Taking into account the financial stresses on its citizens, Johannesburg has worked to keep its tariff increases to a minimum.
THE City has strived to minimise its domestic tariff increases to limit the effects of inflation and high interest rates on residents in the 2008-09 financial year. This is according to Executive Mayor Amos Masondo, who delivered his budget speech on Wednesday, 21 May. The new tariffs come into effect on 1 July.
The new tariffs were announced at a media briefing earlier in the day by Parks Tau, the member of the mayoral committee for finance and economic development.
He said that although the latest trends on CPIX - consumer price inflation stripping out mortgage costs - projected an average of 8 percent for the 2008-09 financial year, the City had based its tariff increases on the CPIX of 6,2 percent, in line with national Treasury guidelines.
“Adjusting the tariffs to [the higher] rate might mean that the City will experience difficulties in collecting revenue at expected levels and bad debts might increase.”
In revising its tariffs for water, electricity and refuse removal, the City had to take into account current food and fuel prices, which had soared by a sky-high margin. “Considering the financial distress the South African consumer is in, the affordability of most goods and services is at risk,” Tau said.
The initial reason behind increasing domestic tariffs was to encourage a greater savings culture in residents. However, the management of the trade-offs between the financial sustainability of the City and the affordability of services was a major challenge.
Tau added that there was an increasing demand on limited and fast-depleting resources - the supply of national electricity was constrained; there was a projected shortage of water; and a decrease in landfill space.
“[There is] a need to change user consumption behaviours to ensure resource conservation.”
Another challenge was to make services affordable for the indigent. Tau announced that the free basic water allocation for indigent households would increase from six kilolitres per household per month to 10 kilolitres. This was reiterated later by Masondo in his budget speech.
In addition to the water allocation, Tau said that it had been proposed that 100kwh of free basic electricity be made available to the indigent per month, as well as free refuse collection services.
The new water tariffs for the 2008-09 financial year would force big consumers to pay higher tariffs than those whose consumption was lower.
Water increases
There would be no water tariff increase for using 10 kilolitres or less of water a month. Usage above 11 kilolitres a month would increase by CPIX, or 6,2 percent. Those using above 15 kilolitres would be charged a 7,2 percent increase; above 20 kilolitres would attract an increase of 8,2 percent, 9,2 percent above 30 kilolitres and 10,2 percent above 40 kilolitres.
High consumers would continue to get six kilolitres of water for free per household per month. “The purpose is to encourage high consumers to start saving water,” Tau said.
“The emergency water allowance will be four kilolitres per annum per household to the indigent.”
Electricity increases
Tau noted that the two cents per kWh of electricity penalty tariff announced by Minister of Finance Trevor Manual in his national budget speech in February “has not been factored in, awaiting implementation guidelines”. There might be a possible additional increase of 53 percent in electricity from Eskom, which had also not been “factored at this stage”.
Regarding tariffs for waste removal, a City Cleaning Levy, had been proposed, which would be a contribution made by households and businesses.
“If you litter you will be levied.” This was part of the City’s efforts to step up and enforce cleanliness. “We want to enforce a behavioural change within society, and we will reinforce cleanliness.”
Property rates
He explained that a recently enacted property evaluation law required the council to value property based on its entire value, and not just on the land, as in the past. “[There is] a change in the valuation basis, from site values to full market values.
“The City thus proposes that the tariff for residential properties be 0,4 cents in the rand, less than half-a-cent for the value of each rand in the property value.”
All property owners will get a rebate of R150 000. For example, to work out the rates on a property valued at R500 000, deduct R150 000 and multiply the remainder - R350 000 - with the tariff, 0,004, to get to the property rates payable per year.
“As we bill monthly, the amount should be divided by 12 to get to a monthly amount of R116,67. Notwithstanding any rebate granted, it is proposed that all residential property as defined in the [Property Valuation] Act, shall be subject to the payment of a minimum property rate of R60 per annum, provided that this provision shall not apply to indigent persons,” Tau explained.
“Properties below the threshold of R150 000 don’t pay assessment rates.”
The budget
The City has tabled a budget of more than R26-billion for the 2008-09 financial year, with an operating budget of R21-billion and a capital budget of R5,2-billion. This is about 13,5 percent higher than last year.
Revenue derived from electricity was estimated to be about R4,9-billion; from water and sewage to be about R3,7-billion; and from property rates to be about R3,8-billion.
New tariffs
Water
- Usage below 10kl a month - no increase for the next financial year;
- Usage above 11kl - increased by CPIX (6,2%);
- Usage above 15kl a month - CPIX + 1%;
- Usage above 20kl a month - CPIX + 2%;
- Usage above 30kl a month - CPIX + 3%;
- Usage above 40kl a month - CPIX + 4%; and
- Commercial and industrial users - CPIX + 2%.
Electricity
- Increase free basic electricity benefits to different indigent categories, in line with the expanded social package proposals, between 50kwh to 100kwh per household per month;
- A CPIX (6,2 percent) increase on consumption of more than 100kwh but less than 300kwh;
- A CPIX + 1% (7,2 percent) increase on consumption of more than 300kwh but less than 500kwh;
- Minimum 19% to 23% increase on other domestic customers; and
- An overall 19% increase for large power users.
Refuse collection
- Tariffs to be calculated on property value;
- A maximum of R130 on all properties, irrespective of value;
- A R10 City Cleaning Levy charged to all households and businesses.
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