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The Constitutional Court recently came to the assistance of a mining company that was being bullied by the Sol Plaatje Municipality, based in Kimberley in the Northern Cape, by charging it exponentially more than other industrial clients for property rates.
However, the order only pertains to a specific period, and mining companies that were equally prejudiced in subsequent years may have to approach the court again to have those tariffs set aside, says Ben Espach, director at Rates Watch.
Rates ratios
The matter between Ekapa Minerals, a company that reworks the tailings on old mines where new technology enables it to find diamonds still left after earlier mining operations, and the Sol Plaatje Municipality dates back to 2019 when Ekapa says it first became aware of the exorbitant rates it was being charged.
The court explains: “The manner in which such rates are calculated is based on the market value of the property. All rates ratios in respect of the various categories of properties are calculated in relation to the ‘residential property’ rate which is used by the municipality as a benchmark.”
In this case, the Sol Plaatje ratio for property used for mining was 1:22 and this applied from 2014/15 to 2020/21. For industrial properties, the ratio was 1:3.
That meant that the owner of a mining property valued at R1 million would have been billed more than R195 000 per year or R16 300 per month in 2014/15. In comparison, during the same financial year, the owner of an industrial property of equal value would have been billed R32 600 per annum, or the equivalent of R2 700 per month.
In mid-2019, Ekapa raised an objection with the council, complaining that the rates were excessive. Eventually, it approached the high court, where it stated that, according to its own investigations into rates levied on mining properties by 10 other municipalities, such rates varied from 1:1.09 to 1:3.6.
On that basis, Ekapa unilaterally proclaimed that a rate of 1:3 was not unreasonable in the Kimberley area and proceeded to pay accordingly.
The difference between what it paid and what it was billed stood at R30 million when the court proceedings commenced.
Ekapa asked the high court to review and set aside the decisions of the council that set the rates ratio for mining property at 1:22 without indicating what an appropriate ratio would be.
It argued that the gap between the residential and mining tariffs (1:22) was unlawful, irrational, and unreasonable. It offended the constitutional doctrine of legality and was non-compliant with legislation and a guideline issued by the Department of Cooperative Governance and Traditional Affairs (Cogta).
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Ekapa further stated that the extremely high rates would create an unreasonable financial burden on it, which would impact its profitability, result in the loss of employment, and adversely affect the businesses of certain of its service providers. Ekapa stressed that its diamond mining operations were essential to South Africa’s export market and job creation in general.
Rates ratio differentiation ‘unreasonable’
The municipality raised technical arguments and said that the levying of property rates concerns political and intergovernmental issues that are outside the expertise of courts.
In September 2022, the high court found in favour of Ekapa that “there was a striking differentiation in the rates ratio applicable to the various categories of non-residential properties and that, on the face of it, this differentiation was unreasonable”.
It set aside the six council decisions pertaining to the ratio applicable to mining property.
Because Ekapa only brought the application years after the council first decided on this ratio, the court ruled that setting aside the decisions could have a disruptive effect on the municipality if applied retrospectively.
Click here to read the full article on Moneyweb.