The power of municipalities to determine their rates policies is subject to regulatory supervision of the national legislature in terms of section 229(2)(b) of the Local Governance Municipal Property Rates Act of 2004. National legislation limits rates for public benefit organisations (in this case independent schools) to 25% of the rate levied on residential property and therefore the two municipalities involved could not increase the rates above that level.
The scheme of the Constitution has a nuanced framework within which the separation of powers is articulated. The power of municipalities to impose rates is a species of taxing power that may have significant economic effects for other spheres of government and for the development of the economy as a whole hence the limitation on their powers. Although there is separation of powers between the various tiers of government, and local government plays an important role in serving local communities, the Constitution makes it plain that a municipality’s right to govern is subject to national and provincial legislation. Its powers may also not be exercised materially and unreasonably to the prejudice of various economic activities and policies set out in the legislation.
A further challenge by the municipalities on the ground that there had not been consultation for the amended regulations was rejected. As there had been consultation when the original regulations were published on the same issue, there was no challenge by the municipalities to the regulations when published and there was a relevant court order which had not been set aside.