Rates and tax revolts are either underway or being contemplated by ratepayer associations fed up at being forced to pay rates and taxes to dysfunctional municipalities.
They are called ‘tax diversions’ rather than revolts, and they’re of questionable legality, but several ratepayer associations are willing to test the law. Others are planning court actions to allow residents to take over the delivery of municipal services, as recently happened in Kgetlengrivier in North West Province.
The UAG or Umdoni Action Group (based in Scottburgh, KwaZulu-Natal) was established in 2015 to protect the interests of ratepayers, tenants and residents of the area, and has opted for ‘tax diversion’ to hold the local municipality accountable. The ratepayers’ complaints are familiar ones: “Broken roads and stormwater systems, crumbling basic infrastructure, decrepit CBD, very few working street lights, overgrown verges and parks. The list is almost endless,” states the group’s website.
The UAG launched a rates diversion policy in May 2020 after years of attempting to engage with the local municipality to resolve their complaints without success. To get involved, ratepayers have to fill in a ‘Declaration of Dispute’ form which the UAG emails monthly on behalf of all participants to the municipal manager. The rates and taxes that would normally be paid to the municipality are retained in ratepayers’ own accounts.
“Should our complaints not be resolved within a reasonable period, we will impose on Umdoni Municipality an ultimatum, in which we will reserve the right to effect repairs using the diverted funds and our own labour, contractors and material,” says the group’s call to action.
UAG’s initiative appears to have borne some fruit. During a recent Zoom meeting, the newly-appointed CFO at the municipality undertook to “craft a plan” to resolve the rates diversion impasse.
However, UAG remains resolute that no retained rates will be released until repairs actually take place and services resume.
Geoff Smailes, a founding member of UAG, says several hundred residents have signed up for the tax diversion campaign so far, but to have any real clout, it needs all residents on board.
It’s a small beginning, but campaigns like this are being contemplated across the country.
This is not the first time ratepayers have voted by withholding payment to dysfunctional municipalities. In 2009, 30 ratepayer associations withheld rates and taxes and many more declared disputes with their municipalities for non-delivery of services and other issues.
“On the face of it, withholding rates and taxes is unlawful, and declaring a dispute doesn’t legitimise withholding taxes, but it does defer it, as it effectively puts the disputed amount on hold until the matter is resolved,” says Tim Tyrell, project manager at Organisation Undoing Tax Abuse (Outa). “It is also unlawful for local governments to charge taxes and fail to deliver services for which they are charging.”
A dispute is only legitimate if the person declaring the dispute is a legal persona, such as the ratepayer.
“This is why it’s very important to properly constitute and register any community organisation, especially one that seeks to go the rates/taxes diversion route,” adds Tyrell.
Moneyweb this week reported on the court-ordered takeover by residents of water and sewage services in Kgetleng in North West province, after the municipality was found to have breached its constitutional obligation to provide these basic services. Local residents got together and raised money and expertise to get the sewage and water plants – which had been abandoned by municipal workers – up and running in about a week.
Dissolution of municipality
In January 2020, history was made when the Makhanda High Court in Grahamstown ordered the dissolution of the Makana Local Municipality and an administrator be appointed to run its affairs.
The court action was brought by the Unemployed People’s Movement as frustration grew over the municipality’s failure to provide basic services, such as garbage collection and clean water.
The decision was appealed by the Eastern Cape government and the Makana Municipality, but the appeal was rejected by the court.
Another area where a tax diversion campaign is being considered is Pietermaritzburg, falling under the Msunduzi Municipality. Ratings Afrika’s Municipal Financial Sustainability Index (MFSI) survey ranks municipalities on six measures of financial sustainability: operating performance, liquidity management, debt governance, budget practices, affordability and infrastructure development. Municipalities are then given a score out of 100. As shown in the table below, Msunduzi scores a miserable 31. Umdoni is somewhat better at 51.
Melanie Veness of the Pietermaritzburg Chamber of Business says businesses are fleeing the area because of inconsistent electricity supply, potholed roads and a near total breakdown of basic service delivery. “This is the second time in 10 years the Msunduzi Municipality has been under administration, and not a single portfolio within the municipality is well run.”
Complicating matters in the local government are factional rivalries in the ruling ANC. Ratepayers are expected to pay for services while a huge percentage of the prepaid meters in the area are illegally bypassed.
Veness says there are roughly 40 000 electricity meters in the area, but only 11 000 are being billed.
Criminal “entrepreneurs” have been able to run electricity cables to poorer arrears and charge R150 a month for connections. None of this goes to the municipality. Potholes have gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Unless something drastic is done, more companies will leave the area, adds Veness.
Anthony Waldhausen, chair of ratepayers umbrella body Msunduzi Association of Residents, Ratepayers and Civics (Marrc), says the group is consulting with lawyers over an appropriate course of action to ensure ratepayers are given the services they are paying for. Marrc has been emboldened by the recent victory of ratepayers in Kgetlengrivier in North West province, who were allowed by the court to take over the provision of services.
“A lot of residents in this area are talking of a rates and taxes boycott, but we are discouraging that as we are looking for more effective ways of getting the basic services we are paying for. One possibility we are looking at is to ask the court to follow the Kgetlengrivier court case in North West and allow us to take over service delivery in this area.
“We’ve made numerous attempts to resolve our concerns by meeting with the mayor and municipal manager, but these have not borne fruit.
“We now have to look at more urgent ways of solving the problems we face.”
Politically connected but unqualified
Like many other municipalities around the country, Msunduzi is rife with cadre deployments. Unqualified people with the right political connections are being appointed to senior positions.
“There are many good and competent people in the municipality, but their hands are tied. Their budgets are redirected elsewhere by their seniors and there is little they can do.”
Ratepayers across the country are fed up with being told to suck it up while local municipalities are being run into the ground by comrades with neither the expertise nor the willingness to do their jobs.
The issue of rates and taxes boycotts will not go away.
“We don’t encourage boycotts but we do endorse the various types of civic indignation we are now seeing. If enough people break the law, the law becomes moot,” says Tyrrell.
“What are local governments going to do? In many cases, there has already been a collapse of services.”
Outa says it is rolling out a number of campaigns to improve communication between residents and local government, including a mobile-based app to report faults and potholes to the right people in municipalities, and then track the progress in addressing these issues.
Another Outa campaign plans to focus on building capacity at local level to form ratepayer associations and become effective in holding municipalities to account.
Listen to Nompu Siziba’s interview with Ineke Prinsloo from Consulta (or read the transcript here):