Reaching the summit - addressing the land question seminar

REACHING THE SUMMIT – ADDRESSING THE LAND QUESTION SEMINAR

8 MARCH 2016

LEGISLATIVE FRAMEWORK IN LAND RESTITUTION AND LAND REFORM

Bulelwa Mabasa

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INTRODUCTION

WHERE DID IT ALL BEGIN?

> Historical background

> The Natives Land Act, 1913

> The Native Trust and Land Act, 1936

> The Group Areas Act

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THE ADVENT OF DEMOCRACY

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THE WHITE PAPER OF LAND POLICY, 1996

The three pillars of Land Reform Policy

> Restitution

> Redistribution

> Land reform

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THE CONSTITUTION, 1996

25. (1) No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.(2) 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.

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THE CONSTITUTION, 1996 CONT…

(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;and

(b) property is not limited to land.(5) The state must take reasonable legislative and other measures, within its available

resources, to foster conditions which enable citizens to gain access to land on an equitable basis.

(6) A person or community whose tenure of land is legally insecure as a result of past racially discriminatory laws or practices is entitled, to the extent provided by an Act of Parliament, either to tenure which is legally secure or to comparable redress.

(7) A person or community dispossessed of property after 19 June 1913 as a result of past racially discriminatory laws or practices is entitled, to the extent provided by an Act of Parliament, either to restitution of that property or to equitable redress.

(8) No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination, provided that any departure from the provisions of this section is in accordance with the provisions of section 36(1).

(9) Parliament must enact the legislation referred to in subsection (6).

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PRINCIPLES FLOWING FROM SECTION 25 OF THE CONSTITUTION

> Protection of the right to property

> Expropriation as a constitutional concept

> The role of the courts

> “Just and equitable compensation”

> Land reform and land restitution as constitutional obligations

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OVERVIEW OF LAWS PROMULGATED BY THE STATE POST 1994

> The Restitution of Land Rights Act

> Aims and Objectives

> What claimants must show in order for a land claim to be considered

> The role of the Commission

> The rights and obligations of land owners

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WHERE TO FROM HERE

Amendments to the Restitution Land Rights Act

> Extension of deadline for lodgment of claims

> Obligation to establish and keep a National Land Restitution Register

> Current challenges

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EXPROPRIATION BILL

> Protection of the right to property

> Factors to be taken into account in determining the amount of compensation payable

> Powers of the Minister of Public Works in the determination of expropriation

> The role of the courts

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THE REGULATION OF THE LAND HOLDINGS BILL> The regulation of the amount of land owned by individuals

> The limitation of foreign land ownership

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CONCLUSION

THANK YOUBulelwa MabasaT: 011 535 8309E: [email protected]

Legal notice: Nothing in this presentation should be construed as formal legal advice from any lawyer or this firm. Readers are advised to consult professional legal advisors for guidance on legislation which may affect their businesses.

© 2016 Werksmans Incorporated trading as Werksmans Attorneys. All rights reserved.

PRESENTATION ON MITIGATING LAND CLAIMS RISKS IN THE CONTEXT OF PROJECT FINANCING, CONSTRUCTION AND ENGINEERING PROJECTS

Happy Masondo

MITIGATING LAND CLAIMS RISKS IN THE CONTEXT OF PROJECT FINANCING, CONSTRUCTION AND ENGINEERING PROJECTSIntroduction > The existence of a Land Claim does not necessarily (per se)

preclude potential investors, project financiers and project companies from entering into and concluding mutually beneficial contractual arrangements with land claimants

> In our experience and based on some of the case studies to be dealt with below, we have found that the long term financing of infrastructure and industrial projects do not suddenly terminate nor is it a fatal risk on the mere mention of the existence of a Land Claim

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MITIGATING LAND CLAIMS RISKS IN THE CONTEXT OF PROJECT FINANCING, CONSTRUCTION AND ENGINEERING PROJECTS

Introduction

> We have found that the stakeholders (land owners, land claimants, equity investors/sponsors, Development Finance Institutions (“DFIs”), lending institutions/banks) in a project finance transaction will typically come up with a workable solution to overcome the potential hurdles presented by an actual Land Claim or a potential Land Claim

> The following case studies are illustrative of some of the workable solutions implemented to achieve a win-win outcome for all parties

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CASE STUDY 1 – SOLAR PHOTOVOLTAIC ENERGY PROJECT

Introduction

> The following is a schematic presentation of an illustrative typical renewable energy project submitting a bid under the Department of Energy (“DoE”) Renewable Energy for Independent Power Producers Procurement (“REIPPP”) Programme

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Community Party

Project Sponsor

BEE Party

Development Bank

Commercial Bank

EPC Contractor

Power Plant

Project Company

O & M Contractor

Management Contract EPC Contract

5%

65% 20%

Funding

Funding

5%

Engineering Procurement

Construction

Operation Management

5%

Project Site

Lease orPurchase Agreement


The facts

> During 2011, on the advent of the DoE REIPPP Programme, we acted for a Project Company which sought to lease land (“the Property”) for purposes of the development of a solar photovoltaic plant (“the Project”) located in the Limpopo Province

> The land owner informed the Project Company that the Property was in fact subject to a Land Claim in terms of section 2 of the Restitution of Land Rights Act 22 of 1994 (“Restitution Act”) instituted by a community representative through the Regional Land Claims Commissioner: Limpopo (“the Commissioner”) during 1995 and 1998

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The facts

> The Commissioner registered the Land Claim for and on behalf of the Community (“the Community”) consisting of all the individual households and direct descendants of the dispossessed families who were removed from the Property, and various other farm lands in the area

> During May 2006 the Community established a Communal Property Association (“CPA”) as the legal entity through which the Community would act in matters relating to the Land Claim

> The Land Claim was published in the Government Gazette of 2 March 2007

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The facts

> The land owner (“Lessor”) concluded an Option Agreement with the Project Company during 2012 in terms of which the Project Company had the option to lease or purchase the Property

> There was also a notarially executed long lease of the Property signed on behalf of the Lessor, the Community CPA and the Project Company which was registered in the Deeds Office: Polokwane against the title deeds of the Property

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The facts

> The Commissioner had no objection to the development of the Project and/or the Lease/Option Agreement and undertook to engage all stakeholders including the land claimants on the appropriate settlement

> The Community CPA, the Lessee, the Department of Rural Development and Land Reform and the Commissioner also convened a Community meeting at which the anticipated benefits to flow to the Community from the Project were discussed and agreed

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The facts

> In summary, for a period of over one year following the publication of the Land Claim the following pertinent developments happened –> The Commissioner notified the Lessor, as enjoined to do so in

terms of section 11 of the Restitution Act about the Land Claim;

> the Project Company gave due notice to the Commissioner of its intention to develop and construct a Project on the Property in accordance with the provisions of section 11(7) of the Restitution Act;

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The facts

> the Commissioner also responded to the Project Company in terms of section 11(7)(aA) that it had no objection to the development

> it is noteworthy that at the time of the development of the Project it had been 12 years from the lodgment of the Land Claim and it had not been settled

> however, it certainly made it easy for the Commissioner to resolve and settle the Land Claim given the anticipated benefits of the Project


The Land Claimants> In this case study, although the Project Company was awarded

Preferred Bidder status following a gruelling bidding process, it transpired that, prior to bid submission, the Property on which it was to establish/erect a photovoltaic renewable energy power plant was the subject of a Land Claim lodged with the Commissioner

> Just to make matters interesting, the Community Party participating in the Project Company as a shareholder was not the same community which instituted the Land Claim

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The Land Claimants

> The question of a Land Claim in this case study, while paramount to the Land Claimants, did not detract from the myriad socio-economic opportunities which would emanate from the development and construction of a renewable energy power plant in the impoverished rural Limpopo area

> The Land Claimants acknowledged and accepted the socio-economic benefits outlined above, proving that the development of the Project did not in any way, detract from the validity and/or substance of the Land Claim


The Land Claimants

> The process of investigating and confirming the Land Claim inevitably takes an inordinate amount of time from the time it is lodged until settled and/or finalised sometimes even longer than 10 years as was the case in this case study

> In this case study, the socio-economic opportunities could be realised without any adverse impact on the pending Land Claim

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The Socio-Economic Benefits

> The socio-economic opportunities included the following-

> the inclusion of local community members (albeit the non-claimant community members) in the shareholding structure of the Project Company

> employment opportunities for the members of the community residing within a 50km radius to the Project Site where the power plant was to be established

> the EPC Contractor requiring blue collar and semi-skilled workers during the construction phase of the power plant

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The Socio-Economic Benefits

> similarly, the O & M Contractor would, post construction and Commercial Operation Date, need to employ cleaners to clean the photovoltaic panels, security guards to guard the power plant and other general labourers for the upkeep of the power station; and

> economic development through the participation of local companies in the supply of goods and services


Conclusion

> Despite the existence of a published Land Claim the Project continues to co-exist side by side with the Land Claim with the consent of all the stakeholders

> Although the Land Claim was lodged by a different group of Land Claimants who were not direct shareholders in the Project Company, the various socio-economic benefits reach most of the members of the surrounding community

> The various stakeholders did not treat the existence of a published Land Claim as an obstacle to the successful development of a solar photovoltaic energy project together with all other public benefits

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Local Community

CASE STUDY 2 – PRIVATE HOSPITAL PROJECT > Schematic Presentation of Stakeholders

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Local Shareholders in the Area DFI 1 Broad Based Women’s GroupDFI 2

Land Owner

Developers

30 000 hectares of landPrivate Hospital

Project

Deed of Sale of the Land

Fund

er 1

Empo

werin

g W

omen

in th

e Ar

ea

Fund

er 2

Developing and

constructing

Private Hospital

CASE STUDY 2 – PRIVATE HOSPITAL PROJECT

Joint Funders

> In this case study two DFIs were joint funders of the development of a 125 bed hospital (“the Private Hospital Project”)

> The Private Hospital Project was to be constructed and developed on a piece of Land (“the Property”) which was a part of a large portion of various farm lands (“the Land”) which were subject to various Land Claims

> The DFIs were, naturally, concerned about the implications of the Land Claims for the development of the Private Hospital Project, in particular, what the risks were of –

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Joint Funders

> the development of the Private Hospital Project being interdicted by the Regional Land Claims Commissioner on Restitution of Land Rights (“the Commissioner”) or any of the Land Claimants; and

> in the event of the expropriation of the Land, the developers not receiving market value compensation for the Land

> On the other hand, the land owner had given notice in terms of section 11(7) of the Restitution Act of the rezoning, consolidation, subdivision, sale of stands and the development of the Private Hospital Project

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Objection by the Commissioner

> The Commissioner, initially, formally objected to the notice of the land owner in respect of the proposed development and subsequent sale of stands, on the ground that the Commissioner is enjoined by section 22(7) of the Restitution Act to -

> preserve the status quo of the Land claimed under the Land Claim

> protect the Land Claimants’ potential rights to Land; and

> momentarily and justifiably limit the land owner’s rights39


Legal Advice sought by DFIs

> The advice sought from Werksmans Attorneys by the DFIs was on two main questions -

> are there any prospects of success if any party institutes interdict proceedings against the development of the Private Hospital Project; and

> whether there were any factors that could be relied upon by the DFIs as mitigating any risk arising from funding the Private Hospital Project

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CASE STUDY 2 – PRIVATE HOSPITAL PROJECT Mitigating the Risks of Funding

> Socio-Economic Benefits

> One of the shareholders of the developer is a broad-based Women’s group established for the development of 500 000 women in rural and semi-urban areas

> The main premise and focus of the Private Hospital Project was to have a beneficial socio-economic impact and the stimulation of economic growth with an investment of approximately R200 million

> The more specific anticipated socio-economic benefits included-

> the construction phase of the Private Hospital Project would create 500 jobs;

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Mitigating the Risks of Funding

> Socio-Economic Benefits

> during the operational phase at full capacity, the Private Hospital Project would employ 350 persons in skilled and semi-skilled positions;

> the establishment of enterprise and small businesses with the creation of further employment; and

> the generation of significant additional rates and taxes income for the local authority/municipality

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CASE STUDY 2 – PRIVATE HOSPITAL PROJECTMitigating the Risks of Funding

> Settlement of Land Claims

> Weighed against all of these significant socio-economic benefits, as it transpired –

> the one Land Claim in respect of which the Restitution Act notice was given was subsequently settled; and

> in respect of the other three additional Land Claims no section 11 of the Restitution Act notice had been given at all

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> Accordingly, the Commissioner withdrew its initial formal objection to the development of the Private Hospital, in that –

> it is not within the powers of the Commissioner to object to developments and/or alienation of land prior to a section 11 of the Restitution Act notice of the Land Claim being published in the Government Gazette;

> the one Land Claim in respect of which a section 11 of the Restitution Act notice had in fact been published in the Government Gazette had been settled; and


Mitigating the Risks of Funding


> the Commissioner anticipated that subsequent to the publication of the section 11 of the Restitution Act notice in respect of the other three Land Claims, there would be successful settlement negotiations

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> Mitigation Against Actual Restoration

> In addition, numerous factors mitigated against the Land Claimants being entitled to actual physical restoration of the Land and/or Property –

> original use of the Land by the Land Claimants was agricultural and non-commercial in nature;

> the surroundings of the Property would, in all likelihood, have been rural;

> the Property now falls within a municipal boundary with residential and other developments;

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CASE STUDY 2 – PRIVATE HOSPITAL PROJECTMitigation Against Actual Restoration


> the Property was rezoned and now forms part of a recently proclaimed township;

> the service provided by the Private Hospital Project is beneficial to community interests at large;

> the proportion of the Property which forms part of the Land claimed is actually very small;

> the changes in the surrounding area and the proclamation of the township substantially increased the value of the Land which factors would force the State to pay an excessive amount in compensation

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CASE STUDY 2 – PRIVATE HOSPITAL PROJECTConclusion

> Like the first case study, in this case study we found that the mere existence of the several Land Claims did not necessarily mean that the development of the Private Hospital Project had to be abandoned

> Weighed against the substantive socio-economic benefits together with very low prospects of success and the mitigating factors against actual physical restoration of the Land Claimants, there was no risk that the Private Hospital Project would fail

> The DFIs were accordingly comfortable to proceed with the funding of the Private Hospital Project

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Land Claimants

CASE STUDY 3 – BIOMASS POWER PROJECTSchematic Presentation

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Land Claimants Project Sponsors Lenders

Land Owners

Project Company

Biomass Power Plant

Surrounding farm land Land

Land on which BiomassPlant situated

Shareholders

CASE STUDY 3 – BIOMASS POWER PLANT PROJECT

The facts

> In this case study the land (“the Property”) on which the proposed Biomass Power Project is situated in KZN and was subject to various amalgamated Land Claims published in the Government Gazette

> In terms of section 11(7)(aA) of the Restitution Act the Project Company, represented by another law firm –

> gave notice to the Regional Commissioner: Kwa-Zulu Natal of the proposed Biomass Power Plant Project; and

> confirmed that a long-term lease was to be concluded over the Project Site

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The facts > The Project Company also instructed land claims experts (“the

Experts”) to advise on possible approaches to resolve the various amalgamated Land Claims

> The Land Claim risk was –

> in the first instance to the Biomass Plant Site; and

> in the second instance to the surrounding sugarcane producing farm land

> The Land Claim was a risk to the Biomass Power Project as without sufficient production of sugarcane, there would be insufficient tops and trash (biomass) to supply fuel to the Biomass Power Plant

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CASE STUDY 3 – BIOMASS POWER PLANT PROJECT The facts

> The Land Claimants were also the Community shareholders in the Project Company

> The Experts considered four different options/approaches and advised as follows –

> referral of the Land Claim to the Land Claims Court would be protracted, inordinately long and therefore an inappropriate solution;

> the section 11(7) of the Restitution Act notice would be sufficient as a statutory requirement but would not be a practical solution on the issue of the Land Claims in respect of the sugarcane producing land;

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The facts

> an application in terms of section 34 of the Restitution Act for a court order declaring the Property “non-restorable” thus restricting the Land Claimants to only seeking financial compensation or restoration on alternative land

> settlement negotiations to determine the willingness of the Land Claimants to accept alternate land

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Settlement Agreement

> The Project Company facilitated a settlement agreement between the Land Claimants, the Commissioner, the Project Company, Land Owners and the Department of Rural Development and Land Restitution

> In terms of the settlement agreement – > the land owner agreed to provide alternative land to

the Land Claimants;> the alternative land could be used by the Land

Claimants without interfering with the operations of the Biomass Power Plant or the sugarcane production land; and

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Settlement Agreement

> the Land Owner agreed to a value for the alternate land

> The proposed settlement requires the issuance of sections 12(4) and 12(5) Certificate confirming that no new land claims can be lodged in respect of all the properties

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THANK YOUHappy MasondoT: 011 535 8264E: [email protected]



JUST AND EQUITABLE COMPENSATION

Anele Khumalo

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CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA, 1996 - SECTION 25(7)

> Protects property owner’s rights to not have their property expropriated without compensation

> Dispossessed persons right to restitution or equitable redress

RESTITUTION OF LAND RIGHTS ACT 22 OF 1994 – SECTION 33 (eC)

> Gives effect to right of dispossessed person while recognising the rights of property owners

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Florence v Government of the Republic of South Africa [2014] ZACC 22

> Florence family lived in Rondebosch from 1952 till 1970. In 1970 the applicant’s husband (Mr Florence) entered into a written sale agreement with Dr Yeller, the seller, in terms of which the purchase price was to be paid off in instalments for 13 years and 10 months

> These instalments were met. However, as the area where the property was situated was classified as a “white group area” the property couldn’t be transferred into Mr Florence’s name as he was not classified as white

> The sale had to be cancelled and the money the Florence’s had paid (R1350) was refunded. The family finally left Rondebosch in November 1970 due to being harassed by the authorities because of the areas classification

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> Mr Florence lodged a claim in terms of the Restitution Act seeking restitution of the entire plot – however because of the subsequent development on the land, restoration was not feasible

> The claim was therefore amended to seek equitable redress in the form of financial compensation as well as the erection of a memorial plaque

> Florence family had received R1350 from the seller therefore under-compensated for their dispossession by R30 513. How do you convert the 1970 financial loss into present day value

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> Land Claims Court determined extent of loss and what is just and equitable compensation

> Convert the family’s 1970 financial loss to present-day value “changes over time in the value of money”

> Interest or Consumer Price Index (CPI)

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> SCA and Constitutional Court bound by the Farjas case which held that CPI must be used.

> In the court’s views and its reading of S 33 (eC) of the Act, applying interest would not be appropriate as interest relates to investments, and interest accrues to the proceeds of money not to its actual value – the value of money is not changed because interest is earned.

> Equitable redress does not aim to place dispossessed in the position they would have been in had the dispossession not occurred.

> Act seeks to reinstate claimant to the position they would have been in immediately after the dispossession and not decades later when the compensation is paid.

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Mhlanganisweni Community v Minister of Rural Development & Land Reform and Eight Others (LCC 156/2009)

> Initially a number of claims were received from various communities in the area. These were claims were consolidated into one claim

> Parties agreed that the claim was valid but a dispute arose as to whether restitution was possible and what the compensation would be

> Claimants wanted restitution of the land and intended to continue present use of land

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> Land Claims Court agreed with the valuation proposed by the land owner

> Proposed compensation to be paid to the land owners R989 057 000 (including improvements)

> Minister opposed restoration on the basis that it is not feasible – compensation to be paid to the land owner was too expensive

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Factors considered when considering feasibility of restitution

“(cA) if restoration of a right in land is claimed, the feasibility of such restoration;

(eA) the amount of compensation or any other consideration

received in respect of the dispossession, and the

circumstances prevailing at the time of the dispossession;

(eB) the history if the dispossession, the hardship caused, the current use of the land and the history of the

acquisition and use of the land.”

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Settlement

> Restitution of 13,184 hectares

> Owners compensated R939,360,000 including improvements on land

> Transitional period expired on the 31 January 2015

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Post-settlement

> Are communities adequately equipped to maintain and effectively utilise resources such as MalaMala?

> Commission under no legal obligation to maintain watching brief of the continued and appropriate use of restored land

> MalaMala is now proudly the only community owned game to serve in the Sabi Sand area

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LAND OWNERS

WHAT ABOUT LAND OWNERS?

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LAND OWNERS RIGHTS

Niehaus v The Regional Land Claims Commissioner & Others (116/2014) [2015 ZA SCA S1 (27 March 2015)]

> Appellant was represented by Werksmans

> Case is example of how long land claims process can be – claims in question were lodged in 1995 and Commission as at the hearing still could not confirm whether or not the claims were valid in ter

> Commission has a crucial role in processing land claims and in preventing land owners from being unduly prejudiced by restitution process

> Restrictions placed on appellant left him hamstrung and prejudiced

> Matter referred back to the Land Claims Court

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The Times, 21 June 2011

THANK YOUAnele KhumaloT: 011 535 8114E: [email protected]



Reaching the summit - addressing the land question seminar

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Transcript of Reaching the summit - addressing the land question seminar