Cape Town's current conflict: The costly difference between a “rate” and a “tariff”
25 February 2025 Sarah’s Socials | Post 4
The City of Cape Town (“CoCT”) has been taken to court by the South African Property Owners Association (“SAPOA”), supported by other concerned groups, over the tariffs included in their budget. While the CoCT labels these charges as "service tariffs," SAPOA argues that they are actually cleverly disguised rates and therefore challenges the inclusion of these tariffs in the CoCT’s budget on various grounds.
This article focuses on why the distinction between a tariff and a rate makes a significant difference to property owners' pockets and how sectional title owners are particularly affected by this budget.
What are the CoCT’s charges?
The COCT included three new charges in its 2025/26 budget:
city-wide cleaning tariffs;
fixed water charges, and
fixed sanitation charges.
While these are labelled as tariffs or service charges, in actuality they are directly linked to the property value bracket. The crux being that none of these charges link to the actual consumption of services or utilities by the property owner.
Why is SAPOA concerned?
The above led SAPOA to challenge these charges in court on the grounds that they were property rates disguised as service fees. SAPOA argued this was done to bypass existing legislation that regulates how municipalities may charge property rates. Moreover the system of exemptions which the CoCT applied does not align with the Municipal Property Rates Act 6 of 2004. SAPOA further contended that, according to the South African Constitution, a municipality may only impose four specific types of charges, fees for services actually rendered, surcharges on such fees, property rates or other taxes specifically permitted by legislation rates.
It is SAPOA’s view that the raising of these new charges do not fall into any of the aforementioned categories. Moreover, these tariffs attract Value Added Tax (“VAT”) charges, where property rates do not, meaning that the property owner is paying a higher fee for what amounts to a property rate.
In addition, the Cape Town Collective Ratepayers' Association (“CTCRA”) highlighted how sectional title units are being particularly affected by this system of tariffs. The CTCRA noted that charges in certain cases may skyrocket due to the shift from a bulk collective service fee to these new individual property value brackets fees. As these tariffs began mid-year, at TVDM Consultants we have noticed that most schemes did not have the additional budget to cover these unexpected costs and that there is great confusion in the sectional title industry regarding the method of recovery of these fees.
The CoCT’s response
The CoCT contended that these fees are calculated based on property value brackets rather than a rate-in-the-rand value, and as such, they could not be labelled as property rates. The CoCT argued that it has a general permissive power, under the Municipal Systems Act 32 of 2000, to raise tariffs. The CoCT maintains that the principles of rationality and equality permit the system of exemptions for properties under a certain value, which allows for the cross-subsidisation of the CoCT’s charges, while securing stable revenue for the municipality and addressing socio-economic inequalities. Finally, the CoCT claimed there is a strong correlation between property value, household income, and utility usage, thus establishing the link between consumption and the tariffs.
Has the court made a decision?
This matter was heard in the Cape Town High Court in early December 2025, and the court has yet to deliver its judgment.
In conclusion
This case raises several issues of lawfulness, constitutionality, and equality within Cape Town's already strained property market. While the CoCT may need to increase its budget to meet growing demands for services, without exacerbating existing socio-economic tensions in the city, it is still beholden to the Constitutional and legislative guardrails in place.
We are monitoring the situation closely and will keep readers updated once the judgment is handed down. If you are concerned about how your scheme should manage these costs or handle owner recoveries in the meantime, please contact TVDM Consultants for expert guidance, by reaching out to info@tvdmconsultants.com or call 061 536 3138.
About the author
Sarah Sydenham is a community schemes consultants at TVDM Consultants.
Sarah is also an admitted attorney, brings a well-rounded legal background and a passion for community schemes to her role.
Learn more about Sarah Sydenham.
