It was recently reported that the City of Johannesburg aims to start charging a one-off levy on property developers in order to fund increased infrastructure demands that arise from new developments.
The Johannesburg City Council recently replied to a statement by the SA Property Owners Association (SAPOA) which raised concerns as to the implementation of the “once-off” development levy, and said that such a levy is necessary to fund the rising costs in upgrading the current municipal infrastructure necessary to support such development and to avoid overburdening ratepayers.
According to SAPOA, the City however does not have the legal authority to implement such a levy, seeing that the Fiscal Powers Amendment Bill has yet to be implemented by Parliament. Secondly, they stated that Developers will, in effect, be paying double charges as they will be funding external infrastructure already paid for by other financiers, developers, ratepayers. SAPOA has warned that the illegal implementation of such a levy may scare away much needed investors in the City’s new Developments and went so far as to advise potential investors to withhold their investments until the issue has been resolved.
The City reacted by stating that it will nevertheless proceed to implement such a policy and withhold approval should a Developer not pay such a levy.
Although Section 229(1)(b) of the Constitution does allow a Municipality to charge levies on property and developments, it clearly states that it must be authorised by national legislation to do so before proceeding. It is unclear which authority the City will rely upon should the issue go to Court. It is also not clear if imposing such a levy is in line with current national economic policy, especially in light of the fact that the struggling South African Economy is desperately trying to recover after the COVID-19 lockdowns and the effects of the current conflict in Eastern Europe.
