A Moneyweb analysis of property rates in the five largest metropolitan municipalities in South Africa, namely Johannesburg, Ekurhuleni, Tshwane, Cape Town and eThekwini, reveals stark differences in the amounts levied to residential households.
Homeowners in eThekwini (Durban) pay the most among the five metros, with monthly property rates charges as much as 117% more than in Johannesburg, and 174% more than in Cape Town (at a property value of R1 million).
Even at a larger property value of R5 million – where the amount exempt makes less of an impact – eThekwini rates are more than double those of Cape Town and nearly 70% higher than Joburg’s.
Cape Town’s residential rates are the lowest out of the five metros, while the City of Joburg’s are also reasonable in comparison, especially at the lower end of property values given the generous (by comparison) R350 000 exemption.
Ekurhuleni’s and Tshwane’s rates are very similar and significantly higher than Joburg and Cape Town’s, but still also substantially lower than eThewkini’s.
How rates are determined
Municipalities calculate property rates using a charge based on a number of cents in the rand.
This value (which can be at a lower or higher ratio or amount, depending on the type of property) is multiplied by the value of the property, as per its most recent municipal valuation.
This provides a strong incentive for municipalities to regularly update their valuation rolls and to arguably ensure that these values are as close to achievable/bank valuations as possible (historically, municipal values were always lower than those of banks/prices achievable in the market).
The number of cents in the rand multiplied by the property value gives a charge for the year. Any exemptions are then factored in, providing a net charge for the year which is then divided by 12 to get a monthly amount. Vat cannot be levied on this as it is effectively a property tax, so these rates always exclude Vat.
For example, a hypothetical municipality with a residential rates charge of 0.01c in the rand (and an exemption on the first R250 000 in value) will calculate rates on a R1 million property as follows:
- Charge: 0.01c x R1 million = R10 000
- Exemption: 0.01c x R250 000 = (R2 500)
- Rates charge per year: R7 500
- Rates charge per month: R625
Rates per month
|Cents in the rand||R1m property||R2m property||R5m property|
|eThekwini||0.013152||R964||R2 060||R5 348|
|Ekurhuleni||0.01052||R745||R1 622||R4 252|
|Tshwane||0.01044*||R740||R1 610||R4 220|
|Johannesburg||0.00822||R445||R1 130||R3 185|
|Cape Town||0.00603||R352||R854||R2 362|
By regulation, charging rates on the first R15 000 of property value is “impermissible” (due to an out-dated “statutory reduction”), but most metros simply roll this into an “exempted amount”. Some include separate exemptions.
In Joburg, the first R350 000 of a property’s value is exempt, in Cape Town this figure is R300 000, while the value is R150 000 in both Ekurhuleni and Tshwane. In eThekwini only the first R120 000 is exempt.
These figures all include the R15 000 statutory exemption and are sometimes only applied when the value of a property exceeds a certain amount.
Owners of lower value properties and those occupied by pensioners (generally under a certain value) can apply for a rebate on rates charges.
This analysis also includes refuse removal – for one 240-litre bin or bags, depending – as some municipalities (specifically Joburg in this comparison) now charge based on the value of a property, versus a flat fee. Some, like eThekwini, charge a flat fee but offer automatic rebates for lower value properties.
The decision to charge based on property value in Johannesburg drew a fair amount of criticism when this was announced as the underlying cost to remove a bin from a house valued at R1 million and a bin at a house valued at R5 million ought to be the same.
This tariff model could be described as “redistributive” as wealthier residents are effectively subsidising refuse removal (and possibly other services) for lower income residents.
The City of Joburg has also attempted to introduce a contentious recycling levy of R50 per month “for all properties with a market value above R350 000” last year, which made little sense as the city’s army of informal waste pickers are already retrieving all recyclable material of value.
Following stiff resistance from ratepayers, this proposal was scrapped.
Refuse removal charge according to property value
|R1 million||R2 million||R5 million|
* All excluding Vat (Vat is levied on these charges)
At a lower property value, Tshwane’s charge for refuse removal (R315.02) is the highest due to the fixed nature of the charge (and no rebate).
Cape Town’s flat rate of R142 is by far the least expensive.
At higher property values (R5 million in this analysis), Cape Town’s is less than half the amounts charged in Tshwane and Joburg.
Ekurhuleni’s flat rate of R186.62 is reasonable in comparison to those charged in the other metros.
It is important to note that rates are only one fee levied on homeowners to sustain a host of services provided (in theory) by the city/metro (this is also the case for refuse removal as well as other services, such as sewerage).
Even though municipalities typically operate different divisions separately and with their own budgets, certain services are “loss-making” and subsidised by others.
Some services are paid for by transfers and grant receipts, mostly from the equitable share from the national budget. There are smaller grants under various government programmes and departments (the Expanded Public Works Programme, public transport, health, and so on) that are also used to fund various services.
However, increasingly municipalities have begun using the supply of electricity (given the high tariffs), as well as the supply of water to subsidise other services.
*This rate was incorrectly stated and has been corrected. All mentions of R3 million have been corrected to R5 million too. We apologise for the error.
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