Cape Town’s budget: A departure from the rule of law
The City would do well to recall that South African courts have declared municipal charges unlawful where no statutory authority exists and no direct service is provided.
Written by: Eustace Davie
The City of Cape Town's draft 2025/26 budget introduces a series of charges that deviate from foundational principles of municipal governance. By linking service fees to property values rather than actual usage, the City shifts from a cost-recovery model toward wealth redistribution. This raises serious concerns regarding constitutional compliance and economic freedom.
Service charges disconnected from usage
The budget outlines several structural changes:
Water and sanitation: Fixed charges will no longer depend on connection size but on property market value. Two households consuming identical amounts of water, may pay substantially different charges solely due to differing property valuations. Although the City argues that these fixed charges cover shared infrastructure costs, by linking them explicitly to property value rather than consumption, they are distanced from genuine cost recovery.
Electricity: A new monthly "service and wires" fee of R59.90 applies to properties valued above R500,000. Additionally, the existing home-user surcharge increases from R245 to R339. The City suggests that these changes improve cost transparency, yet the imposition of fixed fees unrelated to consumption remains fundamentally redistributive in nature.
City-wide cleaning levy: This levy, scaled by property value, applies city-wide to fund street, beach, and litter-cleansing services previously covered through general rates. Although the City says the levy pays for cleaning services, it does not reflect how much of the service each household uses.
These measures weaken the link between municipal charges and specific, measurable service consumption. The implication is clear: the City has embraced property ownership as sufficient grounds to extract higher payments, regardless of actual service utilisation or cost.
Constitutional considerations
Section 229 of the Constitution allows municipalities to charge property rates and fees for actual services provided. It does not allow them to impose new taxes or general charges outside of explicit national legislation. The city-wide cleaning charge, despite funding cleaning services, does not have clear statutory backing and therefore fails this constitutional test.
The City would do well to recall that South African courts have declared municipal charges unlawful where no statutory authority exists and no direct service is provided. That is precisely the defect that now taints these proposals.
Legal commentary has already raised credible concerns regarding the City’s constitutional mandate. A charge disconnected from measurable service provision becomes, in effect, a disguised tax. Municipalities are not granted general taxing powers; their authority to raise revenue is strictly limited and conditional.
The City has entered legally precarious territory. Should these charges face a legal challenge, there is every reason to anticipate judicial intervention.
Erosion of trust
Beyond constitutional issues, several economic consequences are likely to occur. When municipal charges lose connection with actual consumption, incentives for conserving resources or investing in efficiency disappear. Households that use less still pay the same. Even those investing to become more efficient gain no financial benefit, because fixed charges remain constant irrespective of their behaviour.
Furthermore, tying fixed charges explicitly to property value makes property ownership less attractive. Investment in homes or improvements becomes costlier and less appealing. This undermines the growth that towns and cities depend on.
The inclusion of redistributive intent within municipal billing also undermines public trust. Residents are left wondering whether they are paying for services or simply being charged (indeed punished, under our dire economic circumstances) for owning property. This blurred distinction between service and taxation damages the credibility of council billing, gradually undermining ratepayers' willingness to pay voluntarily.
A damaging precedent
Municipalities exist to provide essential services transparently, lawfully, and cost-effectively. Cape Town’s budget, by introducing charges unrelated to actual service usage, and instead pegged to property values, departs from this proper function.
Property owners and concerned citizens must carefully scrutinise these proposals. Where necessary, they should pursue legal avenues to restrain unlawful municipal conduct. The Constitution remains unambiguous: municipalities cannot lawfully embed taxation in tariff structures, nor conceal redistribution as service delivery.
The sensibility of redistribution as a policy goal is questionable, but whatever one’s views about it may be, it must stand to reason that municipalities, as opposed to other spheres of government, should not engage in it. If there is to be a redistribution of wealth, it must be in line with provincial or national policy.
If these measures stand, they will set a damaging precedent that other municipalities will be quick to adopt. What begins in Cape Town could soon become entrenched across South Africa, eroding economic freedom, undermining property rights, and violating the rule of law.
Those who believe that this extractive model will stop at Cape Town are in for a rude awakening.
Eustace Davie is a Director of the Free Market Foundation and author of Unchain the Child.
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