Court battle looms as SAPOA contests Cape Town's controversial budget
Image: File
While the City of Cape Town (CoCT) is proudly touting its amended Hope Budget for 2025/26, the South African Property Owners Association (SAPOA) is taking legal action over the city's decision to link certain fixed charges to property values.
Even before being adopted in council, the city's budget has faced considerable criticism over its fixed charges, over which SAPOA will now be challenging in the Western Cape High Court.
In his founding affidavit, SAPOA CEO Nilesh 'Neil' Gopal said that the board resolved to take legal action seeking to challenge three items in the budget, namely the Cleaning Tariff, the Fixed Water Charge, and the Fixed Sanitation Charge.
They are hoping to have the budget declared unconstitutional and invalid.
'They contravene the applicable constitutional and national legislative framework applicable to the imposition of rates and the levying of tariffs for municipal services. Because they are linked to property values, the three items of the budget are in fact property rates imposed outside of the legislation which governs the imposition of such rates,' he said in papers.
Gopal argued that the three items are inconsistent with the Constitution.
SAPOA's membership currently comprises more than 90% of the country's commercial and retail property industry, including some of the largest property-owning companies in South Africa.
The properties owned by their membership include the V&A Waterfront (co-owned by Growthpoint), Canal Walk Shopping Centre (owned by Hyprop), Cape Gate Shopping Centre (owned by Hyprop), Table Bay Mall (owned by Hyprop), Tyger Valley Shopping Centre (co-owned by Pareto), Blue Route Mall (owned by Redefine), Gugulethu Square (owned by Vukile), Atlantis City Shopping Centre (owned by Vukile), Sable Square Shopping Centre (owned by Spear), and Cavendish Square (owned by Old Mutual).
In the court papers, they added that litigation was a last resort.
Gopal added that while they acknowledge the city's rebates that they offer, it mostly is to aid pensioners and isn't sufficient to offset the impact the tariffs will have on them.
'These reductions and rebates do not detract from the fact that the three items are unlawful and should not have been introduced in the first place: A reduction or a rebate cannot save a charge which was unlawfully imposed,' he said in his founding affidavit.
Gopal added that the continued rise in municipal costs has a significant detrimental effect on the costs of occupancy faced by tenants in commercial/retail properties.
'My point is that the systems of exemptions, reductions, and rebates established by the City under the Cleaning Tariff (as well as the Fixed Water Charge and the Fixed Sanitation Charge) are different from the Rates Act. It relies, however, on the General Valuation Roll ("GV Roll') established under the Rates Act. It is an impermissible parallel system of rates.
'For all these reasons, the Cleaning Tariff, while purporting to be a service, is a rate, but an unlawful one, because it does not comply, or even follow the scheme let alone the letter of the Rates Act,' he added.
The relief SAPOA is seeking is to have the budget declared invalid.
However, the order of invalidity should be suspended for two months to allow the city to deal with the revenue shortfall that will result from the invalidity of the three items.
Mayor Geordin Hill-Lewis said the city cannot agree that wealthy property owners should be charged the same as lower-income or middle-class households.
'This would be regressive, would place a disproportionate burden on ordinary families, and would be patently unfair.
'The city's budget protects homes under R2,5m and extends rates relief to many more middle-class homes, all while preserving the city's critical infrastructure and service investments. In contrast, this court application by the richest of the rich property portfolio holders seeks to go back to a system of regressive taxation which hits ordinary families, and the poor, the hardest,' said Hill-Lewis.
He added that if SAPOA were to succeed in their argument, the effect would be 'to have ordinary families effectively subsidising the wealthiest property owners'.
'Fixed charges linked to property value are a lawful, fairer, and equitable way for Capetonians to contribute within their means to our city's infrastructure programme and fixed service costs. Cross-subsidising – where the better off among us help to fund services for the less fortunate – is the only sustainable way to ensure a working city of hope for all,' said Hill-Lewis.
Meanwhile, the Cape Town Collective Ratepayers' Association (CTCRA), an association with 56 ratepayer associations and civic organisations from across Cape Town, has commended SAPOA.
'This case is not just of importance to the ratepayers of Cape Town. If left unchallenged, there is a realistic possibility that other municipalities in South Africa will adopt CoCT's methods. It is critical that the rule of law, fairness in service delivery, and constitutional accountability are upheld – not just for our city, but for the nation.'
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The Electoral Commission of South Africa (IEC) distributes both funds according to a formula that aims to achieve both equity and proportionality. Permitted use The purpose for which political representatives may use the funds are explicit. In short, the funds are for campaigning, to build democracy, promote represented political parties and representatives, encourage citizens to participate in political life, connect people with organs of state, and generally comply with the Political Funding Act. Prohibited use Equally explicit is what the funds may not be used for. The funds cannot be used to pay remuneration or other benefits to political representatives in any of the three legislatures; nor may a person who receives remuneration from the state benefit. To fund any matter or event in breach of any code of ethics binding MPs and MECs is prohibited. So is using the funds to establish a business and defray the legal costs of internal party disputes. Prohibited donations Accepting donations from foreign governments and their agencies, organs of state and state-owned enterprises is prohibited, with a few exceptions. Donations from a person or entity to a political representative or candidate were capped at R15-million per annum. In 2025, Parliament voted to increase this limit to R30-million. The threshold for disclosing donations made to a political party and representative was set at above R100,000 per annum. But Parliament has voted to double this amount too. Donations above the threshold must be disclosed to the IEC. Concomitantly, an entity that exceeds the donation threshold must also disclose their donation to the IEC. In this way the IEC can verify the link between donor and donee. Accepting a donation while knowing or suspecting it to originate in crime, is an offence reportable to the IEC. To give a member of a political party or representative a donation and for a member to receive a donation other than on behalf of the party, is prohibited. Political representatives must keep bank accounts dedicated for receiving and reporting on all donations. Interconnected aims The summary outline above of the provisions of the Political Funding Act reveals a spider web of interconnecting protections and prohibitions that cumulatively seek to achieve the constitutional aims of sovereignty, equity, proportionality, transparency and deepening democracy. Tampering with, say, provisions relating to either the disclosure of funding or the funding limits, could undermine not only transparency, equity and proportionality, but also democracy and sovereignty. Sovereignty What is sovereignty? Like identity, sovereignty is multidimensional. At its most basic, sovereignty is characterised by power, authority, freedom and independence to make decisions on behalf of a nation state. These characteristics are partly derived from and fortified by law. Mostly, sovereignty is earned progressively through assertiveness and the exercise of might — economic, political, religious, cultural, etc. Cultivated, developed and maintained rather than conferred, the above characteristics of sovereignty fit the profiles of monarchies, dictatorships and democracies. For now, my interest is in representative democracies. Overlaying these characteristics may be variations between, say, parliamentary and constitutional sovereignty. Economic sovereignty would be a measure of the independence of a state to govern without international or foreign financial assistance and monopolistic private enterprises. Pluralist sovereignty signals that supreme political power vests not in the state alone, but is shared with and shifts among social, political, economic and religious groups. Cumulatively, multiple characteristics shape sovereignty to a greater or lesser extent, depending on the balance of forces at play at any given time. However, it is up to sovereign states to choose to emphasise one or more characteristic. Indeed, to assert their sovereignty in their own best interests. Or not. Thus, states opting for a constitutional, representative democracy — like South Africa — should jettison features of parliamentary sovereignty, but emphasise pluralist sovereignty. Economic and political sovereignty — how much a state borrows from, say, the International Monetary Fund, or permits foreign powers to fund political elections — would signify the extent to which that state chooses to risk its independence and freedom from foreign influences to make its own decisions. PFA markers of sovereignty Firstly, choosing to regulate political funding per se implies a declaration of sovereignty about elections for political office. It is an assertion of democracy. By establishing the Political Representatives Fund (PRF) and the Multi-Party Democracy Fund (MPDF), the state asserts the duty to fund political representatives. Secondly, sanitising elected representatives of unfair and unjustified influences exerted by underhand funding is but one way of ensuring that voters, and not illicit influencers, dominate the national discourse. The exception to the prohibition of donations from foreign governments and their agents is that they may donate a limited amount, currently set at R5-million, for training and skills development of a political representative or for policy development. By stipulating the sources of political funding and limiting the contributions from both foreign governments and a single donor to a political representative, the Political Funding Act seeks to curb and control the influence of both foreign and wealthy private donors on domestic politics. Thirdly, prohibiting organs of state and state-owned enterprises from contributing to the Multi-Party Democracy Fund imports into the system all the efficiencies of receiving funding from a single state source. It is also a way of preventing incumbent representatives and political parties and their apparatchiks from diverting funds budgeted for their departments towards the Multi-Party Democracy Fund. Fourthly, what political representatives may and may not use the Political Representatives Fund and the Multi-Party Democracy Fund for are aimed at fortifying representative democracy. For instance, funding is not meant to benefit political representatives personally. Using the funds to establish a business is illegal. This limitation must, by extension, also apply to funding an already established business. Fifthly, the purpose of political funding prioritises the people, not just voters and their representatives. The provision of state funding is intended to 'ensure continuous and vital links between the people and organs of state'. Convincing people that state institutions exist to deliver their livelihood rights to food, water, health, housing, education and security is campaigning. Campaigning is for garnering support for both the campaigner's constituency and the democratic state. Therefore, political representatives are funded and promoted not only as an end in themselves, but also as a means of strengthening their effectiveness as elected representatives of the people they seek to govern. Maximising the people's participation in society cultivates legitimacy and nurtures sovereignty. Political representatives who find themselves ungirded by popular support jeopardise not only their legitimacy, but also the sovereignty of the state. Sixthly, the aim of entrusting the administration of political funding to the IEC is to assure the integrity of the funding project. The mere whiff of bias or corruption would contaminate the IEC's integrity. Undoubtedly, this would be so if, say, the IEC accepts money for the Multi-Party Democracy Fund knowing that it is the proceeds of crime. Correctly calculating and paying the qualifying political representatives their portions from the Political Representatives Fund and the Multi-Party Democracy Fund, reporting to Parliament and securing clean audits from the Auditor-General, are all markers pointing to the IEC doing its job well. Empowering the IEC to enforce the Political Funding Act and submit to audits by the Auditor-General are the belts and braces to ensure compliance with the act by all. Is our sovereignty safe? My assessment of sovereignty through the political funding lens touches on compliance; underhand funding, low polls and weak enforcement. Compliance Consistent with the constitutional mandate that legislation must regulate funding for national and provincial elections, the IEC has established a unit dedicated to administering the political funding project. Parliament has yet to consider whether it should regulate political funding of local government elections. If the IEC receives illicit funding or misallocates funds, the rules are so precise that illegal transactions would be easily detected. Furthermore, receipts and allocations are made electronically, not as cash in brown paper bags. They generate an electronic trail. Illicit transactions would show up in the annual audits. Anyone aggrieved by an allocation may ask the Electoral Court on review or appeal to correct any decision of the IEC. Annual audits by the Auditor-General and quick corrective measures by the court would mitigate the risk to the integrity of the IEC. The IEC is a modern institution evolving in the technology-driven information age. To execute its constitutional mandate, it must be ever vigilant of its own limitations, advance its capabilities and remain responsive to a fast-changing, high risk financial environment. Building in self-correcting measures of constantly monitoring, measuring and innovating mitigates risks. If the IEC fails to self-correct, the Electoral Court could compel it to comply. In 2024, 14 out of 15 represented political parties reported on their donations received and spent. While such a high level of formal compliance is commendable, authenticating the amount of donations actually received in both cash and kind is challenging. Political representatives do not have similar internal self-correcting mechanisms as the IEC to safeguard against underhand funding. Underhand funding Superficially, a political party's reporting may look compliant. However, on comparing the information in the report with the reality, it appears in some instances that the amount of donations disclosed as received and spent do not match what seems to have been spent. Donations in kind tend to escape the reporting radar. Thus, a political representative could trigger an investigation if, e.g. it uses a posh sound system, busses in crowds, and distributes thousands of T-shirts and food hampers at a mass rally, the costs of all of which manifestly exceed the amount of the disclosed donations and expenses. Vote buying is an internationally prohibited transaction. The prospects of finding accounting records for prohibited transactions are remote. So too is funding from foreign governments and their agencies masquerading as nonaligned organisations. Exploiting gaps in the Political Funding Act subverts not only the letter and spirit of the law, but democracy itself. The minimum reporting threshold of above R100,000 is avoided by a donation of say, R99,000. If a donor makes several payments of R99,000, they need not appear in the reporting to the IEC. However, scrutiny of the financial statements would expose the political representatives to an investigation. Similarly, equity, fairness and the rule prohibiting donations above R15-million from a single person or entity could be subverted when, say, members of the same family, or the CEO of an entity and the entity itself, each donate the maximum allowed to a political representative. While these donations are legal, they could erode the purpose of the Political Funding Act to curb undue influence exerted by the elite. Low polls The greatest risk to sovereignty is the failure or refusal of the people to participate in elections. Whether as people standing for elections, volunteers campaigning for democracy and voters supporting their preferred representatives, their non-participation, irrespective of the reasons, would be the death of democracy. Plummeting polls are clear evidence of the people's disillusionment. Disillusionment would follow those political representatives who misuse the funding or fail to convince the people of the benevolence, competence and capacity of state institutions to deliver their livelihood rights to food, water, health, housing, education and security. Unless elections offer well-meaning, capable political representation as options, disillusionment in the state would ultimately erode its legitimacy. Research by the Human Sciences Research Council found 'a sense of hopelessness and despondency with the country's democracy'. The council exposes the link between disillusioned voters and low polls. From the height of 64% in 1994, the Voter Satisfaction with Democracy Survey shows a drop to 25% in 2024. Unlike say, Italy, South African law does not set a minimum threshold of votes for a valid election. If such a threshold existed, and was not achieved, the elections would have to be rerun. Enforcement Enforcement of the Political Funding Act rests with the IEC. It has powers to monitor compliance and investigate complaints. If there is a failure to disclose information, the IEC can apply to the Electoral Court to compel compliance. However, to perform its Political Funding Act functions optimally, it is not enough for the IEC to establish a unit dedicated to administering political funding. The sources of funding for vote buying and other subversive transactions require extensive investigation to gather evidence to enable the IEC to enforce the act. Mere suspicion does not ground winnable cases in court. Simultaneously, the IEC cannot compromise its integrity, impartiality and independence as a service provider responsible for administering political funding. Ultimately, it is the IEC that must decide whether the funding of political representatives resulted in inclusive, free and fair elections. Therefore, the IEC's investigative functions must be bolstered with forensic capacity for it to be an effective enforcer of Political Funding Act violations. Underhand transactions require criminal investigations aimed at prosecuting offenders. Units in the police, security and prosecutorial services dedicated to electoral crimes would facilitate prosecutions. The record of a successful conviction should be allowed as prima facie proof of a Political Funding Act violation. Possibly, this would dispense with the IEC duplicating an investigation. Whistleblowers are indispensable for monitoring compliance with the Political Funding Act. They must be protected when they report underhand transactions. They have direct evidence that is required for presenting winnable cases in court. Donors should be urged to contribute to the Multi-Party Democracy Fund. This would enable equitable and proportional distribution of funding. Furthermore, it would avert suspicion of underhand funding and undue influence. While low polls could singularly frustrate democracy, political funding is not the sole cause of plummeting polls. What those other causes are leaves little to the imagination. Ultimately, if most people refuse to participate in elections, sovereignty would be scorched on the pyre of democracy. DM
