Sakeliga confirms it has alerted the US Embassy, as well as trade representatives from other countries, about the case.
South Africa’s first expropriation without compensation test case will – if successful – have a ripple effect throughout the economy and negatively impact the development cycle, according to property industry stakeholders.
The Ekurhuleni Metro in April 2019 expropriated a 34-hectare property – portion 406 of the Farm Driefontein – without compensation from Business Venture Investments 900, which has not opposed the expropriation but is seeking market-related compensation for it.
Sakeliga CEO Piet le Roux says the business tried to resolve this dispute amiably, but the court has now ordered mediation, which will take place at the end of October 2025, and thereafter an 18-day trial in February next year.
The impact of the test case is likely to be exacerbated if it leads to a failure in South Africa’s discussions with the United States. These concern a trade agreement and the retention of President Donald Trump’s 30% tariff imposed on all imports from South Africa to the US from 1 August 2025.
In February, President Trump said in a Truth Social post that “certain classes of people” in South Africa were being treated “very badly” and he would cut off funding to the country until the matter was investigated.
“South Africa is confiscating land, and treating certain classes of people very badly,” he said.
Le Roux confirmed to Moneyweb this week that Sakeliga has alerted the US embassy and trade representatives from other countries about this expropriation without compensation.
SA Property Owners Association (Sapoa) CEO Neil Gopal says the association has taken keen interest in the matter but, at this stage, has not joined the court case.
ALSO READ: Ekurhuleni explains why it won’t compensate owner after expropriating R30m land – report
Impact on speculative investors
Gopal says Sapoa supports land redistribution and reform to redress past historical imbalances, adding that unless there is significant reform and redistribution within the property sector, the entire sector is could be placed at risk.
However, he emphasised that it is inappropriate to categorise commercial property as unproductive.
“Speculative investors invest in land where there is a high risk and potentially high return.
“The contention that land, which is held for purely speculative purposes, could be expropriated for nil compensation is dangerous and incorrect,” says Gopal.
“Investment in land is undertaken so as to generate a capital profit and is common, and part and parcel of normal activities within the property sector.
“A buy-and-hold strategy is an internationally recognised real estate approach. If you buy and hold for nil value, it will disrupt property market fundamentals and also disrupt capital flows and capital markets,” he says.
Gopal says there seems to be no reason why land held for so-called speculative purposes would qualify for expropriation without compensation. He says there are many landowners whose sole purpose of business is to speculate in land, adding that they do not get the land for free and they have significant holding costs.
ALSO READ: Expropriation: Another land reform bill in the works
“It seems irrational to indicate that, in these instances, expropriation should qualify for nil compensation.
“Vacant land attracts higher rates, and property owners are prepared to pay these rates because of the future potential of the land,” he says.
Gopal adds that there appears to be no logic or justification for singling out these categories of land as being appropriate for expropriation without compensation.
He says if vacant land is required to achieve urban land reform, then it should be expropriated, but against the payment of just and equitable compensation.
“International law does not permit expropriation without compensation,” says Gopal.
“Actions which erode legally enforceable property rights will raise concerns for investors, both locally and internationally.”
ALSO READ: Ramaphosa advises Gauteng to take advantage of Expropriation Act
Reit risks
SA Real Estate Investment Trust (SA Reit) Association chair Estienne de Klerk, who is also CEO of JSE-listed Growthpoint Properties, says the principle of land expropriation is not something that sits well with the commercial property sector.
“Generally, I think it’s the wrong message to be sending to the market and the wrong message to be sending internationally at this time, given our tensions with the US etcetera,” he says.
De Klerk says there are certain processes that need to be followed before a property can be expropriated without compensation, but generally that kind of behaviour or legislation does not promote confidence in the sector.
However, De Klerk says Sariet gained the impression from the final legislation that it would be very difficult for the state to randomly expropriate commercial or residential real estate without compensation.
De Klerk does not think this case will result in investors shifting their investments away from the Reit sector because of the potential risks posed by expropriation without compensation. This is because the likelihood or possibility of expropriating existing investments that are operating is very unlikely in terms of the legislation.
He says the listed sector in South Africa is commercial real estate, predominantly retail, with a small sliver of residential and it is not that exposed to land positions for development.
De Klerk says the Reit sector needs to get a return on every rand it invests and therefore does not have a lot of money stuck in land parcels.
“But I think developers are going to be much more careful in sitting on big tracts of land, so it may have an impact on the development cycle in South Africa.
“What will happen is that guys will get options on land but not buy it because they will wait until they are ready to develop before they exercise it [the options]. So, it may have a few structural impacts on the development side. But I can’t see it impacting the listed property sector,” he says.
ALSO READ: Expropriation Act in court: Experts on whether the DA has a strong case
Court challenge
Le Roux says Sakeliga will be incorporating the details of the Ekurhuleni case in its constitutional challenge of the Expropriation Act of 2024, because it is relevant to their arguments in its case.
He says Sakeliga expects to file its papers for the constitutional challenge to the Act next month, but it will not be heard on an urgent basis.
However, Le Roux says public interest cases are normally heard within six months, although he expects the case to drag on for several years because the state almost never sticks to the filing timelines.
“We are not asking for an interdict that prohibits the state from applying the provisions of the Act, but if we become aware of an attempted implementation of the unconstitutional aspects of the 2024 Act, we may then at that point bring an urgent application for an interdict,” he says.
This article was republished from Moneyweb. Read the original here.
