Private and government schools in Johannesburg have won a symbolic battle against the city after a judge ruled this week its decision in 2022 to reclassify schools as businesses and hike their rates was unlawful.
Judge Steven Kuny in the high court in Johannesburg did not give reasons for his order, saying he would do so later.
In the 2022 financial year, the City of Johannesburg reclassified private educational institutions as businesses and their rates increased as much as tenfold from July.
The bill of a Soweto school rose from an average R7,000 to just under R64,000 in July with a wealthy private school seeing the rates bill, excluding water and power, of R365,318, Business Day reported at the time.
State schools and tertiary institutions were also reclassified by the City of Johannesburg and would have paid sixfold higher rates. The order reversing this decision applies to them too.
The 2022 rates decision was temporarily reversed by the city after an outcry and threats that schools would have to close. The rates hiked 5% for inflation, but AfriForum told Business Day it wanted a judgment to ensure the reclassification did not happen again.
The court case, argued earlier this year, combined separate legal actions, one from AfriForum, another from JSE-listed Curro, and a third joint action between JSE-listed AdvTech, owner of Crawford and Trinity house brands, and the Independent Institute for Education.
The city also has to pay the applicants’ costs of their non-urgent application but not their earlier court cases they had brought to stop the rates hike.
The city charges schools lower rates than businesses and some private schools are profitable and could potentially be charged more.
But AfriForum head of local government, Morné Mostert, said it had argued in court that public participation on the 2022 rate changes was completely inadequate for a taxation decision with such far-reaching consequences.
If the City of Johannesburg wishes to charge profitable schools higher rates in future, they need a proper consultation process, said Mostert.
The order also sets the rate hike for Johannesburg private schools from July at the current rates plus a 4.85% inflationary increase.
At the time the city argued that they were forced to reclassify schools due to a decision by the department of co-operative governance and traditional affairs. The department was cited as respondent in the case
Then Johannesburg mayor Mpho Phalatse told the media that in 2014 an amendment to the Municipal Property Rates Act was signed into law by the president reclassifying schools, and cities had seven years to implement it.
Phalatse said when they had still not implemented the rates change, the city received a notice of noncompliance from the department in August 2021.
She said in 2022 she has been engaging with the department and “pleading with them to allow the status quo to remain and not change the education category. However, in spite of all those attempts, the department did not accede to the requests by the city”.
But the judgment allows Johannesburg private schools to remain classified as educational institutes, rather than commercial entities for the purposes of taxation.
Mostert said AfriForum brought the case to ensure there was case law to show that municipalities should and are empowered to create categories for billing that are appropriate to the area. There are categories in the Municipal Property Rates Act for residential and commercial.
But municipalities are empowered under the act to create new categories, he said. For example, municipalities near the Kruger Park had a category for private safari parks with their own rates.
The order does not apply outside Johannesburg but it creates a precedent, said Hurter Spies lawyer Marjorie van Schalkwyk.
It could mean municipalities in other areas are less likely to change the rates of private schools and automatically classify them as businesses.
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