Mangosuthu Buthelezi’s Weekly Newsletter to the Nation –
Rates
My dear friends and fellow South Africans,
Most people do not usually show much interest in the Byzantine world of local government finance and who can blame them?
But the month of February was an exception when the Durban city website crashed several times after the city released its valuation roll. The controversy has followed the implementation of the Property Rates Act as ratepayers across the country have been anxious that the new valuation, based on how much their property would sell for on an open market, could mean massive increases in rates. The Durban and Pietermaritzburg valuations went up by an average whooping 200-300%!
Areas which are facing increases also include previously disadvantaged areas that have since been developed. Umlazi, in Durban, for example, has recently received access to basic services. The building of the Umlazi Mega City and several schools has also pushed up property values. I will return to Umlazi in my newsletter next week.
As a party which is committed to keeping rates as low as possible, the IFP was concerned that ratepayers who believed that their property was wrongly valued had only a few weeks, until March 31, to take advantage of the objections process to have their property re-valued. An important point to bear in mind, though, is that rates will not go up the same as valuations, but are only known when a municipality finalises its budget and advertises its tariffs or randage. Municipalities must explain this distinction and how they arrive at tariffs with greater clarity. It is causing considerable confusion as a cursory glance at the letters pages of any newspaper across the nation will show.
Our local government spokesperson Peter Smith called last month for the urgent finalisation and implementation of an existing draft regulation seeking to cap the extent to which rates income may be increased year on year, and to ensure it applies to rates raised during the current implementation phase of the Property Rates Act.
One can only hope that the new rates regime will be accompanied by improved municipal services. As one of our online readers said, "The fact that my property has increased in value does not necessarily mean that the services rendered have either increased or improved". It is right that ratepayers should expect a commensurate improvement in services with higher rates and they should be levied in accordance with services provided. Municipalities must trim the fat of unnecessary expenditure (like imbizos) and inefficiencies (like duplication of activities and expensive consultants), as well as root out corruption which is rife in many of our municipalities.
As a Centre for Development and Enterprise study of Phumelela in the Free State revealed – a municipality marred by violent protests – the uncertainty surrounding the council’s finances contributed to the loss of trust in officials and councilors, and fuelled their resentment at the large salaries paid to municipal managers. A combination of poor delivery, managers’ comparative affluence amid resident’s poverty, and their inability to account for the municipality’s finances led to ratepayers associations depicting all managers as arrogant and unapproachable. They cited poor management and a complete lack of public service values. Inculcating public service values is equally of the essence in this debate.
The IFP, which draws the lion’s share of its support from the most marginalised and poorest sections of our society, is most concerned about the provision of basic services to the poor. Most rural, and some urban, municipalities in South Africa are struggling to provide basic services to the poor because they are simply not funded properly by national government.
To illustrate this point, the city of Johannesburg recently released its rates policy and assessment rates, which has raised concerns about the prospect of rate hikes in rates and user charges for Johannesburg residents (Business Day, April 10 2008). "Many residents are likely to experience above-inflation rises for services and rates, confirming, rather than confounding the provincial and local government’s department’s contention that there is a need to curtail local government fiscal autonomy where it might result in adverse macroeconomic circumstance".
The visionary system of wall-to-wall local government has gaping patches in it because its devolutionary trend militates against the government’s centralist instincts. Addressing inadequate funding, rather than merely passing on the cost of providing services to the indigent by hefty rate increases for the ratepayer, must be addressed.
In this regard, municipalities have already rebelled against a government proposal to slash the rates it pays on its properties. Local authorities in January unanimously rejected the government’s proposed rates-capping policy, which they believe would cripple municipal finances and hugely inflate the rates bills of homeowners (IOL, January 27 2008).
The proposal also made provision for the rates on agricultural and vacant land, and on the properties of state, parastatal and public-benefit organisations, such as schools, hospitals and libraries, to be lowered to a quarter of the rates for private properties. Municipal managers fear the draft rate-capping regulations, coupled with the proposal that business rates be reduced, could cripple the finances of municipalities, making it difficult for them to provide essential services. The IFP fears that, if passed, this proposal could leave municipalities chronically under-funded. Government must pay its way too! Whilst we believe that the indigent should be exempt from rates altogether, households who can afford to pay rates must do so. There are clearly non-payers who, in fact, earn enough to pay rates. I have said before that in South Africa today we are reaping, in part, the bitter harvest of rendering the country’s townships ungovernable during apartheid. This culture has found expression not only in the form of ugly dissent in our public discourse, but also in the pervasive culture of non-payment for municipal services. So we must inculcate a responsible citizen ethic to complement a public service culture.
The culture of non-payment can only be addressed by ensuring that rates are assiduously collected by municipalities as SARS collects income tax – the latter has been a giant step of progress over the last decade. Can some thought be given to how rates can be collected more efficiently?
The media has been replete with horror stories of elderly residents who have been forced to sell their homes because they cannot afford rates. Flexible arrangements need to be made for the elderly to defer rate payments and, depending on their means, have their rates reduced. Next week, I will consider the question of traditional communities and rates.
Yours sincerely,
Prince Mangosuthu Buthelezi MP
