Property Owners Are Misreading the Law, Argues Cape Town Mayor

A legal battle in Cape Town between property owners and the City will clarify what municipalities can charge residents.

• In early July, the South African Property Owners Association filed its founding papers at the Western Cape High Court, seeking to have three new tariffs in the 2025/26 budget declared unlawful.
• This came after the budget was revised following thousands of comments against the new fixed tariffs for city-wide cleaning, water, and sanitation.
• The City filed its answering papers this week, in which the budgetary process, legislation, and requirements are detailed.

The legal challenge to the City of Cape Town’s latest budget brought by the South African Property Owners Association (SAPOA) is based on a selective reading of the Constitution and the Municipal Systems Act, argues Mayor Geordin Hill-Lewis.

In the City’s voluminous 627-page answering papers, filed this week after an agreed extension to the initial 23 July deadline, Hill-Lewis also argues that if the Western Cape High Court grants (SAPOA) the relief they seek, it would result in the City being in breach of its constitutional duties, as well as violating the Municipal Finance Management Act.

SAPOA, in its founding affidavit filed on 2 July, argues that the City’s introduction of a fixed city-wide cleaning tariff, fixed water tariff, and fixed sanitation tariff based on property values rather than consumption of the services, violates Section 229 of the Constitution. This states that 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. SAPOA CEO Nilesh Gopal said there is no other legislation allowing for property taxes to be charged by a municipality.

City’s legal defence

Gopal, representing large commercial property owners, argues in his founding affidavit that the three fixed tariffs are based on property values, but cannot be defined as property rates in terms of the applicable Municipal Property Rates Act (the Rates Act).

He argues they are also not consumption-based charges, as they are not calculated according to how much of the service the property owner is using. Thus, they are a tax and unlawful.

SAPOA appears to be arguing that the value of a property (stated on municipal bills) can only be used to calculate property rates. It cannot be used to calculate tariffs beyond this.

Hill-Lewis takes issue with this. They are also used, for example, to calculate rebates, and are a reliable indicator of household income.
“Accordingly, the use thereof for any purpose outside of the Rates Act is not novel, unique or unlawful,” he argues.

City abiding by the Constitution

Hill-Lewis also brings the Constitution to bear. He states Section 152 of the Constitution mandates local government “to ensure the provision of services to communities in a sustainable manner; to promote social and economic development; and to promote a safe and healthy environment”.

So the City is constitutionally obliged to provide water, sanitation, and cleaning services, and to charge for doing so. Additionally, he notes that neither the Constitution nor “any relevant national legislation” specifies exactly how a municipality should recover the costs of providing these services.

“No specific methodology is prescribed,” he states.

Municipal Systems Act

Hill-Lewis argues SAPOA has also wrongly interpreted the Municipal Systems Act in its founding affidavit.

According to the Systems Act, the City must adopt and implement a tariff policy on the levying of fees for municipal services. The tariff policy must comply with the Systems Act, the Municipal Finance Management Act, and other applicable legislation.

He states there are nine policies stipulated for the tariff policy, but SAPOA focuses only on two, which are that the amount property owners pay for services should generally be in proportion to their use of that service, and tariffs must reflect the costs reasonably associated with rendering the service.

Hill-Lewis lists the other seven, which include that provision may be made in appropriate circumstances for a surcharge on the tariff for a service, and provision may be made for the promotion of local economic development through special tariffs for categories of commercial and industrial customers. Also, the tariff policy must set tariffs at levels “that facilitate financial sustainability”.

The Systems Act also provides that the City adopts by-laws to give effect to the implementation and enforcement of its tariff policy. As a result, the Tariff By-Law came into effect in July 2007.

He states the Systems Act gives the City the “general power to levy and recover fees, charges and tariffs in respect of any service”. This general power is not qualified, and “its ambit is not delineated by any regulation”.

The City thus has a “wide discretion to impose tariffs for its services” provided it does so through a tariff policy compliant with the Systems Act and acts rationally.

He argues the Systems Act does not prescribe the “precise manner” in which tariffs for services should be determined.

Rather than the three fixed tariffs being an unlawful tax, as claimed by SAPOA, Hill-Lewis argues they are sundry tariffs under the City’s tariff policy. The tariff policy, he states, is in line with the Systems Act, and its constitutionality is not being questioned.

He said if the court upheld SAPOA’s contention that the Systems Act does not authorise the City to charge the three fixed tariffs based on property values, then the relevant sections of the Systems Act are not consistent with the Constitution and therefore invalid. This is because the Systems Act cannot lawfully infringe the City’s constitutionally entrenched rights and obligations to administer water, sanitation, and cleaning.

Rationality and the deprivation of property rights

SAPOA argues the fixed water tariff is irrational and interferes with property use in the case of property owners who have invested in water harvesting systems, which increase their property value.

So they would pay a higher tariff for water than property owners without water harvesting systems, even though they use less municipal water. SAPOA argues that having to pay more in the form of a fixed tariff regardless of consumption is an arbitrary deprivation of property.

Hill-Lewis counters that this argument makes no mention of sanitation, which cannot be divorced from water use. Without a fixed sanitation tariff, sanitation is charged as a percentage of municipal water use. If all or most of the water used on the property comes from a water harvesting system, the property owner is thus paying less, or nothing, for use of the sewerage infrastructure. Their use of the sewerage system is thus being subsidised by property owners who are solely reliant on municipal water.

Additionally, the benefit of a water harvesting system is realised by not having to pay for municipal water. SAPOA also did not provide evidence that investing in a water harvesting system substantially increased property value.

“The benefits of water harvesting solutions are self-evident … It is not linked to property rights,” states Hill-Lewis.

Problem with the relief sought

SAPOA wants the court to set aside the three fixed tariffs for two months, during which the City can alter its budget accordingly. Alternatively, SAPOA wants the court to declare the budget as a whole unlawful and give the City two months to bring it in line with the Constitution, the Systems Act, and other applicable legislation.

In his answering affidavit, Hill-Lewis explains the budgetary process in detail in order to show the court that the City cannot simply replace one revenue stream with another without falling foul of the Municipal Finance Management Act.

It takes the better part of a year to develop the budget, he argues. And were the three fixed tariffs to be struck, the City would be approximately R2-billion short, which would translate into an unfunded budget, which is a direct violation of the Municipal Finance Management Act.

It would also mean the City would not be able to render essential services, and thus would be unable to fulfil its constitutional obligations.

He said if the court agreed with SAPOA’s argument that the fixed tariffs are unlawful, then the suspension of the tariffs should be set aside until 1 July 2026, which would give the City enough time to rework the budget without falling foul of other national legislation.

“That is the only practical solution in all the circumstances.”

The City would also then file a counter application seeking to have the provisions of the Systems Act on which SAPOA rested its argument be set aside, because it would mean they prevent municipalities from being able to fully exercise the powers given them by Chapter 7 of the Constitution.

The City has provided a rates calculator on its website, on which you can calculate what your municipal bill will be under the new budget, compared to what it was.

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