Constitutional Review Committee Submission 08 March 2019

Introduction MAIN CONSIDERATIONS Fundamental economic system and structure. Market economy. Need to acknowledge the centrality of land and property markets in society and the economy. Need to acknowledge the centrality of land and property in accessing capital markets. Need to acknowledge the established and functional financial market and systems in SA.

Introduction In terms of section 5 of the Property Valuation Act, No. 17 of 2014(PVA), the Office Of the Valuer General(OVG) is a juristic person that is accountable to the Minister and, must be impartial and exercise the powers and perform its functions without fear , favour and prejudice. In terms of section 12(1)(a) of the PVA, the OVG must value all properties identified for land reform purposes; While in terms of section 12(1)(b) of the PVA, the OVG may value properties identified for acquisition or disposal by a department or for any other reason than land reform purposes; Consequently, the OVG is there to implement Government policy with respect to valuations.

Current Dispensation – Expropriation with Compensation Property may be expropriation only in terms of law of general application for a public purpose or the public interest; 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 interests of those affected , having regard to all the 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. DIFFICULTY WITH ACCESS TO INFORMATION

Current Dispensation – Expropriation with Compensation Cont`d For purposes of section 25(3), 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 and property is not limited to land.

Current Dispensation – Expropriation with Compensation Cont`d The OVG is of the view that its Current Formula can result in a “Just and Equitable value” that is closer to Zero on a land/property that is identified for land reform purposes by applying the above five factors . This is achievable under the following circumstances: i) Where the Current Use Value of the property is equals to Zero- If the land is unproductive ie lying fallow abandoned etc ii ) State subsidies and benefits on the property are equal to or greater than the present market value of the property ie State land or Municipal land Note: Even privately owned land that benefited from state subsidies and benefits, and unproductive will result in Zero value. However, as an industry norm, a nominal figure of R1 is usually used.

Future Dispensation-Expropriation without Compensation Amendment of section 25 : OVG views The envisaged amendment ought to be explicit regarding the properties to be expropriated; Future Expropriation Act should be aligned to the Constitution( Amendment); Regulations from the envisaged Expropriation Act should provide an explicit criteria to ascertain how the land to be expropriated without compensation will be identified so as to minimise uncertainty in the market .

Future Dispensation-Expropriation without Compensation Cont`d Amendment of section 25 : OVG views Even if the Constitution will predetermine that compensation is Zero, a property must still be valued to determine implications flowing from the expropriation decision; If the PVA is amended wrt the land to be expropriated without compensation, valuations will still be needed for Asset Management purposes ( Asset Register- Market value) prior to being transferred to the beneficiaries. Existing mortgage bonds on the identified land/properties. Who will pay and what are overall implications of the fiscus if its Govt? For example, if Compensation is Zero BUT the mortgage bond liability is R 10 Million!

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