Fight to curb spread of Covid-19 could cost City of Cape Town R3bn a month

By Marvin Charles Time of article published Apr 1, 2020

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Cape Town - The City of Cape Town will suffer a monthly loss of R1 billion to R3bn in income as a result of the lockdown to contain the Covid-19 outbreak.

As of Tuesday, there were 1 353 people who tested positive to the virus in the country, with five deaths. The Western Cape has 348 Covid-19 cases, 290 of them in Cape Town.

“The City’s cash reserves are fully allocated in its budget. They could not be used for a new purpose without cutting expenditure and risk service delivery in an already committed budget,” said mayco member for finance and deputy mayor Ian Neilson.

He said the City’s primary responsibility was to ensure that basic services, including water, sanitation, electricity and cleansing were secured. “The reality is the City cannot risk these services. In this crisis, it becomes our overwhelming responsibility.”

Neilson was explaining the City’s stance to implement a rates payment holiday for residents. “The City is facing a significant risk in the current crisis, in that its income streams could fall precipitously over the next months.

“With the significant shutting down and fall in bus passenger numbers, the MyCiTi bus fare income is already falling away.

“There is also risk of a fall-off in payments given the forced closure of the City’s cash offices and general deterioration of the local, national and international economy,” Neilson added. He said the City was forced to fork out additional expenditure which it had not anticipated.

“Experience also shows that once one loses payments, it is difficult to claw it back and this leads to destabilised and often ruined municipalities, as we can see from the plenty of examples in South Africa over the years.

“There is very significant additional expenditure the City now faces that was not anticipated before the crisis. For example, additional personal protective equipment for staff members and cleansing is estimated at an additional R40 million a month,” he said.

The virus has had a massive impact on the global economy and South Africa’s already limping economy. Shortly after President Cyril Ramaphosa had announced the 21-day lockdown, rating agency Moody’s downgraded South Africa’s credit status to junk or sub-investment grade

In Cape Town, specific businesses have been forced to close their doors, informal traders have been instructed not to operate and tourists have not been allowed in.

Chairperson of the Cape Town Central City Improvement District board Rob Kane said: “There is no doubt that Covid-19 will be tough on us - as a local economy, as a nation, and as a world population. I am concerned for investors in the CCID area, but I am just as concerned about the tenants, the homeless and South Africans. The effect of the virus will trickle down to every corner of the economy and the property market will be no exception.”

Professor Andre Roux of the University of Stellenbosch Business School said municipalities and provinces across the country would be in the same boat as the City.

“I can understand why the City of Cape Town does not want a payment holiday because they can’t. They have to provide the services to the people.

“Under these circumstances and considering the homeless, the rent people have to pay, and delivering essential services it calls for drastic measures to be taken and they would eventually have to borrow money,” he said.

STOP COCT founder Sandra Dickson said: “This pandemic clearly exposes the City’s willingness to help out their own front line workers by decrying R40m to be spent on protective clothing. The City is also unwilling to step up the service delivered from their already dysfunctional day hospitals and clinics. The poor state of some day hospitals and clinics under the City’s control have been pointed out in articles over several years.”


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