The City of Cape Town is considering appealing a Western Cape High Court ruling that found aspects of its fixed tariff structure unlawful, warning that the judgment could have unintended consequences for lower- and middle-income households.

The ruling, handed down this week, declared that certain fixed charges, including those for water, sanitation and city-wide cleaning, should not be linked to property values.

While the current 2025/26 budget remains in place until the end of June, the City says the decision could significantly reshape how services are funded from 1 July.

Mayor Geordin Hill-Lewis argues the court’s decision undermines a key principle the City uses to protect poorer residents: cross-subsidisation.

Why the City believes the court got it wrong

At the heart of the dispute is whether municipalities can structure fixed service charges based on property values.

The City maintains that this approach is not only lawful, but essential to ensuring fairness.

According to Hill-Lewis, linking tariffs to property values allows wealthier households to contribute more, effectively subsidising services for those who earn less. Without this mechanism, he says, municipalities are left with blunt alternatives that could be less equitable.

“The only alternative is for everyone to pay the same flat charge, regardless of income level,” he said.

The City also disputes claims that the tariffs were a disguised form of property rates, arguing instead that they were a transparent way of funding services already being delivered, not a means of raising new revenue.

Officials further point out that reforms to separate charges, such as removing cleaning costs from electricity bills and explicitly listing them, were aligned with National Treasury guidelines and aimed at improving accountability.

What the ruling could mean in practice

If the judgment stands and is not overturned on appeal, the City says the consequences could be felt most sharply by poorer households.

Without value-based tariffs, fixed charges would likely become uniform, meaning lower-income households could end up paying the same baseline fees as affluent residents.

“The implication… might be that fixed charges go up for many families, and go down for more affluent families,” Hill-Lewis warned.

In addition, the ruling could force the City to shift certain charges, like city-wide cleaning,  back into property rates. This would likely require an increase in the “rate-in-the-rand,” potentially offsetting planned reductions and reshaping municipal bills across the board.

The City cautions that, regardless of how charges are structured, the cost of delivering services does not disappear.

Limited options going forward

Hill-Lewis says they are now modelling different scenarios to understand the full financial impact, particularly on vulnerable households.

However, options are limited.

One alternative, cutting infrastructure spending, has been firmly rejected. Hill-Lewis argues that reducing investment in water, sanitation, electricity and waste systems would ultimately harm service delivery and economic growth, disproportionately affecting poorer communities.

“Infrastructure investment is what makes a city functional and creates opportunity,” he said.

Political divide over the ruling

Opposition parties have welcomed the judgment, describing it as a win for affordability and legality.

ActionSA has urged the City not to appeal, calling instead for a rethink of tariff structures to provide relief to struggling households.

The GOOD Party has argued that tariffs should strictly reflect usage rather than property values, saying the previous system unfairly penalised some residents, including those affected by rising property prices.

But the City insists the issue is more complex, and warns that removing cross-subsidisation without a viable replacement could deepen inequality rather than reduce it.

What happens next

The City is expected to decide soon whether to appeal the ruling. If it does, the court order will be suspended while the legal process unfolds.

In the meantime, Cape Town’s current tariffs remain unchanged until the end of June.

For residents, the outcome of the appeal and how the City redesigns its tariff system, if required, could determine not just how much they pay but also how the burden is shared across the city.