High Court backs Knysna Municipality in tariff dispute with Grey Elephant Investment
The Thembalethu Circuit High Court has upheld the Knysna Local Municipality’s (KLM) authority to impose service tariffs on Grey Elephant Investment (GEI), the owner of Knysna Mall.
The court found that the municipality’s tariff policies are lawful, rejecting GEI’s claims that the charges were unlawful and inconsistent with existing by-laws and the Local Government Municipal Systems Act.
According to court papers, GEI, having been one of the municipality’s top business debtors, is one of the largest consumers of water in the municipality, averaging around 1,537 kilolitres per month.
GEI sought the court’s decision that the Tariff Policies (TP) by the municipality, in terms of which it levies service charges, are unlawful and ultra vires its By-Laws and the Local Government Municipal Systems Act (the Systems Act).
GEI conceded that the tariff policies contemplated that the municipality may levy basic service charges per shop or business unit. It complained that there was no such provision in either the 2008 or 2019 Tariff By-Laws and that, moreover, the Systems Act required the amount that individual users were to pay for services should generally be in proportion to their use of that service.
In its arguments, KLM submitted that decisions about tariffs, budgets, municipal services, and collecting fees and taxes are part of the municipality’s executive powers, while legislative powers mainly involve passing by-laws.
It said municipalities must provide services efficiently, sustainably, and cost-effectively, while continuously improving and expanding them for communities. KLM also argued that collecting revenue through tariffs, fees, and rates is essential for municipalities to meet their constitutional duty to provide and improve basic services.
The court held that municipalities are allowed to charge fees, rates, and surcharges to help pay for services, keep them running efficiently and sustainably, and improve them over time for the benefit of the community.
Western Cape High Court Judge Daniel Thulare, in his ruling, said: “GEI’s suggestion that salons, gyms, restaurants, and other businesses consuming municipal water at the mall should not pay for water services to enable the municipality to maintain, develop, and extend water infrastructure in Knysna is extraordinarily astonishing and stands to be rejected.
“To suggest that the legislature, through the Systems Act, would have envisaged that businesses in a mall would get water as a freebie from the municipality as regards infrastructure maintenance, development, and improvement, is extremely far-fetched.”
Thulare further held that if a municipality supplies water and sewerage to a shopping mall through one main connection, it can charge the mall for those services as long as the shops and businesses in the mall use municipal water.
“The competency of a municipality to govern on its own initiative and to exercise both its executive and legislative authority, including to finance its affairs by charging for services are subject to its Section 4 rights and duties. The executive and legislative authority of the municipality is exercised by its council.
“The council takes all its decisions subject to Section 59. The general duty of a municipality to provide municipal services gives effect to the provisions of the Constitution. The power of a municipality to collect revenue, including through fees, charges, and tariffs in respect of its functions and services, is inextricably linked to its ability to meet its obligations as required by the Constitution and the Systems Act,” said Thulare.
Enquiries to KLM and GEI had not been answered by the time of publication.
