The affordable education loan option
Ratepayers in Durban are taking strain and a report just released shows why. More than half of its residents do not pay rates – and a large number of homeowners who live in households that have a rateable value are the ones shouldering the burden.
Ratepayers and business organisations have previously expressed concern over the high levels of cross-subsidisation, saying it is unsustainable and urging the city to look for new funding sources.
An economic development and job creation strategy report presented by the city last week said municipal finances were under pressure and local government was unable to carry the full cost of bulk infrastructure needed for development opportunities.
“In addition, only 45 percent of households within the eThekwini municipal area contribute towards rates,” the report said, without elaborating.
It said the city should guard against transferring the full cost of infrastructure on to the private sector as this could undermine the viability of investments.
“The traditional modes of funding have, in some instances, reached their limitations, and new and more innovative forms of finance need to be explored,” it said.
Head of revenue, Peet du Plessis said he had not seen the report and was unsure of the context in which the number was quoted, but 73 percent of households that had a rateable value were paying rates.
The differential was indigent households which were exempt from paying rates as per the council’s policy. About 120 000 homeowners, with properties valued at less than R185 000, did not pay rates.
Durban Chamber of Commerce chief executive Andrew Layman said the government often used business as a “cash cow”.
“We believe this to be counter-productive because the growth of business, and therefore the economy, and a decline in unemployment, depends on a conducive environment,” he said.
He said salary increases of municipal employees were settled at national level and the city’s budget had to absorb them.
“The number of people who pay rates is far too small for the city to meet everyone’s expectations of it. This means there is a significant amount of cross-subsidisation of wealthier property owners and businesses supporting the rates income account.”
Durban was widely regarded as being more costly for businesses than either Joburg or Cape Town.
However, Lilian Develing, of the Combined Ratepayers’ Association of Durban, believed the number of people paying rates was far lower than 45 percent.
“Durban is the most expensive place to live although the city keeps saying it is not,” Develing said.
The report also says the rates charges and development costs in Durban are high compared to those in other metros. However, the proportion of subsidised rates and services through the indigent policy is also higher than in other metros.
The development plan aims to combat poverty and underdevelopment and put programmes in place to grow the formal economy.
Durban must create 45 000 jobs a year to meet the New Growth Path and the National Development Plan targets.
The focus is on increasing local production and the export of local goods as well as attracting foreign and domestic fixed investments.
Projects include the port expansion and dig-out port, Cornubia and the integrated rapid public transport plan.
DA councillor Dean Macpherson said the city first needed to remove the “red tape” which was blocking new developments.
Some of the investment and growth opportunities include:
* Capitalising on the role of the port, international airport and modern rail, road, infrastructure and information and communication technologies.
* Promoting the city as a centre for trade between Africa and the world.
* Marketing the city as an events and tourism destination.
* Promoting the city as the best location for manufacturing activities.