Ina Opperman

By Ina Opperman

Business Journalist

More above-inflation increases for municipal services in SA will hit on 1 July

High interest rates and the cost of living are eating up a big chunk of consumers’ salaries and now municipal services are set to increase.

Consumers will be hit by above-inflation increases for municipal services from 1 July 2024. This is in a time where even high-income consumers are battling to pay their bills and salaries remain stagnant.

South African consumers are already constrained with little to no disposable income. Many have kept their spending in check – which keeps the economy from growing.

Residents and business in the City of Johannesburg can expect these increases in municipal services tariffs:

Julia Fish, manager of JoburgCAN, Outa’s Community Action Network (CAN), says the budget and tariffs of the City are becoming unaffordable for residents.

“Rising interest rates, a declining economic sector, high unemployment and double taxation in the form of having to pay for additional private services, such as security and health services, are severely affecting the City’s residents and they cannot absorb these increases easily.”

The City must add value and keep increases within inflation, she says. “The City continues to rely on paying residents while delivering limited services in the highest paying regions and have no contingency other than taking on new debt.

“The City appears to be ignoring the opportunities for revenue collection through its public advertisement revenue, rental in the JOSHCO (Johannesburg Social Housing Company) and JPC (Johannesburg Property Company) MOE portfolio and the application or collection of fines.”

Other ways to increase City revenue

She says an increase in these items would place the City in better financial standing than pricing the budget out of affordable margins for residents and ratepayers. Fish says that is why we have semigration because ratepayers are moving to municipalities that deliver sustainable services at a cost-effective rate.

“The City risks its ability to keep these ratepayers due to every increased cost, yet there is a significant increase in service breakdowns and infrastructure deterioration. If the City does not start prioritising giving the ratepayers a good return on the rates they pay in the form of sufficient service delivery, it will lose big businesses and a large number of rate-paying residents to better-performing municipalities.”

ALSO READ: Eskom’s new tariff: Here’s how your monthly electricity bill will change

Fish warns that increases which do not match the delivery of services and are not ringfenced for the maintenance of service infrastructure will result in residents being unable to pay, unwilling to pay, or taking their investment money elsewhere if they can.

ALSO READ: Municipal tariff hikes go to court

She says serious austerity in spending on events and salaries is needed while we prioritise spending on projects and services or the trust deficit between residents and government will increase.

Is the increase fair?

Businesses and residents in the City of Ekurhuleni can expect these increases:

Residents and business in the City of Tshwane can expect these increases:

Julius Kleynhans, executive manager for local government at Outa, says the fairness of these increases can be questioned as there is a clear trend of above-inflation increases over the last few years in these Metros.

“What makes things worse, if you take Johannesburg as an example, around 40% of its distributed water qualifies as non-revenue water, mostly due to leaks and theft. City Power runs at a loss of R1 billion per month due to theft and distribution losses. Therefore, inefficient management of the City’s resources and general incompetence in the administration is covered by the ratepayer to a large extent.”

He says adding to this are the inefficiencies and challenges faced by bulk suppliers, such as Eskom and Rand Water. “But because of the lack of consequence management, political meddling and corruption, taxpayers must cover these costs.

“This is not fair and many consumers are already struggling with high living costs, including rising prices for basic goods and services, fuel and housing. If tariff increases were accompanied by improvements in service quality, infrastructure and reliability, they may be perceived as more justified.”

However, he says, if service levels remain the same or deteriorate, consumers may view the increases as unfair. Municipalities must ensure that the tariff structures are progressive, offering some relief to those least able to afford increases.

Are residents getting value for their money for municipal services?

Do people who live and operate businesses in these cities get value for their money? Kleynhans says the perception of value depends heavily on whether the tariff increases lead to tangible improvements in municipal services, such as electricity reliability, water quality and sustainable access, waste management and infrastructure maintenance such as roads.

ALSO READ: ‘Increases have become unsustainable and have ripple effect on economy’ – economist

Currently, you can see some improvements in the City of Tshwane, he says, but sadly this is not the case in Ekurhuleni and Johannesburg.

“In general, the cost of municipal services has heavily been externalised to these businesses and consumers over the last three years as consumers had to fork out money to buy generators, fuel and maintenance to obtain electricity to run their businesses, they had to put up water tanks with pressure pumps and filtration systems to ensure they have water and now we see them cleaning the roads, fixing potholes and ensuring customers can safely arrive to their premises.”

Therefore, Kleynhans says, there is a reason why good talent is leaving Gauteng and it starts with the topic of basic service delivery.

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