‘Mangaung wants non-residential property owners to pay for others’ debt’

The court showdown between the South African Property Owners Association (Sapoa) and the City of Mangaung about the way refuse removal tariffs for non-residential properties are structured in the metro is expected to take place before the end of the month.

Sapoa has approached the Free State division of the High Court to have the tariffs declared unconstitutional and invalid, and asked for an order to set it aside.

It objects to the linking of the tariffs for owners of non-residential properties to the value of their properties, arguing that doing so constitutes a form of tax.

The organisation objected to the tariffs even before the adoption of the metro’s final budget for 2026/27, but the metro proceeded to adopt it unchanged – implementing it at the beginning of the new financial year on 1 July.

That prompted Sapoa to approach the court for relief.

It won a court victory against the City of Cape Town earlier this year in a similar matter, which led to a last-minute change in that metro’s 2026/27 budget in which it moved away from linking fixed sanitation charges and a city-wide cleaning levy to property values.

Tariffs must be based on real costs and while municipalities can levy taxes, they must follow the legally prescribed process to get approval first, which was not done in this case, according to Sapoa.

Mangaung says it wants to ‘fill the gap’

The metro is opposing the application and has disclosed in its answering affidavit, deposed by Mayor Gregory Nthatisi, that one of the motivations for imposing the value-linked tariff on non-residential properties is to fill the gap left by the large number of consumers that are currently not paying for the service they receive.

Sapoa CEO Neil Gopal responded sharply to this in his replying affidavit: “The shortfall it [the metro] is suffering from is therefore something of its own making, yet it expects the owners of non-residential properties to pay for its own inefficiency. Therein lies arguably our biggest concern. The law-abiding, rate-paying members of Sapoa are being punished for the non-compliance of other residents and the city’s inefficiency.”

Nthatisi gave several reasons in his answering affidavit why he and the metro are opposing the Sapoa application:

• A base figure was used as a point of departure for the tariffs, but despite several adjustments over the years, it is still far from cost-reflective.
• In calculating the tariffs, several property value bands are used to multiply the base number, aimed at achieving cost reflectivity.
• Refuse removal services have substantial fixed costs.
• The tariff is lawful, since it is aimed at cost recovery, and the potential overlap of one element of the computation for the refuse tariff with property rates does not convert the tariff to a rate.
• Even with the use of the property value bands, the tariffs are still not cost-reflective, as the metro uses its equitable share (of funds from national government) to subsidise the service, considering the 43% rate of non-payment.

In reply, Gopal points out that the metro conceded that property rates form the basis of the formula to calculate refuse removal tariffs for non-residential properties.

The metro further recognised that there is no direct or mathematical relationship between the market value of a property and the quantity of refuse the metro is required to remove from it.

That, he says, means the relevant legislative prescripts for tariff setting are not complied with. The metro further fails to respond to the fact that it never adopted the required rates or tariff by-laws.

Gopal insists that a “tariff” linked to property value is actually a form of tax and says the fact that the metro has a revenue shortfall on this service does not give it the right to act without legal authorisation.

Gopal suggests several alternative solutions for the Mangaung metro to resolve the revenue shortfall on its refuse removal service:

• Increase rates, since these can be lawfully used to subsidise services like refuse removal;
• Charge per volume, for example per black bag removed or bin emptied; and/or
• Improve the efficiency and cost effectiveness of the service and improve collections.

“It will lead to an untenable precedent if one were to accept, as the city suggests one should, that whenever a municipality has a shortfall, it may simply impose a service tariff linked to property value,” Gopal states.

“Taken to its logical conclusion, it would mean that a municipality has almost limitless power, akin to (if not more than) that of the minister of finance, to increase the percentage used to calculate the tariff based on property value. It simply cannot be that a municipality, such as the city, has virtually unconstrained power to set tariffs. The refuse tariffs is, with respect, a disguised rate or tax,” Gopal states.

* AfriForum has also brought an application to have to Mangaung’s refuse removal tariffs as well as its sanitation tariffs set aside.

This article was republished from Moneyweb. Read the original here.