Registered users can save articles to their personal articles list. Login here or sign up here

Municipalities calling Treasury’s bluff

Increases way above guidelines.

The National Treasury has warned municipalities to keep their tariff increases conservative or have an upper limit forced upon them, but they don’t seem to be listening.

The increased municipal tariffs for property rates, electricity, water, sanitation and refuse removal take effect on July 1. Increases above inflation are planned in most of the metropolitan municipalities. These will make municipal services less affordable for already over-burdened consumers.

National Treasury in December advised municipalities that tariff increases should not exceed the guideline of 6%, except in the case of electricity, where the National Energy Regulator (Nersa) set a guideline of 7.39% based on the 8.06% increase in bulk sales tariffs granted to Eskom last year.

Moneyweb has compared the proposed average tariffs for property rates, water, electricity, sanitation and refuse removal of the eight metropolitan municipalities and most are way above the guidelines (see table below). These tariffs are contained in draft budgets that have been published for comment and have to be approved by each municipal counsel before the end of June. Nersa also has to approve new electricity tariffs.

Please note the City of Cape Town’s tariffs have been adjusted in the table since this article was first published.

 

Property rates

Electricity

Water

Sanitation

Refuse removal

Johannesburg

5%

7,05%

8,9%

8,9%

6%

Tshwane

10%

8%

10%

10%

25%

Ekurhuleni

7,5%

7,39%

8,1%

8%

5,5%(domestic)

Cape Town

6%

7,63%

8%

8%

5,87%

eThekwini

6,9%

7,39%

9,9%(residential)

12,9%(business)

7,9%

7,9%

Nelson Mandela Bay

9,5%

7,39%

12%

12%

12%

Buffalo City

0%

8,5%

14,95%

-0,2%

-0,2%

Mangaung

6%

7,35%

11,45%(residential)

15,22%(non-residential)

6%

6%

 

Naiemah Ishmail, Manager:  Performance Budget of the City of Cape Town commented: “In the case of electricity, although bulk charges makes up for 76% of electricity’s department’s budget it is still below the Nersa-approved electricity bulk purchases increase for 2014/15 at 8.06% as alluded to in the article.

“National Treasury in various circulars also requires water and sanitation increases to be fully cost reflective.  In addition the higher than CPI increase is as a result of the additional cost required to service informal settlements, to keep pace with the demand for maintenance of the current infrastructure, to cater for increased water demand and to ensure compliance to the waste water treatment works legislation issued the Department of Water Affairs.

Rates and refuse removal tariff increases are in line with the National Treasury upper limit of 6%.”

Treasury then threatened: “If municipalities continue to act in this manner the National Treasury will have no other option but to set upper limits on tariff increases for property rates and service charges to which municipalities will have to conform.”

Nevertheless, more than half the tariffs Moneyweb extracted from the metros’ draft budgets did indeed exceed the guidelines. All the metros increased their water tariffs by more than 6%. Cape Town proposed the lowest average increase of 8% and Buffalo City (14.95%), Nelson Mandela Bay (12%), Mangaung (11.45% residential and 15.22% non-residential) and Tshwane (10%) are all into double figures.

Notably Buffalo City decreased its tariffs for sanitation and refuse removal slightly.

Leon Claassen, analyst of Ratings Africa, told Moneyweb that the agency has been concerned that the rate at which municipal cost are increasing is unsustainable and that it is becoming unaffordable for the average household.

He said higher administered prices are putting pressure on disposable income and economic growth. This may be exacerbated by rising interest rates.

Ratings Afrika has developed an affordability index that takes into account among other things the average household income in that municipality as opposed to the national average, average municipal cost per household and the municipality’s debt per household. The result is expressed as a number out of 100.

Claassen said the index has shown a downward trend since 2009, even though bigger cities like Johannesburg, Tshwane and Cape Town are buffered by their higher average income per household.

The results in smaller municipalities are much lower than in the metros and also show a weakening trend, he said.

Affordability of municipal services: Ratings Afrika (out of 100)

 

2009

2013

Johannesburg

80

80

Tshwane

79

75

Ekuhuleni

69

59

Cape Town

86

79

eThekwini

48

47

Nelson Mandela Bay

59

46

Buffalo City

50

51

Mangaung

48

55

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   0

Comments on this article are closed.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
Insider GOLD
ONLY R63pm

Moneyweb's premium subscription is a membership service which will give you access to a number of tools to take charge of your investments.
Or choose a yearly subscription at R630pa - SAVE R126

Get instant access to all our tools and content. Monthly subscription can be suspended at any time.

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2