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Wednesday May 30, 2012

Joburg property rates set to rise by 11% in July

The City of Joburg plans to bill its customers 11 percent more while expecting that more customers will default on bills.

In the budget for 2012/13 - which starts on July 1 - the city plans for an 11 percent hike in revenue, an increase of R3.3 billion.

"In compiling the budget, we use actual revenue billed and proposed tariff increase for services," city spokesman Gabu Tugwana said.

The revenue comes mainly from charges to residents for rates, electricity, water, sewerage and refuse, plus operating grants.

Operating grants (from national government) drop by 6 percent, and the budget notes this is "mainly as a result of the decrease in the fuel levy, PTIS (public transport and infrastructure systems grant), housing top structures, health and ambulance subsidies/ grants".

The three biggest income generators are electricity charges, water and sewerage, and rates.

Charges on all those go up substantially from July 1.

Electricity charges and revenue are both budgeted to go up 14 percent, although this is not yet authorised by the National Energy Regulator of SA (Nersa) as Joburg wants to charge more than the 11 percent increase that Nersa has approved.

Nersa is holding a public hearing today at its Pretoria head office on the applications for above-11 percent increases for Joburg and other municipalities.

Water and sewerage charges and revenue are budgeted to go up by 15 percent.

Rates charges are budgeted to go up 6 percent, but rates income is predicted to go up by 18 percent.

"What has been taken into account in that year-on-year is growth and tariff (which is limited to 6 percent)," said Tugwana, explaining the rates increase.

In guidelines to municipalities, the National Treasury repeatedly emphasises the need for realistic projections of revenue.

But while the bills will go up, the failure to pay is expected to increase too.

The budget prediction for "debt impairment" jumps by 17 percent in the next year.

The Treasury uses the term "debt impairment" for the provision for debts not paid to the metro, but not yet written off.

Joburg's adjusted budget for 2011/12 estimated debt impairment at R1.76bn.

In 2012/13, this is expected to go up 17 percent to R2.05bn.

The debt goes on increasing after that, by 12 percent the next year and 8 percent the year after.

The total increase in debt impairment over the next three years is budgeted at R6.8bn.

In March, the Treasury reported that the total outstanding debt owed to metro municipalities by the end of last year was R44.5bn and that Joburg's share of this was R13.9bn.

"Based on prudent financial management, the city uses realistic anticipated revenue collection, which is estimated at an average of 92.3 percent per service for budget purposes, but the city endeavours to collect all money due," said Tugwana.

"Every year we do an analysis of consumption and rates to bill to determine what we are going to collect."

The Star

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