SAPOA Legal Update Report by SAPOA

SAPOA LEGAL UPDATE - report to members

LEGAL UPDATE REPORT TO SAPOA MEMBERS Volume 2

SAPOA LEGAL UPDATE - report to members

www.sapoa.org.za

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.

SAPOA LEGAL UPDATE - report to members

Contents

1. 2. 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7. 2.8. 2.9. 2.10. 2.11. 2.12. 2.13. 2.14. 2.15. 2.16. 2.17.

EXECUTIVE SUMMARY 3 LEGISLATION 5 Promotion and Protection of Investments Bill 6 Spatial Planning Land Use Management Act, 2013 7 Expropriation Bill, 2013 7 Infrastructure Development Bill, 2013 7 Gauteng Planning and Development Bill, 2013 7 Mpumalanga Planning and Development Bill, 2013 8 Western Province Spatial Planning Land Use Management Bill, 2013 8 Property Practitioners Bill 8 Property Valuations Bill, 2013 9 The Housing Consumers Protection Measures Amendment Bill 9 The Deeds Registries Amendment Bill 9 Special Economic Zones Bill 10 Tobacco Products Control Act No. 83 of 1993 10 Environmental Impact Assessment Regulations 10 Carbon Tax Policy 11 Suspension of Liquor Regulation 21 Notice 11 Transition Period for Compliance with the New BEE Codes 12

3. 3.1. 3.2.

MUNICIPAL LAW 13 The Rates Act 14 Draft Rates Policies 2014/2015 Financial Year 14

4. 4.1. 4.2. 4.3. 4.4. 4.5. 4.6. 4.7. 4.8.

RESEARCH 19 Property Rates in South Africa 20 The Role and Impact of the Commercial Property Sector in the Western Cape Province Economy 20 Financial Intermediary Centre (FIC) Guidelines 21 Business Rescue â&#x20AC;&#x201C; Companies Act No. 68 of 2008 22 Standard Agreements 22 Lease Agreement Workshops 22 Determination of Thresholds 22 Protection of Personal Information 23

5. 5.1. 5.2. 5.3. 5.4.

ADVOCACY AND LOBBYING 25 Illegal Land Use 26 Mpumalanga Services Appeal Board 27 National Department of Agriculture and Act No. 70 of 1970 28 South African Cities Network 28

6. 6.1.

LEGAL OPINIONS 29 National Environmental Management: Integrated Coastal Management Act 30

JUDGEMENTS

SAPOA LEGAL UPDATE - report to members

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. The Department is responsible for legal advocacy which is

Research is a fundamental tool that SAPOA recognises and utilises

fundamental in ensuring SAPOA actively participates in policy for-

to investigate a multiplicity of issues with the intention to increasing

mulation and enactment of laws affecting the property sector in

the institutional and sectoral knowledge relating to the industry, to

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

formulate and determine best practice and guidelines for the use of

ments on published relevant and pertinent Acts of Parliament,

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

Green and White Papers, Municipal Ordinances and Policies having

influencing and changing the commercial property landscape, prac-

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

tices and direction thereof for the attainment of global best practice. Our researches are cognisant of the need of ensuring the growth,

Strategic and collaborative relationships are initiated and/or

sustainability and profitability of the commercial property sector

cemented, where relevant and pragmatic, with other stakeholders

within less protracted public sector environment.

in the property industry which includes engagement with government departments, state-owned entities, organs of the state and

Legal Advisory services are provided to internal departments and

municipalities.

further to members of SAPOA. Compliance remain key in ensuring SAPOA complies with the legal prescripts of various legislation.

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 objective that is supported by the rules and provisions regulating SAPOAâ&#x20AC;&#x2122;s Legal Advocacy Fund.

SAPOA LEGAL UPDATE - report to members

LEGISLATION

Da mihi factum, dabo tibi ius Give me the fact; I will give you the law 5

SAPOA LEGAL UPDATE - report to members

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

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

in November 2013 and was open for public comment until January

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

2014. Government response to the comments and an amended

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

Investment Bill must be anticipated. Seeing that the government

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

has rejected the more trenchant comments on the Investment Bill,

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

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

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

changed materially.

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

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

if necessary.

framework for all investments including foreign investments. The intention is to put local investors on the same footing as foreign

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

investors who were previously disadvantaged under the Bilateral

in terms of the Promotion of Administrative Justice Investment Act

Investment Treaties and, within rational legislative limits to give

which requires rational decisions on rational grounds and subject

equal treatment to foreign investors

to challenge on the principles of legality and a rule of law review by the courts. The exercise of public power must comply with

iii. The Bill applies to: a) Investments made for commercial or business purposes.

the Constitution, which is the supreme law and legality requires decision-makers to act in accordance with the empowering statutes.

b) Material economic investments or a significant underlying physical presence in South Africa such as operational facilities

ix. Some of the overseas criticism has been premised on a suggestion that there may be lack of transparency, efficiency or independence

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

of local judicial and arbitration institutions. There is no justification

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

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

physical presence in South Africa.

advantage in any dispute resolution proceedings, this is better that a bias towards the commercial interests of foreign investors that may

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

be shown by an international arbitration body.

jurisdictions that have or previously had bilateral investment treaties (BITs) with South Africa which have been or will be terminated.

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

Foreign investors in those jurisdictions will in some respects be

Constitution, international law consistent with the Constitution,

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

customary international laws consistent with the Constitution and

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

any relevant convention or international agreement to which South

that those foreign investors that enjoyed the jurisdiction of BITs will

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

be placed on the same footing as foreign investors in jurisdictions which do not have BITs, notably major sources of foreign investment

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

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

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

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

similar international agreements or arrangements. It seems that this

advantages and disadvantages of domestic South African `.

does little more than to protect things which are already protected under international law. It is accepted that countries are entitled

vi. The major issues are: a) The scope of the law and what is an “investment”

without foreign interference provided that they are constitutionally

b) The right to fair and equitable treatment

valid laws of general application.

c) Expropriation and compensation d) The right of establishment e) Dispute resolution f) Security of investments g) Funds transfer.

to govern their own taxation, subsidy and procurement processes

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LEGISLATION B. SPATIAL PLANNING LAND USE MANAGEMENT ACT, 2013 â&#x20AC;&#x201C; 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

spatial planning at the different spheres of government. It further

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

intends to provide a framework for the monitoring, coordination

spatial planning and land use management in the Republic of South

and review of the spatial planning and land use management

Africa; to specify the relationship between the spatial planning and

system and to provide a framework for policies, principles,

the land use management system and other kinds of planning and

norms and standards for spatial development planning and land

to provide for the inclusive, developmental, equitable and efficient

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

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

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

including the rights to equality and to administrative action that is

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

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

interest subject to compensation which is just and equitable and

before Parliament.

reflects an equitable balance between the public interest and the

D. INFRASTRUCTURE DEVELOPMENT BILL NO. 99 OF 2013 - NATIONAL DEPARTMENT OF ECONOMIC DEVELOPMENT The Bill affects Property Developers and Property Owners The Bill was published for public comment in March 2013 and it

infrastructure priorities, designate strategic infrastructure projects

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

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

infrastructure development which is of significant economic impact

SIPs is given priority in planning, approval and implementation.

or social importance to the Republic; eensure that infrastructure

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

development in the Republic is given priority in planning, approval

as such by publishing a notice in the government gazette.

and implementation; and to ensure the development goals of the State are promoted through infrastructure development. The Bill

The Infrastructure Development Act No 23 of 2014 wasÂ assented to

further seeks to empower the Commission to determine and develop

on 2 June 2014.

E. GAUTENG PLANNING AND DEVELOPMENT BILL The Bill affects Property Developers and Property Owners The Gauteng Planning and Development Bill was published for

and municipal land use and development policies; to provide for

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

the land use planning functions of the Province and the process

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

of provincial planning : to provide for land use schemes in the management of land use by municipalities; and to provide for

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

the regulation of municipal land use and the establishment of a

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

municipal appeal tribunal.

for provincial planning and the coordination of national, provincial

The final approved Bill is being awaited.

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LEGISLATION F. MPUMALANGA PLANNING AND DEVELOPMENT BILL â&#x20AC;&#x201C; PROPERTY DEVELOPERS AND BUILDERS The Act affects Property Developers and Property Owners The Mpumalanga Planning and Development Bill was published

Bill which must all be aligned to the SPLUMA.

for public comment during April 2013 and its legislative objective mirrors the objectives of the Gauteng Planning and Development

The final approved Bill is being awaited.

G. WESTERN CAPE LAND USE PLANNING BILL

The Bill affects Property Developers and Property Owners SAPOA submitted formal comments on the Bill on 18 March 2013.

management while also promoting integrated social and economic

The Bill intends to establish a system for provincial spatial planning

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

and development management in the Western Cape Province and

development frameworks in the province. The drafters of the Bill

further to consolidate legislation in the Province pertaining to

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

provincial planning, regional planning and development, urban and

for implementation of provincial environmental, housing, nature

rural development.

conservation, tourism, agricultural, transport and economic development policy and measures.

The Bill further intends to establish and enforce legal measures essential to orderly coordinated spatial planning and development

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

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

provided to SAPOA, at SAPOAâ&#x20AC;&#x2122;s request, to ensure that it can be

education, training and development of property practitioners.

studied internally and initial comments provided to the Department. The Estate Agency Affairs Act, 1976 is the current legal framework The objects of this Bill are to assist in providing a just and equitable

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

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

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

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

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

in the property market; assist in protecting and promoting the

was withdrawn from National Assembly.

interests of consumers; provide a framework for the licensing of property practitioners; regulate the conduct of persons involved

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

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

2014.

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LEGISLATION I. PROPERTY VALUATION BILL The Act affects Property Developers and Property Owners The Property Valuations Bill is one of the Bills that emanates from

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

the Green Paper on Land Rural Development and Land Reform.

General;

Accompanying it in its policy endeavours is the Restitution of Land

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

Rights Amendment Bill, 2013.

to municipalities; d. to provide for a review mechanism.

The Property Valuation Bill seeks to achieve the following objectives: a. to give effect to the provisions of the Constitution which provide

SAPOA submitted formal comments on 23 June 2013.

for land reform and the facilitation of land reform through the valuation of property in order to determine the purchase price for

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

or payment in respect of property;

July 2014.

J. THE HOUSING CONSUMERS PROTECTION MEASURES AMENDMENT BILL The Act affects Property Developers and Property Owners The proposed Draft Bill of the Housing Consumers Protection

SAPOA members who represent SAPOA on the NHBRCâ&#x20AC;&#x2122;s Industry

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

Advisory Committee.

Builders Registration Council (NHBRC) in August 2011 and was due for the Ministerial legislative process with the National Department

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

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

will afford SAPOA an opportunity to review and make comments.

K. DEEDS REGISTRIES AMENDMENT BILL The Act affects Property Developers and Property Owners The Deeds Registries Amendment Bill is meant to provide for

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

Promotion of Administrative Justice Act (PAJA) principles. PAJA

thereon and any registered deed of lease or other registered deed

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

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

administrative action. It further requires that any administrative

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

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

on the aforesaid deed a description of the land according to the new or corrected diagram, which description shall supersede the

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

description already appearing in the aforesaid deeds.

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

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

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

to on 13 December 2013.

written application by the owner of the land accompanied by the

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LEGISLATION L. SPECIAL ECONOMIC ZONES BILL - DEPARTMENT OF TRADE AND INDUSTRY The Act affects Property Developers and Property Owners The special economic zones Bill is an improvement on the industrial

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

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

aside for specifically targeted economic activities, which are then

were established to boost investment, growth, employment and skills

supported through special arrangements (which may include laws)

development. Each needed access to an international port or airport

and support systems promote industrial development.

and the potential for export-orientated production. They were in Coega in Port Elizabeth, East London, Richards Bay and OR Tambo International

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

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

critical instruments that can be used to advance government’s

infrastructure, expedited customs procedures and duty-free operations.

strategic objectives of industrialisation, regional development and job creation. The programme further aims to assist in improving

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

the attractiveness of South Africa as a destination for foreign direct

34968 under Government Gazette Number 10505 which relates to

investments and export of value added commodities.

Special Economic Zones intended to continue to foster government’s efforts to create employment and economic growth by establishing

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

a strong industrial base in South Africa. Special Economic Zone

19 May 2014.

M. THE TOBACCO PRODUCTS CONTROL ACT, 1993 – REGULATIONS The Act affects Property Developers and Property Owners The Minister of Health issued the regulations on 30 March 2012 and

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

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

a signatory.

section 2 and (4) of the Tobacco Products Control Act No.83 of 1993. The principles of the Convention dictate that, effective measures The Preamble of the Tobacco Products Control Act, acknowledges

should be applied to provide protection from exposure to tobacco

that tobacco use is extremely injurious to the health of smokers

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

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

protected from exposure, all indoor workplaces and indoor public

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

places should be smoke free and legislation is necessary to protect

action to deter people from using tobacco products and to protect

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

non- smokers from exposure to tobacco smoke and to encourage

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

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

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

align the health system with democratic values of the constitution and the World Health Organization’s Framework Convention on

The Regulations are pending approval.

N. ENVIRONMENTAL IMPACT ASSESSMENT REGULATIONS - DEPARTMENT OF ENVIRONMENTAL AFFAIRS AND TOURISM The Act affects Property Developers and Property Owners 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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LEGISLATION O. CARBON TAX POLICY The Act affects Property Developers and Property Owners 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: a. First, carbon pricing will encourage a shift in production and

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

consumption patterns towards low carbon and more energy efficient

respect to the countryâ&#x20AC;&#x2122;s proposed infrastructure build programme

technologies by altering the relative prices of goods and services

appropriate policies are required to ensure mitigation and adaption

based on their emissions intensity and encouraging the uptake of

strategies are taken into account in investment decisions that have

cost effective, low carbon alternatives. Pricing carbon emissions

long term lock-in effects.

addresses the problem of negative externalities, as polluters should c. Third, a carbon price will create dynamic incentives for research,

pay for their emissions.

development and technology innovation in low carbon alternatives. b. Second, carbon intensive factors of production, products

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

and services are likely to be replaced with low carbon emitting

intensive technologies and new low carbon alternatives.

alternatives. To achieve the extent of emission reductions committed to in Copenhagen, the production technologies will need to

The implementation of the Carbon Tax Policy has now been

become less carbon intensive and/or the consumption of certain

postponed to 2016.

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

P. SUSPENSION OF LIQUOR REGULATION 21 NOTICE The Act affects Property Developers and Property Owners The Minister of Trade and Industry has suspended the

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

implementation of Regulation 21 of the Liquor Amendment

Regulations were promulgated on 3 December 2013 and Regulation

Regulations 2013. The implementation of this regulation, which is

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

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

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

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

the transitional period for the recently revised Broad-Based Black

April 2015

SAPOA LEGAL UPDATE - report to members

MUNICIPAL LAW

Da mihi factum, dabo tibi ius Give me the fact; I will give you the law 13

SAPOA LEGAL UPDATE - report to members

MUNICIPAL LAW PROPERTY RATES FOR THE 2014/2015 FINANCIAL YEAR

The Rates Act 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. Section 229 (2) (a) of the Constitution states that a municipality may not

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

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

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

unreasonably prejudice the national economic policies; economic activities

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

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

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

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

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

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

together with the definition of “rateable property” implies that

between categories of property. This discretion is provided for in

each year a municipality must determine and review the amount

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

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

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

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

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

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

provides that the Constitution enjoins local government to be

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

developmental in nature, in addressing the service delivery priorities

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

of our country and promoting the economic and financial viability

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

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

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

local government with access to a sufficient and buoyant source of

approved by the provincial executive.

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

DRAFT RATES POLICIES 2014/2015 FINANCIAL YEAR 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

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

u address all the aspects of the Medium Term Revenue and

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

Expenditure Framework that have a direct impact on the property

rates policies.

owner and ratepayer. The following aspects, if directly linked to property, will be included:

The brief was as follows:

a. Projects;

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

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

policies and legislation, draft and approved budgets and any other

management

relevant sources of information relating to the reviewing and analysis of budgets and rates policies of the all the metropolitan municipalities as

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

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

comment on the compliance of the new tariff with legislation or

SAPOA LEGAL UPDATE - report to members

MUNICIPAL LAW other requirements. If abnormal increases can be linked to specific

u Identify Aspects that require formal comments by SAPOA must

projects or activities it will be shown.

be identified.

u analyse the sample accounts reflecting the cost of the basket

u Review and analyse the rates policies and highlight changes

of municipal services which will be provided for business and

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

commercial and industrial properties for the following values:

and residential sector; and identify aspects that require formal

a. R10 million

comments by SAPOA

b. R50 million c. R200 million d. R1 billion

EXTRACTS OF COMMENTS: DRAFT RATES POLICIES 2014/2015 Polokwane Municipality 1. Definitions

Where buildings are constructed and used on the remainder of a township, the category ‘properties used for multiple purposes’

1.1 Illegal Use The definition should be expanded to ensure that all these

are applicable. 1.4 Vacant Land

properties are identified. The changes to the definition are supported. The following wording is suggested: It is however suggested that the following wording be “Illegal use” means a use that is inconsistent with or in

considered:

contravention with the permitted use of the property, including advertising sign, in which event and without condoning the use

“Vacant

land”

thereof the property will be valued in accordance with section

improvements have been erected or if erected such

56(2)(b) & (c) of the Act.”

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

means

land

where

immovable

of land if vacant, excluding vacant land forming part of the 1.2 Property Property is defined in the MPRA (Municipal Property Rates Act)

remainder of a township.” 2. Different categories of rateable property

and this definition is in conflict with the MPRA. 2.1 Clause 5.2(d) The rates policy is subject to the MPRA and definitions may not be amended.

Provision should be made for farm properties used for industrial purposes.

This definition should be deleted or the definition as per MPRA must be included in the policy. 1.3 Residential property

2.2 Clause 5.2(q) There is a definition for ‘Public benefit organisation property’ in the ratio regulation published on 10 March 2010.

The inclusion of the remainders of townships in this

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

category is welcomed as it will reduce the holding costs for

organisation property’.

township developers. 2.3 Clause 5.2(r) It is suggested that only vacant land in the remainder of a township should qualify, therefore the word “vacant” should

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

be added.

the definition.

SAPOA LEGAL UPDATE - report to members

MUNICIPAL LAW 2.4 Clause 5.3(h)

provision in s 48(2)(g) that the valuation roll is to include ‘any other prescribed particulars’ in addition to those specifically

The proposed ratio of 2.0 does not comply with the ratio

mentioned, reinforces my conclusion that the Act, properly

regulations and should be changed to 0.25.

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

2.5 Clause 5.2(l)

municipal valuer compiling the valuation roll to determine and record those uses and to apportion the market value of

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

the property between them. In the present case, this was not done. The municipal valuer therefore incorrectly dismissed

Penalty rates on vacant land will not force development.

the second respondent’s objection to the valuation roll and

Development will be triggered if there is a demand for

the valuation appeal board correctly ordered that it should

the product.

be amended.”

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

Properties categorised as ‘properties used for multiple purposes’

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

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

The demand is for subsidised housing which should be provided

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

by government.

must be levied according to the different purposes for which the property is used.

The challenges with regard to vacant land will not be resolved through high rates. The City of Polokwane and property owners

The ratio must be 0.00.

will have to take hands to address the problems. 2.6 Clause 5.3(o)

2.7 Clause 5.3(r)

In The City of Johannesburg Metropolitan Municipality v

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

The Chairman of the Valuation Appeal Board for the City of

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

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

assist the municipality to identify these properties.

Leach said: 3. Clause 8 “[30] Not only would the interpretation now advanced by the appellant be absurd for the reasons mentioned, but one

3.1 Clause 8.11

of the details that has to be recorded on the valuation roll under s 48 is ‘the category determined in terms of section 8

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

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

clause 8.

a category of ‘properties used for multiple purposes subject to section 9’ (my emphasis) and, under s 45(1) of the Act,

Clause 8 deals with exemptions, rebates and reductions while

the municipal valuer is required to carry out the valuation

‘Religious organisations’ are excluded from rates.

of rateable property in accordance with the provisions of the Act. This clearly makes s 9 applicable, at least in part, to

Properties excluded from rates should be grouped under the

the compilation of the valuation roll. The obvious intention

heading ‘Property excluded from rates’

is that where a property is used for multiple purposes, those categories of use – in respect of which different rates are to be

3.2 Clause 8.15

applied under s 9(2)(c) – should be determined and recorded, as should the values apportioned to each such category.

Rebates for high value properties is welcomed.

This is all to be done by the municipal valuer who is, after all, the person possessed with the necessary skill, expertise

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

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

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

‘Properties used for business or industrial purposes whose

market value apportioned between categories of use should

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

be recorded in instances of multiple use properties, the

rebate as determined by Council from time to time.’

SAPOA LEGAL UPDATE - report to members

MUNICIPAL LAW 3.3 Clause 8.17

The previous policy made provision for: a. Smallholdings –rebates based on the size;

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

b. Owners of business or industrial properties with a market

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

value in excess of R50,000,000;

a rebate.

c. Resorts on agricultural land; d. Development land;

Suggested wording:

e. Private townships; f. Sectional title schemes.

‘The remainder of a township will receive a rebate as determined by Council from time to time.’ 3.4 Clause 5.4

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

Properties used for multiple purposes

make them aware of the fact that they need to re-apply when the new roll is implemented on 1 July 2014.

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

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

be levied on the values apportioned to the different purposes for

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

which the property is used (see section 9(2) of the MPRA). This was confirmed by the Valuation Appeal Board (VAB) for the City

iii. Municipal (clause 8.7)

of Johannesburg. The decision was taken on review in the South Gauteng High Court and the Court confirmed the decision of

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

the board.

does that not mean that all municipal properties are exempted?

The matter was recently heard in the Supreme Court of Appeal. The appeal by the City of Johannesburg was dismissed with cost. The

iv. Public benefit organisations/Non-governmental organisations and cultural organisations (clause 8.9)

original decision of the VAB was therefore confirmed. The possible exemption of these organisations is commendable. Clause 5 of the current rates policy should be retained but the words “is proposed” in the first sentence must be replaced with “will

v. Religious organisations (clause 8.11)

Wbe applied”; The ratio for these properties must be 0.00 (refer to clause 5.4) Places of worship vi. Owners of properties used for bona fide farming This category of properties is excluded in terms of section 17(1)(i) of

purposes (clause 8.14)

the MPRA and the ratio must be 1:0. By referring to a differential rate the impression is created that Categories of owners of property for purposes of exclusions,

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

exemptions, reductions and differential rating (clause 7)

the case a separate property category must be created, but that is not possible as this is a category of owners of property.

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

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

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

of differential rate.

only determine other categories as part of the annual review process of the rates policy Exemptions, reductions and rebates (clause 8):

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

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

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

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

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

Johannesburg Metropolitan Municipality v The Chairman of the

SAPOA LEGAL UPDATE - report to members

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

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

[2014] ZASCA 5 (12 March 2014)â&#x20AC;?, the panel ruled clearly that if you have multipurpose properties, section 9(2) is applicable.

this instance is 1 July 2014

viii. Phasing in of certain areas (clause 12) Phasing is no longer applicable and this clause could be deleted.

To avoid confusion the financial year should be stated which in

SAPOA LEGAL UPDATE - report to members

RESEARCH

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

SAPOA LEGAL UPDATE - report to members

RESEARCH A. PROPERTY RATES IN SOUTH AFRICA SAPOA jointly appointed Rates Watch (Pty) Ltd and Business

accurate and complete billing and full collection of taxes and charges

Enterprises to conduct research, produce empirical and credible

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

evidence that outlines the following:

periods July 2008 – June 2009, July 2009 – June 2010, July 2010 – June 2011, July 2011 – June 2012 and July 2012 – June 2013).

a) The legislative intention of the Constitution of South Africa, 1996 (Act No. 108 of 1996) in as far as the power by municipalities

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

to impose property tax is concerned against the government’s

are correctly determined and imposed on the non-residential

objective of playing a developmental and transformative role;

property sector (commercial, retail and industrial) for the afore-said 5 (five) financial years;

b) he purport and consequences of the Rates Act in an attempt to discharge that power that is entrenched in the Constitution of South

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

Africa in as far as the correct determination and implementation of

accounts the funding models and requirements of the indicated

property rates is concerned within the statutory limitation imposed

municipalities and the market values of properties and the impact

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

thereof on the operating costs of commercial property sector and the future sustainability of the commercial property sector.

c) The duty by municipalities to attend to the valuation of rateable properties in their jurisdictions and to compile valuation rolls based

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

on the market value of the properties determined in accordance

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

with market conditions and the applicable law.

affordability and sustainability of businesses are concerned within their business models.

d) The determined, imposed and collected property rates for the sector for the periods July 2008 – June 2009, July 2009 – June 2010,

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

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

baseline property tax increase rate must be indicated.

2013, the associated General and Supplementary Valuation Rolls and the relevant approved valuation property rates ratios;

j) Recommendations must be given that can be utilized to influence policy and/or administrative changes in as far as the determination

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

and imposition of property rates is concerned.

respect of residential and non-residential properties categories for the research study periods (2008 – 2013) as reported in their

The results of the research were discussed at the 2014 SAPOA

respective audited Annual Financial Reports. (The Revenue effort

Convention.

of municipalities by showing whether or not there is consistent,

B. THE ROLE AND IMPACT OF THE COMMERCIAL PROPERTY SECTOR IN THE WESTERN CAPE PROVINCE

The South African Property Owners Association (SAPOA) undertook

property market and prominent economy are centred within Cape

a detailed investigation of the private property industry in the

Town therefore it is the centre of major economic growth and

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

expansion within the province.

Cape Town Metro. The report aims to contextualise the size and quantity of the private property sector in the Western Cape to

The general research approach describes the basic methodology

provide a foundation for cost calculations related to application

implemented to measure the economic value of the private

and other administrative processing timeframes. Furthermore, the

commercial property sector of the Western Cape.

report seeks to analyse development application case studies in

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

order to link processing timeframes to economic performance.

all economic activities are related to property either directly or

In essence

indirectly. In order to measure the economic value of the private The study is envisioned to analyse the commercial private property

commercial property industry the relevant activities within the

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

specific sectors needs to be identified and evaluated according to

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

specific analysis factors which complies with standard case practise

SAPOA LEGAL UPDATE - report to members

RESEARCH for economic impact calculations. For the purpose of this report

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

only property-centred economic activities with a direct impact are

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

evaluated, in line with generic economic impact practises.

SARS and not the local municipal tax revenue.

The directly impacting factors analysed are Gross Domestic Product

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

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

Convention.

commercial property sector in the Western Cape.

C. FINANCIAL INTERMEDIARY CENTRE (FIC) GUIDELINES 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

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.

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.

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.

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.

SAPOA LEGAL UPDATE - report to members

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

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

Guidelines which should be customised to the commercial property

a fee.

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

D. BUSINESS RESCUE - COMPANIES ACT NO. 68 OF 2008 The Companies Act of 2008b defines business rescue as

One of the most important factors that are being considered in

proceedings to facilitate the rehabilitation of a company that is

respect of business rescue proceedings is that the company must

financially distressed by providing for the temporary supervision

be financially distressed which means that it should appear to be

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

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

and property. It includes also a temporary moratorium on the

debts as they become due and payable within the immediately

rights of claimants against the company or in respect of property

ensuing six months.

in its possession. Commonly understood, business rescue is the development and implementation, if approved, of a plan

SAPOA will hold a breakfast session on Business Rescue again

to rescue the company by restructuring its affairs, business,

during 2014. The Education department is currently confirming the

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

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

maximises the likelihood of the company continuing in existence

court driven and that the failure by business practitioners to follow

on a solvent basis.

the correct procedures leaves the system open to abuse.

E. STANDARD AGREEMENTS 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.

F. LEASE AGREEMENT WORKSHOPS The Education department of SAPOA is facilitating Lease

all categories of SAPOA membership should be considered. The

Agreements workshop throughout the country as it was well

following manuals for the industry were recommended:

received by members.

u Offer to lease u Service level Agreements

The SAPOA Legal Committee acknowledged the need for relevant

u Lease for CPA tenants

standard Notices, Agreements and â&#x20AC;&#x153;Clausesâ&#x20AC;? in Agreements to

u Fixed Term contracts notification (2 years)

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

u Frequently asked questions handbook

G. DETERMINATION OF THRESHOLDS A meeting was held at the Department of Trade and Industry

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

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

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

in mergers and acquisition transactions. It was noted that

fees that are being paid by property companies, SAPOA requested

DTI has advised that they cannot make an exception for the

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

property industry.

financial years by the property sector in respect of filing fees. The DTI undertook to provide SAPOA with the requested report during

SAPOA requested DTI to provide a copy of the submission that

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

was submitted to parliament when the Thresholds were increased

notification and filing of merger and acquisition transactions, is the

the previous time. DTI subsequently advised SAPOA that no was

time delay.

submitted to parliament, and that the decision was taken by the Commissioner.

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

SAPOA LEGAL UPDATE - report to members

RESEARCH 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

H. PROTECTION OF PERSONAL INFORMATION â&#x20AC;&#x201C; POPI 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.

SAPOA LEGAL UPDATE - report to members

ADVOCACY AND LOBBYING

Faciendum Something which is to be done 25

SAPOA LEGAL UPDATE - report to members

ADVOCACY AND LOBBYING 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

u to provide democratic and accountable government for

local communities,

that the municipality encounters when managing street trading

u to promote social and economic development, and

activities, hence the establishment of street trading task team.

u to encourage the involvement of communities and

Through monitoring processes by the municipality, there are

community organizations in the matters of local government.

instances where traders are found selling illegal products. The task teams then assists in advising and assisting on enforcement,

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

the approach and amongst others, to be taken regarding

manage its administration; budgeting and planning processes

contravention of the Municipal By-laws.

to give priority to the basic needs of the community and to promote the social and economic development of the

The duties of the task team include developing recommendations on

community”. Local Economic Development (LED) and the

the processes and mechanisms for hawker management, identifying

LED Forum thereof offers the local government, the private

and making recommendations on areas for trading purposes within

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

the city and to give advice on regulating hawker management.

opportunity to work together to improve the local economy. It aims to enhance competitiveness and thus encourage

Local Economic Development Forum

sustainable growth that is inclusive.

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

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

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

identifying where employment creation is possible, both within

governmental sector partners’ work collectively to create better

economic sectors as conventionally defined and in cross-cutting

conditions for economic growth and employment generation. The aim

activities. It then analyses the policies and institutional developments

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

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

where the community (businesses, private organizations, government,

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

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

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

an aim to share information and experiences, pool resources and

we must use both macro and micro economic policies to create

solve problems which come up in the course of implementing

a favourable overall environment and to support more labour-

LED projects.

absorbing activities. The main indicators of success will be jobs (the number and quality of jobs created), growth (the rate, labour

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

intensity and composition of economic growth), equity (lower

on economic policies of Government between the Private sector,

income inequality and poverty) and environmental outcomes.

Non-governmental organizations and academia. e. Accelerated Shared Growth Initiative of SA [2005] is a national c) The formulation of the Terms of References for the establishment

shared growth initiative which focuses on relative volatility of

of LED Forum and championing of Local Economic Development is

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

supported by the following legislation:

logistics system; shortages of suitably skilled labor, and the spatial distortions of apartheid affecting low-skilled labor

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

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

explains that LED is about creating a platform and environment

investment opportunities; the regulatory environment and the

where investment and entrepreneurship thrives. The White

burden on small and medium enterprises (SMEs) ;Deficiencies

Paper further states that: “Local Government is not directly

in state organization, capacity and leadership.

responsible for creating jobs. Rather, it is responsible for taking active steps to ensure that the overall economic and

f. The National Spatial Development Perspective (NSDP)

social conditions of the locality are conducive to the creation

the framework which provide guidance for discussion on

of employment opportunities”.

the future development of the national spatial economy by reflecting on localities of severe deprivation and need,

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

of resource potential, of infrastructure endowment and of

out the objects of local government as follows:

current and potential economic activity by describing the

SAPOA LEGAL UPDATE - report to members

ADVOCACY AND LOBBYING key social, economic and natural resource trends and issues

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

shaping the national geography.

as including the local community within the municipal area, working in partnership with the municipality’s political and

g. The Limpopo Employment, Growth and Development Plan

administrative structures; to provide for the manner in which

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

municipal powers and functions are exercised and performed.

inclusive economic growth, decent work and sustainable livelihoods in order to reinforce decent employment and

Illegal Land Use

income security and sustainable investment built with a purpose of creating and improving industrial competitiveness.

Polokwane Regional Council raised concerns in 2013 about illegal land use within the municipality. The concern essentially

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

referred to the failure by property owners to comply with land

introduces the concept of ‘developmental local government’

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

which is defined as “Local government committed to working

the following:

with citizens and groups within the community to find sustainable ways to meet their social, economic and material

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

needs, and improve the quality of their lives.”

b. The process by which individuals, households and communities

i. The Provincial Spatial Development Framework [2007]

c. The way in which land use is regulated;

guides the spatial development of Limpopo. It includes the

d. The systems by which land is developed; and

preparation of plans that will guide the physical development

e. How land is traded.

continue to have and hold rights to land;

of the province. SAPOA has been provided with a list of compliance notices that j. The Municipal Finance Management Act [2003] the main

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

of the document is to regulate the budget process of the

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

municipality. It ensures that the municipal budget is open and

provided by the SAPOA Limpopo Regional Council. Only two

participatory and aligned to the IDP.

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

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

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

principles, mechanisms and processes that are

attended to on an urgent basis.

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

B. MPUMALANGA SERVICES APPEAL BOARD The Office of the Public Protector reported SAPOA’s complaint

to the Executive Council for appointment.

to the Department of Agriculture, Rural Development and Land Administration in respect of the failure to appoint the Services

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

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

Protector noting its concerns about the lack of notification of any

the Public Protector in which the following is stated:

advertisement relating to the Service Appeal Board. It is our belief that sufficient time until 21 May 2014 has been granted to the

u The Services Appeals Board is appointed in terms of the

Department to determine if any advertisement was published.

Town Planning and Townships Ordinance, 1986. Due to that fact, appeals of this nature has never been lodged in Mpumalanga,

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

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

Kleynhans has indicated that his section was transferred to

is also dealt with on an ad hoc basis.

COGTA so he is still handling the matter from the Department of Agriculture. He reports that the advertisement is ready and

u The function has now been moved to COGTA and ll

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

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

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

Nominations will then be evaluated and names will be presented

ensued from the transfer of the unit to COGTA.

SAPOA LEGAL UPDATE - report to members

ADVOCACY AND LOBBYING C. NATIONAL DEPARTMENT OF AGRICULTURE AND ACT 70 OF 1970 (TURN AROUND TIMES â&#x20AC;&#x201C; APPROVALS OF SUB-DIVISION AND CONSENT LETTERS) Introduction

1937) but excluding a private township as defined in section 1 of the Town Planning Ordinance of 1949 of Natal, not situated in an

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

areas of jurisdiction or a development area.

except land situated in the area of jurisdiction of example a municipal council, City council; Town council; Village council;

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

Village management board; Village management council; Local

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

board; Health board or health committee and Land forming

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

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

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

such land declared by the Minister after consultation with the

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

executive committee concerned and by notice in the Gazette to be

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

agricultural land for the purposes of the Act.

in terms of the Act has been submitted to him.

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

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

in terms of the Agricultural Holdings (Transvaal) Registration

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

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

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

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

proclaimed by the President by proclamation in the Gazette.

D. SOUTH AFRICAN CITIES NETWORK SAPOA and SACN renewed for three years (2014 â&#x20AC;&#x201C; 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

c) The State of the Cities Report (SoCR) is a flagship project of the SACN which provides an analysis of performance by the cities

a) SAPOA participated in a Spatial Planning Conference that

in South Africa to enable informed decision-making in urban

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

management and development.

Johannesburg and SACN. SAPOA was represented by Andrew

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

Barker, an experienced town planner to highlight the challenges

in 2016.

relating to the Integrated Development Plan for the City

e) The Reference Group has the responsibility of guiding and

of Johannesburg.

reviewing the production of the SoCR IV towards ensuring its success.

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.

SAPOA LEGAL UPDATE - report to members

LEGAL OPINIONS

Secus The legal position is different, it is otherwise

SAPOA LEGAL UPDATE - report to members

LEGAL OPINIONS A. NATIONAL ENVIRONMENTAL MANAGEMENT: INTEGRATED COASTAL MANAGEMENT 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.

B. PURPOSE OF THE AMENDMENT BILL 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”).

C. THE CONSTITUTION (a) Section 24 of the Constitution provides that “everyone has the

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

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

when it is necessary to maintain national security; to maintain

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

economic unity; to maintain essential national standards; to

present and future generations, through reasonable legislative

establish minimum standards for the rendering of services

and other measures that – Or i) Prevent pollution and ecological degradation; ii) Promote conversation; and

To prevent unreasonable action taken by a province this is

iii) Secure ecologically sustainable development and use of

prejudicial to the interest of another province or the country as

natural resources while promoting justifiable economic and

a whole.

social development.” (b) Section 44 (2) thereof states that Parliament may intervene, by passing legislation in accordance with section 76 (1), with regard

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

Objects of the Act

system of integrated coastal and estuarine management in the Republic of South Africa, including norms, standards and po0licies, in

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

order to promote the conservation of the coastal environment, and

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

maintain the natural attributes of coastal landscapes and seascapes.

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

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

protect, extend and enhance the status of coastal public property

use of natural resources within the coastal zone is socially and

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

economically justifiable and ecologically sustainable.

including future generations; and

u to secure equitable access to the opportunities and benefits of

areas and to prohibit incineration at sea.

coastal public property.

(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.

SAPOA LEGAL UPDATE - report to members

LEGAL OPINIONS E. SOUTH AFRICA’S INTERNATIONAL OBLIGATIONS IN RELATION TO COASTAL MATTERS a) Reference is made to “A Review of the Department of

an integrated whole that is an essential component of the global

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

life support system and a positive asset that presents opportunities

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

for sustainable development.

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

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

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

integrated management of coastal areas, the sustainable use

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

and conservation of living resources in the exclusive economic

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

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

the South African waters.)

pollution and promoting the sustainable use and conservation of living resources in the high seas.

b) The ‘Article” refers to the United Nations Convention on the Law of the Sea, which was ratified by South Africa in 1982.

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

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

Act was promulgated to halt the indiscriminate development

of navigational rights, territorial sea limits, economic jurisdiction,

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

legal status of resources on the seabed beyond limits of national

legislation then largely ignored natural coastal processes. While

jurisdiction, the conversation and management of living marine

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

resources, and the protection of the marine environment.

had a narrow perspective and allegedly failed to address access. Agenda 21 requested a broader vision for managing the coast in

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

an integrated manner.

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

F. THE BILL a) The Bill seeks to amend the “Act” by:

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

a. Amending certain definitions;

“property does not include any immovable property structure, or

b. Clarifying coastal public property and the ownership of

part of immovable property structure, or installation or infrastructure

structures erected on and in costal public property;

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

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

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

property;

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

d. To clarify and expand the provisions of reclamation;

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

e. To clarify definitions and terminology;

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

f. To simplify the administration of coastal access fee

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

approvals;

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

g. To simplify and amend powers relating to coastal

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

authorisation;

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

h. To replace coastal leases and concessions with coastal use permits;

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

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

creating new land within coastal waters, and includes the creation

j. To revise offences and increase penalties;

of an island or peninsula, but excludes beach replenishment by

k. To improve coastal authorisation processes; and

sand pumping for maintenance purposes. It is noteworthy to

l. To provide exemptions. Etc.

mention that “reclamation” was not defined in the “Act” and that it is hereby being introduced by the Bill.

b) Below are the main critical amendments that are being noted for this legal opinion and a comparison is being made with the

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

provisions in the “Act”.

A coastal public property is established for the following

SAPOA LEGAL UPDATE - report to members

LEGAL OPINIONS purposes: â&#x20AC;Ś(e) to facilitate the achievement of any of the

c. Any natural island within coastal waters;

objects of this Act.

d. The seashore, includingi. The seashore of a natural or reclaimed island; and

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

ii. The seashore of reclaimed land;

composition of coastal property. The new section 7(1) of the Bill state that coastal property public property consists of-

e. any admiralty reserve owned by the State; f. any land owned or controlled by the State declared to be

a. Coastal waters;

coastal property;

b. Land submerged by coastal waters, including-

g. reclaimed land;

i. Land flooded by coastal waters which subsequently

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

becomes part of the bed of coastal waters; and

a category mentioned in paragraphs a to g.

ii. The substrata beneath such land;

G. RECLAMATION OF LAND FOR STATE INFRASTRUTURE a) As mentioned above, the Bill introduces the concept of

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

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

the development of state infrastructure except where exceptional

According to the Bill, reclamation of land for state infrastructure

circumstances, which are not contrary to the purpose of coastal

can only be done after authorisation has been granted by the

public property, can be shown.

Minister of Environmental Affairs and Tourism after an application e) The Bill provides the Minister with the discretion to exempt

for such has been received.

in writing any person or group of persons or organ of state from b) The Bill requires that an application for reclamation must

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

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

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

through a Government Gazette.

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

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

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

state infrastructure vests in the organ of state applying for such

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

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

grant such.

the reclaim application is being made unless authorised otherwise by the Minister.

H. IMPACT ON THE COMMERCIAL PROPERTY SECTOR a) The reclamation provisions impact on the current and future

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

developments that other property owners have along the

developments have been established on historically reclaimed land

coastal areas;

which means further developments will be made on further reclamation.

SAPOA LEGAL UPDATE - report to members

JUDGEMENTS

Ratio decidendi/rationes decidendi The reason/ the rationale for the decision 33

SAPOA LEGAL UPDATE - report to members

JUDGMENTS COMPETITION TRIBUNAL SOUTH AFRICA 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.

COMPETITION TRIBUNAL DECISIONS 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

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

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

companies and trusts. The Zenprop Group property portfolio comprises

unconditionally approved the acquisition by Redefine Properties

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

Limited of 115 West Street in respect of the property letting

and hotel property sectors throughout South Africa.

enterprise known as Alexander Forbes Building. Proposed Transaction and Rationale 2) The reasons for approving the proposed transaction follow.

6) Redefine intends to acquire 50% of the undivided shares in Alexander Forbes Building located at 115 West Street Sandton, the

Parties to the transaction

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

3) The primary acquiring firm is Redefine Properties Limited (“Redefine”), a company listed on the Johannesburg Securities

7) Redefine has a strategy of acquiring high quality income

Exchange and not controlled by any firm. Its largest shareholders

producing assets located in primary investment markets. This

include State Street (custodian), Stanlib, Government Employees

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

Pension Fund, Investec and Investec Solutions.

enable the 115 West Street Trust and Zenprop to realise the value of Alexander Forbes building in favour of its beneficiaries. Similarly to

4) Redefine exercises control over Redefine International PLC,

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

Madison Property Fund Managers Ltd, Fountainhead Property Trust Management Limited, Fountainhead Property Administration (Pty) Ltd,

Relevant Market and Impact on Competition

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

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

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

property portfolio ranging of properties such as office, retail and industrial. It also owns rentable A-grade office properties located

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

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

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

surrounding areas.

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

9) The target firm owns Alexander Forbes Building which is

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

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

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

square metres.

SAPOA LEGAL UPDATE - report to members

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

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

the Sandton and Environs node.

constrain the merged entity in the event of price increase. They are also new developments in the area.

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

Conclusion

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

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

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

transaction is unlikely to substantially prevent or lessen

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

competition in the market for provision of rentable Grade A

Zenprop Property Holdings Ltd and Vunani.

office property. In addition, no public interest issues arise from the proposed transaction. Accordingly we approve the proposed

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

transaction unconditionally.

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

Competition Tribunal – Case Number 018523 In the matter between: 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

Approval

Business of Clariant provides water and wastewater treatment

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

products and associated services to industrial and municipal

unconditionally approved the merger between Improchem (Pty) Ltd

sector. The Water Treatment Business also produces chemicals

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

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

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

care industries.

2) The reasons for approving the proposed transaction follow.

5) Blendtech on the other hand is also fully active in all aspects of water and water waste treatment including raw and process water

Parties to transaction

treatment, drinking water production, and industrial applications

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

in boilers amongst others.

subsidiary of AECI Limited (“AECI”). AECI is a public company listed on the JSE Limited and offers products and services to the mining and

Proposed transaction and rationale

manufacturing sectors both locally and internationally. Improchem

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

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

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

water optimisation, total water management, hygiene and sanitation

Blendtech. Post transaction Improchem will therefore acquire sole

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

control over the Water Treatment business.

the municipal sector, in particular to the mining, municipal water treatment, food and beverages and oil refining sectors.

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

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

strategy of investing to facilitate its growth strategies, and will

subsidiary of Clariant Produkte (Deutschland) GmbH (Clariant

provide Improchem with an opportunity of accessing additional

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

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

SAPOA LEGAL UPDATE - report to members

JUDGMENTS hand submits that the proposed transaction will assist it to dispose

hearing the Commission submitted that their market shares were

of the water treatment market which is not core to Clairantâ&#x20AC;&#x2122;s

based on submission from market participants as there is no reliable

operations and business.

source in the market that calculates market shares in the identified product markets. After interaction with market participants, the

Competition assessment 8) The

proposed

transaction

Commission came to the conclusion that the estimated market results

two

horizontal

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

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

relevant product markets. Whilst the merging parties submitted

proposed transaction.

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

9) Both the Commission and merging parties agreed on two

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

relevant product markets to be the markets for industrial water and

not concerned with the high market shares that the merging parties

waste water treatment and the municipal water and waste water

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

treatment. The municipal segment specialises in treating portable

because they received their market shares from a market participant,

water and sewerage whilst the industrial segment specialises in

it is possible that the market participant might have overestimated

treating industrial affluent. Both the Commission and the merging

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

parties agreed on the relevant geographic market to be national

assured us that the markets are highly competitive and have various

since both services are offered throughout South Africa.

other players such as Buckman Laboratories, Nalco, Zeta Chem, Watercare Mining, and Process Water Chemicals inter alia.

10) During its investigation the Commission tried to ascertain whether the two relevant product markets did not constitute a

15) The Commissionâ&#x20AC;&#x2122;s interaction also revealed that none of the

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

market participants raised any concerns to the proposed transaction. One market participant even went further to submit that the

11) Market participants the Commission spoke to submitted that

transaction will about synergies that will benefit the customers.

the two sectors are different. Firstly the industrial segment is more service intensive, whilst the municipal segment is more focused on

Public Interest

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

16) During the Hearing the merging parties confirmed that the

requires constant servicing and on-site supervision whilst the

employees of Clariant will be absorbed into Improchem and thus

municipal segment requires no on-going servicing.

not job losses will result from the proposed transaction. We are thus satisfied that the proposed transaction will not have negative

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

impact on employment or any other public interest issue.

demand side substitutability between the two markets as the

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

water treatment needs of the municipal segment customer, mainly

substantially prevent or lessen competition in any relevant market.

requires water treatment for portable water whilst the industrial segment customer, requires water treatment to extract effluent.

Conclusion 18) I approve the merger unconditionally.

Market Shares 13) There was some discrepancy between the market shares submitted by the merging parties and the Commission. During the

SAPOA LEGAL UPDATE - report to members

JUDGMENTS SEARCH WARRANTS BY INSPECTORS: ESTATE AGENCIES Case No: CCT 94/13 Estate Agency Affairs Board and Auction Alliance (Pty) Ltd and others

Date of hearing: 18 November 2013

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

Date of judgment: 27 February 2014

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

(As reported by the Court for the Media) Before the Constitutional Court, the parties agreed that section 32A The Constitutional Court confirmed an order of the Western

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

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

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

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

contours and managing the consequences of the invalidity. In a

Intelligence Centre Act (FICA) unconstitutional and invalid.

unanimous judgment by Cameron J, the Constitutional Court held that the provisions unjustifiably infringe the right to privacy. Both

The Estate Agency Affairs Board is the primary regulator under the

provisions lack meaningful limits as to the locations and scope of

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

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

FICA compliance. The Board suspected that Auction Alliance had

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

not complied with both statutes. Relying on the search powers

not adequate to achieve the purposes of the statutes.

under the two statutes, inspectors tried to conduct a search of Auction Alliance’s business premises without a warrant. Auction

Accordingly, the Constitutional Court has confirmed the

Alliance refused them entry, and instead launched the current

declaration of invalidity in respect of both provisions. It stipulated

constitutional challenge.

that, consistent with past practice, the declarations of invalidity would operate only prospectively. The declarations have been

The High Court held both provisions unconstitutional because

suspended for 24 months, to allow the Legislature an opportunity

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

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

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

requirement into each provision and empowered magistrates and

without a warrant. The High Court declared the provisions invalid

judges to issue a warrant upon application by an inspector.

to that extent. The declaration of invalidity has immediate effect in relation to section 32A of the EAAA, but has been suspended

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

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

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

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

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

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

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

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

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

which it sought a warrant to inspect documents previously stored

SAPOA LEGAL UPDATE - report to members

JUDGMENTS B. FAILURE TO DESIGNATE AN AREA FOR INFORMAL TRADING 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

Date of hearing: 5 December 2013

subsequent interaction with the applicants the City conceded this

Date of order: 5 December 2013

flaw and offered an interim arrangement while it corrected the

Date of reasons for order: 4 April 2014

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

(As reported by the Court to the Media)

that the evictions must persist and that verified traders must settle for relocation to an unspecified area.

On 5 December 2013 the Constitutional Court heard two urgent

The applicants unsuccessfully instituted proceedings in the High

applications together. Both sought leave to appeal a decision

Court seeking urgent interim relief permitting them to return to

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

their trading locations pending a review of the lawfulness of the

This Court made an order granting leave to appeal, upholding

City’s conduct.

the appeal and setting the order of the High Court aside. It also ordered that, pending the determination of a review of

The Constitutional Court granted the applicants leave to appeal

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

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

was to remove the applicants from their trading locations, the

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

respondents are interdicted from interfering with the applicants’

suffer irreparable harm. The undisputed evidence showed that the

trading at the locations they occupied immediately before their

applicants and their families’ livelihood depended on their trading

removal between 30 September and 31 October 2013. A costs

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

order was also made against the respondents.

destitute and unable to provide for their families for over a month. Seeing that an application for leave to appeal to the High Court

Today the Court furnished reasons for this order.

would have been heard in February 2014 at the very earliest, the traders would not have been able to provide for their families until

The applicants represent informal traders who have been trading in

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

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

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

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

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

Trading By-laws. During October 2013 the applicants, who were allegedly authorised to trade informally, were removed from their

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

trading locations and had their goods impounded by City officials.

while the verification process was underway were to cause any

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

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

Clean Sweep initiative” aimed at ensuring that only traders legally

been temporary. The immediate and irreversible harm that the

entitled to trade in the inner city do so.

traders were facing rendered their application manifestly urgent and justified the interim relief which this Court granted.

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

SAPOA LEGAL UPDATE - report to members

JUDGMENTS TAX LAW Case CCT 56/13 [2013] ZACC 38 In the matter between: 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

Heard on:

12 September 2013

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

Decided on: 14 November 2013

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

(Extracts of the Judgment)

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

1) OCS imports and distributes bulk frozen foodstuffs and holds

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

licenses for storage warehouses (also known as customs bonded

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

warehouses or bond stores) in Muizenberg. SARS officials perform

terms of section 4 of the Customs and Excise Act.

routine inspections of OCS’s storage warehouses, at most annually, to monitor compliance with the Customs and Excise Act. Past

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

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

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

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

respondents before this Court and several SARS officials. They

employees or officers.

sought declarators that the searches and seizures were unlawful and that section 4 of the Customs and Excise Act is inconsistent

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

with the Constitution and invalid to the extent that it permits

instituted motion proceedings against OCS claiming the return

targeted, non-routine enforcement searches to be concluded

of consignments of skim milk powder sold to OCS, alternatively

without a warrant.

payment of the purchase price. SVD served a copy of the application on SARS. SARS compared the invoices attached to the application

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

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

the Customs and Excise Act is unconstitutional and contended,

customs duty. The prices on the SVD invoices were substantially

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

higher than what was reflected on the submission to SARS.

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

This discrepancy led SARS to suspect that OCS had fraudulently

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

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

unconstitutional should not be retrospective and that it should be

SARS decided to search the premises of OCS.

suspended to afford the Legislature an opportunity to correct the defect. SARS also denied that the searched had been conducted in

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

an unlawful manner.

searched OCS’s Muizenberg premises. When they arrived on the first day, they gave Mr Gaertner to understand that they were there

Discussion

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

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

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

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

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

issues for determination are:

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

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

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

unconstitutional and thus invalid:

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

i. Do they limit the right to privacy; and

SAPOA LEGAL UPDATE - report to members

JUDGMENTS ii. If they do, is the limitation justified?

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

the declaration of invalidity be retrospective?

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

c. Should the declaration of invalidity be suspended pending

1964 made by the Western Cape High Court is confirmed.

correction of the defect?

9) The declaration of invalidity is not retrospective.

d. How long should the period of suspension be?

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

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

an opportunity to cure the invalidity.

a remedy in the interim?

Order

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

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