Businesses threaten to leave Pietermaritzburg if proposed tariff hikes are approved

Two “significant employers” have threatened to relocate their operations if the proposed tariff hikes are approved, the Pietermaritzburg and Midlands Chamber of Business (PMCB) said on Monday.

Chief executive officer of the PMCB, Melanie Veness, said the proposed increases are “irrational” and cannot be cost-reflective.

Veness said business consumes 70% of the total electricity consumption in the City, so they are significant stakeholders.

ALSO READ | Msunduzi hopes new budget will plug city’s financial holes

Directive from National Treasury

The recent directive from National Treasury in respect of the setting of cost-reflective tariffs states that a credible expenditure budget reflects the costs necessary to provide a service efficiently and effectively.

If the municipality’s initial calculation results in high increases to facilitate cost-reflectiveness, it is recommended that such are phased in over three to five years.

READ MORE

Focus on KZN economy

The directive cautions municipalities against setting tariffs that include operating inefficiencies as this could lead to tariffs falling into the unaffordable range.

“The Consumer Price Index (CPI) inflation is forecasted to be within the three to six percent target band; therefore, municipalities are required to justify all increases in excess of the projected inflation target for 2023/24 in their budget narratives.

“Every single one of the proposed tariff increases for 2023/24 exceeds this directive — proposed tariff increases range from seven percent to 8546,2%. These kinds of increases are completely irrational and cannot possibly be cost-reflective. How can the cost of access to a municipal swimming pool possibly go from R14 per person to R142? Or the hiring of the City Hall increase from R5 685,62 to R49 618,38?”

In our view the outcome of these calculations is a reflection of the inefficiencies within Msunduzi’s municipal operations rather than being reflective of efficient costs.

ALSO READ | Msunduzi won’t give in to tariff increases without a fight

Business community and residents struggling to recover

Veness said the economy is growing at just under one percent and the business community and residents are still struggling to recover from the cumulative effects of the Covid-19 lockdown, the 2021 riots, the recent floods and the unprecedented levels of load shedding.

“These kinds of increases are completely unaffordable in the current economic context and are consequently vehemently opposed. With specific reference to the proposed increase on electricity of 21,65%, Nersa is yet to announce the recommended tariff increase for municipalities, which will be lower than the 18,65% awarded to Eskom, because municipalities charge off a significantly higher base.”

Consumers, and especially businesses, cannot be expected to shoulder more than this, without it creating severe and irreparable damage to our already fragile local economy.

“We hereby strongly object to the proposed water tariff increase of 35% as well as the proposed sanitation tariff increase of 35%, because it is unaffordable in the current economic context. Two significant employers, that are large water consumers, have indicated that they will have no alternative but to consider relocating their operations if these tariffs are approved,” said Veness.

ALSO READ | Blow for residents as Msunduzi pushes for tariff increases

She said putting businesses under undue financial pressure in a tight market is bound to create further unemployment, rather than resolve the unemployment challenge, and it is rather self-defeating from a fiscal perspective.

It is our view that the budget could be balanced by cost containment, efficient electricity and rates collection without fear or favour, and strict compliance to the law, instead of the raising of exorbitant tariffs.

“Expenditure could be managed and services vastly improved if the municipality managed the human and financial resources of the council more efficiently and effectively.

Public discussions on tarrifs

City spokesperson Ntobeko Mkhize said the municipality convened a number of consultative meetings for all parties involved, including civic society, members of the public and organised residents’ associations.

She said those who attended the meetings had an opportunity to participate in the discussions about the tariffs.

“The municipality has made a call for all interested parties to submit their objections in writing via an e-mail address that has been publicised. The budget circulars 122 and 123 issued by National Treasury direct that municipalities must impose cost-reflective tariffs.”

ALSO READ | Our Viewpoint | Msunduzi on its knees

“The city remains committed to continue providing consumers with services that are effective and long-lasting, and in order to do so, we must cooperate,” she said, adding that the city has no intention of imposing unreasonable tariffs on the ratepayers.

“The council agreed that the tariffs proposed by the two entities [Eskom and Umgeni Water] are too high and rejected them in the strongest possible terms as they are unaffordable to the consumers. The tariffs have a direct impact on the billing of revenue and the financial sustainability of the municipality.”