sapoa legal update report
DESCRIPTION
The South African Property Owners Association, is a non profit organisation that lobbies and speaks out for the commercial property industry in South Africa - The legal update report to its members helps keep those associated with the industry up to date with relevant legal issues that may affect their businesses.TRANSCRIPT
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SAPOA LEGAL UPDATE - report to members
LEGAL UPDATEREPORT TO
SAPOA MEMBERS
Volume 2
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SAPOA LEGAL UPDATE - report to members
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.
www.sapoa.org.za
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SAPOA LEGAL UPDATE - report to members
Contents
1. EXECUTIVE SUMMARY 32. LEGISLATION 52.1. Promotion and Protection of Investments Bill 62.2. Spatial Planning Land Use Management Act, 2013 72.3. Expropriation Bill, 2013 72.4. Infrastructure Development Bill, 2013 72.5. Gauteng Planning and Development Bill, 2013 72.6. Mpumalanga Planning and Development Bill, 2013 82.7. Western Province Spatial Planning Land Use Management Bill, 2013 82.8. Property Practitioners Bill 82.9. Property Valuations Bill, 2013 92.10. The Housing Consumers Protection Measures Amendment Bill 92.11. The Deeds Registries Amendment Bill 92.12. Special Economic Zones Bill 102.13. Tobacco Products Control Act No. 83 of 1993 102.14. Environmental Impact Assessment Regulations 102.15. Carbon Tax Policy 112.16. Suspension of Liquor Regulation 21 Notice 112.17. Transition Period for Compliance with the New BEE Codes 12
3. MUNICIPAL LAW 133.1. The Rates Act 143.2. Draft Rates Policies 2014/2015 Financial Year 14
4. RESEARCH 194.1. Property Rates in South Africa 204.2. The Role and Impact of the Commercial Property Sector in the Western Cape Province Economy 204.3. Financial Intermediary Centre (FIC) Guidelines 214.4. Business Rescue – Companies Act No. 68 of 2008 224.5. Standard Agreements 224.6. Lease Agreement Workshops 224.7. Determination of Thresholds 224.8. Protection of Personal Information 23
5. ADVOCACY AND LOBBYING 255.1. Illegal Land Use 265.2. Mpumalanga Services Appeal Board 275.3. National Department of Agriculture and Act No. 70 of 1970 285.4. South African Cities Network 28
6. LEGAL OPINIONS 296.1. National Environmental Management: Integrated Coastal Management Act 30
7. JUDGEMENTS 33
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The Department is responsible for legal advocacy which is
fundamental in ensuring SAPOA actively participates in policy for-
mulation and enactment of laws affecting the property sector in
South Africa. Monitoring, analysis and submission of formal com-
ments on published relevant and pertinent Acts of Parliament,
Green and White Papers, Municipal Ordinances and Policies having
an impact on the property industry is one of the strategic focuses.
Strategic and collaborative relationships are initiated and/or
cemented, where relevant and pragmatic, with other stakeholders
in the property industry which includes engagement with govern-
ment departments, state-owned entities, organs of the state and
municipalities.
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 objec-
tive that is supported by the rules and provisions regulating SAPOA’s
Legal Advocacy Fund.
Research is a fundamental tool that SAPOA recognises and utilises
to investigate a multiplicity of issues with the intention to increasing
the institutional and sectoral knowledge relating to the industry, to
formulate and determine best practice and guidelines for the use of
the members and also as a negotiating tool to be used in positively
influencing and changing the commercial property landscape, prac-
tices and direction thereof for the attainment of global best practice.
Our researches are cognisant of the need of ensuring the growth,
sustainability and profitability of the commercial property sector
within less protracted public sector environment.
Legal Advisory services are provided to internal departments and
further to members of SAPOA. Compliance remain key in ensuring
SAPOA complies with the legal prescripts of various legislation.
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.
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Da mihi factum, dabo tibi iusGive me the fact; I will give you the law
LeGIsLAtIon
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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
in November 2013 and was open for public comment until January
2014. Government response to the comments and an amended
Investment Bill must be anticipated. Seeing that the government
has rejected the more trenchant comments on the Investment Bill,
it is unlikely that the overall scheme of the Investment Bill will be
changed materially.
ii. The primary purpose of the Bill is to provide a legislative
framework for all investments including foreign investments. The
intention is to put local investors on the same footing as foreign
investors who were previously disadvantaged under the Bilateral
Investment Treaties and, within rational legislative limits to give
equal treatment to foreign investors
iii. The Bill applies to:
a) Investments made for commercial or business purposes.
b) Material economic investments or a significant underlying
physical presence in South Africa such as operational facilities
iv. It is correct that there is no way of knowing where the threshold is
in regard to what is a material economic investment or a significant
physical presence in South Africa.
v. Much of the criticism has emanated from or in relation to
jurisdictions that have or previously had bilateral investment treaties
(BITs) with South Africa which have been or will be terminated.
Foreign investors in those jurisdictions will in some respects be
worse. There are those who believe the foreign investors will be
placed on the same footing as South African investors. It is an opinion
that those foreign investors that enjoyed the jurisdiction of BITs will
be placed on the same footing as foreign investors in jurisdictions
which do not have BITs, notably major sources of foreign investment
such as USA, Japan and India. Whether it is an ideal situation, it is
believed that the Bill will ensure that all investors will have all the
advantages and disadvantages of domestic South African `.
vi. The major issues are:
a) The scope of the law and what is an “investment”
b) The right to fair and equitable treatment
c) Expropriation and compensation
d) The right of establishment
e) Dispute resolution
f) Security of investments
g) Funds transfer.
vii. There are many concepts in the Investment Bill which are
open-ended. It uses concepts such as “public interest”, “commercial
purposes” and “public welfare objectives”. It is seldom helpful to
try to define terms like “material”, “significant” or “public interest”.
It is not possible to craft a definition that is satisfactorily for all
the circumstances under which all these issues will be decided. It
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
if necessary.
viii. In addition, any government decision is subject to challenge
in terms of the Promotion of Administrative Justice Investment Act
which requires rational decisions on rational grounds and subject
to challenge on the principles of legality and a rule of law review
by the courts. The exercise of public power must comply with
the Constitution, which is the supreme law and legality requires
decision-makers to act in accordance with the empowering statutes.
ix. Some of the overseas criticism has been premised on a suggestion
that there may be lack of transparency, efficiency or independence
of local judicial and arbitration institutions. There is no justification
for that criticism. To the extent that there is always home-ground
advantage in any dispute resolution proceedings, this is better that a
bias towards the commercial interests of foreign investors that may
be shown by an international arbitration body.
x. In addition, the Bill must be interpreted with due regard to the
Constitution, international law consistent with the Constitution,
customary international laws consistent with the Constitution and
any relevant convention or international agreement to which South
Africa is a party. It does not stand in isolation.
xi. This Bill entitles the government to take steps in relation to
taxation, customs unions, free trade areas, common markets and
similar international agreements or arrangements. It seems that this
does little more than to protect things which are already protected
under international law. It is accepted that countries are entitled
to govern their own taxation, subsidy and procurement processes
without foreign interference provided that they are constitutionally
valid laws of general application.
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LeGIsLAtIon
B. sPAtIAL PLAnnInG LAnD Use MAnAGeMent ACt, 2013 – 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
in 2013 and its purpose is amongst others to provide a framework for
spatial planning and land use management in the Republic of South
Africa; to specify the relationship between the spatial planning and
the land use management system and other kinds of planning and
to provide for the inclusive, developmental, equitable and efficient
spatial planning at the different spheres of government. It further
intends to provide a framework for the monitoring, coordination
and review of the spatial planning and land use management
system and to provide a framework for policies, principles,
norms and standards for spatial development planning and land
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
submitted comments on the Bill on 30 April 2013. The Bill provides
for expropriation of property for a public purpose or in the public
interest subject to compensation which is just and equitable and
reflects an equitable balance between the public interest and the
interests of those affected; and respect of the rights of everyone
including the rights to equality and to administrative action that is
lawful, reasonable and procedurally fair. The Bill has not been tabled
before Parliament.
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
seeks, amongst others, to provide for facilitation and co-ordination of
infrastructure development which is of significant economic impact
or social importance to the Republic; eensure that infrastructure
development in the Republic is given priority in planning, approval
and implementation; and to ensure the development goals of the
State are promoted through infrastructure development. The Bill
further seeks to empower the Commission to determine and develop
infrastructure priorities, designate strategic infrastructure projects
(SIPs) and ensure that infrastructure development in respect of any
SIPs is given priority in planning, approval and implementation.
Once a project qualifies as a SIP, the Minister designates the project
as such by publishing a notice in the government gazette.
The Infrastructure Development Act No 23 of 2014 was assented to
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
public comment in 2013. As reported in the last Legal Update
Report, 2013, SAPOA submitted formal comments on 1 April 2013.
The broad legislative objectives of the Bill are to provide for the
planning and development of land use in the Province; to provide
for provincial planning and the coordination of national, provincial
and municipal land use and development policies; to provide for
the land use planning functions of the Province and the process
of provincial planning : to provide for land use schemes in the
management of land use by municipalities; and to provide for
the regulation of municipal land use and the establishment of a
municipal appeal tribunal.
The final approved Bill is being awaited.
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LeGIsLAtIon
F. MPUMALAnGA PLAnnInG AnD DeVeLoPMent BILL – PRoPeRtY DeVeLoPeRs AnD BUILDeRs
The Act affects Property Developers and Property Owners
The Mpumalanga Planning and Development Bill was published
for public comment during April 2013 and its legislative objective
mirrors the objectives of the Gauteng Planning and Development
Bill which must all be aligned to the SPLUMA.
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.
The Bill intends to establish a system for provincial spatial planning
and development management in the Western Cape Province and
further to consolidate legislation in the Province pertaining to
provincial planning, regional planning and development, urban and
rural development.
The Bill further intends to establish and enforce legal measures
essential to orderly coordinated spatial planning and development
management while also promoting integrated social and economic
development. Key also is for the Bill to provide for binding spatial
development frameworks in the province. The drafters of the Bill
opted to be more detailed by stating that the Bill must provide
for implementation of provincial environmental, housing, nature
conservation, tourism, agricultural, transport and economic
development policy and measures.
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
provided to SAPOA, at SAPOA’s request, to ensure that it can be
studied internally and initial comments provided to the Department.
The objects of this Bill are to assist in providing a just and equitable
legal framework for the marketing, managing, financing, letting,
renting, sale and purchase of property; ensure fairness and efficiency
in the property market; assist in protecting and promoting the
interests of consumers; provide a framework for the licensing of
property practitioners; regulate the conduct of persons involved
in the financing, marketing, managing, letting, hiring, sale and
purchase of property not regulated in other law; and regulate the
education, training and development of property practitioners.
The Estate Agency Affairs Act, 1976 is the current legal framework
within the estate agents and the industry is being regulated. The
Act, which is under the Minister of National Department of Human
Settlements, is in the process of being reviewed or repealed. The Bill
was withdrawn from National Assembly.
SAPOA was advised that the Bill is likely to be published in June
2014.
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I. PRoPeRtY VALUAtIon BILL
The Act affects Property Developers and Property Owners
The Property Valuations Bill is one of the Bills that emanates from
the Green Paper on Land Rural Development and Land Reform.
Accompanying it in its policy endeavours is the Restitution of Land
Rights Amendment Bill, 2013.
The Property Valuation Bill seeks to achieve the following objectives:
a. to give effect to the provisions of the Constitution which provide
for land reform and the facilitation of land reform through the
valuation of property in order to determine the purchase price for
or payment in respect of property;
b. to provide for the establishment of the Office of the Valuer
General;
c. to provide a valuation service to departments , organs of state and
to municipalities;
d. to provide for a review mechanism.
SAPOA submitted formal comments on 23 June 2013.
The Property Valuation Act No. 17 of 2014 was assented to on 1
July 2014.
LeGIsLAtIon
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
Measures Act No. 95 of 1998 was finalised by the National Home
Builders Registration Council (NHBRC) in August 2011 and was due
for the Ministerial legislative process with the National Department
of Human Settlements. A copy of the first draft was provided to
SAPOA members who represent SAPOA on the NHBRC’s Industry
Advisory Committee.
The industry will wait for the publication of the White Paper which
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
Promotion of Administrative Justice Act (PAJA) principles. PAJA
recognises an act or failure to act by an organ of state as an
administrative action. It further requires that any administrative
action taken must be transparent, reasonable, just and equitable.
The Bill provides that rectification of title is required in respect of
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
under the Land Survey Act, [1927] 1997, the registrar may, on
written application by the owner of the land accompanied by the
title deed and the new or the corrected diagram thereof, any bond
thereon and any registered deed of lease or other registered deed
whereby any real right therein is held by any other person and the
written consent of the holder of such bond, lease or right, endorse
on the aforesaid deed a description of the land according to the
new or corrected diagram, which description shall supersede the
description already appearing in the aforesaid deeds.
The Deeds Registries Amendment Act No. 34 of 2013 was assented
to on 13 December 2013.
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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
development zone (IDZ) programme, initiated in 2000. Four IDZs
were established to boost investment, growth, employment and skills
development. Each needed access to an international port or airport
and the potential for export-orientated production. They were in Coega
in Port Elizabeth, East London, Richards Bay and OR Tambo International
Airport. The benefits of the establishment were the network of quality
infrastructure, expedited customs procedures and duty-free operations.
The Department of Trade and Industry then issued Policy Notice No.
34968 under Government Gazette Number 10505 which relates to
Special Economic Zones intended to continue to foster government’s
efforts to create employment and economic growth by establishing
a strong industrial base in South Africa. Special Economic Zone
(SEZ) is defined as “geographically designated areas of a country set
aside for specifically targeted economic activities, which are then
supported through special arrangements (which may include laws)
and support systems promote industrial development.
The Policy further recognises SEZ’s programme as one of the most
critical instruments that can be used to advance government’s
strategic objectives of industrialisation, regional development and
job creation. The programme further aims to assist in improving
the attractiveness of South Africa as a destination for foreign direct
investments and export of value added commodities.
The Special Economic Zones Act No 16 of 2014 was assented to on
19 May 2014.
LeGIsLAtIon
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
called for public comment. The regulations were made in terms of
section 2 and (4) of the Tobacco Products Control Act No.83 of 1993.
The Preamble of the Tobacco Products Control Act, acknowledges
that tobacco use is extremely injurious to the health of smokers
and non-smokers and considers that the extent of the harmful
effects of the use of tobacco products on health calls for strong
action to deter people from using tobacco products and to protect
non- smokers from exposure to tobacco smoke and to encourage
existing users of tobacco products to quit. Further, it resolves to
align the health system with democratic values of the constitution
and the World Health Organization’s Framework Convention on
Tobacco Control (Convention), to which South Africa is a party and
a signatory.
The principles of the Convention dictate that, effective measures
should be applied to provide protection from exposure to tobacco
smoke as there is no safe level of exposure, all people should be
protected from exposure, all indoor workplaces and indoor public
places should be smoke free and legislation is necessary to protect
people from exposure to tobacco smoke. It states further, that no
objections are justified on the basis of health or law arguments and
that there is no trade-off between health and economics.
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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o. CARBon tAX PoLICY
The Act affects Property Developers and Property Owners
a. First, carbon pricing will encourage a shift in production and
consumption patterns towards low carbon and more energy efficient
technologies by altering the relative prices of goods and services
based on their emissions intensity and encouraging the uptake of
cost effective, low carbon alternatives. Pricing carbon emissions
addresses the problem of negative externalities, as polluters should
pay for their emissions.
b. Second, carbon intensive factors of production, products
and services are likely to be replaced with low carbon emitting
alternatives. To achieve the extent of emission reductions committed
to in Copenhagen, the production technologies will need to
become less carbon intensive and/or the consumption of certain
carbon intensive products such as cement, steel, and aluminium will
need to be reduced. Given that these industries are important with
respect to the country’s proposed infrastructure build programme
appropriate policies are required to ensure mitigation and adaption
strategies are taken into account in investment decisions that have
long term lock-in effects.
c. Third, a carbon price will create dynamic incentives for research,
development and technology innovation in low carbon alternatives.
It will help to reduce the price gap between conventional, carbon
intensive technologies and new low carbon alternatives.
The implementation of the Carbon Tax Policy has now been
postponed to 2016.
LeGIsLAtIon
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:
P. sUsPensIon oF LIQUoR ReGULAtIon 21 notICe
The Act affects Property Developers and Property Owners
The Minister of Trade and Industry has suspended the
implementation of Regulation 21 of the Liquor Amendment
Regulations 2013. The implementation of this regulation, which is
about trading hours, will take place nine months after the date of
the attached notice, which is 11 April 2014. The Liquor Amendment
Regulations were promulgated on 3 December 2013 and Regulation
21 requires distribution activities to take place between 09:00 and
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
the transitional period for the recently revised Broad-Based Black
Economic Empowerment (B-BBEE) Codes of Good Practice to end
April 2015
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Da mihi factum, dabo tibi iusGive me the fact; I will give you the law
MUnICIPAL LAW
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PRoPeRtY RAtes FoR tHe 2014/2015 FInAnCIAL YeAR
The Rates Act
The Rates Act gives Council the discretion to levy an additional rate
on property in a special rating area and, in doing so, may differentiate
between categories of property. This discretion is provided for in
section 22 of the Act. The Rates Act is emphatic on the need for
all persons liable for rates to be treated equitably as required by
the Act. What is noteworthy is that the preamble to the Rates Act
provides that the Constitution enjoins local government to be
developmental in nature, in addressing the service delivery priorities
of our country and promoting the economic and financial viability
of municipalities. It is further stated that there is a need to provide
local government with access to a sufficient and buoyant source of
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
annual budget process as set out in Chapter 4 of the Municipal
Finance Management Act No. 1 of 1999. A municipality must annually
at the time of its budget process, review the amount in the Rand of its
current rates in line with its annual budget for the next financial year.
The interpretation of the subsection (1) and (2) of section 12, read
together with the definition of “rateable property” implies that
each year a municipality must determine and review the amount
in the Rand of its current rates. This seems to imply that the rate
automatically lapses at the end of financial year, i.e. 30 June of each
year. This interpretation is supported by section 13 (1) of the Rates
Act that provides that a rate becomes payable as from the start of a
financial year or if the municipality’s annual budget is not approved
by the start of the financial year, as from such later date when the
municipality’s annual budget, including a resolution levying rates, is
approved by the provincial executive.
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.
MUnICIPAL LAW
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
DRAFt RAtes PoLICIes 2014/2015 FInAnCIAL YeAR
Rates Watch (Pty) Ltd was appointed in February 2014 to analyse
and review, on behalf of SAPOA, the municipal budgets and
rates policies.
The brief was as follows:
u identify, analyse and conduct research into all applicable and relevant
policies and legislation, draft and approved budgets and any other
relevant sources of information relating to the reviewing and analysis of
budgets and rates policies of the all the metropolitan municipalities as
well as the local municipalities of Msunduzi, Polokwane and Mbombela.
u address all the aspects of the Medium Term Revenue and
Expenditure Framework that have a direct impact on the property
owner and ratepayer. The following aspects, if directly linked to
property, will be included:
a. Projects;
b. Tariffs such as Property rates, Electricity, Water, Sewer and Waste
management
u make evident the increase in relation to the previous year and
comment on the compliance of the new tariff with legislation or
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
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SAPOA LEGAL UPDATE - report to members
other requirements. If abnormal increases can be linked to specific
projects or activities it will be shown.
u analyse the sample accounts reflecting the cost of the basket
of municipal services which will be provided for business and
commercial and industrial properties for the following values:
a. R10 million
b. R50 million
c. R200 million
d. R1 billion
u Identify Aspects that require formal comments by SAPOA must
be identified.
u Review and analyse the rates policies and highlight changes
that will have an impact on the business, commercial, industrial
and residential sector; and identify aspects that require formal
comments by SAPOA
MUnICIPAL LAW
eXtRACts oF CoMMents: DRAFt RAtes PoLICIes 2014/2015
Polokwane Municipality
1. Definitions
1.1 Illegal Use
The definition should be expanded to ensure that all these
properties are identified.
The following wording is suggested:
“Illegal use” means a use that is inconsistent with or in
contravention with the permitted use of the property, including
advertising sign, in which event and without condoning the use
thereof the property will be valued in accordance with section
56(2)(b) & (c) of the Act.”
1.2 Property
Property is defined in the MPRA (Municipal Property Rates Act)
and this definition is in conflict with the MPRA.
The rates policy is subject to the MPRA and definitions may not
be amended.
This definition should be deleted or the definition as per MPRA
must be included in the policy.
1.3 Residential property
The inclusion of the remainders of townships in this
category is welcomed as it will reduce the holding costs for
township developers.
It is suggested that only vacant land in the remainder of a
township should qualify, therefore the word “vacant” should
be added.
Where buildings are constructed and used on the remainder of
a township, the category ‘properties used for multiple purposes’
are applicable.
1.4 Vacant Land
The changes to the definition are supported.
It is however suggested that the following wording be
considered:
“Vacant land” means land where no immovable
improvements have been erected or if erected such
improvements are valued at less than 10% of the market value
of land if vacant, excluding vacant land forming part of the
remainder of a township.”
2. Different categories of rateable property
2.1 Clause 5.2(d)
Provision should be made for farm properties used for industrial
purposes.
2.2 Clause 5.2(q)
There is a definition for ‘Public benefit organisation property’ in
the ratio regulation published on 10 March 2010.
It is suggested that the category be renamed to ‘Public benefit
organisation property’.
2.3 Clause 5.2(r)
The category should be renamed to ‘Illegal use’ to align it with
the definition.
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2.4 Clause 5.3(h)
The proposed ratio of 2.0 does not comply with the ratio
regulations and should be changed to 0.25.
2.5 Clause 5.2(l)
The increase in ratio from 2.0 to 4.5 cannot be supported.
Penalty rates on vacant land will not force development.
Development will be triggered if there is a demand for
the product.
The demand for accommodation by the homeless is a reality, but
this demand will not result in development by the private sector.
The demand is for subsidised housing which should be provided
by government.
The challenges with regard to vacant land will not be resolved
through high rates. The City of Polokwane and property owners
will have to take hands to address the problems.
2.6 Clause 5.3(o)
In The City of Johannesburg Metropolitan Municipality v
The Chairman of the Valuation Appeal Board for the City of
Johannesburg (282/2013)[2014] ZASCA 5 (12 March 2014) Judge
Leach said:
“[30] Not only would the interpretation now advanced by
the appellant be absurd for the reasons mentioned, but one
of the details that has to be recorded on the valuation roll
under s 48 is ‘the category determined in terms of section 8
in which the property falls’. Section 8(r) of course provides for
a category of ‘properties used for multiple purposes subject
to section 9’ (my emphasis) and, under s 45(1) of the Act,
the municipal valuer is required to carry out the valuation
of rateable property in accordance with the provisions of
the Act. This clearly makes s 9 applicable, at least in part, to
the compilation of the valuation roll. The obvious intention
is that where a property is used for multiple purposes, those
categories of use – in respect of which different rates are to be
applied under s 9(2)(c) – should be determined and recorded,
as should the values apportioned to each such category.
This is all to be done by the municipal valuer who is, after
all, the person possessed with the necessary skill, expertise
and experience to do so (which the municipal council lacks).
Moreover, although s 48(2) does not specifically state that the
market value apportioned between categories of use should
be recorded in instances of multiple use properties, the
provision in s 48(2)(g) that the valuation roll is to include ‘any
other prescribed particulars’ in addition to those specifically
mentioned, reinforces my conclusion that the Act, properly
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
municipal valuer compiling the valuation roll to determine
and record those uses and to apportion the market value of
the property between them. In the present case, this was not
done. The municipal valuer therefore incorrectly dismissed
the second respondent’s objection to the valuation roll and
the valuation appeal board correctly ordered that it should
be amended.”
Properties categorised as ‘properties used for multiple purposes’
must be rated as contemplated in section 9(2)(b) of the MPRA
and it is incorrect to determine a ratio for this category. Rates
must be levied according to the different purposes for which the
property is used.
The ratio must be 0.00.
2.7 Clause 5.3(r)
The high ratio for ‘Illegal use’ is supported and it is regarded as a
bold step to discourage the illegal use of properties. SAPOA will
assist the municipality to identify these properties.
3. Clause 8
3.1 Clause 8.11
It is technically not correct to list ‘Religious organisations’ under
clause 8.
Clause 8 deals with exemptions, rebates and reductions while
‘Religious organisations’ are excluded from rates.
Properties excluded from rates should be grouped under the
heading ‘Property excluded from rates’
3.2 Clause 8.15
Rebates for high value properties is welcomed.
The word ‘property’s’ could be deleted. The clause should read:
‘Properties used for business or industrial purposes whose
improved market value is R50,000,000 and above will receive a
rebate as determined by Council from time to time.’
MUnICIPAL LAW
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MUnICIPAL LAW
3.3 Clause 8.17
The clause should be reworded if it is the intention that properties
that are still part of the remainder of the township will receive
a rebate.
Suggested wording:
‘The remainder of a township will receive a rebate as determined
by Council from time to time.’
3.4 Clause 5.4
Properties used for multiple purposes
It is incorrect to determine a 1:2 ratio for this category as rates must
be levied on the values apportioned to the different purposes for
which the property is used (see section 9(2) of the MPRA). This
was confirmed by the Valuation Appeal Board (VAB) for the City
of Johannesburg. The decision was taken on review in the South
Gauteng High Court and the Court confirmed the decision of
the board.
The matter was recently heard in the Supreme Court of Appeal. The
appeal by the City of Johannesburg was dismissed with cost. The
original decision of the VAB was therefore confirmed.
Clause 5 of the current rates policy should be retained but the
words “is proposed” in the first sentence must be replaced with “will
Wbe applied”;
Places of worship
This category of properties is excluded in terms of section 17(1)(i) of
the MPRA and the ratio must be 1:0.
Categories of owners of property for purposes of exclusions,
exemptions, reductions and differential rating (clause 7)
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
or is a property category determined in clause 5.2. The council can
only determine other categories as part of the annual review process
of the rates policy
Exemptions, reductions and rebates (clause 8):
Relief measures must be enabled in the rates policy. It is not
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 clause 9.3 of the current policy, it must be included in this policy.
The previous policy made provision for:
a. Smallholdings –rebates based on the size;
b. Owners of business or industrial properties with a market
value in excess of R50,000,000;
c. Resorts on agricultural land;
d. Development land;
e. Private townships;
f. Sectional title schemes.
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
make them aware of the fact that they need to re-apply when
the new roll is implemented on 1 July 2014.
b. Do you have the capacity to deal with these applications?
c. Do you have a pro-forma application form?
iii. Municipal (clause 8.7)
The ratio for municipal properties is 0.00 (refer to clause 5.4),
does that not mean that all municipal properties are exempted?
iv. Public benefit organisations/Non-governmental
organisations and cultural organisations (clause 8.9)
The possible exemption of these organisations is commendable.
v. Religious organisations (clause 8.11)
The ratio for these properties must be 0.00 (refer to clause 5.4)
vi. Owners of properties used for bona fide farming
purposes (clause 8.14)
By referring to a differential rate the impression is created that
there will be a tariff for the owners of these properties. If that is
the case a separate property category must be created, but that
is not possible as this is a category of owners of property.
It is suggested that reference should be made to a rebate instead
of differential rate.
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
9(2) of the MPRA is applicable. Refer to comments on clause 5.4.
In addition in the recent judgment in the case “ The City of
Johannesburg Metropolitan Municipality v The Chairman of the
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Valuation Appeal Board for the City of Johannesburg (282/2013)
[2014] ZASCA 5 (12 March 2014)”, the panel ruled clearly that if
you have multipurpose properties, section 9(2) is applicable.
viii. Phasing in of certain areas (clause 12)
Phasing is no longer applicable and this clause could be deleted.
ix. The effective date of the rates policy (clause 13.3)
To avoid confusion the financial year should be stated which in
this instance is 1 July 2014
MUnICIPAL LAW
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ei incumbit probatio qui the onus of proving the fact rests upon a man
ReseARCH
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ReseARCH
A. PRoPeRtY RAtes In soUtH AFRICA
SAPOA jointly appointed Rates Watch (Pty) Ltd and Business
Enterprises to conduct research, produce empirical and credible
evidence that outlines the following:
a) The legislative intention of the Constitution of South Africa,
1996 (Act No. 108 of 1996) in as far as the power by municipalities
to impose property tax is concerned against the government’s
objective of playing a developmental and transformative role;
b) he purport and consequences of the Rates Act in an attempt to
discharge that power that is entrenched in the Constitution of South
Africa in as far as the correct determination and implementation of
property rates is concerned within the statutory limitation imposed
by section 229 (2) (a) of the Constitution.
c) The duty by municipalities to attend to the valuation of rateable
properties in their jurisdictions and to compile valuation rolls based
on the market value of the properties determined in accordance
with market conditions and the applicable law.
d) The determined, imposed and collected property rates for the
sector for the periods July 2008 – June 2009, July 2009 – June 2010,
July 2010 – June 2011, July 2011 – June 2012 and July 2012 – June
2013, the associated General and Supplementary Valuation Rolls
and the relevant approved valuation property rates ratios;
e) The amounts that were written off by the municipalities in
respect of residential and non-residential properties categories
for the research study periods (2008 – 2013) as reported in their
respective audited Annual Financial Reports. (The Revenue effort
of municipalities by showing whether or not there is consistent,
accurate and complete billing and full collection of taxes and charges
due from the residential and non-residential property sectors for the
periods July 2008 – June 2009, July 2009 – June 2010, July 2010 –
June 2011, July 2011 – June 2012 and July 2012 – June 2013).
f) An analysis, with case studies, of whether or not property rates
are correctly determined and imposed on the non-residential
property sector (commercial, retail and industrial) for the afore-said
5 (five) financial years;
g) An Assessment of the impact of property rates by taking into
accounts the funding models and requirements of the indicated
municipalities and the market values of properties and the impact
thereof on the operating costs of commercial property sector and
the future sustainability of the commercial property sector.
h) A Research Model that illustrates, amongst others, the impact
of property tax on the commercial property sector in as far as e.g.
affordability and sustainability of businesses are concerned within
their business models.
i) An indication of best international property tax models and a
baseline property tax increase rate must be indicated.
j) Recommendations must be given that can be utilized to influence
policy and/or administrative changes in as far as the determination
and imposition of property rates is concerned.
The results of the research were discussed at the 2014 SAPOA
Convention.
The South African Property Owners Association (SAPOA) undertook
a detailed investigation of the private property industry in the
Western Cape Province, with special reference made to the City of
Cape Town Metro. The report aims to contextualise the size and
quantity of the private property sector in the Western Cape to
provide a foundation for cost calculations related to application
and other administrative processing timeframes. Furthermore, the
report seeks to analyse development application case studies in
order to link processing timeframes to economic performance.
The study is envisioned to analyse the commercial private property
sector within the Western Cape Province. The City of Cape Town MM
is the capital of the Western Cape Province. An active commercial
property market and prominent economy are centred within Cape
Town therefore it is the centre of major economic growth and
expansion within the province.
The general research approach describes the basic methodology
implemented to measure the economic value of the private
commercial property sector of the Western Cape. In essence
all economic activity has to take place in a specific space, thus
all economic activities are related to property either directly or
indirectly. In order to measure the economic value of the private
commercial property industry the relevant activities within the
specific sectors needs to be identified and evaluated according to
specific analysis factors which complies with standard case practise
B. tHe RoLe AnD IMPACt oF tHe CoMMeRCIAL PRoPeRtY seCtoR In tHe WesteRn CAPe PRoVInCe
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ReseARCH
C. FInAnCIAL InteRMeDIARY CentRe (FIC) GUIDeLInes
for economic impact calculations. For the purpose of this report
only property-centred economic activities with a direct impact are
evaluated, in line with generic economic impact practises.
The directly impacting factors analysed are Gross Domestic Product
(GDP), direct employment and tax revenue generated by the private
commercial property sector in the Western Cape.
Tax refers to the level of tax revenue generated by the South African
Revenue Service (SARS). The tax calculations present tax income of
SARS and not the local municipal tax revenue.
The full Research will be available for release at the 2014 SAPOA
Convention.
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
1. 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.
2. 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.
3. 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.
4. 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.
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ReseARCH
SAPOA instructed a service provider to compile a manual on the FIC
Guidelines which should be customised to the commercial property
sector. The manual will be available before September 2014, and it
will be available for free to members. Non-members will be charged
a fee.
D. BUsIness ResCUe - CoMPAnIes ACt no. 68 oF 2008
e. stAnDARD AGReeMents
F. LeAse AGReeMent WoRKsHoPs
G. DeteRMInAtIon oF tHResHoLDs
The Companies Act of 2008b defines business rescue as
proceedings to facilitate the rehabilitation of a company that is
financially distressed by providing for the temporary supervision
of the company and of the management of its affairs, business
and property. It includes also a temporary moratorium on the
rights of claimants against the company or in respect of property
in its possession. Commonly understood, business rescue is
the development and implementation, if approved, of a plan
to rescue the company by restructuring its affairs, business,
property, debt and other liabilities, and equity in a manner that
maximises the likelihood of the company continuing in existence
on a solvent basis.
One of the most important factors that are being considered in
respect of business rescue proceedings is that the company must
be financially distressed which means that it should appear to be
reasonably unlikely that eh company will be able to pay all of its
debts as they become due and payable within the immediately
ensuing six months.
SAPOA will hold a breakfast session on Business Rescue again
during 2014. The Education department is currently confirming the
logistics. It was noted that the Business Rescue provisions are very
court driven and that the failure by business practitioners to follow
the correct procedures leaves the system open to abuse.
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.
The Education department of SAPOA is facilitating Lease
Agreements workshop throughout the country as it was well
received by members.
The SAPOA Legal Committee acknowledged the need for relevant
standard Notices, Agreements and “Clauses” in Agreements to
be generated for the benefit of SAPOA members. In this instance,
all categories of SAPOA membership should be considered. The
following manuals for the industry were recommended:
u Offer to lease
u Service level Agreements
u Lease for CPA tenants
u Fixed Term contracts notification (2 years)
u Frequently asked questions handbook
A meeting was held at the Department of Trade and Industry
(DTI) senior official to address the issue of filing notifications
in mergers and acquisition transactions. It was noted that
DTI has advised that they cannot make an exception for the
property industry.
SAPOA requested DTI to provide a copy of the submission that
was submitted to parliament when the Thresholds were increased
the previous time. DTI subsequently advised SAPOA that no was
submitted to parliament, and that the decision was taken by
the Commissioner.
In cognisance of the fact that most filing and notifications are not
rejected by the Competition Commissioner, and due to the high filing
fees that are being paid by property companies, SAPOA requested
information of the contribution amount that was paid in the last five
financial years by the property sector in respect of filing fees. The
DTI undertook to provide SAPOA with the requested report during
the month of May 2014. It was noted that the concern relating to
notification and filing of merger and acquisition transactions, is the
time delay.
It was agreed that for SAPOA to take the matter further to
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ReseARCH
H. PRoteCtIon oF PeRsonAL InFoRMAtIon – PoPI
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
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.
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Faciendum Something which is to be done
ADVoCACY AnD LoBBYInG
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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
that the municipality encounters when managing street trading
activities, hence the establishment of street trading task team.
Through monitoring processes by the municipality, there are
instances where traders are found selling illegal products. The
task teams then assists in advising and assisting on enforcement,
the approach and amongst others, to be taken regarding
contravention of the Municipal By-laws.
The duties of the task team include developing recommendations on
the processes and mechanisms for hawker management, identifying
and making recommendations on areas for trading purposes within
the city and to give advice on regulating hawker management.
Local Economic Development Forum
a) SAPOA is further a member of the Local Economic Development
(LED) Forum. LED is the process by which public, business and non-
governmental sector partners’ work collectively to create better
conditions for economic growth and employment generation. The aim
is to improve the quality of life for all. The LED Forum is also a platform
where the community (businesses, private organizations, government,
NGO’s, Traditional authorities) within the Municipality gather, with
an aim to share information and experiences, pool resources and
solve problems which come up in the course of implementing
LED projects.
b) Amongst other things, the forum seeks to encourage dialogue
on economic policies of Government between the Private sector,
Non-governmental organizations and academia.
c) The formulation of the Terms of References for the establishment
of LED Forum and championing of Local Economic Development is
supported by the following legislation:
a. The White Paper on Local Government (1998) clearly
explains that LED is about creating a platform and environment
where investment and entrepreneurship thrives. The White
Paper further states that: “Local Government is not directly
responsible for creating jobs. Rather, it is responsible for
taking active steps to ensure that the overall economic and
social conditions of the locality are conducive to the creation
of employment opportunities”.
b. The South African Constitution 1996 - Section 152 (1) spells
out the objects of local government as follows:
u to provide democratic and accountable government for
local communities,
u to promote social and economic development, and
u to encourage the involvement of communities and
community organizations in the matters of local government.
c. Section 153 states that: “A municipality must structure and
manage its administration; budgeting and planning processes
to give priority to the basic needs of the community and
to promote the social and economic development of the
community”. Local Economic Development (LED) and the
LED Forum thereof offers the local government, the private
sector, the not for profit sectors and the local community the
opportunity to work together to improve the local economy.
It aims to enhance competitiveness and thus encourage
sustainable growth that is inclusive.
d. The New Growth Path states that government should start by
identifying where employment creation is possible, both within
economic sectors as conventionally defined and in cross-cutting
activities. It then analyses the policies and institutional developments
required to take advantage of these opportunities. In essence, the
aim is to utilize our limited capital and capacity on activities that
maximize the creation of decent work opportunities. To that end,
we must use both macro and micro economic policies to create
a favourable overall environment and to support more labour-
absorbing activities. The main indicators of success will be jobs
(the number and quality of jobs created), growth (the rate, labour
intensity and composition of economic growth), equity (lower
income inequality and poverty) and environmental outcomes.
e. Accelerated Shared Growth Initiative of SA [2005] is a national
shared growth initiative which focuses on relative volatility of
the currency, the cost, efficiency and capacity of the national
logistics system; shortages of suitably skilled labor, and the
spatial distortions of apartheid affecting low-skilled labor
costs; barriers to entry, limits to competition and limited new
investment opportunities; the regulatory environment and the
burden on small and medium enterprises (SMEs) ;Deficiencies
in state organization, capacity and leadership.
f. The National Spatial Development Perspective (NSDP)
the framework which provide guidance for discussion on
the future development of the national spatial economy
by reflecting on localities of severe deprivation and need,
of resource potential, of infrastructure endowment and of
current and potential economic activity by describing the
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ADVoCACY AnD LoBBYInG
B. MPUMALAnGA seRVICes APPeAL BoARD
key social, economic and natural resource trends and issues
shaping the national geography.
g. The Limpopo Employment, Growth and Development Plan
(LEGDP)[2009 – 2011] requires the province to ensure more
inclusive economic growth, decent work and sustainable
livelihoods in order to reinforce decent employment and
income security and sustainable investment built with a
purpose of creating and improving industrial competitiveness.
h. The White Paper on Local Government [March 1998]
introduces the concept of ‘developmental local government’
which is defined as “Local government committed to working
with citizens and groups within the community to find
sustainable ways to meet their social, economic and material
needs, and improve the quality of their lives.”
i. The Provincial Spatial Development Framework [2007]
guides the spatial development of Limpopo. It includes the
preparation of plans that will guide the physical development
of the province.
j. The Municipal Finance Management Act [2003] the main
of the document is to regulate the budget process of the
municipality. It ensures that the municipal budget is open and
participatory and aligned to the IDP.
k. Municipal Systems Act 32 Of 2003 provides for the core
principles, mechanisms and processes that are 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
affordable to all; to define the legal nature of a municipality
as including the local community within the municipal area,
working in partnership with the municipality’s political and
administrative structures; to provide for the manner in which
municipal powers and functions are exercised and performed.
Illegal Land Use
Polokwane Regional Council raised concerns in 2013 about
illegal land use within the municipality. The concern essentially
referred to the failure by property owners to comply with land
use management policies and laws of the City. This relates to
the following:
a. The manner in which land is accessed and acquired;
b. The process by which individuals, households and communities
continue to have and hold rights to land;
c. The way in which land use is regulated;
d. The systems by which land is developed; and
e. How land is traded.
SAPOA has been provided with a list of compliance notices that
have been sent out to illegal occupants of land by the City. This
list was reconciled with the list of illegal land occupants that was
provided by the SAPOA Limpopo Regional Council. Only two
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
requesting that the list of properties given to them by SAPOA be
attended to on an urgent basis.
The Office of the Public Protector reported SAPOA’s complaint
to the Department of Agriculture, Rural Development and Land
Administration in respect of the failure to appoint the Services
Appeal Board.. A response from the Department was received from
the Public Protector in which the following is stated:
u The Services Appeals Board is appointed in terms of the
Town Planning and Townships Ordinance, 1986. Due to that fact,
appeals of this nature has never been lodged in Mpumalanga,
such a Board was never established. In other provinces the matter
is also dealt with on an ad hoc basis.
u The function has now been moved to COGTA and ll
indications are that the matter will be advertised early May 2014.
Nominations will then be evaluated and names will be presented
to the Executive Council for appointment.
SAPOA Head Office sent an e-mail to the office of the Public
Protector noting its concerns about the lack of notification of any
advertisement relating to the Service Appeal Board. It is our belief
that sufficient time until 21 May 2014 has been granted to the
Department to determine if any advertisement was published.
The Public Protector advised SAPOA on 21 May 2014 that Mr.
Kleynhans has indicated that his section was transferred to
COGTA so he is still handling the matter from the Department
of Agriculture. He reports that the advertisement is ready and
should be published within the next two weeks. The reason for
the delay is that they have to sort out budgetary issues which
ensued from the transfer of the unit to COGTA.
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C. nAtIonAL DePARtMent oF AGRICULtURe AnD ACt 70 oF 1970 (tURn ARoUnD tIMes – APPRoVALs oF sUB-DIVIsIon AnD Consent LetteRs)
ADVoCACY AnD LoBBYInG
Introduction
a) Act 70 of 1970 relates to agricultural land which is any land
except land situated in the area of jurisdiction of example a
municipal council, City council; Town council; Village council;
Village management board; Village management council; Local
board; Health board or health committee and Land forming
part of, in the province of Cape of Good Hope etc. but excluding
such land declared by the Minister after consultation with the
executive committee concerned and by notice in the Gazette to be
agricultural land for the purposes of the Act.
b) This also excludes land which forms part of any area subdivided
in terms of the Agricultural Holdings (Transvaal) Registration
Act, 1919 (Act No. 22 of 1919) or which is a township as defined
in section 102 (1) of the Deeds Registries Act, 1937 (Act No. 47 of
1937) but excluding a private township as defined in section 1 of
the Town Planning Ordinance of 1949 of Natal, not situated in an
areas of jurisdiction or a development area.
c) It is noted that a Surveyor-General shall only approve a general
plan or diagram relating to a subdivision of agricultural land, and
a Registrar of Deeds shall only register the vesting of an undivided
share in agricultural land or a part of any such share or a lease
or if applicable, a right referred to in section 3 (b0 in respect of a
portion of agricultural land, if the written consent of the Minister
in terms of the Act has been submitted to him.
It should be noted that the whole of this Act has been repealed by
section 1 of the Subdivision of Agricultural Land Act Repeal Act 64
of 1998, a provision which will come into operation on a date to be
proclaimed by the President by proclamation in the Gazette.
D. soUtH AFRICAn CItIes netWoRK
SAPOA and SACN renewed for three years (2014 – 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
a) SAPOA participated in a Spatial Planning Conference that
was held in March 2014 which was organized by the City of
Johannesburg and SACN. SAPOA was represented by Andrew
Barker, an experienced town planner to highlight the challenges
relating to the Integrated Development Plan for the City
of Johannesburg.
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.
c) The State of the Cities Report (SoCR) is a flagship project of the
SACN which provides an analysis of performance by the cities
in South Africa to enable informed decision-making in urban
management and development.
d) SACN is preparing the next edition of the SoCR for publication
in 2016.
e) The Reference Group has the responsibility of guiding and
reviewing the production of the SoCR IV towards ensuring
its success.
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secus The legal position is different,
it is otherwise
LeGAL oPInIons
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LeGAL oPInIons
A. nAtIonAL enVIRonMentAL MAnAGeMent: InteGRAteD CoAstAL MAnAGeMent ACt
B. PURPose oF tHe AMenDMent BILL
C. tHe ConstItUtIon
D. tHe 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.
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”).
(a) Section 24 of the Constitution provides that “everyone has the
right to an environment that is not harmful to their health or well-
being; and to have the environment protected, for the benefit of
present and future generations, through reasonable legislative
and other measures that –
i) Prevent pollution and ecological degradation;
ii) Promote conversation; and
iii) Secure ecologically sustainable development and use of
natural resources while promoting justifiable economic and
social development.”
(b) Section 44 (2) thereof states that Parliament may intervene, by
passing legislation in accordance with section 76 (1), with regard
to a mater falling within a functional areas listed in Schedule 5,
when it is necessary to maintain national security; to maintain
economic unity; to maintain essential national standards; to
establish minimum standards for the rendering of services
Or
To prevent unreasonable action taken by a province this is
prejudicial to the interest of another province or the country as
a whole.
(a) The “Act” was passed as law for the purpose of establishing a
system of integrated coastal and estuarine management in the
Republic of South Africa, including norms, standards and po0licies, in
order to promote the conservation of the coastal environment, and
maintain the natural attributes of coastal landscapes and seascapes.
(b) The “Act” further seeks to ensure that development and the
use of natural resources within the coastal zone is socially and
economically justifiable and ecologically sustainable.
(c) It further seeks to define rights and duties in relation to coastal
areas and to prohibit incineration at sea.
(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.
Objects of the Act
The objects of the “Act” bring clarity to the intention of the
legislators in passing it. Some of the objects thereof are:
u to determine the coastal zone of the Republic; top preserve,
protect, extend and enhance the status of coastal public property
as being held in trust by the State on behalf of all South Africans,
including future generations; and
u to secure equitable access to the opportunities and benefits of
coastal public property.
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LeGAL oPInIons
e. soUtH AFRICA’s InteRnAtIonAL oBLIGAtIons In ReLAtIon to CoAstAL MAtteRs
F. tHe BILL
a) Reference is made to “A Review of the Department of
Environmental Affairs and Tourism: 1994 – 2009” article (hereinafter
referred to as the “Article”) that notes that the South African
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
northern Kwa-Zulu Natal to the kelp forests of the Northern Cape,
South Africa’s shores are particularly rich in biodiversity (some 10
000 species of marine plants and animals recorded as being part of
the South African waters.)
b) The ‘Article” refers to the United Nations Convention on
the Law of the Sea, which was ratified by South Africa in 1982.
The Convention sets limits related to the use of the sea in terms
of navigational rights, territorial sea limits, economic jurisdiction,
legal status of resources on the seabed beyond limits of national
jurisdiction, the conversation and management of living marine
resources, and the protection of the marine environment.
c) What the “Article” refers to which is noteworthy is South Africa’s
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
an integrated whole that is an essential component of the global
life support system and a positive asset that presents opportunities
for sustainable development.
d) It is noteworthy to mention that Agenda 21 includes the
integrated management of coastal areas, the sustainable use
and conservation of living resources in the exclusive economic
zone (EEZ), the protection of marine environment by managing
pollution and promoting the sustainable use and conservation of
living resources in the high seas.
e) It is reported that in 1989, the Environmental Conservation
Act was promulgated to halt the indiscriminate development
that was taking place along the coast due to the fact that existing
legislation then largely ignored natural coastal processes. While
it attempted to restrict negative impact, it is reported that it
had a narrow perspective and allegedly failed to address access.
Agenda 21 requested a broader vision for managing the coast in
an integrated manner.
a) The Bill seeks to amend the “Act” by:
a. Amending certain definitions;
b. Clarifying coastal public property and the ownership of
structures erected on and in costal public property;
c. To remove the power to exclude areas from coastal public
property;
d. To clarify and expand the provisions of reclamation;
e. To clarify definitions and terminology;
f. To simplify the administration of coastal access fee
approvals;
g. To simplify and amend powers relating to coastal
authorisation;
h. To replace coastal leases and concessions with coastal use
permits;
i. To extend the powers of MECs to dumping permits;
j. To revise offences and increase penalties;
k. To improve coastal authorisation processes; and
l. To provide exemptions. Etc.
b) Below are the main critical amendments that are being noted
for this legal opinion and a comparison is being made with the
provisions in the “Act”.
c) Notwithstanding the provisions of subsection (1), coastal
“property does not include any immovable property structure, or
part of immovable property structure, or installation or infrastructure
located in a port of harbour whether located on land or the seabed,
lawfully constructed by an organ of state. It further does not include
any portion of the seashore below the high-water mark, which was
lawfully alienated before the Sea-Shore Act, 1935, took effect, or
which was lawfully alienated in terms of that Act, and which has
not subsequently been re-incorporate into the seashore. It does not
include any part of an island that was lawfully alienated before this
Act commenced or any portion of a coastal cliff that was lawfully
alienated before this Act took effect and is not owned by the State.
d) The Bill defines “reclamation” as the process of artificially
creating new land within coastal waters, and includes the creation
of an island or peninsula, but excludes beach replenishment by
sand pumping for maintenance purposes. It is noteworthy to
mention that “reclamation” was not defined in the “Act” and that it
is hereby being introduced by the Bill.
i) Proposed section 7A: Purpose of coastal public property:
A coastal public property is established for the following
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LeGAL oPInIons
purposes: …(e) to facilitate the achievement of any of the
objects of this Act.
ii) It is important then to have regard to what is regarded as
composition of coastal property. The new section 7(1) of the
Bill state that coastal property public property consists of-
a. Coastal waters;
b. Land submerged by coastal waters, including-
i. Land flooded by coastal waters which subsequently
becomes part of the bed of coastal waters; and
ii. The substrata beneath such land;
c. Any natural island within coastal waters;
d. The seashore, including-
i. The seashore of a natural or reclaimed island; and
ii. The seashore of reclaimed land;
e. any admiralty reserve owned by the State;
f. any land owned or controlled by the State declared to be
coastal property;
g. reclaimed land;
h. any natural resources or in any coastal public property of
a category mentioned in paragraphs a to g.
a) As mentioned above, the Bill introduces the concept of
reclamation of land and in terms of the proposed section 7B.
According to the Bill, reclamation of land for state infrastructure
can only be done after authorisation has been granted by the
Minister of Environmental Affairs and Tourism after an application
for such has been received.
b) The Bill requires that an application for reclamation must
be published for public comment for a period of 60 (sixty) days
through a Government Gazette.
c) It is provided that any land reclaimed for the development of
state infrastructure vests in the organ of state applying for such
reclamation. The land should be used for the purpose for which
the reclaim application is being made unless authorised otherwise
by the Minister.
d) The Bill allows for land to be reclaimed for purposes other than
the development of state infrastructure except where exceptional
circumstances, which are not contrary to the purpose of coastal
public property, can be shown.
e) The Bill provides the Minister with the discretion to exempt
in writing any person or group of persons or organ of state from
a provision of this Act, provided that such exemption does not
conflict with the objects of the Act. An exemption granted may
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
compelled to consult with any organ of state that may be affected
by such exemption prior to making a decision whether or not to
grant such.
a) The reclamation provisions impact on the current and future
developments that other property owners have along the
coastal areas;
b) The major concern is that a major part of certain commercial
developments have been established on historically reclaimed land
which means further developments will be made on further reclamation.
G. ReCLAMAtIon oF LAnD FoR stAte InFRAstRUtURe
H. IMPACt on tHe CoMMeRCIAL PRoPeRtY seCtoR
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Ratio decidendi/rationes decidendi The reason/ the rationale for the decision
JUDGeMents
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JUDGMents
CoMPetItIon tRIBUnAL soUtH AFRICA
CoMPetItIon tRIBUnAL DeCIsIons
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.
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
1) On 14 May 2014, The Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition by Redefine Properties
Limited of 115 West Street in respect of the property letting
enterprise known as Alexander Forbes Building.
2) The reasons for approving the proposed transaction follow.
Parties to the transaction
3) The primary acquiring firm is Redefine Properties Limited
(“Redefine”), a company listed on the Johannesburg Securities
Exchange and not controlled by any firm. Its largest shareholders
include State Street (custodian), Stanlib, Government Employees
Pension Fund, Investec and Investec Solutions.
4) Redefine exercises control over Redefine International PLC,
Madison Property Fund Managers Ltd, Fountainhead Property Trust
Management Limited, Fountainhead Property Administration (Pty) Ltd,
Fountainhead Property Trust (South Africa), Redefine Retail (Pty) Ltd,
Freedom Square (Pty) Ltd (Namibia) and Redefine Pacific (Mauritius).
5) The primary target firm is the Alexander Forbes Building which is
owned by the Trustees for the Time being of 115 West Street Trust (“115
West Street Trust”). The Trustees of the 115 West Street Trust are also
executive directors of Zenprop Property Holdings (Pty) Ltd (“Zenprop”),
they are: James Otto Tannenberg, Adam John Blow and Allan James
Flynn Mundell. Zenprop manages a portfolio of property on behalf of
companies and trusts. The Zenprop Group property portfolio comprises
of more than 84 building that range from retail, commercial, industrial
and hotel property sectors throughout South Africa.
Proposed Transaction and Rationale
6) Redefine intends to acquire 50% of the undivided shares in
Alexander Forbes Building located at 115 West Street Sandton, the
remaining shares will be held by the 115 West Street Trust.
7) Redefine has a strategy of acquiring high quality income
producing assets located in primary investment markets. This
acquisition is in line with that strategy. The proposed transaction will
enable the 115 West Street Trust and Zenprop to realise the value of
Alexander Forbes building in favour of its beneficiaries. Similarly to
Redefine, this is in line with the entities investment objectives.
Relevant Market and Impact on Competition
8) Redefine is a property loan stock company with a diverse
property portfolio ranging of properties such as office, retail and
industrial. It also owns rentable A-grade office properties located
in Rosebank, Hyde Park/Dunkeld and Sandton Cbd as well as
surrounding areas.
9) The target firm owns Alexander Forbes Building which is
classified as a rentable A-Grade office space measuring 36 250
square metres.
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JUDGMents
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
10) The relevant market is rentable A-Grade office space within
the Sandton and Environs node.
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
2.,7%, the Commission viewed this as minimal as recommended that
the proposed transaction is unlikely to alter A-grade office spaces in
the node owned by reputable competitors such as Acupap, Sycom,
Zenprop Property Holdings Ltd and Vunani.
12) There is a product overlap arising in relation to provision of
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
leasing in the node. The Commission is of the view that this will
constrain the merged entity in the event of price increase. They are
also new developments in the area.
Conclusion
14) In the light of the above we conclude that the proposed
transaction is unlikely to substantially prevent or lessen
competition in the market for provision of rentable Grade A
office property. In addition, no public interest issues arise from
the proposed transaction. Accordingly we approve the proposed
transaction unconditionally.
Approval
1) On 21 May 2014 the Competition Tribunal (“Tribunal”)
unconditionally approved the merger between Improchem (Pty) Ltd
(“Improchem”) and Clariant Southern Africa (Pty) Ltd, in respect of its
Water Treatment Business and 50% of Blendtech (Pty) Ltd (“Blendtech”).
2) The reasons for approving the proposed transaction follow.
Parties to transaction
3) The primary acquiring firms is Improchem, a wholly-owned
subsidiary of AECI Limited (“AECI”). AECI is a public company listed on
the JSE Limited and offers products and services to the mining and
manufacturing sectors both locally and internationally. Improchem
is a seller of chemical processing, water and wastewater treatment,
water optimisation, total water management, hygiene and sanitation
as well as additive products and services to the industrial sector and
the municipal sector, in particular to the mining, municipal water
treatment, food and beverages and oil refining sectors.
4) The primary target firm is Clariant, which is wholly-owned
subsidiary of Clariant Produkte (Deutschland) GmbH (Clariant
Produkte), which is a German company. The Water Treatment
Business of Clariant provides water and wastewater treatment
products and associated services to industrial and municipal
sector. The Water Treatment Business also produces chemicals
used in the cosmetics, antiperspirant deodorant, hair care and skin
care industries.
5) Blendtech on the other hand is also fully active in all aspects of
water and water waste treatment including raw and process water
treatment, drinking water production, and industrial applications
in boilers amongst others.
Proposed transaction and rationale
6) Through a Sale of Business Agreement, Improchem intends to
acquire the water treatment business of Clariant, as well as 50% of
Blendtech. Post transaction Improchem will therefore acquire sole
control over the Water Treatment business.
7) AECI submits that the proposed transaction will assist it in its
strategy of investing to facilitate its growth strategies, and will
provide Improchem with an opportunity of accessing additional
client base and the public sector market. Clariant on the other
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hand submits that the proposed transaction will assist it to dispose
of the water treatment market which is not core to Clairant’s
operations and business.
Competition assessment
8) The proposed transaction results in two horizontal
overlaps, however no vertical overlaps arise as a result of the
proposed transaction.
9) Both the Commission and merging parties agreed on two
relevant product markets to be the markets for industrial water and
waste water treatment and the municipal water and waste water
treatment. The municipal segment specialises in treating portable
water and sewerage whilst the industrial segment specialises in
treating industrial affluent. Both the Commission and the merging
parties agreed on the relevant geographic market to be national
since both services are offered throughout South Africa.
10) During its investigation the Commission tried to ascertain
whether the two relevant product markets did not constitute a
single market i.e. demand and supply side substitutability.
11) Market participants the Commission spoke to submitted that
the two sectors are different. Firstly the industrial segment is more
service intensive, whilst the municipal segment is more focused on
the supply of chemicals. In addition to this the industrial segment
requires constant servicing and on-site supervision whilst the
municipal segment requires no on-going servicing.
12) The Commission also came to a conclusion that there is no
demand side substitutability between the two markets as the
water treatment needs of the municipal segment customer, mainly
requires water treatment for portable water whilst the industrial
segment customer, requires water treatment to extract effluent.
Market Shares
13) There was some discrepancy between the market shares
submitted by the merging parties and the Commission. During the
hearing the Commission submitted that their market shares were
based on submission from market participants as there is no reliable
source in the market that calculates market shares in the identified
product markets. After interaction with market participants, the
Commission came to the conclusion that the estimated market
share of the merging parties will be approximately 10-55% in the
relevant product markets. Whilst the merging parties submitted
their market shares to be less than 25% in both markets.
14) During the hearing we asked the Commission whether they were
not concerned with the high market shares that the merging parties
would have post-merger, and the Commission re-assured us that
because they received their market shares from a market participant,
it is possible that the market participant might have overestimated
the post-merger market shares. In addition to this, the Commission re-
assured us that the markets are highly competitive and have various
other players such as Buckman Laboratories, Nalco, Zeta Chem,
Watercare Mining, and Process Water Chemicals inter alia.
15) The Commission’s interaction also revealed that none of the
market participants raised any concerns to the proposed transaction.
One market participant even went further to submit that the
transaction will about synergies that will benefit the customers.
Public Interest
16) During the Hearing the merging parties confirmed that the
employees of Clariant will be absorbed into Improchem and thus
not job losses will result from the proposed transaction. We are
thus satisfied that the proposed transaction will not have negative
impact on employment or any other public interest issue.
17) Therefore, I conclude that the transaction is unlikely to
substantially prevent or lessen competition in any relevant market.
Conclusion
18) I approve the merger unconditionally.
JUDGMents
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JUDGMents
Date of hearing: 18 November 2013
Date of judgment: 27 February 2014
(As reported by the Court for the Media)
The Constitutional Court confirmed an order of the Western
Cape High Court, Cape Town, which declared section 32A of the
Estate Agency Affairs Act (EAAA) and section 45B of the Financial
Intelligence Centre Act (FICA) unconstitutional and invalid.
The Estate Agency Affairs Board is the primary regulator under the
EAAA and is also a “supervisory body” responsible for enforcing
FICA compliance. The Board suspected that Auction Alliance had
not complied with both statutes. Relying on the search powers
under the two statutes, inspectors tried to conduct a search of
Auction Alliance’s business premises without a warrant. Auction
Alliance refused them entry, and instead launched the current
constitutional challenge.
The High Court held both provisions unconstitutional because
they unjustifiably limit the right to privacy by allowing “targeted”
searches (i.e., searches based on specific suspicion of wrongdoing)
without a warrant. The High Court declared the provisions invalid
to that extent. The declaration of invalidity has immediate effect
in relation to section 32A of the EAAA, but has been suspended
for 18 months with respect to section 45B of the FICA. The High
Court ordered that, during that interim period, section 45B be read
as modified to allow a magistrate or judge to grant a warrant. The
High Court also rejected a counter-application by the Board, in
which it sought a warrant to inspect documents previously stored
at Auction Alliance’s offices, and which, by agreement, were being
held in trust by KPMG pending the outcome of this litigation.
Before the Constitutional Court, the parties agreed that section 32A
of the EAAA and section 45B of the FICA are unconstitutional and
have to be declared invalid. The main issue was about defining the
contours and managing the consequences of the invalidity. In a
unanimous judgment by Cameron J, the Constitutional Court held
that the provisions unjustifiably infringe the right to privacy. Both
provisions lack meaningful limits as to the locations and scope of
warrantless searches as well as the manner in which they may be
conducted. The state failed to show that less restrictive means are
not adequate to achieve the purposes of the statutes.
Accordingly, the Constitutional Court has confirmed the
declaration of invalidity in respect of both provisions. It stipulated
that, consistent with past practice, the declarations of invalidity
would operate only prospectively. The declarations have been
suspended for 24 months, to allow the Legislature an opportunity
to cure their defects. In the interim, the Court has read a warrant
requirement into each provision and empowered magistrates and
judges to issue a warrant upon application by an inspector.
Lastly, the Constitutional Court, like the High Court, has declined
to authorize a warrant in favour of the Board to search and access
the material being held in trust by KPMG. Instead, the Court has
given the Board an opportunity to apply to the High Court for a
warrant to access that material under the newly read-in provisions.
Case No: CCT 94/13
Estate Agency Affairs Board
and
Auction Alliance (Pty) Ltd
and others
seARCH WARRAnts BY InsPeCtoRs: estAte AGenCIes
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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
B. FAILURe to DesIGnAte An AReA FoR InFoRMAL tRADInG
Date of hearing: 5 December 2013
Date of order: 5 December 2013
Date of reasons for order: 4 April 2014
(As reported by the Court to the Media)
On 5 December 2013 the Constitutional Court heard two urgent
applications together. Both sought leave to appeal a decision
of the South Gauteng High Court, Johannesburg (High Court).
This Court made an order granting leave to appeal, upholding
the appeal and setting the order of the High Court aside. It
also ordered that, pending the determination of a review of
decisions of the City of Johannesburg (City), the upshot of which
was to remove the applicants from their trading locations, the
respondents are interdicted from interfering with the applicants’
trading at the locations they occupied immediately before their
removal between 30 September and 31 October 2013. A costs
order was also made against the respondents.
Today the Court furnished reasons for this order.
The applicants represent informal traders who have been trading in
the City of Johannesburg (City), for several years. Informal trading
rights are regulated and approved in terms of the City’s Informal
Trading By-laws. During October 2013 the applicants, who were
allegedly authorised to trade informally, were removed from their
trading locations and had their goods impounded by City officials.
They were told that they had been removed as part of “the Mayoral
Clean Sweep initiative” aimed at ensuring that only traders legally
entitled to trade in the inner city do so.
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
subsequent interaction with the applicants the City conceded this
flaw and offered an interim arrangement while it corrected the
defects in the process. This interim arrangement was, however,
that the evictions must persist and that verified traders must settle
for relocation to an unspecified area.
The applicants unsuccessfully instituted proceedings in the High
Court seeking urgent interim relief permitting them to return to
their trading locations pending a review of the lawfulness of the
City’s conduct.
The Constitutional Court granted the applicants leave to appeal
on the basis that it was in the interests of justice to do so, holding
that a refusal to grant leave to appeal would cause the traders to
suffer irreparable harm. The undisputed evidence showed that the
applicants and their families’ livelihood depended on their trading
in the inner city. At the time of the hearing, they had been rendered
destitute and unable to provide for their families for over a month.
Seeing that an application for leave to appeal to the High Court
would have been heard in February 2014 at the very earliest, the
traders would not have been able to provide for their families until
that time. The City’s conduct impaired the dignity of the traders
and their children and had a direct and ongoing adverse effect on
their rights to basic nutrition, shelter and basic healthcare services.
The Court reasoned that, if allowing the traders to continue trading
while the verification process was underway were to cause any
prejudice to the residents of the City, such prejudice would have
been temporary. The immediate and irreversible harm that the
traders were facing rendered their application manifestly urgent
and justified the interim relief which this Court granted.
JUDGMents
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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
tAX LAW
JUDGMents
Heard on: 12 September 2013
Decided on: 14 November 2013
(Extracts of the Judgment)
1) OCS imports and distributes bulk frozen foodstuffs and holds
licenses for storage warehouses (also known as customs bonded
warehouses or bond stores) in Muizenberg. SARS officials perform
routine inspections of OCS’s storage warehouses, at most annually,
to monitor compliance with the Customs and Excise Act. Past
inspections have always been limited to OCS’s bond stores and
have never extended to OCS’s offices of to the home of OCS’s
employees or officers.
2) On 21 May 2012 Sloan Valley Dairies Ltd (SVD) of Canada
instituted motion proceedings against OCS claiming the return
of consignments of skim milk powder sold to OCS, alternatively
payment of the purchase price. SVD served a copy of the application
on SARS. SARS compared the invoices attached to the application
with those that OCS had submitted to SARS for the purpose of
customs duty. The prices on the SVD invoices were substantially
higher than what was reflected on the submission to SARS.
This discrepancy led SARS to suspect that OCS had fraudulently
manipulated the invoices so as to pay less duty. Consequently,
SARS decided to search the premises of OCS.
3) On 30 and 31 May 2012, SARS officials numbering about 40
searched OCS’s Muizenberg premises. When they arrived on the
first day, they gave Mr Gaertner to understand that they were there
to conduct a bond inspection and he allowed them in. It was only
after they had sealed the premises that they told Mr Gaertner the
true reason for their presence. At that point Mr Gaertner asked for
time to get his attorney to the premises. The attorney not having
arrived after 30 minutes, an extensive search ensued. Over the
two-day period it included a search of the warehouse; bond store;
a safe in the strong room, computes; and the offices of Mr Gaertner
and Mr Klemp. Mirror images of data on various computers were
made and a variety of documents and other objects were seized.
4) Through it all, the official did not have a search warrant. In fact,
they told Mr Gaertner that they did not need one for a search in
terms of section 4 of the Customs and Excise Act.
5) On 2 July 2012 the applicants brought an application before
the High Court citing, as respondents, the Minister, the other
respondents before this Court and several SARS officials. They
sought declarators that the searches and seizures were unlawful
and that section 4 of the Customs and Excise Act is inconsistent
with the Constitution and invalid to the extent that it permits
targeted, non-routine enforcement searches to be concluded
without a warrant.
6) The Minister and SARS contested the claim that section 4 of
the Customs and Excise Act is unconstitutional and contended,
instead, that to the extent that the section limited the right to
privacy, this was justified under section 36 of the Constitution. In
the alternative, they pleaded that a declaration that section 4 was
unconstitutional should not be retrospective and that it should be
suspended to afford the Legislature an opportunity to correct the
defect. SARS also denied that the searched had been conducted in
an unlawful manner.
Discussion
7) Flowing from the High Court’s declaration of constitutional
invalidity, the reading-in and the submissions made before us, the
issues for determination are:
a. Are sections 4(4)(a)(i)-(ii), 4(4)(b), 4(5) and 4(6)
unconstitutional and thus invalid:
i. Do they limit the right to privacy; and
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ii. If they do, is the limitation justified?
b. If the sections are unconstitutional and thus invalid, must
the declaration of invalidity be retrospective?
c. Should the declaration of invalidity be suspended pending
correction of the defect?
d. How long should the period of suspension be?
e. If the declaration of invalidity is suspended, should there be
a remedy in the interim?
Order
8) The declaration of constitutional invalidity of sections 4(4)(a)
(i)-(ii), 4(4)(b), 4(5) and 4(6) of the Customs and Excise Act 91 of
1964 made by the Western Cape High Court is confirmed.
9) The declaration of invalidity is not retrospective.
10) The order is suspended for six months to afford the Legislature
an opportunity to cure the invalidity.
JUDGMents
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SAPOA LEGAL UPDATE - report to members
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SAPOA LEGAL UPDATE - report to members