City of Jo'burg slammed for rate hikes

Economists have criticised the mostly above-inflation increases, suggesting less spending is required.

Economists have criticised the City of Johannesburg for approving above-inflation rate increases. Picture: Ryan Wynn.

JOHANNESBURG - Economists have criticised the City of Johannesburg for approving domestic tariff increases above the inflation rate.

Analysts say the hike will have an adverse effect on consumer spending.

The municipality announced on Tuesday that it will increase tariffs across the board, with property rates up five percent, electricity by just over seven percent and water and sewerage tariffs by 8,9 percent.

The budget also shows waste removal services will be increase by six percent for domestic customers, and eight percent for businesses and commercial customers.

Johannesburg Finance MMC Geoffrey Makhubo says the hikes will ensure the city remains a competitive and attractive investment area.

He said the council was compelled to increase tariffs because of constrained national electricity, a water shortage had been projected and landfill space had decreased in the metro.

"When we consider tariffs and tariff increases, we do take into account the economic conditions, the input costs and the affordability of the services while at the same time looking after the interests of the poorer households."

Makhubo says tariffs will be determined based on consumption.

Those who use more resources will simply have to pay more, the MMC says.

But economists say the municipality should've cut expenditure instead of hiking rates.

Efficient Group Director and Chief Economist Dawie Roodt says the increases are disproportional.

"Most of these hikes are increasing at a rate stronger than the inflation rate and that is simply unacceptable. There's no reason why a local authority can or should increase above the inflation rate."

Roodt says taxpayers' money needs to be better handled, suggesting certain services should be privatised to ease the burden.

Economist Mike Schüssler agrees, adding many people simply can't afford to pay for services they need.

"The higher they increase the rates, the less people can afford it and the worse the bad debt figures become."

He says cities throughout the country will have to find ways of reducing costs rather than increasing rates.

However, as part of his announcement, Makhubo noted that the 2014/2015 financial year's "record budget" - now at R47,1 billion - was in fact a sign of the city's "determination to confront the social deficits in various areas".