# Summary

- Link: https://dearsouthafrica.co.za/draft-municipal-fiscal-powers-and-functions-amendment-bill/summary/
- Published: 2020-01-14T11:32:33+02:00
- Author: dearSA

[ PROVIDE YOUR INPUT ON THE DRAFT MUNICIPAL FISCAL POWERS AND FUNCTIONS AMENDMENT BILL](https://dearsouthafrica.co.za/5g-south-africa/)

The Amendment Bill provides for a uniform regulation of development charges. Development
charges are a once off charge levied by a municipality on the land owner as a condition
for approving land development application. They are imposed to cover the costs 
incurred by the municipality when installing new infrastructure or upgrading an 
existing infrastructure that is required to service the proposed development.

Key reforms that are introduced through the Amendment Bill:

1. The Amendment Bill establishes an unambiguous, fair and consistent basis for 
municipalities to recover development charges for all new land development projects
that require statutory approvals through the municipal land use planning system.

2. The aim of the Amendment Bill is to increase the amount and the predictability
of development charge revenue, to provide both municipalities and developers with
more certainty and assurance that the costs of infrastructure are covered by its
users. The incidence of the payment is also immediately apparent as the land owner
pays and, to the extent that the market permits, the land owner will pass on these
costs to the purchaser of the property that is sold.

3. The Bill ensures that the cost of the municipal infrastructure required to service
a new land development (including an intensification in land use) is primarily borne
by its direct beneficiaries. This promote the principles of aligning costs with 
benefits and intergenerational equity (i.e. the burden of payment for infrastructure)
is shifted from the existing tax payers to land owners and new users of the infrastructure,
who finance this over time through private borrowing.

4. The Bill restricts the scope of engineering services to those already covered
in the definition of engineering services provided in the Spatial Planning and Land
Use Management Act (SPLUMA). These are the provision of water, sewerage, electricity,
municipal roads, storm water drainage, gas and solid waste collection and removal
required for the purpose of land development. However, some level of flexibility
has been provided for municipalities to levy development charges on other engineering
services not specified in SPLUMA by providing for a municipality to apply to the
Minister of Finance for an extension of services to be included in the calculation
of development charges.

5. The Bill makes provision for the subsidisation or exemption of certain categories
of land owners and land developments from the payment of development charges. However,
where a municipality decides to grant an exemption from the payment of development
charge, it must identify an alternative source of revenue to fund the associated
infrastructure.

6. The infrastructure for servicing the poor households is funded by the fiscus 
through conditional grants transfers. Therefore, development charges will not have
an impact on the poor.

Benefits of levying development charges

1. Development charges ensure that infrastructure required to service new developments
is paid by direct beneficiaries, so that existing residents do not continue to subsidise
new developments.

2. Development charges enable municipalities to provide infrastructure in a timely
and sufficient manner thereby supporting economic development.

3. Development charges provide a pledgeable revenue stream to support borrowing 
for infrastructure. Where the municipality has borrowed to provide infrastructure
in advance of a development, development charges can be used to repay this debt,
which will reduce the finance charges in rates and tariffs and reduce the cost burden
on existing residents.

4. Even though development charge is a financial tool it has a spatial impact. Development
charges have the potential to guide planning by discouraging urban sprawl which 
perpetuates unequal spatial patterns. In other words, development charges can help
encourage infill development (i.e. developing in areas where infrastructure already
exists) and densification. This will begin to reverse the unsustainable low density
expansion of urban and peri-urban settlements

5. Development charges promote integrated planning and budgeting among spheres of
government by ensuring each sphere bears the full cost of infrastructure provision.
This will be achieved by requiring other spheres of government to align their development
plans with those of a municipality. Where a development by either a national or 
provincial sphere of government falls outside the municipal prioritised areas or
plans, it will trigger a development charge.