Finance Minister criticised for absence in Cape Town's fixed tariffs case

It was both the view of the City of Cape Town and the Department of Cooperative Governance and Traditional Affairs (CoGTA) that the Minister of Finance should be wrapped over the knuckles for the department’s absence in the case where the city’s fixed tariffs are being challenged.

Thursday saw the conclusion of what the court heard had been one of the “most complex cases that we’ve ever had to articulate”, according to the city’s lawyer, Advocate Nazreen Bawa SC.

Since Tuesday, Judge President Nolwazi Mabindla-Boqwana, as well as presiding judges Judge Andre le Grange and Judge Katharine Savage, have heard from legal representatives from the South African Property Owners Association (SAPOA), AfriForum, the city, GOOD, Cape Town Ratepayers Association, SA 1st Forum, and CoGTA.

In its main application, SAPOA and AfriForum are asking for the three tariffs in the budget, namely the Cleaning Tariff, the Fixed Water Charge, and the Fixed Sanitation Charge, to be declared unconstitutional and invalid.

The city has maintained that its fixed charges are not rates but service charges.

In the city’s counter-application, it argues that should the court rule in favour of AfriForum and SAPOA, it is seeking that Section 75A of the Systems Act be declared inconsistent with the Constitution and invalid, as it impedes its ability to exercise its full municipal powers and deliver services to communities.

Thursday’s proceedings began with CoGTA’s response to the city, where Advocate Michael Edmunds SC said that the minister (CoGTA) felt it was not appropriate to take sides in the main application. However, in the counter-application, it sought to be of assistance to the court, while also making sure it defended its legislation.

Edmunds said that the minister viewed the city as “the most exemplary” of municipalities, and “takes no pleasure in litigating with the city, but it must to defend its regulations”.

Edmunds argued that the court shouldn’t entertain the counter-application as it is “based on something intangible as interpretation” and that it has not been “properly pleaded with heightened rigour”.

He explained that it “is very difficult to respond to a constitutional challenge” based on an interpretation of that which is yet unknown.

He also argued that the department is of the view that consumption-based charges are divorced from the value band charges, and that they may affect inflation and national economic policies.

“What you are effectively giving licence to is to charge tax on a value band.”

He also argued that there was no algorithmic item or formula given to formulate the value band.

“Each value band is an arbitrary charge needed by the municipality to balance its books.”

Later in proceedings, Bawa hit back against this, arguing that it cannot be okay to use value bands to determine who the poor are, “but it is not okay to use it to determine who the rich are”. It cannot be lawful to use the one, but then “punted in the reverse”.

Bawa said that it was in the mayor’s court paper, which explained how the property value bands are formulated.

The court had also heard from the city’s legal representative, Advocate Karrisha Pillay SC, that if the court found in favour of SAPOA and AfriForum in the main application, then it would have huge implications for Chapter 7 of the South African Constitution, the Municipal Systems Act, and the Municipal Finance Management Act.

A noticeable occurrence from the proceedings was both CoGTA and the city’s critique of the Minister of Finance’s absence. CoGTA said that not only should the Finance Minister have been cited, but also the Department of Water and Sanitation, and the South African Local Government Association (SALGA).

Edmunds said that there has been “radio silence” from the other departments when the matter touched on parts of the National Water Act and Value-Added Tax Act.

Bawa said that “it is not our fault that they are not before the court, where that minister (Finance) elected not to come”, and that they “should be wrapped over the knuckles for not being in court”.

She later also responded to AfriForum’s previous argument that the city should use one rate to fund and cross-subsidise “to deliver on its constitutional obligation, whatever it may be”.

Bawa explained that “if you do it through a disguised rate, then SARS (South African Revenue Service) would charge you, as it would not be zero-rated”.

“(It’s not) real, not rational and not lawful, given the VAT implications, as it would not result in lower costs for the consumers.”

She explained that if that were to happen, then the charges “that you are fighting us about” would be charged under rates, and the burden passed onto the ratepayers.

Mabindla-Boqwana said that, given the complexity of the case, judgment has been reserved.

theolin.tembo@inl.co.za