Rustenburg gets final chance to solve valuation mess

MEC invokes ‘exceptional circumstances’, extends validity of 2014 roll.
Inflated valuations would have increased the value of the mining town’s municipal budget from R41bn to R71bn and had ‘a devastating effect on the community’. Image: Supplied

Following a public outcry over property valuations that increased by up to 500% in a declining market, the Rustenburg local council took the unusual step of objecting to its own new property valuation roll that was supposed to take effect on July 1.

North West MEC for cooperative governance, human settlements and traditional affairs Mothibedi Kegakilwe subsequently extended the validity of the previous valuation for another year – but under strict conditions.

The council on Tuesday decided to terminate its agreement with the municipal valuer who has already received payment of R3.3 million and appoint a new municipal valuer before the end of the month.

The validity period of the Rustenburg general valuation roll was from July 1, 2014 to June 30, 2030. The council appointed Bobby Motau from the firm Optiprop to compile a new valuation roll that was supposed to take effect on July 1 this year.

This new roll was published earlier this year, but the public participation process was disrupted by the Covid-19 lockdown imposed on the country late in March.

When the lockdown regulations were eased and property owners became aware of their new valuations, it became clear that there were some serious flaws.

According to Johan van Wyk, a professional valuer who works in Rustenburg, the values on some properties increased by as much as 500% compared to the roll that was due to lapse at the end of June. This roll was, as prescribed by the Local Government Municipal Property Rates Act, based on market value.

New roll ‘completely skewed’

Van Wyk says the new roll was as a whole completely skewed and any notion that property values in Rustenburg had increased since 2014 was “simply not true”.

Frans Rootman from the consultancy Munsolv says he is aware of business premises that saw its valuation increase from R6 million to R166 million. If the latter value is implemented, the monthly property rates would amount to R322 000. “The owner doesn’t even earn as much in rent”, says Rootman.

An analysis by the council showed the valuation of:

5 948 properties increased by between 80% and 100%;

12 783 properties increase by between 50% and 79%;

8 346 properties increased by between 30% and 49%; and

7 649 properties increased by between 10% and 29%.

To add insult to injury, 3 748 properties that were on the previous roll are not on the new one, which means the council would not be able to bill them for property rates.

On June 10, with less than a month to go before the new roll would take effect, Mayor Mpho Khunou wrote to the MEC to request such an extension.

He motivated that implementation of the roll would open the floodgates for objections and litigation that would exhaust the municipality’s resources.

He further stated the effect of the inflated valuations was to increase the value of the municipality’s budget from R41 billion to R71 billion. That would have a devastating effect on the community, he said.

“To attempt to use the new valuation roll will have a ripple effect of destabilising the economy of Rustenburg and cause internal financial turmoil in dealing with numerous adjustments to the budget structure .… ” Khunou wrote.

Extension conditional

A week later MEC Kegakilwe granted the extension, on condition that the municipality sticks to a strict plan to develop and implement a new valuation roll on July 1, 2021. His office requires regular progress reports.

In his letter to Kegakilwe, Khunou accuses Motau as municipal valuer of failing to provide information, explain the methodology he used and substantiate the disputed valuations.

The council decided to terminate the contract with Optiprop, to which it still owes R8.7 million. It realises however that the appointment of another municipal valuer will lead to further costs.

“Any consequential loss suffered as a direct result of the negligent conduct of the municipal valuer will be recovered through normal legal routes”, Khunou stated.

Moneyweb contacted Motau for comment, but he preferred not to respond.

* In an unrelated matter Eskom has given notice that it plans to interrupt power supply to the Rustenburg local municipality due to arrear debt of R144 million. The interruptions are set to start on July 30 and continue indefinitely. According to Eskom the amount has been outstanding since August 2018. The municipality disputes this, but its dispute pertains to only R8 million. The municipality would not comment in the light of ongoing engagement with Eskom. Mining group Glencore, which relies on electricity supply from the municipality for some of its operations, said it is aware of the matter and will continue to engage with all parties to manage the situation and ensure that operations are not affected.

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You would think that after 25y there would be a mediocum of governance experience learned from previous failures..
Sad thing is that if there was an election tomorrow in this town, the same clowns would get elected.

Be aware – the same BS IS HAPPENING COUNTRYWIDE!!!!!!

Including the DA run municipalities, 500% is in the mix.

The problems are:
-The majority of municipalities in SA now have over-valued valuation rolls,
-There are too many people not paying for rates and utilities or stealing utilities thereby forcing municipalities to go bankrupt,
-The ANCrun municipalities are overloaded with workers, most of whom do not have the skills to perform.

One only has to look at the rate of increase in the amount of “equitable share” households in any municipality to realise that no municipality in South Africa is a viable entity. The municipality depends on rising property valuations for its existence. The income of the residents does not increase at the same rate. This leads to a decline in the affordability of the rates and taxes. In effect, a municipality is a vehicle that turns the property of residents into salaries for municipal workers, Eskom employees and BEE coal mine beneficiaries. The poor, emaciated property owner supports BEE contracts, Eskom employees and overpaid municipal workers whose salaries rise faster than the rate of inflation. Property owners are forced into debt to pay rates and taxes. He gives his house as collateral for the loan. This implies that the municipality is taking equity out of the house.

This redistribution of wealth can only last until it spills over into declining property valuations. The crash in the value of listed property tells us the end-game has already started for municipalities.

End of comments.

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