Special Assessment Districts and the Financing of Infrastructure in South Africa
Since 2000, special rating areas (SRAs), also known as Special Assessment Districts and/or city improvement districts (CIDs), have been used to revive urban nodes across the City of Cape Town (Cape Town). Similar to CIDs elsewhere in the world, South African SRAs constitute a mechanism by which an additional property rate can be levied in a given area to finance “top up” municipal services within that area.
The Claremont SRA was one of the first SRAs established in Cape Town. Going way beyond the usual “crime and grime” approach adopted by SRAs, The Claremont Improvement District Company (CIDC), who managed the Claremont SRA, arranged to finance the construction of a bypass road that would ease traffic on the SRA’s main artery and increase the attractiveness of the area. CIDC then planned to donate the bypass road to Cape Town. The creation of RoadCo, a special purpose vehicle created by CIDC for purposes of the project, was made possible by various institutional and financial innovations. This is a unique case in South Africa of an SRA financing large infrastructure and having recourse to a long-term loan.
The project was to a great extent made possible by the presence of a champion who managed to build trust between the different stakeholders. His death unfortunately resulted in the partners moving in diverging directions. Less than a decade later, the level of mistrust is high and compounded by the perception that Cape Town is disengaging itself from areas where SRAs are operating. Cape Town’s lack of active promotion has resulted in a lack of awareness and understanding of the greater role that SRAs could play in terms of broader developmental issues, and at the same time, other municipalities have encountered legal challenges in the implementation of SRAs. Consequently, it remains challenging for the RoadCo model to be adopted elsewhere in South Africa.
Through this case study, we illustrate how although successful in regenerating an area, SRAs as they are currently implemented cannot tackle two of the main challenges facing South African cities: social justice and spatial transformation. We suggest that Cape Town administration plays a more active role to encourage SRAs to fully embrace a holistic mandate rather than a narrow “crime and grime” approach, in line with the provisions of the existing legislation. We also suggest a few initiatives that could be implemented by Cape Town administration in this regard.