, and so does public interest.

There is simply no way that the Restitution Commission would have been able to convince a court that it is in the public interest not to prove the validity of a claim and in the process replace a productive commercial farmer with a beneficiary whose chances of success are under suspicion, especially against the background of the government’s appalling track record on farmer development.

To shy away from compensation based on market value only, and allow for the so-called discount factors as provided for by the Constitution, the government has to amend the Expropriation Act. Its biggest challenge in doing so is to design a mechanism to measure the value of those deductibles. How, for instance, is it possible to calculate the effect of subsidised Agricultural Credit Board interest rates in the 1950s on the price of a farm today? It stands to reason, moreover, that the government would want to deduct as much as possible from market value.

As there are no scientific means to bring these factors into account, the government has decided to appoint a Valuer-General to assist with this process. Given the time that will inevitably be spent in court to challenge this person’s decisions, it is doubtful whether the process of land reform will be speeded up. The irony is that it is still necessary to establish market value from which to deduct these discounts, and for that, the willing-seller principle has to be applied!

There is simply no other way to establish market value scientifically, no matter how unwilling the actual buyer or seller is. Market value is the only factor that can be measured when calculating a fair and equitable price as described in Section 25 of the Constitution and must be applied as the basis from which to deduct the other four, so the ANC cannot just scrap the principle.

Fear leads to disinvestment
Although labour issues and the ghost of De Doorns also played a major role in the latest wave of disinvestment in the primary production sector, the destructive role of fear for the deadly combination of scrapping the willing- seller principle and reopening the disastrous restitution programme cannot be underestimated.

This time it cannot be labelled an unintended result of government’s land policies, as the government was made aware of it over and over again and chose to ignore it. No commercial bank can finance production if it is not certain that its exposure will be covered by the value of the land offered as collateral for the loan, should its number get drawn for land reform.
Government will necessarily have to step in as the primary financier for agriculture, and keep that position as it has done for beneficiaries of land reform whose farming enterprises are deemed ‘unbankable’.

The real reason that the government had to scrap the willing-seller principle was because this principle had to bear the blame for the failures brought about by corruption and incompetency in the department. Many directors-general, chief directors and senior officials have been fired over the last few years and Cabinet has repeatedly acknowledged the lack of capacity in the department. Yet no one at Mangaung or Polokwane had the guts to point out that its deployed cadres were responsible for our land reform woes.

The scrapping of the willing-seller principle has not been thought through properly and has a shaky foundation. As it is exactly the same team of officials who must implement the alternative, the chances are slim indeed that the latest twist in
the story of land reform will lead to a happier ending. – Lindi van Rooyen

Contact Theo de Jager at [email protected]

The views expressed in our weekly opinion piece do not necessarily reflect those of Farmer’s Weekly.