Fin24

Rising municipal accounts to hit pockets

2012-07-01 15:18

Pretoria – Consumers will soon have to spend up to a fifth of their net income on municipal accounts.

So says Economists.co.za chief economist Mike Schüssler, warning that people need to take the rising cost of electricity, in particular, into account when undertaking long-term commitments.

Schüssler was reacting to information that Eskom wants to increase its selling price of electricity to 97.51c/kWh by 2016/17, compared with the current 50.27c.

In 2007/08 it was a mere 19.4c. The increase is being done to reflect the real cost of electricity provision.

These figures are presented in the group’s objectives for the next five years, which are contained in its annual report and against which the utility’s performance is measured.

Schüssler says this tariff is an average that includes cheap power provision to clients such as BHP Billiton’s smelters. Sake24 has for some time been embroiled in a court battle to get these tariffs disclosed. According to Schüssler the tariffs could be as low as 12c.

Municipalities buy wholesale electricity from Eskom at considerably higher rates and re-sell it to consumers for even more.

Every year the National Energy Regulator (Nersa) sets guidelines as to the percentage by which municipalities may raise their electricity tariffs. This week Nersa however provided Sake24 with the names of 33 local authorities that wished to exceed the guidelines.

Nersa recommended that municipal electricity tariffs may rise 11.03%, but the Gamagarra Council (Kathu) applied for a 23.83% increase and Midvaal in Gauteng for 25.04%.

Nersa says it takes into account whether the tariffs of the municipality concerned are currently below the acceptable level.

When a bigger increase is allowed the municipality has to isolate the electricity revenue and indicate the purpose for which it intends using the money.

It has to report on its expenditure to Nersa every six months and any money used differently is deducted from the next year’s tariff.

Nersa failed to respond to a request for particulars of cases where local authorities had been penalised in this manner.

If the tariff is relatively high and the council asks for an increase in excess of 11.03%, it has to attend public hearings to explain why. These hearings have already been finalised for this year and Nersa was to have decided by Friday regarding the relevant municipalities’ electricity tariffs for the new financial year, which are due to start on July 1. These decisions will be announced later.

Schüssler says because municipalities also demand their pound of flesh and are not necessarily modest, municipal accounts become an increasingly significant item in consumer budgets.

It's not only the electricity tariffs that are relevant, but also various levies and VAT.

He uses the example of an elderly couple in Johannesburg whose electricity consumption amounts to R542 but, because of additional levies and VAT, the final account is 59% higher.

The price of water is moreover also rising sharply and property rates generally increase by at least the inflation rate.

He says the municipal account already takes more than a tenth of a homeowner’s salary and with Eskom’s plans to double its tariffs this could soon become a fifth.

Schüssler says that, according to National Treasury's figures for the third quarter municipalities had a income of R286bn in the financial year to end-June. That’s almost 10% of the gross domestic product (GDP).

"Together with the rest of government's 30% we are heading for a situation where government income is 40% of GDP.”

This makes South Africa one of the countries in the world where government plays the major role in the economy.

*Eskom recently submitted its application for price increases for the next five years to National treasury and the SA Local Government Association (Salga).

Details will be published later and public hearings will follow. These prices will come into effect early next year.

Municipalities will then base their increases, which come into force every July, on those prices.

Acceptable tariffs for 2012/13 – c/kWh

0-50 kWh             51-350 kWh        351-600 kWh      More than 600 kWh

61-66                  77-82                 104-109                124-129

*Acceptable household municipal electricity tariffs according to Nersa.

 - Sake24

For more business news in Afrikaans, go to Sake24.com.

Comments
  • neville.fouche - 2012-07-01 15:53

    This is happening when the municipalities fail to recover unpaid Electricity bills and the few who pay subsidize the rest. If you stay in Tswane Metro and you even get a monthly bill in the post consider yourself lucky. No municipality is supposed to be making money. Why should we pay for senior management in the system that is getting very close to the same package as the President? The old regime was far from perfect but at least they were able to steal at an affordable rate to the consumer!

      ike.jakson - 2012-09-10 08:46

      Oompie You deserve my greatest compliments. I live there once when it was still Pretoria. But you don't know the bunch in Bergrivier Municipality[Bergmun] in Piketberg Western Cape where I retired to some years sgo. The Municipal Manager, a complete incompetent is already drawing a salary of more than a Member of Parliament and she wants more.

  • johnathon.masters - 2012-07-02 10:26

    As with e-tolling, consumers should follow the principal set by the masses, and stop paying all Municipal Accounts, until their rates drop to an acceptable level, and all communities pay their due. As this will be in proportion to their income, it should place no harder burden on them as those who have the conscience to pay for services received. Eskom's extortionist regular increase in tarriffs are also unacceptable, as all capital projects should be financed from money borrowed internationally, not from consumers. We must let this incompetent Government realise that the population is no longer prepared to be taxed to death. Let them reduce all Government and Municipal costs, to match the present tax revenue they receive. That's what happens in all developed countries in the world.

  • robin.stobbs.9 - 2012-07-02 10:45

    Meanwhile my miserable joke of a government employees pension increases by a whopping 4.8% - it is already insufficient to cover my rates/taxes/municipal accounts/insurance and house maintenance - but the ANC thieves give themselves whopping salary increases for simply polishing seats!

  • leonard.rom.7 - 2012-07-02 11:06

    and still no service delievery

  • martin.britchford.5 - 2012-07-02 11:46

    viva anc viiiiva.

  • nikoleen.vanderspuy - 2012-07-02 11:49

    Amazing - theses suggested tariffs are a lot less than what we are really going to pay in our area. We have solar for the geyser and that helped us cut our cost with about R350-R450.00 per month. Just cannot understand that they preach that we must "save" and "adapt" and "do what we can", but they do not have anything in place (rebate) when you want to get a system in place to store your own electricity or get solar for you plugs etc. As long as they can pocket more money, do less work and still be famous, they will never "get down to our level" and help out.

  • ian.d.samson - 2012-07-02 11:52

    Complaining about it ain't gonna do anything! If "they" can toyi-toyi, go on mass-action strikes, so can we! Why are the majority of complainants so complacent? It's not part of our "kultcha" to embark on mass protest action, we just sit back, shut up and pay up. NO MORE! I agree with "Thinkertank" whose comment ought to be headline news for all to read.

  • johnathon.masters - 2012-07-02 12:16

    Only two months municipal charges boycott, would be enough to do the trick. Let the whole country default on payments and instead put the money into their private savings account. The billion of rands shortfall, should be enough to cure the Governments insatiable greed, and realise the country has now had enough of endless tax increases, to support their corruption, incompetence, and high flying lifestyles that they have become so comfortable with, and expect to continue forever.

      ike.jakson - 2012-09-10 08:24

      Hioera vir Thinkertank!

  • ike.jakson - 2012-09-10 08:22

    Most Municipal Authorities in SA are run by incompetents and greed; it has become the highest paid group people in the country. We are in a fight to the end with our Bergrivier [Bergmun] Municipality based in Piketberg Western Cape; on the verge of bankruptcy they have just announced huge tax increases at the same time as enormous wage increases for the top echelon but not a cent is spent to erect a street light. Thanks for this Article. I suggest that we publish more of them and stand together.

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