Schools, universities and colleges in Johannesburg were given a reprieve on Tuesday (26 July) when the High Court in Johannesburg ordered that no credit control measures may be undertaken if these institutions fail to pay the hugely increased rates bills they will start receiving soon.
Read: Joburg schools in for huge rates shock
The order follows an agreement between the city and the parties who have applied to have the city’s decision that resulted in this increase set aside.
AfriForum said in a statement that educational institutions, including public and private schools, will therefore still be liable for the property tax paid in terms of the 2021/22 rates.
However, if they are unable or unwilling to pay the difference between this amount and the amount that is due according to the new rates that apply for the city’s 2022/2023 financial year, no action will be taken against them to enforce the collection of this amount during this period.
Moneyweb earlier reported that the court was set to hear applications in this regard by civil rights group AfriForum and JSE-listed education group ADvTech on Tuesday.
ADvTech states in its application that it owns 17 educational institutions within the area of jurisdiction of the City of Joburg. Although it is one of the biggest players in the industry there, the city failed to communicate with the company about the drastic increase in rates, it states.
In court the parties and the city however reached an agreement to have the case postponed until October.
This will give the city more time to respond to the applications and allow other parties that are considering joining the litigation to prepare their papers.
The agreement was made an order of the court.
It also provides that the two applications will be heard together and that they may apply for an extension of the grace period for the institutions if for some reason the applications are not heard in October.
No more ‘Education’ …
The applicants contend that the decision by the city to scrap the ‘Education’ category from its rates policy is unlawful and must be set aside.
Following the scrapping, public schools are categorised as ‘public service properties’, which are rated at a tariff six times what they used to be rated at.
Independent schools meanwhile are now rated as businesses – and pay 10 times more.
These categorisations apply from 1 July, when the new policy came into effect.
Independent schools may apply for a 25% rates rebate, which will apply from the date of application. It is however not yet clear what the qualifying criteria are.
The city does not provide similar relief for public schools.
Rates Watch has calculated that a public school with a valuation of R70 million that has been paying about R12 000 per month for rates, will in future be expected to pay about R75 000 per month.
An independent school with the same valuation will see its R12 000 monthly bill increase to R96 000 – even after applying the rebate (which is not offered to public schools).
Both AfriForum and ADvTech argue that schools and other educational institutions won’t be able to afford the increase and will have to raise their tuition fees sharply.
This may lead to students dropping out or cancelling some of their courses.
According to Alana Bailey, AfriForum’s head of cultural affairs: “AfriForum hopes that the case which will be heard in October will bring permanent clarity on the matter and relief from the new excessive tariffs.
“If this does not happen, there is a risk that some of the institutions will have to cut back on the quality of their services and tuition, or some may even have to close their doors ‒ steps that will be to the detriment of everyone in Johannesburg and, in fact, in South Africa,” she says.
Cogta and CoJ confused?
Judy Suddaby, member of the mayoral committee, earlier claimed that the city merely gave effect to an amendment to the Local Government: Municipal Property Rates Act aimed at the rationalisation of rates categories.
According to the city’s reading of the act, no provision is made for a special category for educational institutions and the city needs approval from the minister of Cooperative Governance and Traditional Affairs (Cogta) to retain it.
Suddaby said the city did apply, but no approval was given.
ADvTech however argues that the city and Cogta misunderstand the act and may independently retain the category.
It further argues that the city is not allowed to differentiate between schools on the basis of ownership. Rates are based on the permitted use of property and therefore all educational institutions should be rated equally, ADvTech states in its application.
Bailey also warns: “This recategorisation and the ensuing increases also create a dangerous precedent and AfriForum therefore takes a strong stand against it in order to protect the interests of all municipal taxpayers.”
Listen to Fifi Peters’s interview with AfriForum’s Morné Mostert (or read the transcript here):