Janine Myburgh
Cape Town - The City of Cape Town has been warned that it risks losing its revenue base and driving residents to other towns if it continues to increase tariff rates.

Cape Chamber of Commerce and Industry president Janine Myburgh said the City could expect to sell a lot less water next year, even if Cape Town got good rain.

Consumers, who are already buckling under the increased VAT, will be slapped with steep tariff increases, if approved, some as high as 26.9% for water and sanitation.

“The more expensive water becomes, the more worthwhile it will be to exploit alternative water sources and the council will lose out,” said Myburgh.

Businesses and some residents had made big investments in water-saving equipment, grey water systems, boreholes and especially rain water tanks, she said.

She likened the move to alternative water sources to what has happened with electricity, which has seen more people switching from Eskom to alternative sources such as generators and solar panels.

Economist Dawie Roodt said by raising tariffs the City risked driving residents to other cities owing to Cape Town’s high cost of living.

Roodt said instead of raising tariffs the City had to improve cost efficiencies and curb expenditure, particularly for “well-paid” civil service workers.

“They don’t have to increase the water tariffs. All they need to do is get the private sector to provide the water at a cheaper rate and, through the right procurement processes, getting the cheapest bidder to do it.

“Why do they want to compete with the private sector? Politicians like doing what they are not supposed to do,” Roodt said.

The proposed tariffs, tabled on Wednesday, will also see the introduction of a new fixed water tariff for the level 6 water restrictions for homeowners with water meters.

Depending on the size of the meter, homeowners could pay anything from R56 a month to R22 500.

And for the first time, homeowners with properties valued at more than R1 million will be slapped with an additional fixed rate of R150 a month to their electricity accounts.

The City said the proposed tariff increases, higher than the Consumer Price Index (CPI), are aimed at bridging the funding gap due to reduced income from water sales.

The City’s projected water revenue of 88% for the 2017/8 financial year only fell to 69.1% and now it wants to boost its income with R12 billion from electricity sales, R9bn from property rates and over R3bn from water revenue.

In addition to the introduction of the new fixed charges, the City has also increased tariffs for electricity, property and refuse.

Myburgh blamed the tariff increases on the City’s lack of preparation for the drought.

She said the proposed increases came after a decade of water tariff increases well above the inflation rate.

“We have been calling for greater reuse of water for years, but little was done and now we are paying for It. A lot of this work should have been done and financed by the steep increases in water tariffs we have seen over the last decade,” said Myburgh.

Roodt rejected the City’s defence for the proposed tariff increases, saying it all boiled down to cutting spending before increasing expenditure.

Mayoral committee member for water and sanitation, Xanthea Limberg, said the City had seen a reduction in water sales as a result of the drought and the water restrictions and more investments had to be made to the water augmentation schemes.

More than R1.4bn will be spent on developing aquifers and upgrading treatment plants to recycle more water. 

The upgrading of water treatment works will cost more than R720m and that includes R500m for the Zandvliet water reuse plant.

Limberg also noted the increasing uptake on alternative energy sources as having impacted negatively on the City’s electricity revenue. 

The City defended its higher than CPI increases, saying in light of the drought, it needed over R3bn for augmentation initiatives planned over the next few years to ensure sustainable provision of water.

This included investments in desalination, underground extraction from aquifers and water reuse schemes.

Mayor Patricia de Lille acknowledged that the budget of R49.1bn - of which R39.7bn was operating budget and R9.3bn capital - was significantly higher than previous financial years.

The major capital expenditure planned in 2018/19 sees R5bn allocated to Water and Waste Services (54.9% of the capital budget), R1.7bn for Transport and Urban Development and R1.1bn for Energy. 

Some of the money will be spent on land acquisition, (dark) fibre broadband infrastructure, CCTV installations, cemetery developments, library construction, sport and recreation facilities’ upgrades, and road rehabilitation works.

The City said while it needed to invest in new infrastructure, it also had to prioritise repairs and maintenance to existing infrastructure.

Nearly R3bn is earmarked for the social package of services to assist the poor for free basic services such as electricity, refuse removal, water, sanitation and rates rebates to residents who qualify.

Homeowners whose properties are valued at R100 000 and below qualify for 100% rates and refuse removal rebates, 10500 litres of free water and 7350 litres of free sanitation.

For properties valued above R100000 and below R150000, residents get a 100% rates rebate, 75% off refuse removal charges, 10500 litres of free water and 7350 litres of free sanitation.

Households with a monthly income of R4000 also qualify for a 100% rates rebate.

Mayoral committee member for finance, Johan van der Merwe, said the City would generate an estimated R9bn from property rates, R12bn from electricity and over R3bn from water revenue.

The proposed budget increases will go out to public consultation and a final budget will be tabled for approval in May.