SAPOA High Court Case – update

SAPOA and Afriforum high court case brought against the City of Cape Town – summary of 3 days’ proceedings

 

Below you will find an excellent summary by the Cape Town Collective Ratepayers’ Association (CTCRA, of which NRPA is founding member) of the South African Property Owners Association (SAPOA) and Afriforum high court cases brought against the City of Cape Town. These cases are challenging the link of fixed water, sewage and city-wide cleaning charges to property values for ratepayers.

 

For background on this case and the reasons why NRPA is supporting CTCRA as “Amicus Curiae” in the high court case please look at this previous post: https://nrpa.org.za/july2025-rates-bill/

 

CTCRA is a newly formed umbrella organisation for ratepayer organisations in Cape Town. It currently has 43 members. NRPA is one of the founding members, and Bas Zuidberg, NRPA chairman, is also chair of CTCRA. NRPA contributed R6,500 to the legal expenses of CTCRA to join as the SAPOA court case as “Amicus Curiae”, or Friend of the Court. It was important for CTCRA to do this in order to present the effects of the change in method of fixed charge calculation on residential ratepayers, since SAPOA represents the interests of commercial ratepayers, which are different.

Given the similarities between the SAPOA and Afriforum cases the high court decided to merge proceedings in hearings that were held December 2 – 4 2025. The hearings took place in Court 19 of the Cape Town High Court and were presided over by three judges: La Grange, Savage, and Boqwana.

The ruling will take quite some time due to the complexity of the case and countercase, possibly until February 2026.

SAPOA/Afriforum Case – Day 1 Summary

Adv. JP Steenkamp delivered the first presentation on behalf of SAPOA. He clarified that municipal revenue is derived from rates, fees, surcharges and taxes. Rates are based on property values, whereas fees must reflect the cost of delivering a specific service and the level of consumption.

Because the City has now linked fixed water and sanitation charges to property values, SAPOA argues that these charges are in fact disguised rates. Rates must be imposed in accordance with the Municipal Property Rates Act. If the City may simply reclassify a rate as a “fee,” it can effectively bypass the Rates Act entirely.

Steenkamp emphasised that the Municipal Systems Act (MSA) requires that a fee must reflect the service provided. Consequently, if a municipality fails to deliver a service, there is no obligation on the consumer to pay for it. Rates, by contrast, must be paid regardless of service delivery.

SAPOA also challenged the City’s claim that the budget is “pro-poor.” They gave a hypothetical example: a low-income pensioner in the Bo-Kaap who cannot afford the tariffs due to gentrification, compared with high-income landlords who own multiple lower-value rental properties and end up paying less.

SAPOA concluded by stating that it does not oppose support for low-income households, but opposes the unlawful means through which the City seeks to achieve this.

CTCRA and GOOD Party

Adv. M. de Beer appeared for both CTCRA and the GOOD Party.

De Beer aligned with SAPOA’s argument, emphasising the importance of limiting municipal powers through a national legislative framework. He explained that municipalities provide two types of services:

1. 1. Public-good services, benefiting the entire community; and
   2. Consumption services, used by specific residents.

Rates may fund either category, but tariffs may only be used for consumption-based services. For this reason, the MSA requires tariffs to be linked to services that can be measured.

The MSA further requires that tariffs must generally be linked to the cost of providing the service. “Generally” means as far as reasonably and practically possible. The City, however, stretches the meaning of “general” to justify diverting tariff revenue—meant for consumption services—to fund public-good services. This is problematic not only from a legality perspective but also from a cost perspective, because consumer services attract VAT.

SA First

Adv. A. Cockrell presented the arguments for SA First.

Their first argument was that the City had not properly considered the affordability impacts of the tariff increases, which they argue are unaffordable for many households. The second argument challenged the adequacy of the public participation process.

Although one of the judges questioned the relevance of these arguments, they highlight systemic issues. National and provincial governments are required to conduct Socio-Economic Impact Assessments (SEIAs) for new policy, but municipalities are not. Cockrell’s argument therefore illustrates the need to extend SEIA requirements to local government. He also referenced the widespread public frustration that public participation processes have become mere tick-box exercises. With advances in artificial intelligence, public participation could now be made transparent, auditable and objectively verifiable.

AfriForum

Adv. E. Botha presented AfriForum’s case. While broadly aligned with the arguments of SAPOA and CTCRA, he offered a systematic legal exposition beginning with Section 229 of the Constitution, then the MSA, and finally the City’s own bylaws, showing how the new tariffs fail to comply with these requirements.

Botha accepted that the City requires additional revenue but argued that the chosen method is unlawful. He explained that lawful alternatives exist—one example is the use of a surcharge.

City of Cape Town

The City’s legal team arrived with three boxes containing six lever-arch files each. The City was represented by Adv. Bawa.

She began by asserting that City research shows that property-value bands are a reliable proxy for household income. While the City recognises that low-income households may live in high-value properties due to gentrification, these are treated as outliers, and relief mechanisms are available for them.

She disputed the argument that generating additional revenue through rates would be cheaper. According to her argument, increasing revenue through rates rather than tariffs could trigger provisions in the VAT Act that might cause the City to lose its VAT exemption.

Bawa further argued that raising additional revenue through tariffs is less costly than doing so through rates or surcharges. The explanation was so complex that the judges struggled to follow it. Judge Savage expressed irritation at the City’s lengthy affidavits and the lack of clarity in its arguments.

Adv. Bawa then argued that neither the Constitution nor the MSA prohibits the City from basing tariffs on property value. The City appears to apply a permissive interpretation of its powers: it may do anything unless expressly prohibited, whereas the applicants rely on the principle that a municipality may only act where empowered.

Her repeated refrain was that “there is nothing to suggest…” the city’s support for a potential dictatorial way of interpreting the law. Judges Savage and Boqwana expressed concern about the far-reaching implications of such a view.

Bawa concluded by stating that the tariffs are calculated using property-value bands and not by applying a rate-in-the-rand to an individual property value. On this basis, she denied that the tariffs are disguised rates. One must concede that the tariffs are not simply disguised rates—they are very cleverly disguised rates.

Adv. N. de Jager closed for the City by arguing that the tariff changes did not require the promulgation of a new bylaw, because the existing bylaw automatically incorporates updated tariff policies.

SAPOA/Afriforum Case – Day 2 Summary

Day 2 focused on replies to the previous day’s arguments and the City of Cape Town’s (CoCT) counter-application, which would become relevant only if the court were to find the City’s tariffs unlawful.

With the introduction of the counter application, arguments were becoming increasingly complex.

SAPOA REPLY

Adv. van Reenen presented SAPOA’s reply. SAPOA reiterated that rates may be based on property value and used for any municipal purpose, whereas tariffs may only be used to fund specific services. Using property-value bands to determine fixed charges is, in SAPOA’s argument, essentially the same as applying a rate-in-the-rand (RiR). Therefore, the fixed charges based on property value are disguised rates.

Although the Constitution grants local authorities fiscal powers, it also requires that these powers be limited by national legislation. If municipalities may impose any tariff they choose, then section 74 of the Municipal Systems Act (MSA) serves no purpose.

SAPOA further argued that if property value is used as a proxy for household income, then fixed tariffs become a disguised income tax.

The City had argued that raising revenue through these fixed tariffs is more efficient than raising revenue through rates. SAPOA responded that efficiency is irrelevant—the legal question is whether the tariffs are lawful, not whether they are financially convenient.

AFRIFORUM REPLY

Adv. Botha delivered AfriForum’s reply. He argued that, unlike national and provincial governments—where legislative and executive powers are clearly separated—local authorities exercise only executive authority. Their legislative powers are therefore subject to national and provincial legislation. This reinforces the principle that municipalities cannot expand their powers beyond national limits.

Botha also argued that the shift to property-value-based fixed charges has been driven by the widespread adoption of rainwater harvesting by wealthier households, which has reduced their volumetric water charges. Although these residents use less municipal water, they still generate the same volume of sewage. AfriForum argued that sewerage usage can be estimated by other lawful methods besides property value. It is especially ironic that the City itself encouraged water harvesting before Day Zero to secure supply for the poor—yet now seeks to penalise residents who invested in it.

For households that have gone completely off-grid, a fixed charge based on property value amounts to paying for a service they do not use.

AfriForum concluded that while the City’s motivation for changing tariff policy may be practical, but practical challenges cannot justify unlawful conduct.

GOOD PARTY REPLY

Adv. de Beer replied on behalf of the GOOD Party (intervening party). Friends of the court were not permitted to reply.

He emphasised that the case concerns legality, not rationality. While water tariffs consist of both fixed and consumption-based components, he noted that the fixed component must be based on the cost of installing and maintaining infrastructure, not on property value.

De Beer further warned that if the court finds the fixed-charge methodology unlawful, the City may be obliged to refund those charges.

CITY REPLY

On Day 2, the City was represented by Adv. Pillay. She argued that the City’s authority to impose fixed charges derives from sections 74 and 75 of the MSA, which she claimed do not restrict how fixed tariffs may be calculated and permit both direct and indirect cross-subsidisation.

Her arguments were difficult to follow, as she frequently referred to statutory sections without summarising them—e.g., stating that a position is justified by “reading section X together with Y and Z.” Without intimate knowledge of these provisions, it was impossible to follow the line of reasoning.

Pillay argued that since the MSA does not limit how fixed tariffs may be set, and the City acted rationally, any attempt to restrict these powers would be unconstitutional.

She confirmed that the introduction of property-value-based fixed charges was driven by wealthier consumers using less water due to water harvesting. In 2018, the City applied to the Department of Cooperative Governance and Traditional Affairs (COGTA) for approval to levy an additional rate (with a different rate-in-the-rand) to offset the revenue loss. COGTA refused and advised the City to recover the revenue via tariffs instead.

Pillay argued that recovering lost revenue through rates would subject the rates to the Property Rates Act instead of section 74 of the MSA and would cause “untold harm”—though she did not explain what this harm would be.

She also argued that surcharges, as proposed by AfriForum, would not enable the City to recover the shortfall.

Judge Savage expressed concern that the City sought to recover lost revenue by expanding its powers to extract more money from wealthier residents, while making no effort to improve its internal efficiency or reduce its wage bill. Adv. Pillay dismissed this concern as irrelevant.

CITY’S COUNTER APPLICATION

After lunch, the City motivated its counter-application. If its tariffs were found unlawful, the City argued that national legislation—specifically the MSA—must be amended to grant municipalities unlimited discretion to set tariffs. The City effectively argued that the MSA is unconstitutional because it limits municipal fiscal powers.

Adv. Pillay argued that municipalities have obligations to realise socio-economic rights and should be permitted to use any reasonable means to do so. She cautioned the court to “tread carefully” when considering limitations on municipal authority.

Her submissions gave the impression that the City was advocating for unrestricted municipal powers to pursue redistributive objectives—raising the question of whether the City’s political leadership is directing such an approach. Warnings of Adv, Pillay that the court should tread carefully also gave the impression of a veiled threat to the judiciary.

AFRIFORUM REPLY TO COUNTER APPLICATION

Adv. Botha argued that the City had not demonstrated that the text of the MSA is unconstitutional. Instead, the City merely complained that the MSA prevents it from doing what it believes is desirable.

The City also failed to show that the MSA makes it impossible to fulfil its developmental obligations or that it cannot recover the R1.9 billion shortfall through lawful means. AfriForum presented four lawful alternatives.

AfriForum further clarified that the City incorrectly refers to fixed charges as a “sundry tariff.” In law, sundry tariffs are once-off charges for infrastructure—never permanent connection fees.

Botha also referred to the National Water Act, which requires municipalities to develop Water Services Development Plans (WSDPs). The City’s WSDP does not provide for property-value-based fixed charges.

He warned that if the counter-application were granted, Parliament would have two years to amend the MSA. During that period, the City would enjoy unrestrained powers, and if Parliament refuses to grant such powers, the City would nonetheless retain them temporarily.

SAPOA REPLY TO COUNTER APPLICATION

Adv. Steenkamp summarised the core issue: rates may be used for services, but tariffs may not be used as rates. The law already allows the City to fulfil developmental obligations through the rates system.

SAPOA argued that the counter-application is impermissibly vague and lacks any factual foundation justifying amendment of the MSA. The City conceded that the law does not prevent it from fulfilling its obligations—only that it makes the process cumbersome.

Granting the City the powers it seeks would effectively grant local authorities powers akin to those of the National Minister of Finance.

Lastly, SAPOA warned that approving the counter-application would render the MSA internally contradictory—requiring tariffs to reflect the cost of delivering the service while simultaneously allowing tariffs that do not reflect such costs.