Attached for information is  a copy of the judgment that was delivered by the Supreme Court of Appeal last Friday, 9 November 2012, in an application that was brought by SAPOA against the City Council of JHB and Four Others.

In essence, the relief sought by SAPOA in the said application was an order setting aside an additional increase of 18% that was imposed by the JHB Municipality on business properties because the Municipality had failed to comply with the prescribed legal requirements and procedures, which included community participation, when its Council took a decision to impose such increase.  The additional 18% increase had the effect of increasing the ratio of rates payable by business, industrial and commercial properties vis-à-vis the rates payable by residential properties from 3:1 (which had already been subjected to community participation) to 3.5:1 (without referring the latter ratio to the owners of business, industrial and commercial properties for comment).

The SCA held that the imposition of property rates is part of the budget process for municipalities and, as such, must be preceded by community participation in accordance with Chapter 4 of the Local Government: Municipal Systems Act, No. 32 of 2000 (“the Systems Act”), read with Chapter 4 of the Local Government: Municipal Finance Management Act, No. 56 of 2003 (“the MFMA”).  It held that the Council of a municipality is obliged to comply with the provisions of the Systems Act, the MFMA, as well as the Local Government: Property Rates Act, No. 6 of 2004 (“the Rates Act”) whenever it wishes to approve an amended budget with rates which are different from the rates in the budget that was tabled and advertised for public comment.

In view of the aforegoing, the Court found that the additional 18% increase that was imposed by the JHB Municipality on business properties was unlawful due to the Municipality’s failure to consult with the community regarding its implementation.  However, the Court stopped short of ordering the Municipality to repay the additional amounts which were recovered by the Municipality from the owners of the properties concerned, particularly, due to the difficulties which could arise in the implementation of such an order.

In essence, the effect of this judgment is to highlight the importance of community participation throughout the budgetary process of municipalities, including the assessment of rates and any increases which may become necessary due to the apparent shortfall in the recoverable revenue.