Absa Bank Ltd Submission on the Expropriation Billthe Bill

1
Absa Bank Ltd Submission on the Expropriation
Bill(the Bill)
2
Introduction

• Absa Bank Ltd(Absa) would like to thank the
  Parliamentary Committee on Public Works for
  providing it with the opportunity to provide oral
  comments in addition to the written comments on
  the Bill.
• Absa supports Governments initiatives to adress
  the imbalances of the past through processes such
  as land reform, but we submit that such processes
  must be conducted in an economically responsible
  and constitutionally sound manner.
• Absa wishes to make the following comments

3
Inclusion of Public Interest as grounds
expropriation

• The Term Public Interest is broadly defined in
  the Bill.
• Absa submits that in accordance with principles
  of fairness, the power of expropriation should
  only be exercised if it is both in the public
  interest and for public purpose.

4
Inclusion of movable property in definition of
Property

• The term Property is defined in the Bill as
  follows"Property" includes a right in property
  and includes movable property.
• Section 2 of the Bill provides that an
  expropriating authority may only expropriate
  property in the public interest or for public
  purposes.
• In terms of the above , an Expropraiting
  authority will also have the right to expropriate
  movable property.
•  
• The tenor of the Bill was to deal with the
  expropriation of land(immovabable property). 
  Extending the ambit of the Bill to include
  movable property will not meet the objective of
  the Bill which is to ensure that there is
  equitable access to all South Africa's natural
  resouces.

5
Power to expropriate on behalf of a Juristic
Authority

• Section 4 provides that the Minister may
  expropriate property on behalf of a juristic
  person provided that certain requirements are
  met.
• Clarity is required in the Bill regarding the
  limitation of the rights of the juristic person
  in terms of what it may or may not do with the
  property after expropriation and there are no
  control mechanisms for this purpose. We suggest
  that the Bill address this issue to avoid the
  ambit of the Bill being defeated.

6
Investigating and Gathering of information for
purposes of Expropriation

• This section does not cater for an investigation
  into holders of registered rights such as
  Mortgage Bond and Notarial Leases etc. We
  suggest that the fact that there could be
  Mortgage Bond or Notarial Lease over the property
  also be taken into consideration in the
  investigation contemplated in Section 10.

7
Information that Authority may require the
Advisory Board to provide

• Section 10(2)b) of the Bill, does not expressly
  cover the need for the Advisory Board to provide
  the Expropriating Authority with any information
  regarding mortgage bonds registered over the
  property in favour of any financial institution
  and consequently any monies owing to such
  financial institution under the loan agreement.
• Consequently any compensation determined by the
  expropriating authority may not be sufficient to
  cover monies owed to the Bank. This is a crucial
  consideration that should be taken into account.

8
objection should be lodged prior to the date of
expropriation

• The Bill provides for publication or service of
  notices and the time period of at least 21 days
  within which objections or submissions may be
  lodged.
• Absa suggests that the Bill contain a section
  which states that no expropriation will take
  place until the period of 21days lapses before
  any expropriation can take place.
• Section 5(b) of the Bill provides for the
  expropriating authority to depart from the
  provisions of Section 11 where it is reasonable
  and justifiable. This could be to the detriment
  of the landowner or any holder of rights.
  Principles of fairness require that the Land
  Owner be given adequate notice to object to an
  action that may impact on his/her rights. It is
  therefore suggested that the Bill makes it clear
  that the period of 21 days for objection must
  lapse before any expropriation can take place.

9
Delivery of expropriation notice to mortgagees

• Section 11(1) of the Bill provides that if an
  expropriating authority contemplates
  expropriating a property, it must publish a
  notice to that effect and serve a copy thereof on
  all persons of whom it is aware whose rights may
  be materially and adversely affected by the
  contemplated expropriation.
• It is submitted that a mortgagee in respect of a
  property may be so affected if the property is
  expropriated.
• However, for sake of certainty, the Bill should
  expressly make provision for the delivery of such
  a notice to mortgagees.

10
the title deeds of property considered and/or
identified for expropriation to be endorsed with
Section 11 Notice

• Provision should be made for the title deeds of
  property considered and/or identified for
  expropriation to be endorsed with the notice
  contemplated in section 11(1) of the Bill and the
  expropriation notice (section 12).
• This will ensure that in the event that a new
  mortgage is to be registered in favour of a
  mortgagee, the mortgagee will prior to
  registration be aware that the property will be
  expropriated or that expropriation thereof is
  being considered.

11
monies owed to financial institutions arising
from Mortgage Bonds registered over such property
is not considered when considering the Basis on
which compensation is to be determined

• Section 15(3) (a) and (b) of the Bill does not
  expressly stipulate that monies owed to financial
  institutions arising from Mortgage Bonds
  registered over such property should be a factor
  to be considered when determining the basis on
  which compensation is to be determined.
• It is submitted that this be included in Section
  15.

12
Market Value is the most objective means of deter

• It is submitted that the market value of a
  property is the most reliable and objective means
  incorporating principles of being just and
  equitable when determining the compensation
  amount and should definitely bear more weight
  than any of the other factors.
• The Constitution of the Republic of South Africa
  requires that compensation for expropriation must
  be just and equitable, reflecting an equitable
  balance between public interest and the interests
  of those affected,having regard to all relevant
  circumstances.
• We firmly believe that people should not be
  divested of their property for consideration that
  differs substantially from the market value
  therof
• We submit that the amount of compensation to be
  paid to an expropriated owner or an expropriated
  holder should be just and equitable, but do not
  see the reason for the determination of the
  amount of compensation to reflect a balance
  between the public interest and the interest of
  the affected parties. Consequently, the purpose
  of the expropriation as contained in section
  15(3) (a) (v) should not be deemed a relevant
  factor in determining the amount of compensation
  but should be used as a relevant factor in
  determining whether the decision to expropriate
  is correct.

13
Owner should be obliged to provide details of any
mortgage bond and monies outstanding under loan
facility advanced against such bond

• In terms of Section 17(1) of the Bill an owner
  may deliver a statement to the expropriating
  authority setting out what compensation it deems
  as acceptable.
• Once again this section does not oblige the
  owner to provide details of any mortgage bond and
  monies outstanding in terms of a loan facility
  advanced against such bond.
• This requirement by the owner to provide such
  details should be inserted in the Bill.

14
Consequence if compensation is insufficient to
settle an outstanding loan

• Section 21 (1) provides that no amount of the
  compensation may be paid out to the owner if
  there is a mortgage bond registered over the
  property.
• In essence this section provides that such
  amount of the compensation required to settle the
  interests of the mortgagee must be paid to the
  mortgagee.
• It does not however address the consequence if
  such portion of the compensation or total amount
  thereof is insufficient to settle an outstanding
  loan.
• Section 21(2) only gives a mortgagee recourse to
  court to determine the terms of payment of such
  compensation, not recourse to re-determine the
  value of such compensation. It is submitted that
  the Bill address this issue.

15
Role of Courts

• In terms of the Bill the court can intervene
  regarding a dispute between the Expropriating
  Authority and the owner regarding a compensation
  amount.
• In the event that there is disagreement about
  Governments determination of compensation ,the
  only remedies available to a property owner is
  judicial review or approval.
• These processes do not offer sufficient
  protection to property owners.
• These procedures may also be in conflict with the
  constitution ,which requires that compensation
  for expropriation be determined or approved by
  the court.

16
Conclusion

• As property of various kinds is utilised on a
  daily basis, by amongst others, financial
  institutions as security for debt, the rights of
  such security holders should also be protected by
  the Bill.
• It is crucial that the amount of outstanding debt
  secured by property to be expropriated be
  included as one of the factors to be considered
  in determining the expropriation consideration.
• Principles of fairness require that security
  holders eg Financial Institutions should have the
  right to challenge expropriation considerations
  where their interests are adversely affected when
  the determination is made.

17
HEADING

• The ability to take sound security over property,
  especially immovable property is of utmost
  importance to financial in order to enable them
  to provide financing to their customers
• The provisions of the Bill will negatively affect
  security holders rights under their security or
  at the very least introduce risk with regard to
  the quality of such security.
• Financial institutions will therefore be less
  likely to provide financing to customers and may
  need to increase finance costs.
• This will impact negatively on the loan market
  and employment in the sector.

18
HEADING

• If financing becomes difficult to attain, fewer
  people will be able to afford residential
  property and the financing of small business will
  be limited.
• Should there not be sufficient access to
  financing,it is forseeable that the impact on the
  agricultural sector, which is key to a
  sustainable nation, will be negative.
• The impact of the Bill in its current form will
  have serious effects not only on property owners
  and financial institutions but on the nation as a
  whole.
• It is submitted that if any property can be
  expropriated by Government at any time for almost
  any reason and without the owner receiving a fair
  and market-related price for such property ,
  economic uncertainty and a lack of confidence in
  the country will be created.

19
HEADING

• Absa would once again like to thank the portfolio
  Committee on Public Works for this opportunity to
  provide written and oral comments and would like
  to commend the committee for conducting this
  process in a fair and consultative spirit.

20
HEADING
21
HEADING
22
HEADING
23
HEADING
24
HEADING
25
HEADING
26
HEADING
27
HEADING
28
HEADING
29
HEADING
30
HEADING
31
HEADING
32
HEADING
33
HEADING
34
HEADING
35
HEADING
36
HEADING
37
HEADING
38
HEADING
39
HEADING
40
HEADING
41
HEADING
42
HEADING
43
HEADING
44
HEADING
45
HEADING
46
HEADING
47
HEADING
48
HEADING
49
HEADING
50
HEADING
51
HEADING