Monday, 5 December 2011

Bloemfontein has spoken: A ratespayers strike is not a protected course in itself

South African municipal authorities are in a terrible state and residents, rates-payers (many of whom are residents) and businesses operating within particular municipalities have developed hostility towards paying monies which are perceived to be or are maladministered.

Ultimately the residents and ratespayers of the municipality within which Kroonstad finds itself formed an association which like many other residents and ratespayers associations embarked on a rates strike. One of the striking members, a Ms Rademan, found that the municipality had terminated her electricity supply even though she had paid her electricity bill (it seems this is a postpaid account). Subsequently Ms Rademan (presumably with the support of some form of the association) approached the magistrates court to compel the reconnection of her electricity. The case has moved through the High Court to the Supreme Court of Appeal. The Supreme Court of Appeal ruled last week Thursday (1st December) and effectively confirmed both the reasoning and the finding of the Bloemfontein High Court which set aside a decision by the magistrate for the Kroonstad district which gave Ms Rademan reprieve. An advantage of the manner in which this case has been handled is that we have two good judgments, one in English and one in Afrikaans. Unfortunately for Ms Rademan she is finding herself with costs from three courts and these costs do grow.

The judgment which bears the reference Rademan v Moqhaka Municipality & others (173/11) [2011] ZASCA 244 (01 December 2011) is a judgment which any person considering withholding monies from the municipality should consider. The reasoning of the Supreme Court of Appeal is crisp and its findings above any real criticism when regard is had to the relevant statutory provisions. Of course there is always the possibility of a Constitutional Court challenge on the basis that the legislation is unconstitutional.

I don’t believe that the Constitutional Court will find the relevant provisions of the Municipal Systems Act unconstitutional for two reasons: Firstly the Constitution does not contain any provisions requiring meaningful representation before taxation or that the government failing in critical duties may justify certain steps - in so far as this may be viewed as a flaw in the Constitution itself I align myself for fairly complex reasons with the view, in so far as certain political interests advocate the inclusion of such a provision in order to enhance “accountability” I do not. Secondly the Constitutional Court has already in Pretoria City Council v Walker 1998 (2) SA 363 (CC) placed its flag on the mask against a dissent into anarchy. A feature strongly endorsed by the Rademan decision is the fact that municipal rates are “part of the civic and contractual responsibilities” of ratespayers and that “for a municipality to be able to properly and efficiently

One area of the law which this case does not address and which is relevant to Kouga ratespayers is whether a ratespayer must pay the rates assessed by the municipality according to inflated property values of whether they may pay rates on a lower valuation of the property if the second valuation is in order – this is a major issue due to the assessment on the market value of property. I suspect that the statutory basis for rates determination will entail a pay first argue later policy and that the municipal authorities will not endorse a policy by which a ratespayer may pay on a lower assessment.

However the political considerations behind the law are still open to debate. Is it correct that residents and ratespayers have no recourse against the municipality who simply misuses their funds? The view of the courts appears to be that the law itself is the recourse and in exchange for the protection which the Rule of Law brings we surrender our right to self-help in the form of a rates strike; of course we can turn to our courts (we have a Constitutional right of access to legal recourse after all) but the record suggests that litigation by many follows debt collection, commerce and evading conviction for criminal behaviour and not the maintaining a democracy. Perhaps South African’s are not sufficiently prepared to litigate about important issues and principles, being too afraid of descending into the perceived (and possibly real) litigant society of the USA and the unfortunate cynicism that may emerge on finding that whilst poor unsatisfactory and shoddy legal services may be obtained easily, quality litigation is both costly and inconvenient - unless you happen to be a public official facing criminal charges. (Just ask the President, whose office repeatedly demonstrates the shoddiest of work while his personal criminal defence team extract massive fees paid by the fiscus.) Sadly certain government entities are more afraid of certain well connected entities than they are of the law itself – rather keep particular business or party interests happy than comply with the law, after all who is going to take you to court and even if they succeed it is public monies that are spent; and this may include Kouga. In addition to the courts we also have recourse through the municipal council’s legislative mandate, we can lobby for a municipal policy which allows the creation of a holding trust for ratespayers funds in dispute. The municipality would be well served by a policy which sees the proper declaration and resolution of individual and collective disputes instead of a general disquiet that currently exists.


Suffice it to state that unless a policy creating space for the entrustment of monies by ratespayers as a withholding rates unless specific issues are addressed is created a rates strike by ratespayers simply will not succeed and Kouga not only have a right but a legal duty to break the strike by cutting services. Of course the prospects that some ratespayers purporting to be in a rates strike are simply acting on a pretext which undermines service delivery could see an improvement for residents as the municipality will have more funds. Unfortunately the issue is one upon which measurement of the management and administrative structures are important, further as many municipalities have demonstrated the two dominant political organizations in Kouga both appear to set course on policies which are as prejudicial to the poor as they are idiotic. In the present instance  the Kouga Municipality has bizarrely embarked on terminating access to tenants without complying with the prescripts of the Constitutional Court decision in Joseph & others v City of Johannesburg & others 2010 (4) SA 55 (CC) which requires that 14 days notice be given before terminating access to electricity and that the municipality must make it possible for tenants to enter into a relationship with the municipality for services. Unfortunately this is a subject on which the concept and principles of sub iudice prevent me from commenting at this time.


[Small category note: I have included a tag “legal opinion” although this is not to suggest that this piece is or should be viewed as a legal opinion, but rather that it has a bearing on an issue relating to the seeking of or reliance on legal opinions. A legal opinion can be sought from one of the many legal practitioners within the Kouga municipality] 


  1. Thank you for an interesting and well-researched view on the issue of with-holding rates.

    I would be interested to see if the Kroonstad case you mention does go to the Concourt. The idea that municipalities or the state should be exempt from the same rules that apply to citizens is abhorrent to me. I would also assume that the issues at stake might be addressed by provisions of the new Consumer Protection Act as well. No one, least of all public service organisations, should be entitled to demand payment without adequate delivery of the service being paid for.

    Rather than a coordinated rates boycott which is easily halted by attacking the organisers, I believe that ratepayers should declare individual disputes with the municipality, and that payment should be withheld until resolution of the dispute. Can you comment on the legality of this, or is the judgement referred to the final word on this subject?

    An organisation like the JBRA can facilitate and investigate the individual dispute mechanism for the benefit of members, rather than the alternative of a head-on collision with the municipality (which you seem to indicate may fail for legal reasons).

  2. The CPA should certainly provide assistance to consumers of municipal services, and it might actually be the case that residents will be able to withhold payment for services but not rates - historically rates strikes have been accompanied by paying for rates. I do however have doubts about some of the readings of the Act I have seen, but as I am not a lawyer of any form (and have not been published in a peer review journal in a legal field - yet, I need somebody to get my backside into gear into finishing a few of the drafts to publishable standing) must await a decision from the courts or tribunal on the subject (at which point I can say "mmm I was right") and am most unlikely to bring any action or application under the CPA myself - it is far out of my league.

    The basic issue here though is the simple fact that municipalities are securing their monies not in terms of a service sales provision but rather what is really a law of taxation particularly when we consider rates. By tax I am speaking in legal not economic terms although the electrical surcharge - which I will return to - it is really a terrible economic surcharge.

    Personally I believe that a great many problems would actually be solved if municipalities were released of their responsibility to collect their revenue and instead hand the affair over to SARS which while still having the occassional hitch is a significantly more competent authority than most in SA and is a better taxation authority than most in the world. The proposal is not that municipalities loose power over taxation - which is actually quite limited in SA compared to most other jurisdictions, especially if you consider the vast mandate and responsibility of our municipalities but - rather that the administration of the taxation be "outsourced" to SARS, so the council devises its rates policies. SARS already has very competent taxation appeal processes and so on. Of course SARS could then be empowered to withhold payment over if irregularities of certain forms are suspected or if directed to by a court or ... or ... or ... - the advantage here being that a practice could be built into law allowing organized civil society to focus on SARS as the tap for municipal activities.
    But yes there are political issues that SA constitutional law does not provide a premise to make demands that follow taxation, and whilst various frindge US tax dissidents provide a background to ridicule tax dissidence there is something materially wrong with being burdened with tax of some form without meaningful representation - we are a democracy?
    Certain municipalities can legally find themselves subject to a rates strike if money is paid into a trust, because of the relevant policies of the municipality. Again if we had a courageous and democratically minded national government an organized protest structure against rates would be available in statute - sadly we do not. Nor is their provincial legislation in any of the provinces - including a western neighbour. As the residents association and with other Kouga organizations we can fight for such policy from the municipality, but I doubt many councillors from any party will show the commitment to democracy that such policy requires.

    Another issue which resonates in the issues coming up in various judgments is the fact that a cycle of non-payment is a vicious one. Here, without suggesting that the courts have considered extraneous matters, a feeling that is difficult to ignore is the fact that a horrible inefficiency system has been built into the local government sphere by decades of corruption and ineptitude:

  3. Currently electricity in SA is too cheap as it leaves the power plant but too expensive when it reaches the consumer. Looking at the difference the middle man makes and considering who the middle man is it should be unnecessary for the municipalities to charge any rates or service fees and to still be sitting cosy. In short the South African economy has a heavy electricity tax which funds local government, so why is local government in such a perilous and penniless state? The answer is simply that municipalities have a chronic defect in actually recieving money from their base. In essence Kouga buys electricity supply from Eskom which it resells at a major profit per unit but because its collection routine is so faulty it only collects revenue on say half of the electricity it has to buy, meaning that just to break even those who pay for their electricity have to pay double. Things may be getting better - and maybe Kouga only has a quarter of its electricity supply being borne by other payers - but the debt is still mountainous.

    However the disgusting thing is that contrary to general mythmongering it is not the poor communities but rather big debtors - particularly speculative property developers and fly-by-night industrial activities - who are to blame and most municipalities could if it were not for their large recalcitrant debtors supply every household (regardless of the income of the household) with R200 prepaid electricity a month and actually function within their budgets, and more importantly providing households with electricity reduces the dependence on burning parafin etc ... which impose enormous costs to municipal emergency services. You also see benefits from the possibility of refridgeration (reducing health care burdens as food quality is improved) and have an effect as simple as the fact that poorer communities children in senior parts of high school can study better during the evening. Also the installation of prepaid meters provides access to electricity for purchasing and the "tax base" in the form of people purchasing electricty increases reducing the effect that currently exists in SA where our tax base is to small - particularly on income tax- and where it is large is largely regressive and anti-poor - VAT - a proper municipal "electricity tax" in the form of the markup is a most effective consumption tax. Treasury realises this and has written its guides and rules concerning infrastructure development towards rolling out infrastructure such as prepaid meters, but it is exactly at infrastructure that municipalities so badly underspend their budgets. A basic survey of cases in the superior courts involving municipal accounts tells the harrowing story of developers and tycoons owing hundreds of thousands of rands and being allowed to do so for years while municipalities target ordinary and poor people on service charges, but there is a dangerous mentality towards debt collection and credit control in SA with regard to public goods - and the Joburg billing crisis shows this.

    Sadly over the last two weeks I have first hand discovered just how inept Kouga remains at understanding this basic issue of service delivery and unfortunately it is likely that ratespayers funds are going to be sacrificed to the ineptitude, unless the municipal authorities - particularly the mayor - holds officials accountable.

  4. If individual ratespayers have particular service disputes with the municipality the terms of the contract and the contractual relationship may provide recourse that allows witholding those service fees and the CPA could be of help. Unfortunately municipal service contracts are generally written by legal eagles with the specific objective of closing loopholes like that - municipalities will spend more money drafting rights limiting instruments than making themselves accountable - and because of a major power imbalance as a result of the monopoly held by the municipality that could be ineffective. Again if the municipality believes in the values of our Constitution it will adopt a dispute resolution policy that allows money to be held independently while a dispute is being promptly handled.


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