eThekwini Municipality and Another v Independent Schools Association of Southern Africa and Others

ISASA (Independent Schools Association of Southern Africa), which owns public benefit organisation (PBO) properties throughout South Africa, challenged municipalities' levying of rates on PBO property. In 2007, the Minister for CoGTA published draft regulations proposing rate ratios for various categories of non-residential property, including PBO property at 25% of residential property rates. eThekwini and Stellenbosch participated in consultations through SALGA but did not object. When the 2009 regulations were promulgated, PBO property was omitted. ISASA challenged this omission in the Gauteng High Court. In March 2010, a settlement order was made requiring the Ministers to publish amended regulations including PBO property at a 1:0.25 ratio. The 2010 amended regulations were published on 12 March 2010, effective 1 July 2010. eThekwini refused to comply, arguing PBO property was not a defined category in its rates policies. ISASA brought an application in the KwaZulu-Natal High Court seeking to compel eThekwini to levy rates not exceeding 25% on PBO property. eThekwini counter-applied to review the amended regulations and challenge the constitutionality of s 19(1)(b) of the MPRA. Stellenbosch later joined the proceedings.

• Whether the 2010 amended regulations, properly interpreted, applied to municipalities that did not include PBO property as a separate category in their rates policies
• Whether s 8(1) of the MPRA, using the word 'may', conferred discretion on municipalities to exclude PBO property from their rates policies and thereby avoid application of s 19 prescribed ratios
• Whether the 2010 amended regulations were validly promulgated without fresh consultation under s 84 of the MPRA
• Whether s 19(1)(b) of the MPRA was unconstitutional for offending municipal autonomy under ss 151, 156 and 229 of the Constitution

The appeal was dismissed. The appellants (eThekwini and Stellenbosch) were ordered to pay the costs of the first, second and third respondents jointly and severally, including costs of two counsel. The first respondent's (ISASA's) cross-appeal was dismissed with no order as to costs.

Section 19 of the MPRA has primacy over s 8, which is expressly made "subject to section 19". Once s 19 prescribes a ratio for a category of non-residential property, municipalities may not impose rates exceeding that prescribed ratio regardless of whether the municipality has chosen to recognize that category in its rates policy. A municipality cannot avoid obligatory limitations arising from s 19 by declining to recognize a category of property in its rates policy - to hold otherwise would permit wholesale evasion of national regulation specifically provided for in s 229(2)(b) of the Constitution. Section 19(1)(b) of the MPRA is constitutional as it constitutes national legislation regulating the municipal power to impose rates as expressly permitted by s 229(2)(b) of the Constitution. Municipal autonomy in rate-setting under ss 151, 156 and 229 is not untrammelled and is subject to national regulation. Where consultation has occurred on the substance of proposed regulations and no objections were raised, fresh consultation under s 84 of the MPRA is not required when correcting an administrative omission in the promulgated regulations.

The Court noted that the recognition in City of Tshwane v Marius Blom of municipal power to determine rates policies does not derogate from the regulatory supervision accorded to the national legislature in terms of s 229(2)(b). The Court observed that the Constitution has a nuanced framework for separation of powers and that municipal powers to impose rates may have significant economic effects for other spheres of government and the economy as a whole, justifying regulatory oversight. The Court commented that the cross-appeal, though unsuccessful, was brought with good reason and bona fide, justifying no costs order against ISASA on the cross-appeal.

This case clarifies the constitutional framework governing municipal autonomy in rate-setting and the scope of national regulatory oversight. It establishes that while municipalities have constitutional autonomy under ss 151 and 156, this autonomy is expressly subject to national regulation under s 229(2)(b) of the Constitution. The MPRA's s 19 prescribed ratios constitute valid national regulation that municipalities cannot evade by excluding categories from their rates policies. The judgment reinforces the hierarchical relationship between s 19 (limiting powers) and s 8 (conferring powers) of the MPRA. It also clarifies procedural requirements for amending regulations under s 84 of the MPRA, holding that fresh consultation is not required when correcting an administrative omission where the substance was previously consulted upon. The case is significant for defining the limits of municipal fiscal autonomy and the proper interpretation of enabling versus limiting provisions in municipal legislation.