PROPERTY: ConCourt rules CPI appropriate method to determine present-day value of property for land

In the recent case of Florence v Government of the Republic of South Africa, the Constitutional Court ruled that using the Consumer Price Index (“CPI”) to determine the current value of a property that was taken away from a land restitution claimant in 1970 under apartheid legislation is an appropriate method leading to equitable redress for purposes of the Restitution of Land Rights Act. The court referred with approval to the reasoning of the Supreme Court of Appeal that the application of the principles of returns on investment on a historical loss could lead to overcompensation and that the market value of a property is only one of many factors that have to be taken into account when deciding on what would constitute equitable redress.

In a minority judgment, Van der Westhuizen J (Cameron J, Froneman J and Majiedt AJ concurring) held that using CPI cannot be appropriate for the valuation of an immovable property, as the CPI measures changes in costs of consumption, whereas a property is an investment and its value can only be determined with reference to the principles of returns on investments.

As a side issue, the court was called upon to decide whether the state was obliged to bear the cost of erecting a memorial plaque on the property in question, but this argument was rejected by the majority as forming a private matter between the parties and outside the scope of the remedies provided for in the Restitution Act, which consist of either restitution of the land or equitable redress, which the court seems to have interpreted to mean a monetary figure only.

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