# summary

- Link: https://dearsouthafrica.co.za/ratesfreeze/summary/
- Published: 2021-05-18T11:56:14+02:00
- Author: dearSA

[ Have your say on the call to FREEZE](https://dearsouthafrica.co.za/ratesfreeze/)

### Open letter to Tito Mboweni, National Treasury, SALGA and CoGTA⏎  From Dear South Africa

#### Let’s put a freeze on municipal increases in rates and taxes until this economic downturn is behind us.

In the midst of one of the worst economic downturns in recent memory, South Africans
are expected to set aside their own personal and financial difficulties and front
up inflation-plus increases in rates and taxes.

A study by the United Nations Development Programme (UNDP) published in August 2020
suggests up to a third of South African households have been pushed out of the middle
class into vulnerability. Estimates show that the lockdowns may have cost the country
one million permanent jobs. By the best estimations South Africa may only fully 
recover from this economic shock by 2024.

Yet, municipalities across the country demand increases of 6% or more on municipal
rates when the country is suffering. The disciplines and frugality of the marketplace
are seemingly absent when councilors award themselves generous pay increases while
service levels decline. As we have seen, most increases feed the ballooning wage
and salary demands of local government – precious little is allocated to maintenance
or infrastructure upgrades.

[Figures](http://www.statssa.gov.za/?p=13503) from Stats SA show local government
spending increased by 12.2% for the year to March 2020, driven largely by increased
spending on employee costs – now nearly a third of total municipal spending.Unfortunately,
local government has become insensitive to the pain experienced by the rest of the
country.

The latest [Ratings Afrika Municipal Financial Sustainability](https://www.moneyweb.co.za/news/south-africa/the-extent-of-sas-municipal-problem-r51bn-says-ratings-afrika/)
Index (MFSI) for the fiscal year to June 2020 recently examined the 105 largest 
local municipalities plus eight metros in South Africa. This report shows it will
take R51 billion to prevent a total collapse of municipalities and bring them on
a level footing to pay their creditors.

“Unfortunately, this R51 billion burden will have to be carried by the already overstressed
taxpayers” notes the survey.

The deteriorating financial position of municipalities is in plain sight. There 
are declining service levels, potholes unrepaired for years, sewage spills into 
public spaces and rivers, and municipal debtors’ books that appear increasingly 
uncollectible. R18 out of every R100 now goes uncollected, against a target of collection
rate of 95%.

### It is against this background that we urge Minister Mboweni, National Treasury, SA Local Government Association (SALGA), and the Department of Cooperative Governance and Traditional Affairs (CoGTA) to impose an immediate freeze on rates and tax increases at the local government level.

The Municipal Property Rates Act contains checks and balances to protect property
owners. The “General Guidelines” issued as an addendum to the Act in March 2020 
states the following:

_“The Minister responsible for local government, with the concurrence of the Minister
of Finance, can limit the cent amount in the Rand rate that municipalities impose,
if such proof can be provided that such a cent amount in the Rand rate on specific
category of properties is materially and unreasonably prejudicing national economic
policies, economic activities across municipal boundaries or the national mobility
of goods, services, capital or labour.”_

Therefore, it is entirely within the Minister responsible for local government’s
power (with the concurrence of the Minister of Finance) to impose a freeze on rates
in the interests of national economic policy.

South Africans are already over-taxed. To continue to allow municipalities and metros
to award themselves generous pay increases is to encourage resentment and disobedience–
as that will surely follow.

We are not encouraging tax revolts, as we believe there are better ways to achieve
fiscal responsibility. However, assuming this is business as usual cannot continue.

Rates and tax increases at local government level must be halted until South Africa
is restored to pre-Covid lockdown levels of employment and economic activity. In
light of the above, and on behalf of DearSA’s supporters but more importantly on
behalf of the millions of South Africans who are suffering economically and subjected
to deteriorating municipality management, we call on the Minister of Finance to 
put a freeze on municipal increases in rates and taxes until this economic downturn
is behind us.

**Kind regards
 
Rob Hutchinson
 MD, DearSA

 

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