The City of Johannesburg’s 18% rates increase on commercial properties, which came into effect with the City’s 2009/2010 budget, and which has been hotly contested by the South African Property Owners Association (SAPOA) and other property industry stakeholders, has been declared invalid by the Supreme Court of Appeal of South Africa.
SAPOA took the matter on appeal to the Supreme Court of Appeal, which has ruled in favour of SAPOA (with all costs, including the costs of junior counsel) and set aside the High Court’s ruling. It ruled that the City of Johannesburg and the Mayor failed to comply with the statutory requirements and procedures in arriving at the decision on 21 May 2009 to impose a rate of R 0.0154 in the rand on the value of business, industrial and commercial properties.
SAPOA took the City to the South Gauteng High Court over the matter in 2010 on the grounds that the increase contravened several laws and that there had been woefully inadequate public participation allowed for. SAPOA contended firstly that the levying of the ratecontravened section 19(1)(b) of the Rates Act because the ratio of the rate levied on business properties (1.54 cents in the rand) to the rate levied on residential properties (0.44 cents in the rand) exceeded the ratio which is permissible under section 19(1)(b) of the Rates Act read with the regulations; secondly, that the levying of property rates is an integral part of the budget process in terms of the Rates Act, the Local Government: Municipal Finance Management Act 56 of 2003 (the Finance Act) and the Local Government: Municipal Systems Act 32 of 2000 (the Systems Act) and the decision to increase the rates on business properties by an additional 18% required community participation which did not occur; and, thirdly, the rates imposed on business properties contravened the Rates Act because they unfairly discriminated against the owners of commercial properties. At the time, the High Court ruled against SAPOA and the rates increase was upheld.
SAPOA took the matter on appeal to the Supreme Court of Appeal, which has ruled in favour of SAPOA (with all costs, including the costs of junior counsel) and set aside the High Court’s ruling. It ruled that the City of Johannesburg and the Mayor failed to comply with the statutory requirements and procedures in arriving at the decision on 21 May 2009 to impose a rate of R 0.0154 in the rand on the value of business, industrial and commercial properties. It further declared that in the future the City was obliged to comply with the provisions of the Local Government: Municipal Systems Act 32 of 2000, the Local Government: Municipal Finance Management Act 56 of 2003 and the Local Government: Municipal Property Rates Act 6 of 2004 when it materially amends a proposed budget after it has been tabled and advertised for public comment.
SAPOA says it is extremely pleased with the decision, as its members in the affected municipal area have been forced to fork out massive rates payments over the past three years in circumstances which SAPOA believed were unfair. The Supreme Court did not set aside the City’s entire 2009/2010 budget, which was one of SAPOA’s initial prayers. The main reason for this is that, three years down the line, it would be extremely difficult to ‘unscramble the egg’ as one of the judges put it.
SAPOA’s Chief Executive Officer, Neil Gopal, says that this victory is a meaningful one because an important principle has been upheld. It is important that South Africans and corporate entities continue to be committed to protecting the spirit embodied within our Constitution and the principle of legality. Government, the private sector and private citizens need to accept that South Africa is at our mercy and that our duty to it is to ensure that the laws and policies of our country pass the test of constitutional law scrutiny.”
He continues by stating that: “It is important that it be noted that South Africans will not stand by and let the Constitution of our country be relegated to a legal instrument that can be overridden by policy decisions. SAPOA has, as a result of this judgment, made great strides and attained commendable victory that cannot immediately be quantified in monetary terms, but which will ensure that municipalities will adhere to the spirit of the constitution in approving rates policies.”
Mr Gopal notes that: “There is urgent indictment on both the public and the private sectors to realise that the sustainability and growth of our country’s economy is a 'fragile dream' that is fuelled by the hopes of bridging the disparities in our country. It is SAPOA’s hope that this judgment leaves a footprint that begins to open doors of strategic conversations and communication between the public and private sector on issues that are beneficial to our country. The priorities of both sectors may be different, but there will always be an inherent common socio-economic thread that binds the two sectors, which obliges both parties to be committed to successful, efficient and effective cities and municipalities. What is important though is that the quest to deliver municipal services must not be so paramount that the entrenched constitutional right prohibiting unfair discrimination is infringed in favour of unfairly burdening the commercial property sector.”
Headds that this case sets an important precedent which will hopefully ensure that not only SAPOA’s members specifically, but corporate and private citizens of South Africa generally, are not unfairly disadvantaged when government bodies do not follow the proper procedures.
The case has reinforced SAPOA’s standing as an organisation with influence, particularly in the eyes of government. SAPOA’s primary role is to protect the interests of the commercial property industry and the victory will ensure that it is taken more seriously. It is also likely to ensure that similarly unfair policies are not pushed through in other municipalities without due regard to the law or to the necessity of proper public consultation.