Rocketing municipal bills hit SA

Pretoria – In the third quarter of this year South Africans shelled out 72.2% more for municipal services than during the same period two years ago.

Annual municipal rates and services tariffs were now equal to the total amount that South Africans paid in personal tax. But for this massive contribution they received little value for money, said Economists.co.za director Mike Schüssler, who reported these statistics.

He reckoned these large increases equalled a 3.37 percentage point rise in interest rates.

It was no wonder, he said, that interest-rate cuts did not have the desired outcome of getting consumer expenditure rolling forward. A large part of these savings were being sucked up by municipal accounts.

Schüssler said the R51.7bn that the public had paid to municipalities in the third quarter represented 7.8% of the quarterly gross domestic product (GDP). Two years ago this percentage was 5.17%.

Municipalities increasingly demand a greater proportion of the GDP and the tax burden on citizens is always on the rise, said Schüssler. If the situation should continue, within five years all the money would go to the state. This situation was not sustainable.

He said local authorities needed to reduce costs, and municipal officers’ salaries were excessive.

It was not a case of too little money. Municipalities were hopelessly ineffective. He said the fact that municipalities’ outstanding debts were continually rising was a sign that consumers were being tapped dry.

According to figures released by National Treasury last week, by the end of September consumers owed metro councils 12.4% more than a year ago. In Johannesburg the increase was 23.5%. In secondary cities the outstanding debt was 18.3% up. More than 60% of this debt was owed by households.

Efficient Group chief economist Dawie Roodt said the sharp rise in municipal costs was moreover unevenly distributed among the county’s citizens. For the middle class, which is easier to track down and can apparently afford to pay, the rise is probably even higher.

He said if the economy grew by 3% this year, the benefits of this growth could be lost to the individual because he or she would have to shell out more and more to the local municipality.

The biggest threat for the South African economy was for the state to break down completely, said Roodt.

This could already be seen at municipal level.

He said municipalities were only supposed to deliver services and should therefore earn money only from levies. But they were actually busy redistributing, which was a function belonging to central government. That was how poverty was simply being spread.

According to the municipal budget’s medium-term review, which Treasury also announced last week, municipalities’ budgets will increase by a further 25% over the next two years.

[Date:] 2010-12-06

[Source:] http://m.news24.com/fin24/Economy/Rocketing-municipal-bills-hit-SA-20101206

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