THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no. 1056/2022
In the matter between:
KOUGA LOCAL MUNICIPALITY Appellant
and
ST FRANCIS BAY (WARD 12)
CONCERNED RESIDENTS’ ASSOCIATION First Respondent
ST FRANCIS BAY PROPERTY OWNERS
ASSOCIATION Second Respondent
ST FRANCIS BAY PROPERTY OWNERS NPC Third Respondent
Neutral Citation : Kouga Local Municipality v St Francis Bay (Ward 12)
Concerned Residents’ Association and Others (Case no. 1056/2022 ) [2023]
ZASCA 168 (1 December 2023)
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Coram: NICHOLLS and MABINDLA -BOQWANA JJA and BINNS -
WARD, MASIPA and UNTERHALTER AJJA
Heard: 13 November 2023
Delivered: 1 December 2023
Summary: Local government – section 22 of the Local Government: Municipal
Property Rates Act 6 of 2004 (PRA) – establishment by municipalities of special
rating area (SRAs) – attack on legal validity of the appellant’s rates policy and
by-law concerning the establishment of SRAs on grounds of alleged
inconsistency with s 22 of the PRA a nd allegation that the appellant unlawfully
abrogated its powers and functions by delegating same to applicant ratepayers’
organisation and non-profit company (NPC) established to be management body
of proposed SRA.
Civil practice and procedure – evidence and argument not cognisably related to
relief sought in notice of motion, irrelevant – argument on grounds not properly
founded in the papers disregarded for the purposes of determination of appeal.
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________________________________________________________________
ORDER
On appeal from: Eastern Cape Division of the High Court, Port Elizabeth
(Mjali J, sitting as a court of first instance):
1. The appeal is upheld.
2. The order of the court a quo is set aside and substituted with the following:
‘The application is dismissed with no order as to costs.’
JUDGMENT
BINNS-WARD AJA (NICHOLLS and MABINDLA -BOQWANA JJA and
MASIPA and UNTERHALTER AJJA concurring):
[1] It is notorious that most local authorities in South Africa struggle to deliver
municipal services at anything approaching optimal levels. The phenomenon is
by no means uniqu e to this country. A way of alleviating the problem that has
been adopted in many countries around the world is the creation of improvement
districts within local government areas .1 The owners or occupiers in such areas
bind themselves to pay a premium on their property taxes . The extra tax is
ring-fenced in the local authority’s acc ounts, and the revenue is expended on
providing enhanced municipal services in the district in accordance with a
contractual arrangement between the ratepayers, or an entity representing them ,
1 The nomenclature for such improvement districts varies country by country. In the United Kingdom, for
example, one encounters ‘business improvement districts’ and in parts of the United States ‘community
improvement districts’. The establishment of business improvement districts in Britain is regulated by part 4 of
chapter 2 of the Local Government Act 2003 (cap.26).
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and the local authority. In South Africa these are called ‘special rating areas ’
(SRAs), although the term ‘city improvement district’ is also often used.
[2] The appellant is the Kouga Local Municipality, which has its seat in
Jeffreys Bay, Eastern Cape. The appeal concerns the legality of the establishment
by the appellant, of an SRA in St Francis Bay. The area demarcated for the SRA
is in part of Ward 12 of the appellant’s municipal area.
[3] The establishment of SRAs is regulated by s 22 of the Local Government:
Municipal Property Rates Act 6 of 2004 (the PRA ). This appeal turns on the
import of s 22, properly construed. The text provides as follows:
‘Special rating areas
(1) A municipality may by resolution of its council-
(a) determine an area within that municipality as a special rating area;
(b) levy an additional rate on property in that area for the purpose of raising funds
for improving or upgrading that area; and
(c) differentiate between categories of properties when levying an additional rate
referred to in paragraph (b).
(2) Before determining a special rating area, a municipality must-
(a) consult the local community, including on the following matters;
(i) the proposed boundaries of the area; and
(ii) the proposed improvement or upgrading of the area; and
(b) obtain the consent of the majority of the members of the local community in the
proposed special rating area who will be liable for paying the additional rate.
(3) When a municipality determines a special rating area, the municipality-
(a) must determine the boundaries of the area;
(b) must indicate how the area is to be improved or upgraded by funds derived from
the additional rate;
(c) must establish separate accounting and other record-keeping systems regarding-
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(i) the revenue generated by the additional rate; and
(ii) the improvement and upgrading of the area; and
(d) may establish a committee composed of persons representing the community in
the area to act as a consultative and advisory forum for the municipality on the
improvement and upgrading of the area, provided representivity, inclu ding
gender representivity, is taken into account when such a committee is
established. Such a committee must be a subcommittee of the ward committee
or committees in the area, if the municipality has a ward committee or
committees in the area.
(4) This section may not be used to reinforce existing inequities in the development of
the municipality, and any determination of a special rating area must be consistent with
the objectives of the municipality's integrated development plan.
(5) This section must be read with section 85 of the Municipal Systems Act if this
section is applied to provide funding for an internal municipal service district
established in terms of that section of the Municipal Systems Act.’
[4] Section 22 falls to be construed with due regard to its context in the
constitutional scheme for local government. A municipality derives its power to
levy rates on property from s 229(1) of the Constitution, which makes that power
subject to regulation by national legislation , the PRA. Section 2(3) of the PRA
obliges municipalities to exercise their rating powers subject to the Act and the
rates policy that every municipality is obliged by s 3 of the Act to adopt.
A municipality is required by s 6(1) of the PRA to adopt and publish by-laws, in
the m anner prescribed by ss 12 and 13 of the Local Government: Mun icipal
Systems Act 32 of 2000 (the Systems Act ), to give effect to its rates policy.
Section 22 should also be understood with reference to the pertinent provisions
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of Chapter 7 of the Constitut ion, especially ss 1522 and 153 3 concerning the
objects of local government and the developmental duties of municipalities.
[5] On 19 December 2017, the appellant’s municipal council adopted an
amendment to its rates policy and passed a new by-law to give effect to it. The
amendment to the policy introduced, in paragraph 23, a provision that Part A of
the policy would ‘apply to Special Rating Areas as envisaged in Section 22 of the
[PRA]’. The new by-law was gazetted on 29 December 2017.
[6] The declared object of Part A of the rates policy is ‘to provide a framework
and procedure under which owners of properties within the jurisdiction of the
Municipality can initiate the establishment of [an] SRA and undertake the
improvement or upgrading of the SRA funded by additional rates to be levied on
the SRA Properties by the Municipality, subject to an acceptable agreement being
concluded between the Municipality and a management body to be established
by the owners of the SRA Properties’. ‘Management Body’ is specially defined
to mean ‘the management body of [an] SRA which shall only be a Non -Profit
Company established in terms of the Companies Act 71 of 2008’.
[7] The St Francis Property Owners Association, which is the second
respondent in the appeal, submitted an application to the appellant on 23 February
2 Section 152 of the Constitution provides:
‘Objects of local government
(1) The objects of local government are
(a) to provide democratic and accountable government for local communities;
(b) to ensure the provision of services to communities in a sustainable manner;
(c) to promote social and economic development;
(d) to promote a safe and healthy environment; and
(e) to encourage the involvement of communities and community organisations in the matters of local
government.
(2) A municipality must strive, within its financial and administrative capacity, to achieve the objects set out in
subsection (1).’
3 Section 153 of the Constitution provides:
‘Developmental duties of municipalities
A municipality must-
(a) structure and manage its administration and budgeting and planning processes to give priority to the basic
needs of the community, and to promote the social and economic development of the community; and
(b) participate in national and provincial development programmes.’
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2018 for the establishment of an SRA in a demarcated area of St Francis Bay .4
The application was supported by a majority of the affected ratepayers. The
demarcated area, which includes a system of artificially created canals between
the properties, is protected from the erosive and potentially flooding effects of the
adjoining Indian Ocean by a spit of beach sa nd. The spit had, for several years,
been diminishing in extent due to the forces of nature. Many property owners in
the area were concerned that the spit’s likely eventual disappearance would
expose their prope rties to flooding and other damage . The municipality
acknowledged the p roblem but was constrained to confess that i t lacked the
financial wherewithal to undertake effective measures to protect and restore the
spit and the adjoining beach.
[8] The second respondent’s primar y object in seeking to have an SRA
established by the municipality was to raise the necessary funding to address the
perceived danger and create the mechanism through which that might be
achieved. The other objects of the intended SRA were the improved maintenance
of the municipal road network and the installation and maintenance of a CCTV
security camera network in the demarcated area.
[9] The third respondent i s St Francis Property Owners NPC , a non -profit
company established in terms of the Companies Act, 2008. The company was
set up at the instance of the second respondent during 2016, when it was initially
sought to establish an SRA in the area, as the management body of the proposed
SRA. The initial endeavour was frustrated because it became apparent that
majority support from the owners in the larger area of Ward would not be
obtainable and that the appellant’s rates policy did not make provision for SRAs.
4 It appears that the application was formally submitted in the name of the third respondent, a non-profit company
established at the instance of the second respondent . That was probably done by reason of the effect of the
definition of ‘Applicant’ in paragraph 1 of Part A of the appellant’s rates policy: ‘“Applicant” means any Owner
who makes an application for the establishment of a SRA in accordance with the provisions of this Part, or when
a Management Body is established in terms hereof, any reference to the “Applicant” means the said “Management
Body”’. I shall give a fuller description of the second respondent later in this judgment.
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The third respondent was again utilised as the proposed management body for the
purpose of the application submitted by the second respondent to the municipality
in February 2018. The insertion of Part A into the appellant’s rates policy appears
to have been precipitated by the appreciation that a framework was required for
the municipality to be able to process and determine the second respondent’s
application.
[10] After the completion of a process, which the appellant’s municipal council
was satisfied complied with the prescribed requirements in Part A of the rates
policy, the council acceded to the application for the establishment of the SRA,
with the third respondent being confirmed as the area’s management body. The
council decision to approve the establishment of the SRA was made at a special
sitting on 23 May 2018, convened so that the establishment of the SRA could be
accommodated in the municipality’s budget for the financial year commencing
on 1 July 2018. As a result of the decision, a special rate amounting to a surcharge
of 25 percent on the normal rate has been levied by the appellant on the owners
of property in the demarcated area with effect from 1 July 2018.
[11] On 26 September 2018, a newly constituted body called the St Francis Bay
(Ward 12) Concerned Residents’ Association5 (the first respondent) instituted an
application in the High Court to set aside th e decision by the appellant’s
municipal council to establish the SRA. Ward 12 extends well beyond the
predominantly affluent area demarcated for the SRA. The first respondent’s
papers did not disclose what proportion of its membership is comprised of owners
or residents within that part of Ward 12 demarcated for the SRA, as distinct from
those owning property or living in the parts of the ward outside the SRA.
5 An unsigned copy of the body’s constitution was annexed to the founding affidavit. The unsigned document
provided for signature thereof to be effected on an unspecified date in 2018.
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[12] The first respondent sought the following substantive relief from the court:
1. An order t hat Part A of the municipality’s rates policy be declared
‘unconstitutional as being in conflict with section 22 of the [PRA]’.
(Emphasis supplied.)
2. An order that the decision of the municipal manager or other municipal
officials to permit the second and/ or third respondents to conduct and
manage the process in respect of which the decision to declare the special
rating area was made be reviewed and set aside; alternatively, that the
failure of the municipality’s officials to conduct and manage the process
be reviewed and set aside.
3. An order that the decision of the municipal council on 23 May 2018 to
declare the special rates area be reviewed and set aside, alternatively be
declared to have been unlawful and void.6
The appellant opposed the application. T he matter was argued before Mjali J,
who granted an order against the municipality in the terms sought in the notice of
motion. The appeal comes to this Court with leave granted by the court a quo.
[13] The conceptual premise upon which the relief was sought b y the first
respondent was what it contends to be the import of s 22 of the PRA, properly
interpreted. The first respondent contended that as s 22 of the PRA empowered
the municipality to establish special rating areas, it was therefore only the
municipality, and nobody else, that could initiate and run the process leading up
to the establishment of such areas.
[14] If the argument were sound, it would have to follow that Part A of the
appellant’s rates policy was void by reason of its inconsistency with the enabling
provision. Any decision of the municipal council following upon the process
6 Just as the appellant’s counsel did in argument, I have rearranged the order in which the relief sought is described
to create a more logical sequence than the arrangement in which it was set out in the notice of motion.
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conducted by the second respondent in accordance with the framework provided
by Part A would then fall to be vitiated because it was taken in terms of a legally
invalid policy. The municipality would be unable to lawfully levy special rates ,
if that were done in terms of a rates policy that was void in relevant part. Were
the first respondent to have made out a case that Part A was void, the second and
third of the aforementioned heads of relief would accordingly fall to be granted
consequentially; aliter, if it had not.
[15] Ironically, the first respondent adduced evidence in its replying papers
attacking the council’s decision to establish the SRA on the basis that the process
had not been compliant with Part A of the appellant’s rates policy and that the
public consultation process in that connection had fallen short of the relevant
prescripts in the Systems Act.7 That evidence was irrelevant, however. It is trite
that in motion proceedings the papers stand as the pleadings and evidence do in
action proceedings. The relevance of the evidence offered is depend ent on its
cogent connection with the relief being sought which, in an application, is defined
in the notice of motion.
[16] In their argument in this Court, the first respondent’s counsel attacked the
municipal council’s decision on a number of grounds unrelated to the case made
out in the founding papers , including the alleged failure by the council and the
second respondent to comply with the impugned part of the rates policy. The
appellant’s counsel, understandably, objected to those arguments being
entertained because they were unrelated to the proper interpretation of s 22 of the
PRA and the legal validity of Part A of the rates policy.
[17] Insofar as the first respondent’s counsel sought to rely on CUSA v Tao Ying
Metal Industries and Others ,8 to argue issues outside the papers, this was
7 Notwithstanding an averment by the deponent to its replying papers that ‘ the Applicant’s [ie first respondent’s]
case is focussed on the content of the By-Law and the manner in which the SRA came into existence, not the public
participation phase thereof’.
8 CUSA v Tao Ying Metal Industries and Others [2008] ZACC 15 (18 September 2008); 2009 (2) SA 204 (CC);
2009 (1) BCLR 1 (CC) ; [2009] 1 BLLR 1 (CC) ; (2008) 29 ILJ 2461 (CC) para 68.
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misplaced. In CUSA it was held that ‘where a point of law is apparent on the
papers but the common approach of the parties proceeds on a wrong perception
of what the law is, a court is not only entitled, but is in fact also obliged, mero
motu, to raise the point of law and require the parties to deal therewith.’ That was
not the position here. In the current matter, the extraneous legal issues that the
respondent’s counsel sought to argue were dependent on fact -based
determinations for which a case had not been made out in the founding papers.
[18] The appeal will therefore be determined strictly with reference to the case
advanced by the first respondent in its founding papers. The essence of it was the
contention that the appellant had unlawfully delegated its role in terms of s 22 of
the PRA to the second and third respondents. It a rgued that Part A of the
appellant’s rates policy was unconstitutional because its provisions were directed
at facilitating or enabling the allegedly unla wful delegation of the appellant’s
governmental functions and responsibilities to persons or bodies outside
government.
[19] I turn then to examine Part A of the appellant’s rates policy . It provides
that any owner of rateable property or a non-profit company established for the
purpose of administering an SRA may apply to the municipal council for the
establishment of an SRA. The requirements with which such an application must
comply are set forth in paragraphs 4 – 6 of Part A. In summary:
1. The application must be in writing in such form as t he municipality
might prescribe.
2. It must be submitted within nine months after the date of the holding
of a public meeting that the applicant is required to c onvene to
consider the proposal.
3. The applicant is required
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(i) to publish notice of the forementioned meeting in at least two daily
newspapers circulating in the area of the proposed SRA, prominently
place posters within the area of the SRA advertising the meeting and
(ii) give written notice of it individually to all of the owners of rateable
property within the proposed SRA.
4. The forementioned notice must state the purpose of the meeting and
provide details of the place, date and time of the meeting, it must also
state where _
(i) the proposed 5-year SRA business plan,
(ii) the memorandum (or draft memorandum) of incorporation of
the proposed management body, and
(iii) the motivational report compiled in compliance with paragraph
4.3.6
will be available for inspection. It must also identify the municipal
offices at which objections to the SRA business plan may be lodged ,
and state by when that must be done.
5. The proposed SRA business plan is required to address the following
matters:
5.1 the services to be provided to improve or upgrade the SRA;
5.2 the manner in which the proposed imp rovements or upgrades
will be implemented;
5.3 the timescale for achievement of the improvements or upgrades;
5.4 ‘an implementation program’ setting out ‘the implementation
milestones, dates and responsibilities’;
5.5 ‘the aggregate SRA rates that ar e proposed to be levied by the
municipality’;
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5.6 payment of any administration fee that the m unicipality may
from time to time determine’.
6. The memorandum of incorporation of the proposed management body
must provide –
6.1 that only owners of property within the proposed SRA may b e
members of the company, and
6.2 that each owner of each rateable property within the proposed
SRA shall have one vote.
(If an application is approved, the municipality is entitled , in terms of
paragraph 11 of Part A, to nominate a political representative to attend and
participate, but not vote, at meetings of the management body.)
7. The prescribed motivation report is required to contain:
7.1 a list of all rateable properties in the prop osed SRA,
differentiated by category in accordance with s 8(2) of the PRA,
with particulars of their owners and municipal valuation roll
values;
7.2 a diagram clearly indicating the boundaries of the proposed
SRA;
7.3 an executive summary of the improvement or upgrade proposed
for the SRA as set out in the SRA business plan;
7.4 an explanation of how the proposed improvement or upgrade is
linked to the geographical area of the SRA;
7.5 an explanation of why the proposed SRA will not reinforce
existing inequities in the development of the municipal area; and
7.6 an explanation of how the SRA, if it were established, would be
consistent with the municipality’s integrated development plan.
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8. The advertised meeting must be held, ‘chaired by a suitably qualified
and experienced pers on’ and attended by a rep resentative of the
municipality. Minutes must be kept of the proceedings which must
be available for inspection by members of the local community.
[20] An application to the appellant’s municipal council for the establishment
of an SRA must evidence that all of the forementioned requirements have been
complied with. It must also be accompanied by copies of the draft agreements (if
any) that the applicant considers necessary for the proposed management body
and the municipality to enter into in order for the submitted SRA business plan
to be successfully implemented . The applicant is required to provide proof , to
the satisfaction of the municipality, that a majority of owners of rateable property
within the proposed SRA have approved th e proposed business plan and
consented to the establishment of the proposed SRA.
[21] Part A of the appellant’s rates policy further provides that any owner of
property within the proposed SRA and any member of the ‘local community’ 9
may submit written objections to the establishment of the SRA and provides for
a four-week window of opportunity after the application has been lodged in which
they can do so.
[22] It is clear that all of the forementioned requirements of the appellant’s rates
policy were directed at achieving compliance with the prescripts of s 22 of the
PRA.
[23] Section 22 does not contain any prescription concerning the initiation of
the process to establish an SRA. All that it does is prescribe, in broad terms, the
nature of consultation that must precede any decision by a municipal council to
9 ‘Local community’ bears the meaning defined in s 1 of the PRA, viz. ‘ (a) … that body of persons comprising
(i) the residents of the municipality; (ii) the ratepayers of the municipality; (iii) any civic organisations and non -
governmental, private sector or labour organisations or bodies which are involved in local affairs within the
municipality; and (iv) visitors and other people residing outside the municipality who, because of their presence
in the municipality, make use of services or facilities provided by the municipality; and (b) includes, more
specifically, the poor and other disadvantaged sections of such body of persons ’.
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establish an SRA10 and the considerations that a council must weigh in making
the decision.11
[24] The provision, in relevant part, is conceptually, rather than procedurally,
prescriptive. I t gives municipalities a relatively free hand in how to go about
establishing SRAs. Obviously, municipalities are obliged, in relation to
s 22(2)(a), to comply with the Systems Act concerning public participation and
notice. The detail of what is required in this regard in given cases will necessarily
vary depending on the circumstances.
[25] Part A of the appellant’s rates policy plainly contemplates that the initiating
steps for the establishment of an SRA would ordinarily be undertaken by the
affected ratepa yers, culminating in an application by those ratepayers to the
municipality. It does nevertheless also record that its provisions do not detract
from the entitlement of the municipality itself to initiate the establishment of such
a rating area.
[26] It is evident from s 22(2)(b) of the PRA that, irrespective of the identity of
the initiating party, an SRA can only be established with the support of more than
half of the ratepayers who will be liable to pay the additional rate. 12 This
highlights that the establishment of an SRA will always entail a cooperative effort
between the legislative and executive branches of a municipality, of the one part,
and the affected ratepayers , of the other . A municipality is not empowered to
unilaterally foist an SRA on a community of ratepayers, the majority of whom
are opposed to its establishment.
[27] The construction of s 22 for which the first respondent contends is
fundamentally dependent on giving the word ‘municipality’ wherever it appears
10 See s 22(2) of the PRA.
11 See s 22(3) and (4) of the PRA.
12 Section 22(2)(b). It may be gleaned from the rates policies of certain other municipalities that the measure of
required support from affected ratepayers is sometimes fixed even higher than a simple majority. The rates
policies of other municipalities are published online as contemplated by s 21B of the Systems Act.
16
in the provision a limited meaning, restricted only to the legislative and executive
manifestations of the concept. The word, however, has a wider import; not only
in ordinary English, but also in the specially defined language used in the suite of
local government legislation enacted between the years 1998 and 2004, of which
the PRA is an integral component. The suite comprises the Local Government:
Municipal Structures Act 117 of 1998, the Systems Act, the Lo cal Government:
Municipal Finance Management Act 56 of 2003 (the MFMA) and the PRA.
[28] This Court held in South African Property Owners Association v Council
of the City of Johannesburg Metropolitan Municipality and Others,13 that ‘[t]he
three Acts [the judgment omitted Act 117 of 1998] must be read together as they
form part of the suite of legislation that gives effect to the new system of local
government’.14
[29] Section 2(b) of the Systems Act provides that a municipality consists of
(i) the political structures and administration of the municipality; and (ii) the
community of the municipality . The conceptualisation of ‘municipality’ in the
Systems Act is consistent with the import of the word in ordinary English usage.
The primary definition of ‘muni cipality’ given in The Shorter Oxford English
Dictionary 3ed is ‘A town, city, or district possessed of privileges of local self -
government, also applied to its inhabitants collectively’.
[30] The definition of ‘municipality’ originally contained in s 1 of the PRA
applied the definition in s 2 of the Systems Act. It was deleted by s 1(g) of the
Local Government: Municipal Property Rates Amendment Act 29 of 2014 ,
without substitution. Bearing in mind the integral relationship of the respective
13 South African Property Owners Association v Council of the City of Johannesburg Metropolitan Municipality
and Others [2012] ZASCA 157; 2013 (1) SA 420 (SCA); 2013 (1) BCLR 87 (SCA); [2013] 1 All SA 151 (SCA)
para 8.
14 The judgment took the term ‘ suite of legislation’ from the preamble to the Systems Act, which describes that
statute as ‘an integral part of a suite of legislation that gives effect to the new s ystem of local government’. See
also Nelson Mandela Bay Municipality v Amber Mountain Investments 3 (Pty) Ltd 2017 (4) SA 272 (SCA) para 1.
17
statutes, there is every reason to interpret the language used in them consistently
unless the context requires otherwise.
[31] Section 22 of the PRA contains nothing that would prevent the legislative
or executive organs of a municipality of their own initiative establishing an SRA.
In the ordinary case , however, it would only be ratepayers dissatisfied with the
level of municipal services being delivered, and willing to pay a premium on their
rates to improve the position , who would agitate for the creation of an SRA in
their local area. Those ratepayers, collectively, would be the obvious persons to
(i) decide how their interests would be best served by t he establishment of an
SRA, (ii) identify the issues it should address and (iii) devise a business plan
directed at achieving the desired improvements within a budget that they were
willing to finance. Giving the potentially affected ratepayers an initiating role in
the process of establishing SRAs would therefore not only be pragmatic, it would
also be a way of fulfilling a municipality’s obligation, in terms of s 152(2) of the
Constitution, to strive to achieve one of the important objects of local
government, viz ‘to encourage the involvement of communities and community
organisations in the matters of local government’.15
[32] In contrast, c onstruing s 22 in the manner contended for by the first
respondent would be to place already resource-challenged local authorities under
an additional administrative burden of having to identify areas that might benefit
from the establishment of an SRA, canvassing the potentially affected ratepayers
and running some form of electoral process to determine whether the statutorily
required level of support for its establishment could be achieved. The exercise,
which _ as the initial attempt at establishing an SRA in a larger area in thi s case
illustrated _ could be abortive , and it would inevitably come at a cost to t he
general body of ratepayers and members of the local community, most of whom
15 Section 152(1)(e) of the Constitution.
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would have little interest in the establishment of SRAs where their properties
were not situated.
[33] The respondent appear s not to have considered that the administrative
burden that its construction of s 22 would place on municipalities would come at
a cost, which municipalities that are finding it impossible to deliver services at
the desired levels are unlikely to be able to afford. It is a construction that would
thwart the object ive that the legislature clearly had in mind and , would be
antagonistic to the purposive approach enjoined by modern principles of statutory
construction.16
[34] The appellant’s rates policy on the establishment of SRAs does not
abrogate the municipality’s function. It provides for the municipality to play a
participatory and supervisory role at every step of the way.
[35] In its founding papers, t he first respondent also attacked the decision by
the appellant’s municipal council to establish the SR A because it was made
subject to certain amendments to the business plan that was submitted in support
of the application. It contended that the municipality’s determination should, in
the circumstances, have been deferred to enable further public consultation in
terms of s 22(2) of the PRA.
[36] There is no merit in the point. Firstly, it assumes the validity of Part A of
the appellant’s rates policy and is consequently at odds with the essence of the
first respondent’s case, which was predicated on a contention to the contrary.
Secondly, and in any event, t he amendments were not material. They did not
affect the amount of the extra levy that the affected ratepayers would have to pay,
or the nature of the upliftment projects that the SRA was establish ed to tackle.
As pointed out by this Court in Kouga Municipality v Bellingan and Others ,17
16 Cf Cool Ideas 1186 CC v Hubbard and Another [2014] ZACC 16; 2014 (4) SA 474 (CC); 2014 (8) BCLR 869
(CC) para 29.
17 Kouga Municipality v Bellingan and Others [2011] ZASCA 222; 2012 (2) SA 95 (SCA); [2012] 2 All SA 391
(SCA) para 9.
19
‘… not every change has to be advertised otherwise the legislative process would
become difficult to implement’.
[37] Finally, the first respondent attacked the legality of the provisions in the
appellant’s rates policy providing for the establishment of a management body
for an SRA , and the municipality’s contractual relationship with it. Its primary
contentions were that the concept of a management body was irreconcilable with
s 22(3)(d) of the PRA which provides that a municipality may establish a
consultative and advisory forum for the improvement and upgrading of an area
that has been established as an SRA. However, a municipality is under no
obligation to do so. A management body functions as an implementation agency
of the municipality in respect of the business plan approved by the council for the
purposes of satisfying the requirements of s 22(3)(b) and (c) of the PRA. It is not
a consultative and advisory body of the character contemplated by s 22(3)(d).
[38] Secondly, it was argued that the financial agreement between the
municipality, represented by its accounting officer, and the management body _
an arrangement of the sort contemplated by paragraph 13 of Part A of the
appellant’s rates policy _ was at odds with the MFMA, which made no provision
for the ‘delegation of the accounting officer’s functions to a private body such as
the SRA Management Body’. In other words, the payment by the mu nicipality
of the special rates to the management body for use in terms of the approved
business plan constituted an impermissible delegation of the appellant’s
accounting officer’s powers and functions.
[39] The responsibilities of the accounting officer of a municipality are
regulated by Chapter 8 (ss 60-79) of the MFMA. They include revenue
management,18 expenditure management 19 and budget implementation. 20 An
accounting officer is not, however, precluded by the definition of his or her
18 Section 64 of the MFMA.
19 Section 65 of the MFMA.
20 Section 69 of the MFMA.
20
responsibilities, or the limitations on his powers of delegation,21 from transferring
funds to organisations and bodies outside government for municipal purposes .
The transfer of funds by the appellant ’s accounting officer to the management
body of the SRA is permitted by s 67 of the MFMA, subject to the prescripts of
that provision.22
[40] It follows that the first respondent failed to make a case for the relief that
it sought in the court below, and the judge at first instance therefore erred by
granting it. The appeal will accordingly be upheld. The parties accepted that in
that event there should be no order as to costs.23
[41] An order will issue in the following terms:
1. The appeal is upheld.
21 Section 79 of the MFMA.
22 Section 67 provides:
‘Funds transferred to organisations and bodies outside government
(1) Before transferring funds of the municipality to an organisation or body outside any sphere of government
otherwise than in compliance with a commercial or other business transaction, the accounting officer must be
satisfied that the organisation or body-
(a) has the capacity and has agreed-
(i) to comply with any agreement with the municipality;
(ii) for the period of the agreement to comply with all report ing, financial management and auditing
requirements as may be stipulated in the agreement;
(iii) to report at least monthly to the accounting officer on actual expenditure against such transfer; and
(iv) to submit its audited financial statements for its financial year to the accounting officer promptly;
(b) implements effective, efficient and transparent financial management and internal control systems to guard
against fraud, theft and financial mismanagement; and
(c) has in respect of previous similar transfers complied with all the requirements of this section.
(2) If there has been a failure by an organisation or body to comply with the requirements of subsection (1) in
respect of a previous transfer, the municipality may despite subsection (1) (c) make a further transfer to that
organisation or body provided that-
(a) subsection (1) (a) and (b) is complied with; and
(b) the relevant provincial treasury has approved the transfer.
(3) The accounting officer must through contractual and other appropriate mechanisms enforce compliance with
subsection (1).
(4) Subsection (1) (a) does not apply to an organisation or body serving the poor or used by government as an
agency to serve the poor, provided-
(a) that the transfer does not exceed a prescribed limit; and
(b) that the accounting officer-
(i) takes all reasonable steps to ensure that the targeted beneficiaries receive the benefit of the transferred
funds; and
(ii) certifies to the Auditor -General that compliance by that organisation or body with subsectio n (1) (a) is
uneconomical or unreasonable.’
23 Cf. Biowatch Trust v Registrar, Genetic Resources, and Others [2009] ZACC 14; 2009 (6) SA 232 (CC) ; 2009
(10) BCLR 1014 (CC) para 21-25.
21
2. The order of the court a quo is set aside and substituted with the following:
‘The application is dismissed with no order as to costs’.
___________________
A G BINNS-WARD
ACTING JUDGE OF APPEAL
22
Appearances:
Appellant’s counsel: A Byleveld SC and T Rossi
Instructed by: McWilliams & Elliot Inc
Gqeberha
Webbers
Bloemfontein
First Respondent’s counsel: N J Mullins SC and G. Joubert
Instructed by: Richardt van Rensburg Inc
Graaff Reinet
Honey Attorneys
Bloemfontein