Policy first, levies later: Why SANRAL’s ‘sweat the assets’ plan failed in court

A Trust and its partners planned to develop a fuel station and rest-service area along the N12. Negotiations with SANRAL began under a 2016 policy that levied 0.5% on petroleum sales and 1% on other sales. In 2021, SANRAL introduced a new policy with significantly higher levies of 2.5% and 6%, applied retrospectively. The Trust challenged this decision, arguing that SANRAL failed to follow statutory procedures and public participation requirements. The High Court dismissed the challenge, but the Supreme Court of Appeal overturned that decision.

Issues decided

• Administrative action, not just commercial bargaining
  • The Court held that SANRAL’s decision to adopt and apply the 2021 levy policy was the exercise of a public power under statute, not a private, commercial negotiation.
  • Because the policy had direct, external legal effect on developers and the market, it qualified as administrative action.
  • That means it must comply with constitutional and administrative‑law standards, including fairness, lawfulness and rationality.
• Mandatory procedures were not followed
  • The Court found SANRAL did not comply with the procedures required by its empowering Act and by fair‑administrative‑process rules.
  • In particular, SANRAL should have published and consulted on the proposed policy, invited comment, and followed the correct steps before adopting and applying the higher levies.
  • The failure to do so rendered the policy unlawful.
• Internal remedies did not bar the review
  • The Court considered whether the developers had to first use an internal appeal to the Minister.
  • It concluded there was no effective internal remedy to exhaust because the practical steps (form, manner and timelines) for such an appeal had not been prescribed.
  • In those circumstances, it was fair and lawful to proceed directly to court.
• Remedy: set aside and remit
  • The Court reviewed and set aside SANRAL’s levy‑increase decision and declared the policy unlawful.
  • Rather than substituting its own levy figures, the Court sent the matter back to SANRAL to reconsider the policy properly, this time complying with the Act and fair‑process requirements.
  • SANRAL was ordered to pay the developers’ costs, including the costs of two counsel where used.

Key takeaways

• State-owned entities exercising statutory powers must comply with administrative law principles, even when acting in a commercial context.
• Policy changes that affect third parties require proper publication and stakeholder consultation.
• Internal remedies must be effective and accessible; if they are not, courts will allow direct judicial review.
• Boards of state-owned entities cannot exercise unfettered discretion; decisions must align with constitutional and statutory frameworks.
• Courts will generally remit matters for reconsideration rather than substitute their own decision, respecting separation of powers.

Legal implications

• Decisions by state-owned entities with external legal effect are administrative actions and reviewable under PAJA.
• Statutory procedures, including Gazette publication and public participation, are mandatory.
• There have to be effective internal remedies; failure to operationalise them cannot bar judicial review.
• Accountability and transparency in policy-making by organs of state are essential, even when pursuing revenue-generation strategies.

Conclusion

The Supreme Court of Appeal’s ruling sends a clear message: state-owned entities must act within the law when exercising public powers. SANRAL’s failure to follow statutory procedures rendered its policy and levy increase unlawful. The matter has been remitted for reconsideration in compliance with the SANRAL Act, ensuring fairness, transparency, and adherence to constitutional principles.

Contact Nikita Lalla, Ricardo Pillay, Danielle Giannico, or Msizi Zungu to mitigate risks and minimise disputes.