Staff writer
Semigration became the property buzzword of 2023, and the phenomenon shows no signs of slowing down. While remote working capabilities are certainly a driving force, municipal performance (or rather the lack thereof) is also increasingly touted as a key factor.
Senior Economist: Commercial Property Finance at FNB, John Loos, goes so far as to predict that “municipal and utilities service reliability remains a key theme for commercial property in 2024: The increasing municipal rates and utility tariffs are putting pressure on net property operating income. Although electricity supply is predicted to improve, people will likely continue moving to areas where things work, resulting in semigration for household and business activities”.
So, what’s happening to our municipalities?
Paying twice for the same service
A recent Moneyweb article highlights the emergence of ‘parallel municipalities’ that are springing up to do the work: “Beyond water and electricity, these entities now exist to fill the gap in providing fairly basic services. And to sustain this, residents – who are already paying property rates and fees for other services (think refuse collection) each month – need to stump up. It’s either that or watch their immediate surroundings descend into utter squalor”.
The article mentions that these services tend to begin small; think of a residents’ association offering to neaten vergers on the main road through town before tourist season or repainting road markings, noting that this trend is prevalent, particularly in small towns.
However, “To some extent, this is also happening in larger cities and metropoles where suburban residents’ associations are forced to bridge the service delivery gap.
In the Joburg context, these would’ve begun as security-focused entities. Still, many are taking on more and more ‘responsibility’ (reluctantly so), such as pothole repair, maintenance of parks and shared spaces, provision of solar lighting, and so on”.
One could argue that residents could take the fight to the municipality, which is true. Still, surely residents who have weeks worth of rubbish piling up due to a shortage of trucks can be forgiven for forking out additional funds to pay for a private contractor.
Municipal rates aren’t cheap, and the real question becomes how long residents will be willing (and able) to pay twice for the same service.
Ratepayers aren’t paying
On the other end of the scale, several municipalities nationwide are sitting with service payments in arrears amounting to millions. In the case of the City of Johannesburg, the debtor’s book stands at close to R50 billion (although this is not limited only to residential properties).
Kgamanyane Maphologela, Director of communications and stakeholder engagement at COJ group finance department, writes in the Sowetan that a recent Spend Trend 23 report (jointly compiled by Discovery Bank and Visa) shows that municipal services aren’t in the top five for household spending.
The report tracked three years, from 2019 to 2022, analysing spending patterns, revealing that spending on “utility services come last after items like groceries, travel, eating out and take out, retail, fashion retail and transportation”.
Maphologela concurs with the SA Local Government Association, which he claims has repeatedly warned that non-payment of municipal services by households is a contributing factor to municipal collapse.
SA’s municipal sector is about to collapse, except for the Western Cape
Writing for Moneyweb, contributor Ciaran Ryan crafted the above headline based on reports by Ratings Afrika, saying, “It first started publishing its Municipal Financial Sustainability Index (MFSI) in 2011. Never a particularly uplifting read, the latest survey of the 100 largest municipalities in the country is an ice bath: ‘The South African municipal sector [except the Western Cape] is about to collapse financially, and it is time for the government to acknowledge it seriously and start taking the necessary steps to save the country from disaster’.”
Ryan has been tracking a court case that the North West High Court heard in 2020, where the judge ordered that the local residence association, the Kgetlengrivier Concerned Citizens, take over the sewage works, with payment due by the local and provincial governments. Listen to his interview with Nompu Siziba here.
According to Ryan, the association managed to clean up the water and start supplying water to the community within about a week. The case is headed back to the High Court in March when the municipality must explain why this interim order shouldn’t become permanent. Considering the fact that the sewage system is now working, and the local community says it has more water than it knows what to do with, the municipality will have a steep road to climb if it wants to regain control.
What is the solution? For now, some residents tired of not getting services are voting with their feet and moving to areas with better service delivery. Others may have to fight their municipalities in court as it seems the most straightforward solution –for municipalities to adhere to their Constitutional duties by providing basic service delivery – is the option furthest out of reach.
Photo source: Planet of Hotels
