impact of expropriation Bill, 2008 ("the bill") on the mineral and petroleum resources development act, 2002 ("the mprda")
September 2008

Background
The draft Expropriation Bill, 2008 was tabled in the National Assembly by the Minister of Public Works on 16 April 2008 and was subsequently referred to the Portfolio Committee on Public Works. The committee invited written submissions on the Bill in late April 2008, to be submitted by 16 May 2008. Extensive public hearings were conducted by the portfolio committee in Parliament, as well as in all the provinces, in late June 2008. Those making submissions included Anglo American, Absa and AgriSA. The consultation process on the Bill gave rise to numerous objections to it, including warnings of a threat to the property market, that the Bill would severely discourage foreign investment and that it would infringe the Constitution's property clause.

On 14 August 2008, the committee announced that it had suspended its deliberations on the Bill. A media statement was subsequently issued by the Department of Public Works on 28 August 2008, which referred to the "withdrawal" of the Bill. The Minster of Public Works has not, however withdrawn the Bill, as required by the National Assembly's Rules. The precise legal status of the Bill thus remains unclear.

Despite the intensive public hearing process, the reason proffered to justify the Bill's sudden "withdrawal" was a lack of proper consultation on it. As the Bill has not been formally withdrawn, however, doubt remains as to whether it will be completely redrafted or merely reconsidered at a later stage. At the time of its "withdrawal", the committee chairperson stated that the general consensus within the committee was a desire to see the Bill reintroduced when either feasible or appropriate.

Early indications from the chairperson of the committee are that the Bill will be reintroduced after the general election next year, but that the decision rests ultimately with the Minister of Public Works.. The Bill's 'withdrawal' is thus merely temporary. A consideration of the Bill is accordingly warranted.

Effect of the Bill
The Bill empowers the Minister of Public Works (including his or her delegate), as well as any organ of state authorised by the Bill or any other law, to expropriate any property for a public purpose or in the public interest. The compensation payable for such an expropriation under the Bill is that contemplated in the Constitution.

Under the Bill, "public interest" includes "the nation's commitment to land reform and to reforms to bring about equitable access to South Africa's natural resources", while "property" is broadly stated to include "a right in property" as well as "moveable property". This means that shares in a company, as well as various rights in property, such as intellectual property rights, would constitute property capable of expropriation under the Bill. As indicated below, prospecting and mining rights granted under the Mineral and Petroleum Resources Development Act, 2002 ("MPRDA"), would also constitute property for the purposes of the Bill. In addition, under clause 24 of the Bill, the courts are effectively precluded from replacing the value ascribed to the property by the State with a value which the court considers to be fair. While the compensation payable for an expropriation effected under the Bill must, under clause 15(1) be "just and equitable", under clause 15(3)(b) of the Bill, an "expropriating authority may determine an amount of compensation that is below the market value of the property".

The impact of the Bill on the MPRDA
Under section 5(1) of the MPRDA, a prospecting or mining right granted under the MPRDA is a right both in the mineral and the land to which the prospecting or mining right relates. For this reason, a prospecting right or a mining right would fall within the definition of "property" under the Bill. This means that, under the Bill, prospecting rights and mining rights are capable of being expropriated if, in the opinion of the relevant organ of state, such expropriation would be in the "public interest" or for a "public purpose".

As indicated earlier, under clause 1 of the Bill, the public interest includes the "nation's commitment...to reforms to bring about equitable access to South Africa's natural resources". It is accordingly conceivable that the Bill, if eventually enacted in its current form, could permit the expropriation of prospecting or mining rights "in the public interest" or "for a public purpose" by the State. The compensation payable for such an expropriation would be governed by clause 15 of the Bill. Such compensation is likely to be less than the market value of the relevant right.

The MPRDA's expropriation provisions
The MPRDA itself contains provisions under which a person who is able to "prove" that his or her property has been expropriated under any provision of the MPRDA may claim compensation from the State. This provision is particularly relevant to holders of old order mining rights, which will, under Schedule II, expire on 30 April 2009. If, however, the Bill is adopted and enters into force before 30 April 2009, then its provisions will take precedence over the MPRDA's provisions relating to compensation for expropriation. This is because clause 32(2) of the Bill provides that, in the event of a conflict between the Bill and any other law relating to the expropriation of property for a public purpose or in the public interest, the Bill's provisions will prevail. This would result in a more onerous procedure for mining companies to follow in order to claim (and obtain) compensation. It would also give rise to the possibility of mining companies receiving compensation that is far less that their actual loss.

Conclusion
Before the Bill is regarded as a legislative dead letter, two questions need to be asked about its status prior to 30 April, 2009. (i) Will the Bill be withdrawn formally in terms of the National Assembly's rules and why has this not been done already? (ii) Does the committee intend re-considering the Bill following the envisaged "stakeholder consultation" and when will this take place?. If neither step is taken prior to the general election due in April, 2009, the Bill will lapse unless the National Assembly passes a resolution to the contrary.

Webber Wentzel Newsletter, 17 September 2008