- The Supreme Court of Appeal ruled that SANRAL unlawfully increased levies payable by service and rest area developers, exercising public power without following the law.
- The court found that SANRAL’s levy hike policy was adopted without public participation, without gazetting the policy, and in breach of PAJA and the SANRAL Act.
- The policy was set aside in full and sent back to SANRAL for reconsideration, with the agency ordered to pay costs, including two counsel.
The Supreme Court of Appeal has ruled that the South African National Roads Agency (SANRAL) acted unlawfully when it increased levies on service and rest area developers, finding that the agency exercised public power without following the law.
The court set aside SANRAL’s levy hike policy in full, holding that the increases were implemented without public participation, without gazetting the policy, and in breach of the Promotion of Administrative Justice Act and the SANRAL Act.
The ruling overturned a Gauteng High Court decision that had treated the levy increases as a matter of commercial negotiation rather than administrative action.
From negotiation to unlawful conduct
The case arose from a long-running dispute between the Kasselman Trust and SANRAL over the development of a filling station and rest facility along the N12 between Klerksdorp and Wolmaransstad. After negotiations that began in 2016, the parties were on the verge of finalising an agreement by the end of 2020 when SANRAL introduced sharply increased levy percentages in a draft agreement sent to the Trust in January 2021.
Under the previous policy, SANRAL levied 0.5 percent on petroleum sales and 1 percent on all other sales. The new policy increased those figures to 2.5 percent and 6 percent, respectively. SANRAL justified the increases by pointing to its Horizon 2030 strategy, which sought to maximise revenue from SANRAL’s assets.
SANRAL argued that it was entitled to impose the increased levies as part of a commercial contracting process and that its conduct did not amount to the exercise of public power. The Supreme Court of Appeal rejected this characterisation outright.
“What matters is not so much the functionary as the function,” Acting Judge of Appeal R Tolmay wrote, emphasising that the nature of the power exercised determines whether conduct amounts to administrative action.
Administrative action and public power
The court held that SANRAL’s decision to adopt the new levy policy and apply it to developers constituted administrative action as defined in PAJA. Judge Tolmay found that SANRAL was exercising powers conferred by legislation, not private contractual discretion.
“In adopting the 2021 policy, SANRAL was clearly purporting to exercise a public power or public function in terms of the SANRAL Act,” the judgment states.
The court further held that the mere fact that the levies were imposed through a policy document did not shield SANRAL from judicial review. “The fact that it is contained in a policy does not exclude it from the range of actions or decisions that are reviewable in terms of PAJA,” Tolmay AJA said.
Failure to comply with the SANRAL Act
A central finding of the judgment was SANRAL’s failure to comply with mandatory procedural requirements in its governing legislation. The SANRAL Act requires that policies affecting levies and fees be published in the Government Gazette and that interested parties and the public be invited to comment.
“It is common cause that the public participation process, as required by Sections 34, 35, and 39 of the SANRAL Act, was not followed,” the court found.
There was also no evidence that the Minister of Transport had approved or been consulted on the levy increases, despite SANRAL being a state-owned entity accountable to the executive.
The court stressed that “neither the Board nor the Transport Minister can act outside the confines of the Act,” reinforcing earlier jurisprudence on SANRAL’s statutory limits.
State-owned entities are not private actors
In a strongly worded section of the judgment, the Supreme Court of Appeal reaffirmed that state-owned entities occupy a unique constitutional position and cannot evade public law obligations by invoking commercial form.
“SANRAL is both a regulatory and service-delivery agency and as such engages in public functions,” Judge Tolmay held.
The court warned that failing to recognise the public power exercised by SOEs creates an accountability vacuum. “A failure to recognise the public power and constitutional obligations of boards of SOEs opens the door to abuse and mismanagement,” the judgment states.
The court reiterated that all exercises of public power are subject to the principle of legality and must be rational, lawful, and procedurally fair.
Delay and internal remedies rejected
SANRAL argued that the Trust had delayed unreasonably in launching the review and had failed to exhaust internal remedies under Section 57 of the SANRAL Act. Both arguments were dismissed.
The court found that the Trust only became aware of the full reasons for the levy increases in February 2022 and that the review application was launched within the 180 days prescribed by PAJA.
More significantly, the court held that the internal appeal mechanism relied on by SANRAL was ineffective because the Minister had failed to prescribe the manner, form, or time limits for such appeals.
“There was simply no effective internal remedy available for the Trust to pursue,” Judge Tolmay concluded.
Policy set aside, and the matter sent back
Although the Trust asked the court to reinstate the lower levy percentages contained in the 2016 policy, the Supreme Court of Appeal declined to substitute its own decision.
“The appropriate remedy is to remit the matter to the original decision-maker for reconsideration,” the court held, citing the separation of powers.
SANRAL’s levy hike policy was declared unlawful and of no force and effect, and the agency was ordered to reconsider the matter in compliance with the SANRAL Act. SANRAL was also ordered to pay the Trust’s legal costs, including the costs of two counsel.
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