South Africa: The City Of Johannesburg Remains Adamant That The Developmental Levy Will Benefit Economic Growth And Avoid Overburdening The City's Ratepayers.

In October 2021, the Johannesburg City Council approved a policy imposing a levy on all new developments to aid in funding the increased infrastructure demands brought about by such developments. At the time, the City justified the policy by stating that property developers need to contribute to the advancement and development of Johannesburg's infrastructure to accommodate the proposed developments and to fund bulk infrastructure as well as economic growth.

In enforcing the developmental levy, the City says that it will withhold necessary approvals until the levy is paid. The City intends to implement the policy during the 2022/2023 financial year and developers who do not pay the levy will not be granted developmental approval and will not be issued with the necessary clearance certificates.

The South African Property Owners Association (SAPOA), which represent many property investors and stakeholders nationwide, had already stated in January 2022 that the policy is self-contradictory in that the stated purpose of the policy is to stimulate and advance development in Johannesburg, but, in SAPOA's opinion it would in fact lead to increased developmental costs when implemented. SAPOA also said that the developmental levy would leave the door open for the City to utilise the levy for any infrastructure requirements, not necessarily in regards to the intended development, and may lead to developers paying double for the City's infrastructure.

SAPOA warned that the developmental levy would chase away investors and advised its members to reconsider investing in Johannesburg. Consequently, SAPOA has launched a High Court application against the City of Joburg interdicting it from applying the 2021 Development Contributions Policy (DCP).

In terms of the Spatial Planning and Land Use Development Act (SPLUMA), a Municipality is responsible for the provision of external engineering services and Property Developers may, in agreement with the Municipality, set-off the fair and reasonable costs in undertaking external engineering services themselves from developmental charges.

SPLUMA also provides that the Municipal Planning Tribunal, who considers applications for property development, may impose any reasonable condition related to the provision of external engineering services and payment of any development charges in respect of a specific development.

In terms of section 46 of the City's Municipal Planning By-Law, which echoes the above provisions of SPLUMA, the City may levy an external engineering contribution from developers in respect of a specific development, should it be required.

However, in terms of Section 47 should the City levy a contribution for external engineering services, the City must provide the applicant with supporting documentation on the manner the contribution was calculated and any conditions it might be subject to together with supporting documentation.

The City's By-Law further makes provision for a refund in circumstances where the property developer's costs of installing external engineering services exceeds the contribution levied by the City.

In the past, such a contribution was only imposed when and if required in the specific proposed development and only if external engineering services was found to be necessary.

The aforementioned confirms the underlying principle that the City shall only levy a contribution for external engineering services, should it be found that the City's infrastructure is not suited to handle the proposed development.

It would seem that the Johannesburg is now seeking to enforce its proposed developmental levy on all developments without regard to the specific development or whether it is necessary in respect of the specific development.

As it appears, current legislation does not permit the City of Johannesburg to impose an umbrella developmental levy on all developments. Due regard must be given to the specific development and whether it is strictly necessary to impose a contribution or not. Imposing a catch-all development levy on all developments would be arbitrary and not in line with the City's own By-laws.

The legal action by SAPOA on behalf of Property Developers will provide clarity on whether any South African city or town may lawfully impose a developmental levy where the proposed development would have no effect on the external engineering services, how Johannesburg may utilise such levy and finally whether the City may enforce such developmental levy by withholding approval of a development.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.