Joburg and Cape Town hike tariffs as consumers buckle under coronavirus pressure

The City of Cape Town has added to the burden of ratepayers, already struggling with the financial pressures brought on by the coronavirus pandemic, by raising tariffs in its budget 2020-2021.

The City has increased rates by 4%; electricity by 4.8%; water and sanitation by 4.5%; and refuse removal by 3.5% as of 1 July.

The City’s chief financial officer, Kevin Jacoby, said in a statement: “The City is dependent on the income from rates and services to fund the delivery of water, sanitation, electricity, clinics, traffic lights and fire service, among others.

“The City would have preferred to have no rates and tariff increases this year because of the Covid-19 economic impact on the people of Cape Town, but as it is, the cost of providing services outpaces the income we get from rates and tariffs.”

It noted that more than 70% of costs of basic service provision per month comes from rates and tariff income. The City covers the shortfall with other funding sources, it said.

The South African funding model for municipalities is based on income from rates and tariffs to fund services.

The City of Johannesburg meanwhile, has postponed its budget, despite the new budget year having already kicked in.

Officials stated that more time was required to consult over the proposed document. This consultation period has been impacted by the Covid-19 pandemic.

The Gauteng Provincial Executive Council (EXCO) convened an extraordinary Executive Council meeting on 4 July 2020 to deliberate on steps to take following the Municipal Council not being able approve an annual budget timeously.

The EXCO has directed the Johannesburg Municipal Council to convene urgently to approve its budget for the 2020/2021 municipal financial year, by no later than 10 July 2020.

The table below sets out the proposed increases for 2020/21-2022/23 financial years

The Organisation Undoing Tax Abuse (Outa) said that the delay in passing the City of Joburg budget means the council can still ensure it is a responsible budget.

It called on the City to vote against any salary and tariff increases in the 2020/2021 budget.

Outa said it believes that salary increases by the City have been abused.

“The salary bill since 2007/08 increased by 192% far exceeding CPI of 89% over this period. If the City had used the average CPI increase in its wage bill, it could have saved its residents R21 billion,” said Julius Kleynhans, Outa Strategy and Development executive.

“The saving in 2018/19 alone would have been R4.5 billion to Joburg residents. In this period the City’s personnel headcount only increased by approximately 4%.”

In our submission on the City of Joburg’s draft budget for 202021, Outa called for an investigation into plans by the City to pay the mayor, the speaker and the chief whip more than the legal rate.

“The lack of maintenance is reaching unacceptable levels, with electricity outages, broken traffic lights, the lack of pointsmen, potholes, exposed electricity boxes, sewage running down the streets. The money wasted on salary increases over the last decade could have addressed the backlog in maintenance and repairs on infrastructure.

“Treasury guidelines suggest that 8% of the asset carrying value should be spent on maintenance, yet Joburg has spent only 2.9% on average over the past decade. This speaks to why the City infrastructure is deteriorating,” said Kleynhans.

The draft budget shows that the City plans to vote for a 6.4% pay increase for its councillors and 5.4% for municipal employees.

Outa argued that the City is not in a financial position to provide any increases due to the impact of the economic crisis on its residents. It called it “unfair and irresponsible to allow for increases to property tariffs and levies, whilst its residents are struggling to make ends meet in these devastating financial conditions”.

Read: Government is looking at a new basic income grant for South Africa

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Joburg and Cape Town hike tariffs as consumers buckle under coronavirus pressure