Explainer: Cape Town’s “Pro-poor” Budget and Its Legal Challenge

Shacks in Khayelitsha, Cape Town. The City has unveiled an ambitious budget that will provide jobs and upgrade much of the city’s infrastructure. But the budget is being funded by increased tariffs that a property owners’ organisation opposes.

Cape Town’s new Invested in Hope budget, which paves the way for spending almost R40-billion over three years, is under fire from commercial property owners, who have approached the court to declare parts of it unlawful.

The City’s 2025/26 budget, which came into effect on 1 July, was challenged from the outset, with stiff opposition to new fixed tariffs based on property values. These are the city-wide cleaning tariff, fixed water tariff, and fixed sanitation tariff.

These were proposed in the first draft budget published for public comment on 27 March. By the close of the commenting period, there were more than 12,000 comments opposing these new tariffs.

As a result, the revised draft budget released on 28 May reduced the cleaning tariff, increased the qualifying threshold for pensioner rates rebates from R22,000 to R27,000 household income per month, and lowered the fixed water and fixed sanitation charges for properties below R2.5-million. Previously, rebates only applied to properties below R1-million.

There were more than 1,100 individual submissions against the revised budget, but it was adopted by the council on 26 June with minor changes.

“Pro-poor”

In Mayor Geordin Hill-Lewis’s budget report, he said the 2025/26 budget aimed to spend R12.6-billion on infrastructure to “grow the economy faster so that we can lift more people out of poverty and into employment”.

This was part of the three-year, R40-billion investment plan, which is expected to create more than 130,000 construction-related jobs. Hill-Lewis stated 75% of this investment would directly benefit lower-income households.

Part of this would be a R5-billion investment in water and sanitation in 2025/26. Over three years, the investment would be R16.5-billion, included in which is more than R6-billion for sewage treatment works infrastructure, and R2.5-billion for new water projects and water re-use to make the city more water secure.

Over the three years, R123-million is set aside for community sports facilities, R662-million for recreation hubs and community halls, R182-million for parts and public spaces, more than R191-million for libraries, and R121-million for public swimming pools.

Public transport also receives a chunk of the capital expenditure over the three-year term, with R4.5-billion for the major MyCiTi south-east expansion. Housing also receives attention, with R3.4-billion for informal settlement upgrades, R2.1-billion for Breaking New Ground (BNG) housing, and close to R2-billion for City affordable rental units.

These, among other capital expenditure initiatives, were alongside what Hill-Lewis states is “South Africa’s most comprehensive social package for struggling households”.

There was R5.1-billion in the social package in 2025/26, up from R3.75-billion in 2022/23. Rates rebates amount to R2.4-billion, with R2.7-billion provided for indigent relief.

In a July press statement responding to the court challenge to the budget brought by the South African Property Owners Association (SAPOA), Hill-Lewis said the budget was “pro-poor” and protected homes valued at less than R2.5-million. It also extended rates relief to more middle-class homes.

The city-wide cleaning tariff

The 2025/26 budget brings changes to the municipal billing. These are the introduction of a city-wide cleaning tariff, a fixed water tariff, and a fixed sanitation tariff. These are all calculated according to the property’s value. However, the City states none of these are new charges for residents. Rather, they are now separated or refined from previously existing charges.

The City-wide cleaning tariff appears to be a new charge on the municipal bill, but residents were paying it through a 10% surcharge on their electricity purchases. The electricity surcharge has now been removed and replaced with the cleaning tariff as a stand-alone item.

In an advert explaining the new rates and tariffs, the City states the cleaning tariff is “embedded in the ‘polluter pays’ principle” as contained in the National Environmental Management Act, which states all generators of waste (including businesses and households) are responsible for the costs of managing the waste they generate.

However, as these services can’t be measured in the same way as electricity or water use, the tariff is not based on individual waste generation, but “designed to provide a collective benefit” to ensure a clean environment for all residents.

Commercial properties will not see the cleaning tariff on their bills this year, as their contribution will continue through electricity purchases during the 2025/26 financial year to be phased in next year.

Fixed water and sanitation tariffs

Before the current 2025/26 budget, every property owner paid a basic water charge calculated according to the size of the water pipe connected to the property. These were mostly 15mm or 20mm pipes. Those connected to the 15mm pipe paid a lower basic charge than those on a 20mm pipe.

This basic water charge started after the severe ‘Day Zero’ drought of 2017, when City revenue from water use dropped sharply. The basic water charge meant the City could still get enough money from property owners to fix and maintain water infrastructure despite a drastic drop in water sales.

However, the basic water charge based on pipe diameter was unfair to poorer households, as a household using 20kl of water per month on a R10-million property was paying the same basic charge as a household on a R500,000 property using less than 6kl of water per month.

The new fixed water charge is meant to correct this. In the revised budget, households on properties of R2.5-million or less now pay the same, or less, in fixed water charges than previously.

The budget annexures explain that the sanitation charge (for investment, repair, and maintenance of the sewerage infrastructure) used to be an estimate of how much water was used on the property.

It is now delinked from water consumption and based on property value, but this also means there is a concomitant reduction in the water volume charges.

Thus, the City states: “The overall cost to the household remains the same, only the structure of the tariff changes.”

Legal opposition to the budget

The property owners who have brought the case before the Western Cape High Court on an urgent basis are predominantly large commercial property companies who own, among others, the V&A Waterfront (owned by Growthpoint), Canal Walk shopping centre (Hyprop), Cavendish Square (Old Mutual), and Blue Route Mall (Redefine).

They are represented by the South African Property Owners Association (SAPOA), of which they are members. They filed their Notice of Motion at the High Court on 2 July.

SAPOA argues that the fixed tariffs for city-wide cleaning, water, and sanitation, all of which are calculated according to property values, are unconstitutional and should be declared unlawful and invalid.

In his founding affidavit, SAPOA CEO Nilesh Gopal argues that, according to the Constitution, a municipality can only charge rates on property, consumption-based charges for services such as water and electricity, surcharges on these service charges, or taxes allowed by other legislation.

All other applicable legislation, such as the Municipal Systems Act, Municipal Finance Management Act, and the Municipal Property Rates Act, is in line with this.

But Gopal argues that the cleaning tariff, fixed water tariff, and fixed sanitation tariff cannot be defined as property rates in terms of the rates legislation. They are also not consumption-based charges as they are not calculated according to how much of the service the property owner is using.

He states SAPOA knows of no other municipal taxes approved by national legislation, and thus, he argues, the cleaning tariff is unconstitutional and unlawful.

Afriforum says it is also filing court papers challenging the City’s introduction of the fixed tariffs.

City spokesperson Jean-Marie de Waal Pressly said the City is yet to file its answering affidavit to SAPOA.

© 2025 GroundUp. This article is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

You may republish this article, so long as you credit the authors and GroundUp, and do not change the text. Please include a link back to the original article.

We put an invisible pixel in the article so that we can count traffic to republishers. All analytics tools are solely on our servers. We do not give our logs to any third party. Logs are deleted after two weeks. We do not use any IP address identifying information except to count regional traffic. We are solely interested in counting hits, not tracking users. If you republish, please do not delete the invisible pixel.