A nine-year legal dispute between Ekapa Minerals and Kimberley’s Sol Plaatje local municipality came to an end this week when the Constitutional Court said the diamond miner did not have to pay a R30m debt, which was incurred through unlawful rate increases.
The courtroom battle stemmed from a disagreement over the extent of taxes Ekapa owed in relation to its eight Kimberley properties, purchased from diamond mining giant De Beers in 2015 to rework the sites’ tailings.
Kimberley’s high court and the Supreme Court of Appeal had both ruled in favour of the local municipality, who argued that Ekapa’s properties should face the premiums associated with mining property rates in the region.
The rates charged to Ekapa’s properties if classified as mining sites would have been almost eight times greater than those of industrial properties in the 2014/15 financial year.
For example, the owner of a Kimberley mining property valued at R1m would have been billed R195,612 in 2014/15, versus only R32,602 for an industrial property with the same value, with the rates on this mining property rising to R228,275 in 2020/21.
On Monday, the Constitutional Court overruled the decisions of the lower courts, declaring the property rates ratio set by the local municipality from 2015-20 as unlawful, and in so doing clearing Ekapa’s R30m debt.
Sol Plaatje was further ordered to pay Ekapa’s legal fees, with the court pointing out that the municipality “would have been aware of the nonpayment of rates on the properties with effect from the 2015 financial year onwards, yet it took no legal steps to recover any amounts from Ekapa”.
The top court ruled: “Rather, it appears that it sat on its hands and only sought to recover the rates, which [the court] found were unlawfully imposed, when Ekapa asked for a rates clearance certificate in order to take transfer of its properties.”
“There is no evidence that the municipality took any steps to recover from Ekapa the full amount allegedly due by it after it unilaterally elected to pay less than what was said to be due by it after 2019.
“Without commenting on the reasonableness of the amount paid by Ekapa, it is apparent that Ekapa has not entirely shirked its responsibility towards the municipality to pay rates on its properties,” the court said.
The Constitutional Court also pointed out that the High Court had overstated the damage that Ekapa’s failure to pay the R30m would do to the municipality, which asserted that it would not be able to recover the debt without taking out a bank loan.
It said the High Court was misdirected in confining itself “to the fiscal interests of the municipality without due regard for the impact of Ekapa’s rights and substantial prejudice in having to pay more than R30m in unlawful rates”.
While the R5m-a-year debt may have put pressure on the local municipality’s books, the previous hearings failed to recognise the effect it would have on Ekapa, as a small miner, potentially leading to job cuts and damaging its business.
The ruling comes as the cash-strapped Sol Plaatje municipality is embroiled in a corruption scandal, with two vehicles belonging to senior officials expected to be seized, after they were attached to R800,000 in debt owed to consulting engineers for services rendered to the municipality.
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