The appellant was incorporated as a section 21 company and established as the management body of the Randburg City Improvement District (CID) allegedly formed under the Gauteng City Improvement Districts Act 12 of 1997. The first respondent owned two properties (erven 1768 and 1978 Ferndale) situated within the geographical area of the Randburg CID. After formation of the CID, levies were imposed on properties within its area. The first respondent refused to pay certain levies imposed on its properties. The appellant instituted two separate actions claiming unpaid levies for various periods between 2005 and 2011. The first respondent defended the claims and the City of Johannesburg was joined as second defendant but took no part in proceedings. The parties agreed to separate certain preliminary issues for determination, including whether the appellant was duly established under the CID Act, whether the properties were rateable property, and whether the amounts claimed were duly levied. The only evidence of approval of the Randburg CID was a letter dated 18 October 2004 from a City employee stating that the mayoral committee (not the municipal council) had approved the establishment of the CID on 14 October 2004. No direct evidence could be produced that the municipal council had delegated authority to the mayoral committee to approve the CID.
The appeal was dismissed. The levies claimed by the appellant were not recoverable as the Randburg CID had not been lawfully established. No order as to costs was made as neither respondent appeared.
A municipal council may not delegate to its mayoral committee (or any other body) the authority to approve the formation of a city improvement district and the imposition of CID levies. This is because: (1) Section 59(2)(a) of the Local Government: Municipal Systems Act 32 of 2000 provides that any delegation by a municipal council must not conflict with the Constitution; (2) Section 160(2)(c) of the Constitution provides that a municipal council may not delegate the imposition of rates and other taxes, levies and duties; (3) CID levies constitute 'levies' within the meaning of section 160(2)(c) as they are compulsory charges imposed by the municipality on property owners with the dominant purpose of raising revenue to fund services of a municipal nature, even though those services are provided through a separate management body; (4) Levies imposed by a municipality can only be authorized by national legislation in terms of section 229(1)(b) of the Constitution, not provincial legislation; (5) Under the Gauteng CID Act, a CID plan covers a three-year period and CIDs do not have indefinite existence without proper renewal or extension approved by the municipal council.
The Court expressed grave reservations about whether the Gauteng City Improvement Districts Act 12 of 1997 itself is constitutionally valid, given that it is provincial legislation purporting to authorize municipalities to impose levies, whereas section 229(1)(b) of the Constitution requires such authorization to come from national legislation. The Court declined to make a definitive ruling on this point as the necessary parties had not been joined and the issue was not fully argued. The Court also noted that both the City of Johannesburg and the appellant had been 'guilty of dereliction of their duty towards the public, to safeguard and keep accessible public records, and have been poor stewards of the trust reposed in them' given their inability to produce proper documentary evidence of the CID's formation and approval. The Court further observed that the issue of whether the first respondent's properties were 'rateable property' became moot in light of the finding that the CID was not lawfully formed, and as it was fact-sensitive with no general public interest, it was unnecessary to determine it.
This case is significant for establishing important constitutional principles regarding local government powers and limitations. It clarifies that: (1) The power to impose levies, rates and taxes is a core municipal council function that cannot be delegated to mayoral committees or other bodies. (2) City improvement district levies are taxes/levies within the meaning of section 160(2)(c) of the Constitution. (3) Provincial legislation cannot authorize municipalities to impose levies - only national legislation can do so under section 229(1)(b) of the Constitution, raising serious questions about the constitutional validity of provincial CID legislation. (4) CIDs established under the Gauteng CID Act have a statutory lifespan of three years unless properly extended or renewed. The judgment highlights the importance of proper record-keeping by municipalities and emphasizes strict compliance with constitutional limitations on delegation of municipal powers. It also casts doubt on the validity of all CIDs established under provincial legislation throughout South Africa, with potentially far-reaching consequences for local government financing and urban management.