/ 11 August 2016

Private schools, two departments and the eThekwini metro are embroiled in rates row

Private schools are facing a potential squeeze on their finances with the current rates dispute with eThekwini municipality.
Private schools are facing a potential squeeze on their finances with the current rates dispute with eThekwini municipality.

Some Durban private schools will have to hike fees drastically if they are forced to pay the property rates being demanded by the eThekwini municipality.

This warning was sounded by the Independent Schools Association of Southern Africa (Isasa), which is embroiled in a protracted high court battle with the municipality over its refusal to charge “public benefit organisations” rates according to a new ratio that was included in the amended Municipal Property Rates Act.

Isasa is acting on behalf of 18 schools, including Kearsney College, St Mary’s Diocesan School for Girls, Maris Stella, Durban Girls College and Clifton College.

It wants the high court in Durban to order the municipality to charge nonprofit schools a property rate capped at 25% of the rate it charges for residential properties. This was the ratio included in the amended rates Act promulgated in March 2010 following a court order by the high court in Pretoria.

The eThekwini municipality has launched a counter-application in court against the department of co-operative governance and traditional affairs and the national treasury to review and set aside the decision to promulgate the March 2010 regulations.

Isasa said in its founding application that a perception existed that independent schools were exclusive and wealthy and that “this is not always true” as some schools charged low fees and were under-resourced.

Isasa’s executive director, Lebogang Montjane, stated in the answering affidavit that the municipality’s rates policy was in breach of the 2010 regulations and that its successive rates policies for subsequent years were “unconstitutional, unlawful and invalid”.

“The municipality makes the elementary confusion of regarding as a business independent schools on the simplistic notion that they collect school fees. Isasa schools are nonprofit-making.”

Isasa’s member schools also include Hilton College and Michaelhouse in KwaZulu-Natal as well as St John’s College in Johannesburg, although these are not party to the court action.

“The minister [of co-operative governance and traditional affairs] is perfectly correct in suggesting that the total amount of rates that are forfeited by the municipality as a result of the impact of the March 2010 regulations on independent schools is insignificant.”

He said the municipality would forfeit R3-million and not R216.7-million as suggested by the municipality.

“The [municipality’s] figure is based on an incorrect calculation because it was calculated with reference to public benefit organisations and not to independent schools with which the application is concerned.”

Montjane said “extreme efforts” had been made by the two ministers (treasury and co-operative government) to settle the dispute with the municipality “but to no avail”.

“The ministers both consented to an order compelling them to publish regulations in the Government Gazette prescribing the ratio that should be charged for properties owned by public benefit organisations.

If the municipality insisted on charging its rate, the 18 schools would be R22.3-million in debt, said Montjane.

“Isasa estimates that the members would have to increase their school fees by amounts which would be simply unaffordable for the majority of the parents.

“Parents who can’t afford the increased school fees will be forced to disrupt the education of their children by pulling them out of the school. School bursaries which cater for poor children and are funded out of school fees will have to be discontinued.”

Veronica Mafoko, co-operative governance’s senior manager for municipal property rating, stated in court documents that the national policy stance is to recognise the positive contribution made by public benefit organisations, including schools, to the country’s socio-economic and developmental goals.

She said the municipality’s argument about the unconstitutionality of section 19 (1) (b) of the rates Act was “superfluous and an indication of the municipality’s lack of a credible defence of its noncompliance with the regulations”.

“That, I argue, is why the municipality seeks so many remedies. The municipality is fully aware that it has no leg to stand [on]. Put simply, the bid to declare section 19 (1) (b) unconstitutional amounts to a waste of the court’s time.”

Responding in court papers to Mafoko’s submission, the municipality’s chief legal officer, Siyabulela Mfingwana, rejected her statement. He said the schools received a full exemption for rates for 2008-2009 after they were “erroneously” not included on the rates roll.

He added that schools were billed in 2009 and were given an 87.5% rebate in 2009-2010 and a 50% rebate in 2010-2011 and 2011-2012.

“eThekwini does not have a category of property termed ‘public benefit organisations’ property. Some private schools are, in fact, not public benefit organisations. Crawford College, for example, is a listed company.”

He stated that the two ministers could not lawfully promulgate the amended regulations without first following a further public process involving comment. “The ministers committed a patent error.”