City of Cape Town v Khaya Projects (Pty) Ltd and Others

The City of Cape Town developed the Witsand informal settlement into a formal low‑income housing project. It appointed Peer Africa (Pty) Ltd as developer and implementing agent, which in turn contracted Khaya Projects (Pty) Ltd to construct the houses. After completion and handover, serious defects were alleged, including roof defects and a partial collapse of a structure. Contractual claims between Peer Africa and Khaya became the subject of arbitration, which remained unresolved, and all contractual claims prescribed. The City, not a party to the construction contract or arbitration, sought a declaratory order that Khaya bore and breached constitutional obligations under section 26 of the Constitution to provide adequate housing, notwithstanding the absence of a direct contract or statutory obligation.

The appeal was dismissed with costs, including the costs of two counsel. The High Court order requiring the City to pay the costs of the amicus curiae was set aside.

The case clarifies that private construction companies involved in state‑funded housing projects do not automatically assume constitutional obligations under section 26 of the Constitution. It reinforces the principle of subsidiarity in socio‑economic rights litigation and limits the horizontal application of such rights to private actors where comprehensive statutory and contractual frameworks exist.