The Agri SA case is one that deserves adequate and thorough analysis simply because it seemingly disrupts what was believed to have been neatly settled in our law.

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The Agri SA case is one that deserves adequate and thorough analysis simply because it seemingly disrupts what was believed to have been neatly settled in our law. Rautenbach, in his article quite helpfully categorises the differing Agri SA judgements into ‘5 constructions’[1], each outlining the varying approaches that judges (within their respective courts) took in presiding over the matter. This essay will deal mainly and separately with three of those constructions (i.e. judgements) and in critical discussion argue the strengths and weaknesses of each. The essay then comes to a close with a summary of what academia has to offer with regards to remedying this disruption. 

It is necessary, before proceeding to the discussion and analysis stage, to briefly outline the facts of the Agri SA case: A private company, Sebenza Mining, held coal rights regarding a property in Mpumalanga. Circumstances lead to the liquidation of the company. The Mineral and Petroleum Resources Development Act[2] (MPRDA) came into effect on 1 May 2001. The effect of which, Sebenza’s coal rights were extinguished. Sebenza ceded its rights to Agri SA, who then went on to claim that the extinguishing of pre-existing mineral rights in general and particularly pre-existing rights which were not transferred/converted (in was the case in Sebenza’s rights) as per Schedule II of the MPRDA amounted to expropriation of all those pre-existing mineral rights. Thus Agri SA claimed, as per s25(2) of the Constitution of the Republic of South Africa, 1996, compensation from the Minister of Minerals and Energy.  It should be noted, in passing that pre-2002, regulation of mining law was so far reaching that mineral rights were considered ineffective unless coupled with State authority to ‘activate’ those rights[3].  

The Supreme Court of Appeal (SCA) judgement[4] is in my view, the most controversial of the three judgements currently in discussion. The SCA held that ‘there was no expropriation because there was nothing to expropriate’[5]. This court did not base its decision on interpretation of s25 but rather on the evaluation and understanding of where mineral rights are (and have allegedly always been) vested. This court postulates two positions. Firstly that ‘mineral rights’, while vesting in private parties, were devoid of ‘the right to mine’ and were thus of no ‘value’[6]. Accordingly, the MRPDA is merely a new and additional ‘reiteration’ to a long linage of Acts that have vested ‘the right to mine’ in the State, who then chooses by ‘allocation’ (of permits, leases and authorisations) who exercises or ‘exploits’ those rights[7]. It thus followed, for this court, that the ‘mineral rights’ that lay with private parties lacked (unless accrued to by the State) the right to mine and thus are not capable of expropriation for lack of being property capable of such[8]. The Minerals Act[9] together with its predecessors manifested within the confines of oppressive regimes. This is an important precursor in interpreting its/their purpose. The MPRDA however manifests in the wake of a liberating dispensation. As such the objects, purposes and interpretations that ought to flow from it, are worlds apart from the Acts that came before. From a practical point of view, the SCA judgement gains its flaws, in my observation, when it erroneously places the Acts of an oppressive regime and this transformative MPRDA in the same boat. One clearly looks to promote accessibility and facilitate the empowering of a certain group of people, while the other(s) inadvertently looked to facilitate the restriction and subjugation of the same group of people. On thus premise, it seems illogical to, in any way, equate the two systems.

The Majority Judgment of the Constitutional Court[10] (CC) is where many of the issues and contentions within the Agri SA debates and discussions arise. Here, the CC starts by disregarding (with great relief) the SCA’s distinction between ‘mineral rights’ and ‘the right to mine’[11]. Purporting rather that what the State held was regulatory power, where it itself could not exploit minerals[12]. More importantly [and controversially], the court held that ‘there was no expropriation because there was no acquisition’[13]. Going on to say that custodianship did not amount to the State ownership, therefore the State did not acquire what Sebenza lost. Though conceding that deprivation of pre-existing rights did take place, it was common cause that this deprivation was not arbitrary[14].  This formal requirement of ‘acquisition’ in order to establish expropriation thus becomes the focal and most distressing point of the judgment. The court does however stress that acquisition can manifest in various ways[15] and it is undesirable to employ a ‘one-size-fits-all’[16] method. It stressed also that enquiring into acquisition and subsequent expropriation should be done on an ad hoc, case by case basis[17]. These qualifications do not however, take away from the onerous implications that ensue from the judgement.

The CC’s mistake was in taking on a ‘context sensitive’ and ‘effect-centred’ approach[18] in its interrogation of expropriation. The result is that having acquisition as a requirement conflates cause and effect; for instance in ‘expropriation proper’ cases (here expropriation is expressly authorised by legislation), where but for the legislation, the State would not have acquired the property[19]. The true determining factor is the legislation and acquisition is thus merely incidental. Inconsistency further arises in the instance of forfeiture; here the acquisition approach of the court fits hand in glove, however it would be nonsensical to prescribe consequently that criminals ought to be compensated[20] subject to compliance with the expropriation as set out by the CC. Really all the CC has done is to shift the enquiry from whether there is expropriation to whether there is acquisition[21]. Though relying on Harksen[22] the CC deviates from the case in that they used the purpose of the Act to ascertain acquisition instead of using it to ascertain expropriation directly[23]. As such, the judgement is infested with oversight. The only thing that stands pro this judgement is a juxtaposition exercise with Australian law; where the extinguishing of rights/property does not amount expropriation if those rights/property are sourced in legislation[24]. This is affirmation in favour of the CC judgement because though premised in common law, mineral rights are very heavily regulated[25] and can thus be perceived as being sourced in legislation. It remains however, that acquisition is and should have been left as, a mere consequence, rather than a pre-requisite of expropriation.

In choosing the lesser of three evils, seemingly the Minority Judgement of the CC (by Froneman) rises above its adversaries. The judgement hold that there is no expropriation because there is compensation in kind. Froneman introduces this concept of ‘compensation in kind’ with regard to the transitional provisions in the MPRDA. He goes on to argue that this compensation in kind is what helps the MPRDA meet the just and equitable standard that s25 requires[26]. Froneman however, fails to consider that compensation in terms of s25(2)(b) must have ‘been agreed to by those affected or decided or approved by a court’. In this instance, that qualification is not met. However, this is a discrepancy, in view of the larger picture, worth overlooking. 

The judgement does however (incorrectly, in my view) look to do away with the distinction between deprivation and expropriation[27]. Froneman supports this ‘doing away’ by relying on the fact that the Constitution itself does not tell us the definition or difference between the two, only that one requires compensation[28]. This argument is unpersuasive since there are a multitude of words and concepts in the Constitution that are not defined and in addition, the s25 is not superfluous when referring to the two concepts[29]. Besides, this distinction lies at the heart of s25 and is quite convincingly set in stone in the FNB[30] case.

All this confusion could have been avoided if, like in the US, the court had accepted that it is beyond its scope to turn ‘regulatory’ action into ‘expropriatory’ action[31]. Given that these ‘regulatory takings’ are expressly provided for and without qualification of administrative action, the Agri SA case would still fail, however on different more coherent reasons. Given the damage already done: another suggested remedy is to have litigants argue, where depreciation is curtail by Agri SA in achieving/succeeding in the expropriation stage, that deprivation is arbitrary and compensation is the missing factor that would turn this arbitrary deprivation into a ‘justifiable limitation’ of their rights in terms of s36 of the Constitution[32].

It is quite prevalent, that through the conversion process, the MPRDA did away with what used to be a rights-based regime and in its place, adopted a licence-based regime[33]. The passing over the bridge from old to new order[34] has resulted in far lesser rights, which have lost their common law ‘real right’ features (no longer perpetual and no longer include ability to sterilize[35]), because these features are inconsistent with the MPRDA[36]. A historical mistake was made in overlooking the gross curtailment of mineral rights by the State, as a consequence it is hard to stomach what the MPRDA aims to achieve (access underpinned by the values of justice, sustainability and fairness) in the manner it seeks to achieve this[37]. I believe it was the courts intention to help us stomach this transformation, albeit they (for the most part) gave the wrong reasons for swallowing. 

Bibliography

Articles

1.      A J Van der Walt ‘Constitutional Property Law’ (2013) JQR

2.      E J Marais ‘When does state interference with property (now) amount to expropriation? An analysis of the Agri SA Court’s State Acquisition Requirement Part I’ (2015) 18 PER

3.      E J Marais ‘When does state interference with property (now) amount to expropriation? An analysis of the Agri SA Court’s State Acquisition Requirement Part II’ (2015) 18 PER

4.      I M Rautenbach ‘Expropriation and Arbitrary Deprival of Property: Five Forensic Constructions’ (2013) 4 TSAR

5.      P J Badenhorst ‘The Make Up of Transitional Rights to Minerals: Something Old Somethinf New, Something Borrowed, Something New…?’ (2011) 128 SALJ

Books

1.      Mostert H Mineral Law: Principle and Policy in Perspective (2012) Juta

Cases

1.      Agri South Africa v Minister of Minerals and Education 2013 (4) SA 1 (CC)

2.      First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service and Another; First National Bank of SA Ltd t/a Wesbank v Minister of Finance 2002 (4) SA 768 (CC)

3.      Harksen v Lane NO and Others 1998 (1) SA 300 (CC)

4.      Minister of Minerals and Energy v Agri South Africa 2012 (5) SA 1 (SCA)

Legislation

1.      Constitution of the Republic of South Africa, 1996

2.      Mineral and Petroleum Resources Development Act 28 of 2002

3.      Mineral Rights Act 50 of 1991

Internet

1.      H Mostert  “This ‘Thing’ Called ‘Mineral Right’ Re-examining the nature, content and scope of a rather confounding concept in South African law” 26-27 available at http://ssrn.com/abstract=2524953, accessed on 2 April 2016