Gavin Du Venage
Johannesburg’s R6,5-billion budget passed earlier this week held few shocks for rate payers. However, business has been hit with an increase that could be as high as 30 percent, most of which will go to fund a huge deficit as a result of unpaid township debts.
The first unitary budget to be passed for Greater Johannesburg is the sixth largest in the country, bigger than that of the old Transvaal Provincial Administration or Eastern Transvaal Province.
Predictions made, in particular by the Democratic Party, that Johannesburg residents could pay as much as double their current rates did not come true, with the increase being kept to 12 percent, the most the national government would allow.
However, the TMC levy — formerly the Regional Services Council levy — was increased by 15 percent. As this levy is a flat rate calculated according to turnover and wages, the effect is likely to push the increase closer to 30 percent, says Johannesburg Chamber of Commerce and Industry official Stuart Morris.
Morris says business will be penalised for doing better in the coming year. Paying workers better wages will also lift the cost of the levy. “It will have an inflationary affect because the flat rate levy is added on to the overall cost of doing business.”
He says, although long-suffering large companies will be able to deal with the increase, small businesses are in for a rough time. “Business has been tapped as an easy option to increase revenue. But it is the small trader who will really feel the pinch.”
Morris says the biggest source of contention is that most of the money will be used to fund operating expenditure, and not capital projects. The original purpose of the RSC levy was to divert money from the white areas, which had a business rates base, to black areas which had virtually no income other than service fees and rent.
With the onset of service payment boycotts throughout townships in the Johannesburg area, this cash was diverted to pay for running costs.
The TMC expects to lose almost R600-million through non-payment of services in the coming year. TMC acting finance director Lucas Opperman says the deficit will be funded by the surplus produced by white local
But Morris fears it will also swallow up most of the levy. “We sympathise with the TMCs’ need to raise revenue, but feel strenuous measures need to be taken to ensure payment levels increase.”
To aggravate the problem, past debts have yet to be written off. Opperman says township local authorities still owe an estimated R723-million. Most of this was incurred before January 1994, the cut-off date set by former state president FW de Klerk and President Nelson Mandela. According to the agreement signed last year all township debts would be scrapped.
So far, R353-million has been written off, but the TMC still needs to clear away legal difficulties before it can recieve permission to write off the bulk of the debt. Current legislation forbids the TMC to issue permission for a resident to transfer fixed property until all outstanding debts are settled, says Opperman. Unless the law is changed, a resident is stuck with his property unless he is willing to settle debts that could go back 10 years.
Another question that needs to be solved is that of legally irrecoverable debts. Because the January agreement was never made law, the TMC cannot legally write of debts anyway. Opperman says until these problems have been sorted out the debt will remain “in
One positive note is that service payment levels have improved and are expected to get better as the TMC spends more on administration. Gauteng Masakhane campaign co-ordinator Bushy Kelobonye says payment levels are now between 30 percent and 40 percent, up from less than 10 percent last year.
“All around, the campaign to encourage payment for service is being supported by the affected communities,” Kelobonye says. He says the biggest single factor limiting payments is the lack of administration. Few pay points discourage residents from handing over their R45-per-month flat fee.
However, Kelobonye says the TMC has committed itself to spending a substantial amount on administration before the end of the year. “A lot of good work has been done to improve infrastructure, and we expect it to get even better this year,” he says.