South African Property Owners' Association v City of Cape Town; AfriForum NPC v City of Cape Town

Two applications were heard together in the Western Cape Division challenging the City of Cape Town's 2025/2026 budget. From 1 July 2025 the City imposed three new non-consumption-based charges on ratepayers: a city-wide cleaning charge, a fixed water charge and a fixed sewerage charge. Each was calculated according to property value bands created by the City and levied in addition to ordinary consumption-based charges. SAPOA, representing commercial property owners, and AfriForum, acting in the public interest, contended that the City was unlawfully using property value to determine service charges. The City defended the charges as lawful fees or tariffs necessary to secure stable revenue, maintain infrastructure, and cross-subsidise poorer households. It also launched conditional counter-applications seeking declarations that section 75A read with section 74(2) of the Municipal Systems Act, and in one matter sections 10 and 17 of the Water Services Act, were unconstitutional if they did not allow fixed tariffs based on property value bands. The Good Party sought and obtained leave to intervene in the SAPOA matter, while two civic bodies were admitted as amici curiae.

• Whether the city-wide cleaning, fixed water and fixed sewerage charges calculated by reference to property value bands were lawful under section 229 of the Constitution and the applicable municipal legislation.
• Whether the impugned charges were in substance property rates, fees for services, surcharges on fees for services, or some other municipal tax, levy or duty.
• Whether sections 74, 75 and 75A of the Local Government: Municipal Systems Act permit a municipality to impose service charges not generally proportional to usage and not reflective of the cost of the service in the manner adopted by the City.
• Whether the charges were inconsistent with the City's Tariff By-law and Tariff Policy.
• Whether the water and sewerage charges were inconsistent with the Water Services Act, the City's Water Services Development Plan, and regulations made under that Act.
• Whether the City's conditional counter-applications challenging the constitutionality of section 75A of the Systems Act and sections 10 and 17 of the Water Services Act could succeed.
• What remedy was just and equitable if the charges were invalid, including whether invalidity should be suspended.

The Good Party was granted leave to intervene; the Minister's late affidavit was condoned; the charges imposed by the City in its 2025/2026 budget for city-wide cleaning, water and sewerage were declared unlawful and invalid insofar as they were inconsistent with the Constitution, national legislation and the City's Tariff By-law; those charges were set aside with effect from 30 June 2026; the City's counter-applications were dismissed; and the City was ordered to pay the costs of both applicants, the costs of opposing the counter-applications, and the Good Party's costs, including costs of two counsel on scale C.

A municipality's power to levy fees, charges or tariffs for municipal services under the Constitution and the Municipal Systems Act is not unlimited. Section 75A of the Systems Act must be read together with sections 4, 74 and 75, so that service charges must be imposed under a valid tariff policy and by-law and must comply with the mandatory minimum principles in section 74(2), including that users should generally pay in proportion to their use of the service and that tariffs must reflect the costs reasonably associated with rendering the service. Stand-alone charges for city-wide cleaning, water and sewerage calculated by reference to property value bands, rather than usage or lawful rates procedures, are unlawful where they do not comply with those requirements and also conflict with applicable by-laws, tariff policy, and water-services legislation.

The Court observed that municipalities have constitutional duties to expand infrastructure, provide services sustainably and address poverty and inequality, and accepted that cross-subsidisation of poor households is an important and lawful municipal objective. It further noted that rates and lawful tariff structures remain available to municipalities to achieve those ends. The Court also remarked that it was not its function to determine the cheapest funding method for municipal services, and it declined to decide the applicants' further arguments based on section 25 of the Constitution and irrationality because the matter could be resolved on legality and statutory grounds.

The judgment is significant for South African local government law because it clarifies that municipalities may not use property value bands as a proxy to impose stand-alone service charges unless authorised and structured in accordance with the Constitution and national legislation. It confirms that section 75A of the Municipal Systems Act must be read subject to sections 74 and 75 and does not create a free-standing power to design revenue measures unconstrained by tariff principles. The decision also reinforces the distinction between property rates, service tariffs, surcharges and municipal taxes, and underscores that municipal revenue-raising measures remain subject to legality, statutory procedure, and sectoral legislation such as the Water Services Act.