Mayor’s Newsletter for George Herald of 30 March 2023
The spectre of loadshedding has made preparation of the draft budget for the financial year commencing in July 2023 an extreme challenge given the poor state of the South African economy.
The total revenue from the core services of the Municipality was budgeted at R1947m for 2022/23. Collectively the surpluses of revenue less expenditure from Electricity, Water, Sewerage and Refuse is budgeted to supplement revenue generated from Property Rates (collectively, “Total Rates”) to cover the expenditure from the range of services that do not generate revenue directly (the former contributing roughly 40% and Rates 60%). Electricity normally contributes over 20% of this total amount. For 2022/23, the Total Rates was projected at approximately R611m with Electricity contributing its R129m surplus.
The Total Rates covers fixed administrative overheads, streets, stormwater, traffic, law enforcement, fire services, planning, economic development, tourism, street cleaning, parks and social support services to the community.
During the adjustment budget approved in February 2023, it was projected that there would be a shortfall of R160m for the full year due to the impact of loadshedding reducing electricity sales, costs of diesel to power generators, increased overtime and maintenance. The budget for 2023/24 will need to address the future scenario of electricity no longer providing its previously secure revenue stream. In 2022, we already commenced with the introduction of fixed charges to ensure adequate maintenance and operation of the R2,5bn electricity network infrastructure. Consumers therefore need to contribute to the cost of using the network, electricity costs to provide water and waste-water treatment, streetlights and traffic lights, etc. A variable cost for each kilowatt-hour being used by a consumer is also being levied.
With loadshedding expected to continue, it is imperative that municipal revenues are restructured to ensure their sustainability. In future, the distribution network will transport energy to users coming from the municipality’s own generation projects, independent producers, as well as excess electricity generated by domestic and business consumers who have installed their own renewable energy.
Future budgets will be structured to eliminate the current shortfall by curtailing expenditure growth where possible while also seeking a higher contribution from Property Rates to cover the expenditure funded by Total Rates. We are fortunate that property valuations in George have risen in accord with property values elsewhere in the Western Cape. Recent statistics show that real residential property prices in Cape Town are indexed at 130 in comparison to indices of between 90 and 100 for the seven other metropolitan areas in South Africa.
The new municipal valuation roll being implemented is a reflection of the higher property values but will allow for a commensurate reduction in the rate in the Rand on the Property Rates payable by property owners.