SAPOA Legal Update Report

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SAPOA LEGAL UPDATE - report to members

LEGAL UPDATEREPORT TO

SAPOA MEMBERS

Volume 2

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The information contained in this document is for information purposes and outlines some of the processes, interventions and projects that are being or have been done by the Legal Services Department of SAPOA. SAPOA cannot guarantee the accuracy, reliability, and completeness thereof and it is of general application and does not take into account the particular circumstances or needs of any person or company or organization or entity whose employees, agents, directors or shareholders may read it. Such persons or entities are encouraged to

seek independent professional advice from suitably qualified professionals prior to making any decision in reliance on the contents of this document. SAPOA is not liable and accepts no responsibility for any claim, loss or damage of whatever nature suffered by any person, entity or corporation who relies or seeks to rely on any information, advice or opinion contained in

this document or otherwise given by the author whether or not such person or entity is a Member of SAPOA.

www.sapoa.org.za

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Contents

1. EXECUTIVE SUMMARY 32. LEGISLATION 52.1. Promotion and Protection of Investments Bill 62.2. Spatial Planning Land Use Management Act, 2013 72.3. Expropriation Bill, 2013 72.4. Infrastructure Development Bill, 2013 72.5. Gauteng Planning and Development Bill, 2013 72.6. Mpumalanga Planning and Development Bill, 2013 82.7. Western Province Spatial Planning Land Use Management Bill, 2013 82.8. Property Practitioners Bill 82.9. Property Valuations Bill, 2013 92.10. The Housing Consumers Protection Measures Amendment Bill 92.11. The Deeds Registries Amendment Bill 92.12. Special Economic Zones Bill 102.13. Tobacco Products Control Act No. 83 of 1993 102.14. Environmental Impact Assessment Regulations 102.15. Carbon Tax Policy 112.16. Suspension of Liquor Regulation 21 Notice 112.17. Transition Period for Compliance with the New BEE Codes 12

3. MUNICIPAL LAW 133.1. The Rates Act 143.2. Draft Rates Policies 2014/2015 Financial Year 14

4. RESEARCH 194.1. Property Rates in South Africa 204.2. The Role and Impact of the Commercial Property Sector in the Western Cape Province Economy 204.3. Financial Intermediary Centre (FIC) Guidelines 214.4. Business Rescue – Companies Act No. 68 of 2008 224.5. Standard Agreements 224.6. Lease Agreement Workshops 224.7. Determination of Thresholds 224.8. Protection of Personal Information 23

5. ADVOCACY AND LOBBYING 255.1. Illegal Land Use 265.2. Mpumalanga Services Appeal Board 275.3. National Department of Agriculture and Act No. 70 of 1970 285.4. South African Cities Network 28

6. LEGAL OPINIONS 296.1. National Environmental Management: Integrated Coastal Management Act 30

7. JUDGEMENTS 33

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The Department is responsible for legal advocacy which is

fundamental in ensuring SAPOA actively participates in policy for-

mulation and enactment of laws affecting the property sector in

South Africa. Monitoring, analysis and submission of formal com-

ments on published relevant and pertinent Acts of Parliament,

Green and White Papers, Municipal Ordinances and Policies having

an impact on the property industry is one of the strategic focuses.

Strategic and collaborative relationships are initiated and/or

cemented, where relevant and pragmatic, with other stakeholders

in the property industry which includes engagement with govern-

ment departments, state-owned entities, organs of the state and

municipalities.

Litigation remains the ultimate and last legal mechanism which is

being used for the mutual protection of members and SAPOA values

the constitutionally and legally sound of the South African Judiciary

system. SAPOA resorts to litigation as an alternative strategic objec-

tive that is supported by the rules and provisions regulating SAPOA’s

Legal Advocacy Fund.

Research is a fundamental tool that SAPOA recognises and utilises

to investigate a multiplicity of issues with the intention to increasing

the institutional and sectoral knowledge relating to the industry, to

formulate and determine best practice and guidelines for the use of

the members and also as a negotiating tool to be used in positively

influencing and changing the commercial property landscape, prac-

tices and direction thereof for the attainment of global best practice.

Our researches are cognisant of the need of ensuring the growth,

sustainability and profitability of the commercial property sector

within less protracted public sector environment.

Legal Advisory services are provided to internal departments and

further to members of SAPOA. Compliance remain key in ensuring

SAPOA complies with the legal prescripts of various legislation.

eXeCUtIVe sUMMARY

The Legal Services Department supports the vision and mandate of SAPOA by ensuring that legal risks that are prevalent in the commercial property industry are mitigated for the protection of the mutual interests of SAPOA members. SAPOA is cognisant of the vibrant and evolving nature of the property market which to a larger extent is regulated through various pieces of legislation.

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Da mihi factum, dabo tibi iusGive me the fact; I will give you the law

LeGIsLAtIon

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LeGIsLAtIon

A. PRoMotIon AnD PRoteCtIon oF InVestMent BILL

The Bill affects Property Owners and Property Developers

i. The Promotion and Protection of Investment Bill was published

in November 2013 and was open for public comment until January

2014. Government response to the comments and an amended

Investment Bill must be anticipated. Seeing that the government

has rejected the more trenchant comments on the Investment Bill,

it is unlikely that the overall scheme of the Investment Bill will be

changed materially.

ii. The primary purpose of the Bill is to provide a legislative

framework for all investments including foreign investments. The

intention is to put local investors on the same footing as foreign

investors who were previously disadvantaged under the Bilateral

Investment Treaties and, within rational legislative limits to give

equal treatment to foreign investors

iii. The Bill applies to:

a) Investments made for commercial or business purposes.

b) Material economic investments or a significant underlying

physical presence in South Africa such as operational facilities

iv. It is correct that there is no way of knowing where the threshold is

in regard to what is a material economic investment or a significant

physical presence in South Africa.

v. Much of the criticism has emanated from or in relation to

jurisdictions that have or previously had bilateral investment treaties

(BITs) with South Africa which have been or will be terminated.

Foreign investors in those jurisdictions will in some respects be

worse. There are those who believe the foreign investors will be

placed on the same footing as South African investors. It is an opinion

that those foreign investors that enjoyed the jurisdiction of BITs will

be placed on the same footing as foreign investors in jurisdictions

which do not have BITs, notably major sources of foreign investment

such as USA, Japan and India. Whether it is an ideal situation, it is

believed that the Bill will ensure that all investors will have all the

advantages and disadvantages of domestic South African `.

vi. The major issues are:

a) The scope of the law and what is an “investment”

b) The right to fair and equitable treatment

c) Expropriation and compensation

d) The right of establishment

e) Dispute resolution

f) Security of investments

g) Funds transfer.

vii. There are many concepts in the Investment Bill which are

open-ended. It uses concepts such as “public interest”, “commercial

purposes” and “public welfare objectives”. It is seldom helpful to

try to define terms like “material”, “significant” or “public interest”.

It is not possible to craft a definition that is satisfactorily for all

the circumstances under which all these issues will be decided. It

is better to use these and to rely on the values in the Constitution

and the common law, in the Investment Bill itself and court review

if necessary.

viii. In addition, any government decision is subject to challenge

in terms of the Promotion of Administrative Justice Investment Act

which requires rational decisions on rational grounds and subject

to challenge on the principles of legality and a rule of law review

by the courts. The exercise of public power must comply with

the Constitution, which is the supreme law and legality requires

decision-makers to act in accordance with the empowering statutes.

ix. Some of the overseas criticism has been premised on a suggestion

that there may be lack of transparency, efficiency or independence

of local judicial and arbitration institutions. There is no justification

for that criticism. To the extent that there is always home-ground

advantage in any dispute resolution proceedings, this is better that a

bias towards the commercial interests of foreign investors that may

be shown by an international arbitration body.

x. In addition, the Bill must be interpreted with due regard to the

Constitution, international law consistent with the Constitution,

customary international laws consistent with the Constitution and

any relevant convention or international agreement to which South

Africa is a party. It does not stand in isolation.

xi. This Bill entitles the government to take steps in relation to

taxation, customs unions, free trade areas, common markets and

similar international agreements or arrangements. It seems that this

does little more than to protect things which are already protected

under international law. It is accepted that countries are entitled

to govern their own taxation, subsidy and procurement processes

without foreign interference provided that they are constitutionally

valid laws of general application.

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LeGIsLAtIon

B. sPAtIAL PLAnnInG LAnD Use MAnAGeMent ACt, 2013 – nAtIonAL DePARtMent oF RURAL DeVeLoPMent AnD LAnD ReFoRM

The Act affects Property Developers and Property Owners

The Spatial Planning Land Use Management Act was passed as law

in 2013 and its purpose is amongst others to provide a framework for

spatial planning and land use management in the Republic of South

Africa; to specify the relationship between the spatial planning and

the land use management system and other kinds of planning and

to provide for the inclusive, developmental, equitable and efficient

spatial planning at the different spheres of government. It further

intends to provide a framework for the monitoring, coordination

and review of the spatial planning and land use management

system and to provide a framework for policies, principles,

norms and standards for spatial development planning and land

use management.

C. eXPRoPRIAtIon BILL - nAtIonAL DePARtMent oF PUBLIC WoRKs

The Bill affects Property Developers and Property Owners

The Bill was released for public comment in March 2013. SAPOA

submitted comments on the Bill on 30 April 2013. The Bill provides

for expropriation of property for a public purpose or in the public

interest subject to compensation which is just and equitable and

reflects an equitable balance between the public interest and the

interests of those affected; and respect of the rights of everyone

including the rights to equality and to administrative action that is

lawful, reasonable and procedurally fair. The Bill has not been tabled

before Parliament.

D. InFRAstRUCtURe DeVeLoPMent BILL no. 99 oF 2013 - nAtIonAL DePARtMent oF eConoMIC DeVeLoPMent


The Bill was published for public comment in March 2013 and it

seeks, amongst others, to provide for facilitation and co-ordination of

infrastructure development which is of significant economic impact

or social importance to the Republic; eensure that infrastructure

development in the Republic is given priority in planning, approval

and implementation; and to ensure the development goals of the

State are promoted through infrastructure development. The Bill

further seeks to empower the Commission to determine and develop

infrastructure priorities, designate strategic infrastructure projects

(SIPs) and ensure that infrastructure development in respect of any

SIPs is given priority in planning, approval and implementation.

Once a project qualifies as a SIP, the Minister designates the project

as such by publishing a notice in the government gazette.

The Infrastructure Development Act No 23 of 2014 was assented to

on 2 June 2014.

e. GAUtenG PLAnnInG AnD DeVeLoPMent BILL


The Gauteng Planning and Development Bill was published for

public comment in 2013. As reported in the last Legal Update

Report, 2013, SAPOA submitted formal comments on 1 April 2013.

The broad legislative objectives of the Bill are to provide for the

planning and development of land use in the Province; to provide

for provincial planning and the coordination of national, provincial

and municipal land use and development policies; to provide for

the land use planning functions of the Province and the process

of provincial planning : to provide for land use schemes in the

management of land use by municipalities; and to provide for

the regulation of municipal land use and the establishment of a

municipal appeal tribunal.

The final approved Bill is being awaited.

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LeGIsLAtIon

F. MPUMALAnGA PLAnnInG AnD DeVeLoPMent BILL – PRoPeRtY DeVeLoPeRs AnD BUILDeRs


The Mpumalanga Planning and Development Bill was published

for public comment during April 2013 and its legislative objective

mirrors the objectives of the Gauteng Planning and Development

Bill which must all be aligned to the SPLUMA.

The final approved Bill is being awaited.

G. WesteRn CAPe LAnD Use PLAnnInG BILL


SAPOA submitted formal comments on the Bill on 18 March 2013.

The Bill intends to establish a system for provincial spatial planning

and development management in the Western Cape Province and

further to consolidate legislation in the Province pertaining to

provincial planning, regional planning and development, urban and

rural development.

The Bill further intends to establish and enforce legal measures

essential to orderly coordinated spatial planning and development

management while also promoting integrated social and economic

development. Key also is for the Bill to provide for binding spatial

development frameworks in the province. The drafters of the Bill

opted to be more detailed by stating that the Bill must provide

for implementation of provincial environmental, housing, nature

conservation, tourism, agricultural, transport and economic

development policy and measures.

Western Cape is reworking its Bill.

H. PRoPeRtY PRACtItIoneRs BILL - nAtIonAL DePARtMent oF HUMAn settLeMents

The Act affects Property Brokers, Managers, Conveyancers and Property Onwers

This Bill is not yet published for public comments but has been

provided to SAPOA, at SAPOA’s request, to ensure that it can be

studied internally and initial comments provided to the Department.

The objects of this Bill are to assist in providing a just and equitable

legal framework for the marketing, managing, financing, letting,

renting, sale and purchase of property; ensure fairness and efficiency

in the property market; assist in protecting and promoting the

interests of consumers; provide a framework for the licensing of

property practitioners; regulate the conduct of persons involved

in the financing, marketing, managing, letting, hiring, sale and

purchase of property not regulated in other law; and regulate the

education, training and development of property practitioners.

The Estate Agency Affairs Act, 1976 is the current legal framework

within the estate agents and the industry is being regulated. The

Act, which is under the Minister of National Department of Human

Settlements, is in the process of being reviewed or repealed. The Bill

was withdrawn from National Assembly.

SAPOA was advised that the Bill is likely to be published in June

2014.

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I. PRoPeRtY VALUAtIon BILL


The Property Valuations Bill is one of the Bills that emanates from

the Green Paper on Land Rural Development and Land Reform.

Accompanying it in its policy endeavours is the Restitution of Land

Rights Amendment Bill, 2013.

The Property Valuation Bill seeks to achieve the following objectives:

a. to give effect to the provisions of the Constitution which provide

for land reform and the facilitation of land reform through the

valuation of property in order to determine the purchase price for

or payment in respect of property;

b. to provide for the establishment of the Office of the Valuer

General;

c. to provide a valuation service to departments , organs of state and

to municipalities;

d. to provide for a review mechanism.

SAPOA submitted formal comments on 23 June 2013.

The Property Valuation Act No. 17 of 2014 was assented to on 1

July 2014.

LeGIsLAtIon

J. tHe HoUsInG ConsUMeRs PRoteCtIon MeAsURes AMenDMent BILL


The proposed Draft Bill of the Housing Consumers Protection

Measures Act No. 95 of 1998 was finalised by the National Home

Builders Registration Council (NHBRC) in August 2011 and was due

for the Ministerial legislative process with the National Department

of Human Settlements. A copy of the first draft was provided to

SAPOA members who represent SAPOA on the NHBRC’s Industry

Advisory Committee.

The industry will wait for the publication of the White Paper which

will afford SAPOA an opportunity to review and make comments.

K. DeeDs ReGIstRIes AMenDMent BILL


The Deeds Registries Amendment Bill is meant to provide for

Promotion of Administrative Justice Act (PAJA) principles. PAJA

recognises an act or failure to act by an organ of state as an

administrative action. It further requires that any administrative

action taken must be transparent, reasonable, just and equitable.

The Bill provides that rectification of title is required in respect of

any one piece of land in consequence of a survey or re-survey of

such land or of the correction of any error in the diagram thereof

under the Land Survey Act, [1927] 1997, the registrar may, on

written application by the owner of the land accompanied by the

title deed and the new or the corrected diagram thereof, any bond

thereon and any registered deed of lease or other registered deed

whereby any real right therein is held by any other person and the

written consent of the holder of such bond, lease or right, endorse

on the aforesaid deed a description of the land according to the

new or corrected diagram, which description shall supersede the

description already appearing in the aforesaid deeds.

The Deeds Registries Amendment Act No. 34 of 2013 was assented

to on 13 December 2013.

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L. sPeCIAL eConoMIC Zones BILL - DePARtMent oF tRADe AnD InDUstRY


The special economic zones Bill is an improvement on the industrial

development zone (IDZ) programme, initiated in 2000. Four IDZs

were established to boost investment, growth, employment and skills

development. Each needed access to an international port or airport

and the potential for export-orientated production. They were in Coega

in Port Elizabeth, East London, Richards Bay and OR Tambo International

Airport. The benefits of the establishment were the network of quality

infrastructure, expedited customs procedures and duty-free operations.

The Department of Trade and Industry then issued Policy Notice No.

34968 under Government Gazette Number 10505 which relates to

Special Economic Zones intended to continue to foster government’s

efforts to create employment and economic growth by establishing

a strong industrial base in South Africa. Special Economic Zone

(SEZ) is defined as “geographically designated areas of a country set

aside for specifically targeted economic activities, which are then

supported through special arrangements (which may include laws)

and support systems promote industrial development.

The Policy further recognises SEZ’s programme as one of the most

critical instruments that can be used to advance government’s

strategic objectives of industrialisation, regional development and

job creation. The programme further aims to assist in improving

the attractiveness of South Africa as a destination for foreign direct

investments and export of value added commodities.

The Special Economic Zones Act No 16 of 2014 was assented to on

19 May 2014.

LeGIsLAtIon

M. tHe toBACCo PRoDUCts ContRoL ACt, 1993 – ReGULAtIons


The Minister of Health issued the regulations on 30 March 2012 and

called for public comment. The regulations were made in terms of

section 2 and (4) of the Tobacco Products Control Act No.83 of 1993.

The Preamble of the Tobacco Products Control Act, acknowledges

that tobacco use is extremely injurious to the health of smokers

and non-smokers and considers that the extent of the harmful

effects of the use of tobacco products on health calls for strong

action to deter people from using tobacco products and to protect

non- smokers from exposure to tobacco smoke and to encourage

existing users of tobacco products to quit. Further, it resolves to

align the health system with democratic values of the constitution

and the World Health Organization’s Framework Convention on

Tobacco Control (Convention), to which South Africa is a party and

a signatory.

The principles of the Convention dictate that, effective measures

should be applied to provide protection from exposure to tobacco

smoke as there is no safe level of exposure, all people should be

protected from exposure, all indoor workplaces and indoor public

places should be smoke free and legislation is necessary to protect

people from exposure to tobacco smoke. It states further, that no

objections are justified on the basis of health or law arguments and

that there is no trade-off between health and economics.

The Regulations are pending approval.

n. enVIRonMentAL IMPACt AssessMent ReGULAtIons - DePARtMent oF enVIRonMentAL AFFAIRs AnD toURIsM


A Notice was issued in May 2013 for comments to be submitted

on the efficacy of South Africa’s environmental impact assessment

regime as a call for responses to government’s legislative and

policy framework to strengthen environmental governance and the

sustainability of our development growth path.

The industry still awaits finalization of the Regulations.

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o. CARBon tAX PoLICY


a. First, carbon pricing will encourage a shift in production and

consumption patterns towards low carbon and more energy efficient

technologies by altering the relative prices of goods and services

based on their emissions intensity and encouraging the uptake of

cost effective, low carbon alternatives. Pricing carbon emissions

addresses the problem of negative externalities, as polluters should

pay for their emissions.

b. Second, carbon intensive factors of production, products

and services are likely to be replaced with low carbon emitting

alternatives. To achieve the extent of emission reductions committed

to in Copenhagen, the production technologies will need to

become less carbon intensive and/or the consumption of certain

carbon intensive products such as cement, steel, and aluminium will

need to be reduced. Given that these industries are important with

respect to the country’s proposed infrastructure build programme

appropriate policies are required to ensure mitigation and adaption

strategies are taken into account in investment decisions that have

long term lock-in effects.

c. Third, a carbon price will create dynamic incentives for research,

development and technology innovation in low carbon alternatives.

It will help to reduce the price gap between conventional, carbon

intensive technologies and new low carbon alternatives.

The implementation of the Carbon Tax Policy has now been

postponed to 2016.

LeGIsLAtIon

According to the Carbon Tax Policy, the primary objective of implementing carbon taxes is to change future behaviour, rather than to raise

revenue. It therefore starts with a relatively low carbon price, and then progressively rises significantly after five to ten years and beyond.

This approach reportedly provides industry and other major emitters sufficient time to innovate and invest in greener technologies for the

future. There are at least three ways in which a carbon tax will work to drive changes in producer and consumer behaviour and therefore

address climate change:

P. sUsPensIon oF LIQUoR ReGULAtIon 21 notICe


The Minister of Trade and Industry has suspended the

implementation of Regulation 21 of the Liquor Amendment

Regulations 2013. The implementation of this regulation, which is

about trading hours, will take place nine months after the date of

the attached notice, which is 11 April 2014. The Liquor Amendment

Regulations were promulgated on 3 December 2013 and Regulation

21 requires distribution activities to take place between 09:00 and

18:00 Monday to Saturday and not at all on Sundays.

Q. tRAnsItIon PeRIoD FoR CoMPLIAnCe WItH tHe neW Bee CoDes

The Act affects all Employers

The Minister of Trade and Industry, Dr. Rob Davies (MP), has extended

the transitional period for the recently revised Broad-Based Black

Economic Empowerment (B-BBEE) Codes of Good Practice to end

April 2015

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Da mihi factum, dabo tibi iusGive me the fact; I will give you the law

MUnICIPAL LAW

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PRoPeRtY RAtes FoR tHe 2014/2015 FInAnCIAL YeAR

The Rates Act

The Rates Act gives Council the discretion to levy an additional rate

on property in a special rating area and, in doing so, may differentiate

between categories of property. This discretion is provided for in

section 22 of the Act. The Rates Act is emphatic on the need for

all persons liable for rates to be treated equitably as required by

the Act. What is noteworthy is that the preamble to the Rates Act

provides that the Constitution enjoins local government to be

developmental in nature, in addressing the service delivery priorities

of our country and promoting the economic and financial viability

of municipalities. It is further stated that there is a need to provide

local government with access to a sufficient and buoyant source of

revenue necessary to fulfil its developmental responsibilities.

Period for which rates may be levied

Section 12 (1) of the Rates Act provides that when levying rates, a

municipality must levy the rate for a financial year. A rate lapses at

the end of the financial year for which it was levied. Subsection (2)

provides that the levying of rates must form part of a municipality’s

annual budget process as set out in Chapter 4 of the Municipal

Finance Management Act No. 1 of 1999. A municipality must annually

at the time of its budget process, review the amount in the Rand of its

current rates in line with its annual budget for the next financial year.

The interpretation of the subsection (1) and (2) of section 12, read

together with the definition of “rateable property” implies that

each year a municipality must determine and review the amount

in the Rand of its current rates. This seems to imply that the rate

automatically lapses at the end of financial year, i.e. 30 June of each

year. This interpretation is supported by section 13 (1) of the Rates

Act that provides that a rate becomes payable as from the start of a

financial year or if the municipality’s annual budget is not approved

by the start of the financial year, as from such later date when the

municipality’s annual budget, including a resolution levying rates, is

approved by the provincial executive.

The Local Government: Municipal Property Rates Act, 2004 (Act No. 6 of 2004), referred herein as the “Rates Act”, is the law meant to regulate

the power of a municipality to impose rates on property, to exclude certain properties from rating I the national interests and to make

provision for municipalities to implement a transparent and fair system of exemptions, reductions and rebates through their rating policies

and to, amongst others, make provision for fair and equitable valuation methods of properties.

MUnICIPAL LAW

Section 229 (2) (a) of the Constitution states that a municipality may not

exercise its power to levy rates on property in a way that would materially and

unreasonably prejudice the national economic policies; economic activities

across its boundaries, or the national mobility of goods, service, capital or labour

DRAFt RAtes PoLICIes 2014/2015 FInAnCIAL YeAR

Rates Watch (Pty) Ltd was appointed in February 2014 to analyse

and review, on behalf of SAPOA, the municipal budgets and

rates policies.

The brief was as follows:

u identify, analyse and conduct research into all applicable and relevant

policies and legislation, draft and approved budgets and any other

relevant sources of information relating to the reviewing and analysis of

budgets and rates policies of the all the metropolitan municipalities as

well as the local municipalities of Msunduzi, Polokwane and Mbombela.

u address all the aspects of the Medium Term Revenue and

Expenditure Framework that have a direct impact on the property

owner and ratepayer. The following aspects, if directly linked to

property, will be included:

a. Projects;

b. Tariffs such as Property rates, Electricity, Water, Sewer and Waste

management

u make evident the increase in relation to the previous year and

comment on the compliance of the new tariff with legislation or

Section 229 (2) (a) of the Constitution states that a municipality may not exercise its power to levy rates on property in a way that would materially and unreasonably

prejudice the national economic policies; economic activities across its boundaries, or the national mobility of goods, service, capital or labour

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other requirements. If abnormal increases can be linked to specific

projects or activities it will be shown.

u analyse the sample accounts reflecting the cost of the basket

of municipal services which will be provided for business and

commercial and industrial properties for the following values:

a. R10 million

b. R50 million

c. R200 million

d. R1 billion

u Identify Aspects that require formal comments by SAPOA must

be identified.

u Review and analyse the rates policies and highlight changes

that will have an impact on the business, commercial, industrial

and residential sector; and identify aspects that require formal

comments by SAPOA

MUnICIPAL LAW

eXtRACts oF CoMMents: DRAFt RAtes PoLICIes 2014/2015

Polokwane Municipality

1. Definitions

1.1 Illegal Use

The definition should be expanded to ensure that all these

properties are identified.

The following wording is suggested:

“Illegal use” means a use that is inconsistent with or in

contravention with the permitted use of the property, including

advertising sign, in which event and without condoning the use

thereof the property will be valued in accordance with section

56(2)(b) & (c) of the Act.”

1.2 Property

Property is defined in the MPRA (Municipal Property Rates Act)

and this definition is in conflict with the MPRA.

The rates policy is subject to the MPRA and definitions may not

be amended.

This definition should be deleted or the definition as per MPRA

must be included in the policy.

1.3 Residential property

The inclusion of the remainders of townships in this

category is welcomed as it will reduce the holding costs for

township developers.

It is suggested that only vacant land in the remainder of a

township should qualify, therefore the word “vacant” should

be added.

Where buildings are constructed and used on the remainder of

a township, the category ‘properties used for multiple purposes’

are applicable.

1.4 Vacant Land

The changes to the definition are supported.

It is however suggested that the following wording be

considered:

“Vacant land” means land where no immovable

improvements have been erected or if erected such

improvements are valued at less than 10% of the market value

of land if vacant, excluding vacant land forming part of the

remainder of a township.”

2. Different categories of rateable property

2.1 Clause 5.2(d)

Provision should be made for farm properties used for industrial

purposes.

2.2 Clause 5.2(q)

There is a definition for ‘Public benefit organisation property’ in

the ratio regulation published on 10 March 2010.

It is suggested that the category be renamed to ‘Public benefit

organisation property’.

2.3 Clause 5.2(r)

The category should be renamed to ‘Illegal use’ to align it with

the definition.

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2.4 Clause 5.3(h)

The proposed ratio of 2.0 does not comply with the ratio

regulations and should be changed to 0.25.

2.5 Clause 5.2(l)

The increase in ratio from 2.0 to 4.5 cannot be supported.

Penalty rates on vacant land will not force development.

Development will be triggered if there is a demand for

the product.

The demand for accommodation by the homeless is a reality, but

this demand will not result in development by the private sector.

The demand is for subsidised housing which should be provided

by government.

The challenges with regard to vacant land will not be resolved

through high rates. The City of Polokwane and property owners

will have to take hands to address the problems.

2.6 Clause 5.3(o)

In The City of Johannesburg Metropolitan Municipality v

The Chairman of the Valuation Appeal Board for the City of

Johannesburg (282/2013)[2014] ZASCA 5 (12 March 2014) Judge

Leach said:

“[30] Not only would the interpretation now advanced by

the appellant be absurd for the reasons mentioned, but one

of the details that has to be recorded on the valuation roll

under s 48 is ‘the category determined in terms of section 8

in which the property falls’. Section 8(r) of course provides for

a category of ‘properties used for multiple purposes subject

to section 9’ (my emphasis) and, under s 45(1) of the Act,

the municipal valuer is required to carry out the valuation

of rateable property in accordance with the provisions of

the Act. This clearly makes s 9 applicable, at least in part, to

the compilation of the valuation roll. The obvious intention

is that where a property is used for multiple purposes, those

categories of use – in respect of which different rates are to be

applied under s 9(2)(c) – should be determined and recorded,

as should the values apportioned to each such category.

This is all to be done by the municipal valuer who is, after

all, the person possessed with the necessary skill, expertise

and experience to do so (which the municipal council lacks).

Moreover, although s 48(2) does not specifically state that the

market value apportioned between categories of use should

be recorded in instances of multiple use properties, the

provision in s 48(2)(g) that the valuation roll is to include ‘any

other prescribed particulars’ in addition to those specifically

mentioned, reinforces my conclusion that the Act, properly

interpreted, requires it to be done.

[31] The inevitable conclusion is that where a property is being

used for multiple permitted purposes, it is necessary for the

municipal valuer compiling the valuation roll to determine

and record those uses and to apportion the market value of

the property between them. In the present case, this was not

done. The municipal valuer therefore incorrectly dismissed

the second respondent’s objection to the valuation roll and

the valuation appeal board correctly ordered that it should

be amended.”

Properties categorised as ‘properties used for multiple purposes’

must be rated as contemplated in section 9(2)(b) of the MPRA

and it is incorrect to determine a ratio for this category. Rates

must be levied according to the different purposes for which the

property is used.

The ratio must be 0.00.

2.7 Clause 5.3(r)

The high ratio for ‘Illegal use’ is supported and it is regarded as a

bold step to discourage the illegal use of properties. SAPOA will

assist the municipality to identify these properties.

3. Clause 8

3.1 Clause 8.11

It is technically not correct to list ‘Religious organisations’ under

clause 8.

Clause 8 deals with exemptions, rebates and reductions while

‘Religious organisations’ are excluded from rates.

Properties excluded from rates should be grouped under the

heading ‘Property excluded from rates’

3.2 Clause 8.15

Rebates for high value properties is welcomed.

The word ‘property’s’ could be deleted. The clause should read:

‘Properties used for business or industrial purposes whose

improved market value is R50,000,000 and above will receive a

rebate as determined by Council from time to time.’

MUnICIPAL LAW

17


MUnICIPAL LAW

3.3 Clause 8.17

The clause should be reworded if it is the intention that properties

that are still part of the remainder of the township will receive

a rebate.

Suggested wording:

‘The remainder of a township will receive a rebate as determined

by Council from time to time.’

3.4 Clause 5.4

Properties used for multiple purposes

It is incorrect to determine a 1:2 ratio for this category as rates must

be levied on the values apportioned to the different purposes for

which the property is used (see section 9(2) of the MPRA). This

was confirmed by the Valuation Appeal Board (VAB) for the City

of Johannesburg. The decision was taken on review in the South

Gauteng High Court and the Court confirmed the decision of

the board.

The matter was recently heard in the Supreme Court of Appeal. The

appeal by the City of Johannesburg was dismissed with cost. The

original decision of the VAB was therefore confirmed.

Clause 5 of the current rates policy should be retained but the

words “is proposed” in the first sentence must be replaced with “will

Wbe applied”;

Places of worship

This category of properties is excluded in terms of section 17(1)(i) of

the MPRA and the ratio must be 1:0.

Categories of owners of property for purposes of exclusions,

exemptions, reductions and differential rating (clause 7)

The heading and clause 7.1 should also refer to categories of

properties as not all of the categories in 7.1(a) to (n) refer to owners

or is a property category determined in clause 5.2. The council can

only determine other categories as part of the annual review process

of the rates policy

Exemptions, reductions and rebates (clause 8):

Relief measures must be enabled in the rates policy. It is not

necessary to quantify the relief, it can be done in the tariff policy. If it

is the intention to provide relief to the owners and properties listed

in clause 9.3 of the current policy, it must be included in this policy.

The previous policy made provision for:

a. Smallholdings –rebates based on the size;

b. Owners of business or industrial properties with a market

value in excess of R50,000,000;

c. Resorts on agricultural land;

d. Development land;

e. Private townships;

f. Sectional title schemes.

ii. Pensioners (Clause 8.4)

a. The municipality will have to embark on an extensive public

awareness campaign to inform pensioners of their rights and

make them aware of the fact that they need to re-apply when

the new roll is implemented on 1 July 2014.

b. Do you have the capacity to deal with these applications?

c. Do you have a pro-forma application form?

iii. Municipal (clause 8.7)

The ratio for municipal properties is 0.00 (refer to clause 5.4),

does that not mean that all municipal properties are exempted?

iv. Public benefit organisations/Non-governmental

organisations and cultural organisations (clause 8.9)

The possible exemption of these organisations is commendable.

v. Religious organisations (clause 8.11)

The ratio for these properties must be 0.00 (refer to clause 5.4)

vi. Owners of properties used for bona fide farming

purposes (clause 8.14)

By referring to a differential rate the impression is created that

there will be a tariff for the owners of these properties. If that is

the case a separate property category must be created, but that

is not possible as this is a category of owners of property.

It is suggested that reference should be made to a rebate instead

of differential rate.

vii. Multipurpose properties (clause 10):

It is our opinion that this clause is in conflict with section 9 of

the MPRA. If the category “multiple purposes” is created, section

9(2) of the MPRA is applicable. Refer to comments on clause 5.4.

In addition in the recent judgment in the case “ The City of

Johannesburg Metropolitan Municipality v The Chairman of the

18


Valuation Appeal Board for the City of Johannesburg (282/2013)

[2014] ZASCA 5 (12 March 2014)”, the panel ruled clearly that if

you have multipurpose properties, section 9(2) is applicable.

viii. Phasing in of certain areas (clause 12)

Phasing is no longer applicable and this clause could be deleted.

ix. The effective date of the rates policy (clause 13.3)

To avoid confusion the financial year should be stated which in

this instance is 1 July 2014

MUnICIPAL LAW

19


ei incumbit probatio qui the onus of proving the fact rests upon a man

ReseARCH

20


ReseARCH

A. PRoPeRtY RAtes In soUtH AFRICA

SAPOA jointly appointed Rates Watch (Pty) Ltd and Business

Enterprises to conduct research, produce empirical and credible

evidence that outlines the following:

a) The legislative intention of the Constitution of South Africa,

1996 (Act No. 108 of 1996) in as far as the power by municipalities

to impose property tax is concerned against the government’s

objective of playing a developmental and transformative role;

b) he purport and consequences of the Rates Act in an attempt to

discharge that power that is entrenched in the Constitution of South

Africa in as far as the correct determination and implementation of

property rates is concerned within the statutory limitation imposed

by section 229 (2) (a) of the Constitution.

c) The duty by municipalities to attend to the valuation of rateable

properties in their jurisdictions and to compile valuation rolls based

on the market value of the properties determined in accordance

with market conditions and the applicable law.

d) The determined, imposed and collected property rates for the

sector for the periods July 2008 – June 2009, July 2009 – June 2010,

July 2010 – June 2011, July 2011 – June 2012 and July 2012 – June

2013, the associated General and Supplementary Valuation Rolls

and the relevant approved valuation property rates ratios;

e) The amounts that were written off by the municipalities in

respect of residential and non-residential properties categories

for the research study periods (2008 – 2013) as reported in their

respective audited Annual Financial Reports. (The Revenue effort

of municipalities by showing whether or not there is consistent,

accurate and complete billing and full collection of taxes and charges

due from the residential and non-residential property sectors for the

periods July 2008 – June 2009, July 2009 – June 2010, July 2010 –

June 2011, July 2011 – June 2012 and July 2012 – June 2013).

f) An analysis, with case studies, of whether or not property rates

are correctly determined and imposed on the non-residential

property sector (commercial, retail and industrial) for the afore-said

5 (five) financial years;

g) An Assessment of the impact of property rates by taking into

accounts the funding models and requirements of the indicated

municipalities and the market values of properties and the impact

thereof on the operating costs of commercial property sector and

the future sustainability of the commercial property sector.

h) A Research Model that illustrates, amongst others, the impact

of property tax on the commercial property sector in as far as e.g.

affordability and sustainability of businesses are concerned within

their business models.

i) An indication of best international property tax models and a

baseline property tax increase rate must be indicated.

j) Recommendations must be given that can be utilized to influence

policy and/or administrative changes in as far as the determination

and imposition of property rates is concerned.

The results of the research were discussed at the 2014 SAPOA

Convention.

The South African Property Owners Association (SAPOA) undertook

a detailed investigation of the private property industry in the

Western Cape Province, with special reference made to the City of

Cape Town Metro. The report aims to contextualise the size and

quantity of the private property sector in the Western Cape to

provide a foundation for cost calculations related to application

and other administrative processing timeframes. Furthermore, the

report seeks to analyse development application case studies in

order to link processing timeframes to economic performance.

The study is envisioned to analyse the commercial private property

sector within the Western Cape Province. The City of Cape Town MM

is the capital of the Western Cape Province. An active commercial

property market and prominent economy are centred within Cape

Town therefore it is the centre of major economic growth and

expansion within the province.

The general research approach describes the basic methodology

implemented to measure the economic value of the private

commercial property sector of the Western Cape. In essence

all economic activity has to take place in a specific space, thus

all economic activities are related to property either directly or

indirectly. In order to measure the economic value of the private

commercial property industry the relevant activities within the

specific sectors needs to be identified and evaluated according to

specific analysis factors which complies with standard case practise

B. tHe RoLe AnD IMPACt oF tHe CoMMeRCIAL PRoPeRtY seCtoR In tHe WesteRn CAPe PRoVInCe

21


ReseARCH

C. FInAnCIAL InteRMeDIARY CentRe (FIC) GUIDeLInes

for economic impact calculations. For the purpose of this report

only property-centred economic activities with a direct impact are

evaluated, in line with generic economic impact practises.

The directly impacting factors analysed are Gross Domestic Product

(GDP), direct employment and tax revenue generated by the private

commercial property sector in the Western Cape.

Tax refers to the level of tax revenue generated by the South African

Revenue Service (SARS). The tax calculations present tax income of

SARS and not the local municipal tax revenue.

The full Research will be available for release at the 2014 SAPOA

Convention.

According to a statement released by the South African Reserve Bank (SARB), it conducted anti-money laundering and combating the

financing of terrorism inspections at ABSA Limited (ABSA), FirstRand Bank Limited (FirstRand), Nedbank Limited (Nedbank) and the Standard

Bank of South Africa Limited (Standard Bank). It is the legal responsibility of SARB to ensure that banks comply with the Financial Intelligence

Act No. 38 of 2001. This is to ensure the controls for anti-money laundering and combating of financing of terrorism are in place. The

following penalties were imposed against each bank, i.e.:

Item Name of the Bank Imposed Sanction

1. ABSA Penalty of R10 million, a reprimand and a directive to take remedial action to address deficiencies in the

following areas:

u Identifying and verifying customers details (better known as know-your-customer or KYC

requirements)

u Maintaining customer and transactional records as prescribed

u The management and processing of potential suspicious and unusual transactions.

2. FirstRand Penalty of R30 million and a directive to take remedial action to address deficiencies in the

following areas:

u Identifying and verifying customers’ details;

u Maintaining customer and transactional records as prescribed

u The governance processes for making amendments to automated suspicious and unusual

transaction monitoring and reporting systems.

3. Nedbank A Penalty of R25 million and a directive to take remedial action to address deficiencies in the

following areas:

u Identifying and verifying customers’ details

u Controls and systems relating to the detection of property associated with terrorists and

related activities.

4. Standard Bank A Penalty of R60 million and a directive top take remedial action to address deficiencies in the

following areas:

u Identifying and verifying customers’ details

u Making customer and transactional records as prescribed

u Failure to report all cash transactions above R24 999.99 to the Financial Intelligence Centre

u Controls and systems for detecting property associated with terrorists and related activities

u The systems, processes and other resources necessary for detecting and reporting suspicious

and unusual transactions.

22


ReseARCH

SAPOA instructed a service provider to compile a manual on the FIC

Guidelines which should be customised to the commercial property

sector. The manual will be available before September 2014, and it

will be available for free to members. Non-members will be charged

a fee.

D. BUsIness ResCUe - CoMPAnIes ACt no. 68 oF 2008

e. stAnDARD AGReeMents

F. LeAse AGReeMent WoRKsHoPs

G. DeteRMInAtIon oF tHResHoLDs

The Companies Act of 2008b defines business rescue as

proceedings to facilitate the rehabilitation of a company that is

financially distressed by providing for the temporary supervision

of the company and of the management of its affairs, business

and property. It includes also a temporary moratorium on the

rights of claimants against the company or in respect of property

in its possession. Commonly understood, business rescue is

the development and implementation, if approved, of a plan

to rescue the company by restructuring its affairs, business,

property, debt and other liabilities, and equity in a manner that

maximises the likelihood of the company continuing in existence

on a solvent basis.

One of the most important factors that are being considered in

respect of business rescue proceedings is that the company must

be financially distressed which means that it should appear to be

reasonably unlikely that eh company will be able to pay all of its

debts as they become due and payable within the immediately

ensuing six months.

SAPOA will hold a breakfast session on Business Rescue again

during 2014. The Education department is currently confirming the

logistics. It was noted that the Business Rescue provisions are very

court driven and that the failure by business practitioners to follow

the correct procedures leaves the system open to abuse.

Standard generic Agreements on Leases, Offers to Purchase, Disclaimer Notices aligned to the Consumer Protection Act of 2008 are

available for free on the SAPOA Website to members. Non-members are charged R342 per agreement.

The Education department of SAPOA is facilitating Lease

Agreements workshop throughout the country as it was well

received by members.

The SAPOA Legal Committee acknowledged the need for relevant

standard Notices, Agreements and “Clauses” in Agreements to

be generated for the benefit of SAPOA members. In this instance,

all categories of SAPOA membership should be considered. The

following manuals for the industry were recommended:

u Offer to lease

u Service level Agreements

u Lease for CPA tenants

u Fixed Term contracts notification (2 years)

u Frequently asked questions handbook

A meeting was held at the Department of Trade and Industry

(DTI) senior official to address the issue of filing notifications

in mergers and acquisition transactions. It was noted that

DTI has advised that they cannot make an exception for the

property industry.

SAPOA requested DTI to provide a copy of the submission that

was submitted to parliament when the Thresholds were increased

the previous time. DTI subsequently advised SAPOA that no was

submitted to parliament, and that the decision was taken by

the Commissioner.

In cognisance of the fact that most filing and notifications are not

rejected by the Competition Commissioner, and due to the high filing

fees that are being paid by property companies, SAPOA requested

information of the contribution amount that was paid in the last five

financial years by the property sector in respect of filing fees. The

DTI undertook to provide SAPOA with the requested report during

the month of May 2014. It was noted that the concern relating to

notification and filing of merger and acquisition transactions, is the

time delay.

It was agreed that for SAPOA to take the matter further to

23


ReseARCH

H. PRoteCtIon oF PeRsonAL InFoRMAtIon – PoPI

the Competition Commission, it is important get portfolio of

evidence from members i.e.

u Number of submissions made to the Competition Commission

u Time delays

POPI was signed by the President of South Africa as law in 2013 but the date of implementation has not been announced.

SAPOA has appointed Norton Rose to do a manual on POPI for SAPOA members. The first draft was discussed on 18nJune 2014 and it

will finalised and be ready for distribution in August 2014.

24


25


Faciendum Something which is to be done

ADVoCACY AnD LoBBYInG

26



A. ILLeGAL LAnD Use

Polokwane Municipality

SAPOA was invited by the City of Polokwane to be a part of their

Illegal Land use task team. There are a number of challenges

that the municipality encounters when managing street trading

activities, hence the establishment of street trading task team.

Through monitoring processes by the municipality, there are

instances where traders are found selling illegal products. The

task teams then assists in advising and assisting on enforcement,

the approach and amongst others, to be taken regarding

contravention of the Municipal By-laws.

The duties of the task team include developing recommendations on

the processes and mechanisms for hawker management, identifying

and making recommendations on areas for trading purposes within

the city and to give advice on regulating hawker management.

Local Economic Development Forum

a) SAPOA is further a member of the Local Economic Development

(LED) Forum. LED is the process by which public, business and non-

governmental sector partners’ work collectively to create better

conditions for economic growth and employment generation. The aim

is to improve the quality of life for all. The LED Forum is also a platform

where the community (businesses, private organizations, government,

NGO’s, Traditional authorities) within the Municipality gather, with

an aim to share information and experiences, pool resources and

solve problems which come up in the course of implementing

LED projects.

b) Amongst other things, the forum seeks to encourage dialogue

on economic policies of Government between the Private sector,

Non-governmental organizations and academia.

c) The formulation of the Terms of References for the establishment

of LED Forum and championing of Local Economic Development is

supported by the following legislation:

a. The White Paper on Local Government (1998) clearly

explains that LED is about creating a platform and environment

where investment and entrepreneurship thrives. The White

Paper further states that: “Local Government is not directly

responsible for creating jobs. Rather, it is responsible for

taking active steps to ensure that the overall economic and

social conditions of the locality are conducive to the creation

of employment opportunities”.

b. The South African Constitution 1996 - Section 152 (1) spells

out the objects of local government as follows:

u to provide democratic and accountable government for

local communities,

u to promote social and economic development, and

u to encourage the involvement of communities and

community organizations in the matters of local government.

c. Section 153 states that: “A municipality must structure and

manage its administration; 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”. Local Economic Development (LED) and the

LED Forum thereof offers the local government, the private

sector, the not for profit sectors and the local community the

opportunity to work together to improve the local economy.

It aims to enhance competitiveness and thus encourage

sustainable growth that is inclusive.

d. The New Growth Path states that government should start by

identifying where employment creation is possible, both within

economic sectors as conventionally defined and in cross-cutting

activities. It then analyses the policies and institutional developments

required to take advantage of these opportunities. In essence, the

aim is to utilize our limited capital and capacity on activities that

maximize the creation of decent work opportunities. To that end,

we must use both macro and micro economic policies to create

a favourable overall environment and to support more labour-

absorbing activities. The main indicators of success will be jobs

(the number and quality of jobs created), growth (the rate, labour

intensity and composition of economic growth), equity (lower

income inequality and poverty) and environmental outcomes.

e. Accelerated Shared Growth Initiative of SA [2005] is a national

shared growth initiative which focuses on relative volatility of

the currency, the cost, efficiency and capacity of the national

logistics system; shortages of suitably skilled labor, and the

spatial distortions of apartheid affecting low-skilled labor

costs; barriers to entry, limits to competition and limited new

investment opportunities; the regulatory environment and the

burden on small and medium enterprises (SMEs) ;Deficiencies

in state organization, capacity and leadership.

f. The National Spatial Development Perspective (NSDP)

the framework which provide guidance for discussion on

the future development of the national spatial economy

by reflecting on localities of severe deprivation and need,

of resource potential, of infrastructure endowment and of

current and potential economic activity by describing the

27



B. MPUMALAnGA seRVICes APPeAL BoARD

key social, economic and natural resource trends and issues

shaping the national geography.

g. The Limpopo Employment, Growth and Development Plan

(LEGDP)[2009 – 2011] requires the province to ensure more

inclusive economic growth, decent work and sustainable

livelihoods in order to reinforce decent employment and

income security and sustainable investment built with a

purpose of creating and improving industrial competitiveness.

h. The White Paper on Local Government [March 1998]

introduces the concept of ‘developmental local government’

which is defined as “Local government committed to working

with citizens and groups within the community to find

sustainable ways to meet their social, economic and material

needs, and improve the quality of their lives.”

i. The Provincial Spatial Development Framework [2007]

guides the spatial development of Limpopo. It includes the

preparation of plans that will guide the physical development

of the province.

j. The Municipal Finance Management Act [2003] the main

of the document is to regulate the budget process of the

municipality. It ensures that the municipal budget is open and

participatory and aligned to the IDP.

k. Municipal Systems Act 32 Of 2003 provides for the core

principles, mechanisms and processes that are necessary

to enable municipalities to move progressively towards

the social and economic upliftment of local communities,

and ensure universal access to essential services that are

affordable to all; to define the legal nature of a municipality

as including the local community within the municipal area,

working in partnership with the municipality’s political and

administrative structures; to provide for the manner in which

municipal powers and functions are exercised and performed.

Illegal Land Use

Polokwane Regional Council raised concerns in 2013 about

illegal land use within the municipality. The concern essentially

referred to the failure by property owners to comply with land

use management policies and laws of the City. This relates to

the following:

a. The manner in which land is accessed and acquired;

b. The process by which individuals, households and communities

continue to have and hold rights to land;

c. The way in which land use is regulated;

d. The systems by which land is developed; and

e. How land is traded.

SAPOA has been provided with a list of compliance notices that

have been sent out to illegal occupants of land by the City. This

list was reconciled with the list of illegal land occupants that was

provided by the SAPOA Limpopo Regional Council. Only two

properties were attended to by the City. We have drafted a letter

to the Head of Legal from the city advising them of the status and

requesting that the list of properties given to them by SAPOA be

attended to on an urgent basis.

The Office of the Public Protector reported SAPOA’s complaint

to the Department of Agriculture, Rural Development and Land

Administration in respect of the failure to appoint the Services

Appeal Board.. A response from the Department was received from

the Public Protector in which the following is stated:

u The Services Appeals Board is appointed in terms of the

Town Planning and Townships Ordinance, 1986. Due to that fact,

appeals of this nature has never been lodged in Mpumalanga,

such a Board was never established. In other provinces the matter

is also dealt with on an ad hoc basis.

u The function has now been moved to COGTA and ll

indications are that the matter will be advertised early May 2014.

Nominations will then be evaluated and names will be presented

to the Executive Council for appointment.

SAPOA Head Office sent an e-mail to the office of the Public

Protector noting its concerns about the lack of notification of any

advertisement relating to the Service Appeal Board. It is our belief

that sufficient time until 21 May 2014 has been granted to the

Department to determine if any advertisement was published.

The Public Protector advised SAPOA on 21 May 2014 that Mr.

Kleynhans has indicated that his section was transferred to

COGTA so he is still handling the matter from the Department

of Agriculture. He reports that the advertisement is ready and

should be published within the next two weeks. The reason for

the delay is that they have to sort out budgetary issues which

ensued from the transfer of the unit to COGTA.

28


C. nAtIonAL DePARtMent oF AGRICULtURe AnD ACt 70 oF 1970 (tURn ARoUnD tIMes – APPRoVALs oF sUB-DIVIsIon AnD Consent LetteRs)


Introduction

a) Act 70 of 1970 relates to agricultural land which is any land

except land situated in the area of jurisdiction of example a

municipal council, City council; Town council; Village council;

Village management board; Village management council; Local

board; Health board or health committee and Land forming

part of, in the province of Cape of Good Hope etc. but excluding

such land declared by the Minister after consultation with the

executive committee concerned and by notice in the Gazette to be

agricultural land for the purposes of the Act.

b) This also excludes land which forms part of any area subdivided

in terms of the Agricultural Holdings (Transvaal) Registration

Act, 1919 (Act No. 22 of 1919) or which is a township as defined

in section 102 (1) of the Deeds Registries Act, 1937 (Act No. 47 of

1937) but excluding a private township as defined in section 1 of

the Town Planning Ordinance of 1949 of Natal, not situated in an

areas of jurisdiction or a development area.

c) It is noted that a Surveyor-General shall only approve a general

plan or diagram relating to a subdivision of agricultural land, and

a Registrar of Deeds shall only register the vesting of an undivided

share in agricultural land or a part of any such share or a lease

or if applicable, a right referred to in section 3 (b0 in respect of a

portion of agricultural land, if the written consent of the Minister

in terms of the Act has been submitted to him.

It should be noted that the whole of this Act has been repealed by

section 1 of the Subdivision of Agricultural Land Act Repeal Act 64

of 1998, a provision which will come into operation on a date to be

proclaimed by the President by proclamation in the Gazette.

D. soUtH AFRICAn CItIes netWoRK

SAPOA and SACN renewed for three years (2014 – 2016) the Memorandum of Understanding between the two entities for the purpose

of collaboration in ensuring successful cities and municipalities by focusing on transport, transport corridors, infrastructure, climate

change, human settlements and joint researches.

Sacn Spatial Planning Conference

a) SAPOA participated in a Spatial Planning Conference that

was held in March 2014 which was organized by the City of

Johannesburg and SACN. SAPOA was represented by Andrew

Barker, an experienced town planner to highlight the challenges

relating to the Integrated Development Plan for the City

of Johannesburg.

South African State Of The Cities Report Iv Reference Group

b) SAPOA, represented by its Legal Manager and Legal Officer,

are part of the South African State of the Cities Report IV

Reference Group.

c) The State of the Cities Report (SoCR) is a flagship project of the

SACN which provides an analysis of performance by the cities

in South Africa to enable informed decision-making in urban

management and development.

d) SACN is preparing the next edition of the SoCR for publication

in 2016.

e) The Reference Group has the responsibility of guiding and

reviewing the production of the SoCR IV towards ensuring

its success.

29


secus The legal position is different,

it is otherwise

LeGAL oPInIons

30


LeGAL oPInIons

A. nAtIonAL enVIRonMentAL MAnAGeMent: InteGRAteD CoAstAL MAnAGeMent ACt

B. PURPose oF tHe AMenDMent BILL

C. tHe ConstItUtIon

D. tHe ACt

The purpose of the legal opinion is to analyse the objects of the amendments to the National Environmental Management: Integrated

Coastal Management Act, 2008 (hereinafter referred to as the “Act”) and to determine the impact thereof on the commercial

property sector.

In order to understand the proposed amendments, there is a need to give an overview of the Constitution of South Africa No. 108 of

1996 (hereinafter referred to as the “Constitution”) and the objectives of the National Environmental Management: Integrated Coastal

Management Act No. 24 of 2008 (hereinafter referred to as the “Act”).

(a) Section 24 of the Constitution provides that “everyone has the

right to an environment that is not harmful to their health or well-

being; and to have the environment protected, for the benefit of

present and future generations, through reasonable legislative

and other measures that –

i) Prevent pollution and ecological degradation;

ii) Promote conversation; and

iii) Secure ecologically sustainable development and use of

natural resources while promoting justifiable economic and

social development.”

(b) Section 44 (2) thereof states that Parliament may intervene, by

passing legislation in accordance with section 76 (1), with regard

to a mater falling within a functional areas listed in Schedule 5,

when it is necessary to maintain national security; to maintain

economic unity; to maintain essential national standards; to

establish minimum standards for the rendering of services

Or

To prevent unreasonable action taken by a province this is

prejudicial to the interest of another province or the country as

a whole.

(a) The “Act” was passed as law for the purpose of establishing a

system of integrated coastal and estuarine management in the

Republic of South Africa, including norms, standards and po0licies, in

order to promote the conservation of the coastal environment, and

maintain the natural attributes of coastal landscapes and seascapes.

(b) The “Act” further seeks to ensure that development and the

use of natural resources within the coastal zone is socially and

economically justifiable and ecologically sustainable.

(c) It further seeks to define rights and duties in relation to coastal

areas and to prohibit incineration at sea.

(d) Furthermore, the “Act” seeks to control dumping at sea,

pollution in the coastal zone, inappropriate development of

the coastal environment and other adverse effects on the

coastal environment;

(e) Finally, the “Act” seeks to give effect to South Africa’s

international obligations in relation to coastal matters and to

provide for matters connected therewith.

Objects of the Act

The objects of the “Act” bring clarity to the intention of the

legislators in passing it. Some of the objects thereof are:

u to determine the coastal zone of the Republic; top preserve,

protect, extend and enhance the status of coastal public property

as being held in trust by the State on behalf of all South Africans,

including future generations; and

u to secure equitable access to the opportunities and benefits of

coastal public property.

31


LeGAL oPInIons

e. soUtH AFRICA’s InteRnAtIonAL oBLIGAtIons In ReLAtIon to CoAstAL MAtteRs

F. tHe BILL

a) Reference is made to “A Review of the Department of

Environmental Affairs and Tourism: 1994 – 2009” article (hereinafter

referred to as the “Article”) that notes that the South African

coastline is more than 3 200 kilometre in extent, linking the east

and west coasts of Africa. It further state that from the coral reefs of

northern Kwa-Zulu Natal to the kelp forests of the Northern Cape,

South Africa’s shores are particularly rich in biodiversity (some 10

000 species of marine plants and animals recorded as being part of

the South African waters.)

b) The ‘Article” refers to the United Nations Convention on

the Law of the Sea, which was ratified by South Africa in 1982.

The Convention sets limits related to the use of the sea in terms

of navigational rights, territorial sea limits, economic jurisdiction,

legal status of resources on the seabed beyond limits of national

jurisdiction, the conversation and management of living marine

resources, and the protection of the marine environment.

c) What the “Article” refers to which is noteworthy is South Africa’s

promotion of the principles of sustainable development in terms

of the marine environment which are based on the principles

of Agenda 21, (our emphasis), whereby marine environment,

including all oceans and all seas and adjacent coastal areas, forms

an integrated whole that is an essential component of the global

life support system and a positive asset that presents opportunities

for sustainable development.

d) It is noteworthy to mention that Agenda 21 includes the

integrated management of coastal areas, the sustainable use

and conservation of living resources in the exclusive economic

zone (EEZ), the protection of marine environment by managing

pollution and promoting the sustainable use and conservation of

living resources in the high seas.

e) It is reported that in 1989, the Environmental Conservation

Act was promulgated to halt the indiscriminate development

that was taking place along the coast due to the fact that existing

legislation then largely ignored natural coastal processes. While

it attempted to restrict negative impact, it is reported that it

had a narrow perspective and allegedly failed to address access.

Agenda 21 requested a broader vision for managing the coast in

an integrated manner.

a) The Bill seeks to amend the “Act” by:

a. Amending certain definitions;

b. Clarifying coastal public property and the ownership of

structures erected on and in costal public property;

c. To remove the power to exclude areas from coastal public

property;

d. To clarify and expand the provisions of reclamation;

e. To clarify definitions and terminology;

f. To simplify the administration of coastal access fee

approvals;

g. To simplify and amend powers relating to coastal

authorisation;

h. To replace coastal leases and concessions with coastal use

permits;

i. To extend the powers of MECs to dumping permits;

j. To revise offences and increase penalties;

k. To improve coastal authorisation processes; and

l. To provide exemptions. Etc.

b) Below are the main critical amendments that are being noted

for this legal opinion and a comparison is being made with the

provisions in the “Act”.

c) Notwithstanding the provisions of subsection (1), coastal

“property does not include any immovable property structure, or

part of immovable property structure, or installation or infrastructure

located in a port of harbour whether located on land or the seabed,

lawfully constructed by an organ of state. It further does not include

any portion of the seashore below the high-water mark, which was

lawfully alienated before the Sea-Shore Act, 1935, took effect, or

which was lawfully alienated in terms of that Act, and which has

not subsequently been re-incorporate into the seashore. It does not

include any part of an island that was lawfully alienated before this

Act commenced or any portion of a coastal cliff that was lawfully

alienated before this Act took effect and is not owned by the State.

d) The Bill defines “reclamation” as the process of artificially

creating new land within coastal waters, and includes the creation

of an island or peninsula, but excludes beach replenishment by

sand pumping for maintenance purposes. It is noteworthy to

mention that “reclamation” was not defined in the “Act” and that it

is hereby being introduced by the Bill.

i) Proposed section 7A: Purpose of coastal public property:

A coastal public property is established for the following

32


LeGAL oPInIons

purposes: …(e) to facilitate the achievement of any of the

objects of this Act.

ii) It is important then to have regard to what is regarded as

composition of coastal property. The new section 7(1) of the

Bill state that coastal property public property consists of-

a. Coastal waters;

b. Land submerged by coastal waters, including-

i. Land flooded by coastal waters which subsequently

becomes part of the bed of coastal waters; and

ii. The substrata beneath such land;

c. Any natural island within coastal waters;

d. The seashore, including-

i. The seashore of a natural or reclaimed island; and

ii. The seashore of reclaimed land;

e. any admiralty reserve owned by the State;

f. any land owned or controlled by the State declared to be

coastal property;

g. reclaimed land;

h. any natural resources or in any coastal public property of

a category mentioned in paragraphs a to g.

a) As mentioned above, the Bill introduces the concept of

reclamation of land and in terms of the proposed section 7B.

According to the Bill, reclamation of land for state infrastructure

can only be done after authorisation has been granted by the

Minister of Environmental Affairs and Tourism after an application

for such has been received.

b) The Bill requires that an application for reclamation must

be published for public comment for a period of 60 (sixty) days

through a Government Gazette.

c) It is provided that any land reclaimed for the development of

state infrastructure vests in the organ of state applying for such

reclamation. The land should be used for the purpose for which

the reclaim application is being made unless authorised otherwise

by the Minister.

d) The Bill allows for land to be reclaimed for purposes other than

the development of state infrastructure except where exceptional

circumstances, which are not contrary to the purpose of coastal

public property, can be shown.

e) The Bill provides the Minister with the discretion to exempt

in writing any person or group of persons or organ of state from

a provision of this Act, provided that such exemption does not

conflict with the objects of the Act. An exemption granted may

be subject to conditions; be subject to payment of a fee; and be

amended or cancelled at any time by the Minister. The Minister is

compelled to consult with any organ of state that may be affected

by such exemption prior to making a decision whether or not to

grant such.

a) The reclamation provisions impact on the current and future

developments that other property owners have along the

coastal areas;

b) The major concern is that a major part of certain commercial

developments have been established on historically reclaimed land

which means further developments will be made on further reclamation.

G. ReCLAMAtIon oF LAnD FoR stAte InFRAstRUtURe

H. IMPACt on tHe CoMMeRCIAL PRoPeRtY seCtoR

33


Ratio decidendi/rationes decidendi The reason/ the rationale for the decision

JUDGeMents

34


JUDGMents

CoMPetItIon tRIBUnAL soUtH AFRICA

CoMPetItIon tRIBUnAL DeCIsIons

The Competition Act, 1998 (Act No. 89 of 1998), hereinafter referred to as the Competition Act, regulates merger and acquisition transactions. In terms of the provisions

of section 12A, whenever required to consider a merger, the Competition Commission of Competition Tribunal, must initially determine whether or not the merger is likely

to substantially prevent or lessen competition, by assessing the strength of competition in the relevant market, and the probability that the firms in the market after the

merger will behave competitively or co-operatively, taking into account any factor that is relevant to competition in that market.

In the matter between:

Redefine Properties Limited Primary Acquiring Firm

and

The Trustees for the time being of the 115 West Primary Target Firm

Street Trust in Respect of an Undivided Half Share

of the Property Letting Enterprise known as

Alexander Forbes Building

Case No: 018630

Approval

1) On 14 May 2014, The Competition Tribunal (“Tribunal”)

unconditionally approved the acquisition by Redefine Properties

Limited of 115 West Street in respect of the property letting

enterprise known as Alexander Forbes Building.

2) The reasons for approving the proposed transaction follow.

Parties to the transaction

3) The primary acquiring firm is Redefine Properties Limited

(“Redefine”), a company listed on the Johannesburg Securities

Exchange and not controlled by any firm. Its largest shareholders

include State Street (custodian), Stanlib, Government Employees

Pension Fund, Investec and Investec Solutions.

4) Redefine exercises control over Redefine International PLC,

Madison Property Fund Managers Ltd, Fountainhead Property Trust

Management Limited, Fountainhead Property Administration (Pty) Ltd,

Fountainhead Property Trust (South Africa), Redefine Retail (Pty) Ltd,

Freedom Square (Pty) Ltd (Namibia) and Redefine Pacific (Mauritius).

5) The primary target firm is the Alexander Forbes Building which is

owned by the Trustees for the Time being of 115 West Street Trust (“115

West Street Trust”). The Trustees of the 115 West Street Trust are also

executive directors of Zenprop Property Holdings (Pty) Ltd (“Zenprop”),

they are: James Otto Tannenberg, Adam John Blow and Allan James

Flynn Mundell. Zenprop manages a portfolio of property on behalf of

companies and trusts. The Zenprop Group property portfolio comprises

of more than 84 building that range from retail, commercial, industrial

and hotel property sectors throughout South Africa.

Proposed Transaction and Rationale

6) Redefine intends to acquire 50% of the undivided shares in

Alexander Forbes Building located at 115 West Street Sandton, the

remaining shares will be held by the 115 West Street Trust.

7) Redefine has a strategy of acquiring high quality income

producing assets located in primary investment markets. This

acquisition is in line with that strategy. The proposed transaction will

enable the 115 West Street Trust and Zenprop to realise the value of

Alexander Forbes building in favour of its beneficiaries. Similarly to

Redefine, this is in line with the entities investment objectives.

Relevant Market and Impact on Competition

8) Redefine is a property loan stock company with a diverse

property portfolio ranging of properties such as office, retail and

industrial. It also owns rentable A-grade office properties located

in Rosebank, Hyde Park/Dunkeld and Sandton Cbd as well as

surrounding areas.

9) The target firm owns Alexander Forbes Building which is

classified as a rentable A-Grade office space measuring 36 250

square metres.

35


JUDGMents

Competition Tribunal – Case Number 018523


Improchem (Pty) Ltd Primary Acquiring Firm

and

Clariant Southern Africa (Pty) Ltd Primary Target Firm

In respect of its Water Treatment Business and 50% of Blendtech (Pty) ltd

10) The relevant market is rentable A-Grade office space within

the Sandton and Environs node.

11) In this market the merging parties market share will increase post

the transaction from 9.2% to 11.91%. The market share accretion is

2.,7%, the Commission viewed this as minimal as recommended that

the proposed transaction is unlikely to alter A-grade office spaces in

the node owned by reputable competitors such as Acupap, Sycom,

Zenprop Property Holdings Ltd and Vunani.

12) There is a product overlap arising in relation to provision of

rentable A-Grade office space.

13) The Commission also identified that there is a total of 88 318

square metres (9.5%) vacant A-Grade office space available for

leasing in the node. The Commission is of the view that this will

constrain the merged entity in the event of price increase. They are

also new developments in the area.

Conclusion

14) In the light of the above we conclude that the proposed

transaction is unlikely to substantially prevent or lessen

competition in the market for provision of rentable Grade A

office property. In addition, no public interest issues arise from

the proposed transaction. Accordingly we approve the proposed

transaction unconditionally.

Approval

1) On 21 May 2014 the Competition Tribunal (“Tribunal”)

unconditionally approved the merger between Improchem (Pty) Ltd

(“Improchem”) and Clariant Southern Africa (Pty) Ltd, in respect of its

Water Treatment Business and 50% of Blendtech (Pty) Ltd (“Blendtech”).

2) The reasons for approving the proposed transaction follow.

Parties to transaction

3) The primary acquiring firms is Improchem, a wholly-owned

subsidiary of AECI Limited (“AECI”). AECI is a public company listed on

the JSE Limited and offers products and services to the mining and

manufacturing sectors both locally and internationally. Improchem

is a seller of chemical processing, water and wastewater treatment,

water optimisation, total water management, hygiene and sanitation

as well as additive products and services to the industrial sector and

the municipal sector, in particular to the mining, municipal water

treatment, food and beverages and oil refining sectors.

4) The primary target firm is Clariant, which is wholly-owned

subsidiary of Clariant Produkte (Deutschland) GmbH (Clariant

Produkte), which is a German company. The Water Treatment

Business of Clariant provides water and wastewater treatment

products and associated services to industrial and municipal

sector. The Water Treatment Business also produces chemicals

used in the cosmetics, antiperspirant deodorant, hair care and skin

care industries.

5) Blendtech on the other hand is also fully active in all aspects of

water and water waste treatment including raw and process water

treatment, drinking water production, and industrial applications

in boilers amongst others.

Proposed transaction and rationale

6) Through a Sale of Business Agreement, Improchem intends to

acquire the water treatment business of Clariant, as well as 50% of

Blendtech. Post transaction Improchem will therefore acquire sole

control over the Water Treatment business.

7) AECI submits that the proposed transaction will assist it in its

strategy of investing to facilitate its growth strategies, and will

provide Improchem with an opportunity of accessing additional

client base and the public sector market. Clariant on the other

36


hand submits that the proposed transaction will assist it to dispose

of the water treatment market which is not core to Clairant’s

operations and business.

Competition assessment

8) The proposed transaction results in two horizontal

overlaps, however no vertical overlaps arise as a result of the

proposed transaction.

9) Both the Commission and merging parties agreed on two

relevant product markets to be the markets for industrial water and

waste water treatment and the municipal water and waste water

treatment. The municipal segment specialises in treating portable

water and sewerage whilst the industrial segment specialises in

treating industrial affluent. Both the Commission and the merging

parties agreed on the relevant geographic market to be national

since both services are offered throughout South Africa.

10) During its investigation the Commission tried to ascertain

whether the two relevant product markets did not constitute a

single market i.e. demand and supply side substitutability.

11) Market participants the Commission spoke to submitted that

the two sectors are different. Firstly the industrial segment is more

service intensive, whilst the municipal segment is more focused on

the supply of chemicals. In addition to this the industrial segment

requires constant servicing and on-site supervision whilst the

municipal segment requires no on-going servicing.

12) The Commission also came to a conclusion that there is no

demand side substitutability between the two markets as the

water treatment needs of the municipal segment customer, mainly

requires water treatment for portable water whilst the industrial

segment customer, requires water treatment to extract effluent.

Market Shares

13) There was some discrepancy between the market shares

submitted by the merging parties and the Commission. During the

hearing the Commission submitted that their market shares were

based on submission from market participants as there is no reliable

source in the market that calculates market shares in the identified

product markets. After interaction with market participants, the

Commission came to the conclusion that the estimated market

share of the merging parties will be approximately 10-55% in the

relevant product markets. Whilst the merging parties submitted

their market shares to be less than 25% in both markets.

14) During the hearing we asked the Commission whether they were

not concerned with the high market shares that the merging parties

would have post-merger, and the Commission re-assured us that

because they received their market shares from a market participant,

it is possible that the market participant might have overestimated

the post-merger market shares. In addition to this, the Commission re-

assured us that the markets are highly competitive and have various

other players such as Buckman Laboratories, Nalco, Zeta Chem,

Watercare Mining, and Process Water Chemicals inter alia.

15) The Commission’s interaction also revealed that none of the

market participants raised any concerns to the proposed transaction.

One market participant even went further to submit that the

transaction will about synergies that will benefit the customers.

Public Interest

16) During the Hearing the merging parties confirmed that the

employees of Clariant will be absorbed into Improchem and thus

not job losses will result from the proposed transaction. We are

thus satisfied that the proposed transaction will not have negative

impact on employment or any other public interest issue.

17) Therefore, I conclude that the transaction is unlikely to

substantially prevent or lessen competition in any relevant market.

Conclusion

18) I approve the merger unconditionally.

JUDGMents

37


JUDGMents

Date of hearing: 18 November 2013

Date of judgment: 27 February 2014

(As reported by the Court for the Media)

The Constitutional Court confirmed an order of the Western

Cape High Court, Cape Town, which declared section 32A of the

Estate Agency Affairs Act (EAAA) and section 45B of the Financial

Intelligence Centre Act (FICA) unconstitutional and invalid.

The Estate Agency Affairs Board is the primary regulator under the

EAAA and is also a “supervisory body” responsible for enforcing

FICA compliance. The Board suspected that Auction Alliance had

not complied with both statutes. Relying on the search powers

under the two statutes, inspectors tried to conduct a search of

Auction Alliance’s business premises without a warrant. Auction

Alliance refused them entry, and instead launched the current

constitutional challenge.

The High Court held both provisions unconstitutional because

they unjustifiably limit the right to privacy by allowing “targeted”

searches (i.e., searches based on specific suspicion of wrongdoing)

without a warrant. The High Court declared the provisions invalid

to that extent. The declaration of invalidity has immediate effect

in relation to section 32A of the EAAA, but has been suspended

for 18 months with respect to section 45B of the FICA. The High

Court ordered that, during that interim period, section 45B be read

as modified to allow a magistrate or judge to grant a warrant. The

High Court also rejected a counter-application by the Board, in

which it sought a warrant to inspect documents previously stored

at Auction Alliance’s offices, and which, by agreement, were being

held in trust by KPMG pending the outcome of this litigation.

Before the Constitutional Court, the parties agreed that section 32A

of the EAAA and section 45B of the FICA are unconstitutional and

have to be declared invalid. The main issue was about defining the

contours and managing the consequences of the invalidity. In a

unanimous judgment by Cameron J, the Constitutional Court held

that the provisions unjustifiably infringe the right to privacy. Both

provisions lack meaningful limits as to the locations and scope of

warrantless searches as well as the manner in which they may be

conducted. The state failed to show that less restrictive means are

not adequate to achieve the purposes of the statutes.

Accordingly, the Constitutional Court has confirmed the

declaration of invalidity in respect of both provisions. It stipulated

that, consistent with past practice, the declarations of invalidity

would operate only prospectively. The declarations have been

suspended for 24 months, to allow the Legislature an opportunity

to cure their defects. In the interim, the Court has read a warrant

requirement into each provision and empowered magistrates and

judges to issue a warrant upon application by an inspector.

Lastly, the Constitutional Court, like the High Court, has declined

to authorize a warrant in favour of the Board to search and access

the material being held in trust by KPMG. Instead, the Court has

given the Board an opportunity to apply to the High Court for a

warrant to access that material under the newly read-in provisions.

Case No: CCT 94/13

Estate Agency Affairs Board

and

Auction Alliance (Pty) Ltd

and others

seARCH WARRAnts BY InsPeCtoRs: estAte AGenCIes

38


Case Numbers: CCT 173/13 and CCT 174/13

South African Informal Traders Forum and Others v City of Johannesburg and Others;

South African National Traders Retail Association v City of Johannesburg and Others

B. FAILURe to DesIGnAte An AReA FoR InFoRMAL tRADInG

Date of hearing: 5 December 2013

Date of order: 5 December 2013

Date of reasons for order: 4 April 2014

(As reported by the Court to the Media)

On 5 December 2013 the Constitutional Court heard two urgent

applications together. Both sought leave to appeal a decision

of the South Gauteng High Court, Johannesburg (High Court).

This Court made an order granting leave to appeal, upholding

the appeal and setting the order of the High Court aside. It

also ordered that, pending the determination of a review of

decisions of the City of Johannesburg (City), the upshot of which

was to remove the applicants from their trading locations, the

respondents are interdicted from interfering with the applicants’

trading at the locations they occupied immediately before their

removal between 30 September and 31 October 2013. A costs

order was also made against the respondents.

Today the Court furnished reasons for this order.

The applicants represent informal traders who have been trading in

the City of Johannesburg (City), for several years. Informal trading

rights are regulated and approved in terms of the City’s Informal

Trading By-laws. During October 2013 the applicants, who were

allegedly authorised to trade informally, were removed from their

trading locations and had their goods impounded by City officials.

They were told that they had been removed as part of “the Mayoral

Clean Sweep initiative” aimed at ensuring that only traders legally

entitled to trade in the inner city do so.

The City did not follow the procedures prescribed by the Business

Act in designating an area for informal trading and making

decisions prohibiting or restricting trading in certain areas. In

subsequent interaction with the applicants the City conceded this

flaw and offered an interim arrangement while it corrected the

defects in the process. This interim arrangement was, however,

that the evictions must persist and that verified traders must settle

for relocation to an unspecified area.

The applicants unsuccessfully instituted proceedings in the High

Court seeking urgent interim relief permitting them to return to

their trading locations pending a review of the lawfulness of the

City’s conduct.

The Constitutional Court granted the applicants leave to appeal

on the basis that it was in the interests of justice to do so, holding

that a refusal to grant leave to appeal would cause the traders to

suffer irreparable harm. The undisputed evidence showed that the

applicants and their families’ livelihood depended on their trading

in the inner city. At the time of the hearing, they had been rendered

destitute and unable to provide for their families for over a month.

Seeing that an application for leave to appeal to the High Court

would have been heard in February 2014 at the very earliest, the

traders would not have been able to provide for their families until

that time. The City’s conduct impaired the dignity of the traders

and their children and had a direct and ongoing adverse effect on

their rights to basic nutrition, shelter and basic healthcare services.

The Court reasoned that, if allowing the traders to continue trading

while the verification process was underway were to cause any

prejudice to the residents of the City, such prejudice would have

been temporary. The immediate and irreversible harm that the

traders were facing rendered their application manifestly urgent

and justified the interim relief which this Court granted.

JUDGMents

39


Case CCT 56/13 [2013] ZACC 38


Patrick Lorenz Martin Gaertner First Applicant

Rory Charles Klemp Second Applicant

Orion Cold Storage (Pty) Ltd Third Applicant

and

Minister of Finance First Respondent

Commissioner: South African Revenue Services Second Respondent

Controller of Customs: Cape Town Third Respondent

tAX LAW

JUDGMents

Heard on: 12 September 2013

Decided on: 14 November 2013

(Extracts of the Judgment)

1) OCS imports and distributes bulk frozen foodstuffs and holds

licenses for storage warehouses (also known as customs bonded

warehouses or bond stores) in Muizenberg. SARS officials perform

routine inspections of OCS’s storage warehouses, at most annually,

to monitor compliance with the Customs and Excise Act. Past

inspections have always been limited to OCS’s bond stores and

have never extended to OCS’s offices of to the home of OCS’s

employees or officers.

2) On 21 May 2012 Sloan Valley Dairies Ltd (SVD) of Canada

instituted motion proceedings against OCS claiming the return

of consignments of skim milk powder sold to OCS, alternatively

payment of the purchase price. SVD served a copy of the application

on SARS. SARS compared the invoices attached to the application

with those that OCS had submitted to SARS for the purpose of

customs duty. The prices on the SVD invoices were substantially

higher than what was reflected on the submission to SARS.

This discrepancy led SARS to suspect that OCS had fraudulently

manipulated the invoices so as to pay less duty. Consequently,

SARS decided to search the premises of OCS.

3) On 30 and 31 May 2012, SARS officials numbering about 40

searched OCS’s Muizenberg premises. When they arrived on the

first day, they gave Mr Gaertner to understand that they were there

to conduct a bond inspection and he allowed them in. It was only

after they had sealed the premises that they told Mr Gaertner the

true reason for their presence. At that point Mr Gaertner asked for

time to get his attorney to the premises. The attorney not having

arrived after 30 minutes, an extensive search ensued. Over the

two-day period it included a search of the warehouse; bond store;

a safe in the strong room, computes; and the offices of Mr Gaertner

and Mr Klemp. Mirror images of data on various computers were

made and a variety of documents and other objects were seized.

4) Through it all, the official did not have a search warrant. In fact,

they told Mr Gaertner that they did not need one for a search in

terms of section 4 of the Customs and Excise Act.

5) On 2 July 2012 the applicants brought an application before

the High Court citing, as respondents, the Minister, the other

respondents before this Court and several SARS officials. They

sought declarators that the searches and seizures were unlawful

and that section 4 of the Customs and Excise Act is inconsistent

with the Constitution and invalid to the extent that it permits

targeted, non-routine enforcement searches to be concluded

without a warrant.

6) The Minister and SARS contested the claim that section 4 of

the Customs and Excise Act is unconstitutional and contended,

instead, that to the extent that the section limited the right to

privacy, this was justified under section 36 of the Constitution. In

the alternative, they pleaded that a declaration that section 4 was

unconstitutional should not be retrospective and that it should be

suspended to afford the Legislature an opportunity to correct the

defect. SARS also denied that the searched had been conducted in

an unlawful manner.

Discussion

7) Flowing from the High Court’s declaration of constitutional

invalidity, the reading-in and the submissions made before us, the

issues for determination are:

a. Are sections 4(4)(a)(i)-(ii), 4(4)(b), 4(5) and 4(6)

unconstitutional and thus invalid:

i. Do they limit the right to privacy; and

40


ii. If they do, is the limitation justified?

b. If the sections are unconstitutional and thus invalid, must

the declaration of invalidity be retrospective?

c. Should the declaration of invalidity be suspended pending

correction of the defect?

d. How long should the period of suspension be?

e. If the declaration of invalidity is suspended, should there be

a remedy in the interim?

Order

8) The declaration of constitutional invalidity of sections 4(4)(a)

(i)-(ii), 4(4)(b), 4(5) and 4(6) of the Customs and Excise Act 91 of

1964 made by the Western Cape High Court is confirmed.

9) The declaration of invalidity is not retrospective.

10) The order is suspended for six months to afford the Legislature

an opportunity to cure the invalidity.

JUDGMents

41


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