City of Joburg to implement tariff hikes

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JIMMY MOYAHA: Yesterday the MMC [Member of the Mayoral Committee] for finance for the City of Joburg, Councillor Dada Morero, announced that the city would be implementing new tariffs effective from July 1.

I’m joined on the line by the CEO of Ratings Afrika, Charl Kocks. Good evening, Charl. Thank you so much for taking the time. More hikes – what does it mean? Can we even afford these things? What is going up and by how much?

CHARL KOCKS: Well, first of all, I think we can’t afford not to afford them, because the city is in dire straits.

We measure their financial sustainability year by year, and it’s really only going downwards.

Read/listen: Joburg needs the finest people to lead the city – Malose Kekana

So whatever the city can do to improve its financial position is potentially good for its inhabitants.

They’re talking about an increase that’s roughly going to be about 2%.

Just to give you some numbers, last year – that is up to June 2022 – they made US$13.5 billion [around R253.3 billion at the current rate of exchange] from property rates.

Their gross profit from electricity was US$3.1 billion [R58 billion]. We don’t know what the net property is – they don’t disclose it any more – and their gross profit from water was US$1.2 billion [R22.5 billion] …

So you see property rates are an extremely important source of income for the city.

JIMMY MOYAHA: Is it just the property rates that are going up, or are there other areas? I noted they said something about essential or key services increasing in terms of costing.

CHARL KOCKS: Well, essentially everything is going up, there’s no question; but the one that most people find extremely hard is the property rate. People do know about the electricity, and it’s painful – and don’t let argue that it’s not painful. I’m a Joburg citizen myself. The property rates are the ones [about which] you think, well, they’ve got the ability to actually not increase that. But unfortunately they need the money and we need them to use this money wisely.

JIMMY MOYAHA: So where has the shortfall sort of been building up from? Do we have areas of indication that sort of point to where the expenditure goes, and what the increases will mean for us? As you mentioned, yes, the city needs it in order for the city to be able to function, but for them to be able to still collect north of 16-odd billion as you mentioned, is not exactly a small sum of money.

CHARL KOCKS: That’s correct. Unfortunately, the one thing that has suffered tremendously is the liquidity. Liquidity has gone downhill at a very, very great pace. We measure that, as I said, year on year. They were up in the 30s and 40s at one stage, but they’re now at seven.

The other thing is that the operating performance – in other words, the fact that they make a surplus or do not make a surplus every year – also has declined significantly.

I think the main thing to say is that the collection from the debtors has not been good.

Last year we were at 88%, [and] were looking at about 95% to be fairly happy. And of course over 100% would be wonderful. But 88% is too low. Every year that you go this low on your debtors collection, you will have significant problems in being able to afford the right kind of things.

So it’s an overall thing. It’s not a simple item [about which] you can say, well, fix this little thing and it’s fine. It’s a big picture. It’s a huge machine, the city. There’s no question it is a huge corporation. It has many components and it needs to be managed very, very carefully to eventually be successful and be sustainable for all of us.

JIMMY MOYAHA: For those of us who are in the city or who stay within the city of Joburg, for some residents there seem to be signs of relief.

I know it seems a bit strange, considering everything we’ve just discussed and the fact that, as you mentioned, things like property rates are going up by 2%, electricity up by almost 15%. But there is some form of relief.

Is that relief now across all citizens, or is it sort of specific groups of citizens that might be able to benefit from this?

CHARL KOCKS: You’re talking about relief in terms of paying less, or less of an increase? Is that what you mean?

JIMMY MOYAHA: The different services are exempt from paying rates, according to the statement issued by the City of Joburg.

CHARL KOCKS: Well, there certainly are classes of people who can pay less than the average person would, and one of them would be pensioners. But it depends on a means test and also an income test. Others would be people who are indigent. In other words, they really can’t afford it at all, and they get classified differently.

That’s across the whole country, by the way. It’s not just Johannesburg.

But there are clusters of people who are less impacted by these increases than others. The middle-class citizen earning, say, more than R7 000 a month will not feel the benefit of any of these reliefs.

JIMMY MOYAHA: So from that point of view there’s very little relief for the middle class in terms of these current increases. Are these increases set to continue? Do we have an indication of whether or not these are sort of one-off increases? Are they going to be become annual increases, or is it a situation where ‘We’ve announced the increases, we’ll see what the effect is and how much we’re then able to collect from that, and then maybe there’ll be future increases’? Obviously Nersa and the like will dictate to the electricity side of the picture.

CHARL KOCKS: First of all, I think there’s no way that the City of Johannesburg can get away without increasing rates and tariffs every year, and similarly they can’t get away without increasing the costs of providing electricity to the residents either.

On the water side there might be relief at some stage, but it honestly doesn’t look as if the water system and the infrastructure on that side are in good shape. So the answer is that they probably shouldn’t be decreasing any tariffs there.

I think what we’re talking about here is a compounded increase year on year for as long as you and I are alive.

JIMMY MOYAHA: And that’s obviously going to just make things even more expensive, given the high inflationary environment and that sort of thing that we’re seeing at the moment. Consumers are already strained and stretched with regards to all of these things. Is there any form of anything that consumers can pursue to sort of offset against the increases? Are there programmes or things in place that consumers can really take advantage of at this stage, or is it one of those things where unfortunately we just have to knuckle down?

CHARL KOCKS: I think you have to knuckle down unless you can at some stage decide to use less of what the city has to offer.

The things that you can use less of, of course, are going to be electricity and water. They’re not going to give you rebates on your rates and taxes.

So if you can use less electricity and use less water, obviously the charge is going to be less. But that’s not the kind of thing that happens overnight.

If you were to invest in something like a solar PV system for your roof, and if you’re in a position to afford that, yes, you might see a smaller charge, [but] you won’t see zero charge; I can guarantee that. And again, if you can save some water, that’s going to be beneficial.

But unfortunately the chances are that you’re going to be faced with some levels of increase from the municipality forever.

JIMMY MOYAHA: Doesn’t sound like the greatest of news but as you rightly mentioned, Charl, it is a necessity at this stage in order for the city to keep going. Thank you so much, Charl.

That was a Charl Kocks, who is the CEO of Ratings Afrika, just giving us a sense of the latest tariff increases announced by the City of Joburg, and what that means for you and [me] as residents of the City of Joburg.