Cape Town – South Africa’s cities – which are being financially squeezed – should be allowed to raise extra taxes from their residents or should be given higher allocations from the fiscus to fund increasing demands such as housing and public transport, councillors from the country’s cities said today.
Presenting the 2013 State of City Finance report, the SA Cities Network’s chief executive Sithole Mbanga said amid rising urbanisation, cities’ budgets were stretched to the limit in meetings various challenge.
Yet despite this and services that were increasingly becoming unaffordable to residents, cities received only between 8% and 10% of the national budget.
Mbanga said there was a need to create an alternative basket of sources of revenue, to ensure that cities were not trapped in high debt.
He said 15 years down the line, the finances of cities have stabilised and added that with increasing urbanisation, worsening poverty was likely to increase if cities were not allocated a higher percentage of tax revenue.
The SA Cities Network represents the country’s nine largest municipalities – including the eight metros and Msunduzi Municipality.
The eight metros are Cape Town, Buffalo City (East London), Tshwane (Pretoria), Johannesburg, Mangaung (Bloemfontein), eThekweni (Durban), Nelson Mandela Bay (Port Elizabeth) and Ekurhuleni.
The report pointed out that the financing gap in cities was illustrated by the poor cashflow positions of Johannesburg, Tshwane, Nelson Mandela Bay and Manguang and Msunduzi.
Added to this, cities have shown a decline in the ability to collect revenue, evident in that the percentage increase in bad debt provision (22%) was greater than the percentage increase of revenue from property rates and service charges (increasing by 13% last year to R138 billion).
The report noted that the increasing operating costs did not appear to have been supported by increasing operating grants, which in the aggregate have remained relatively stable, at least since 2009.
Ian Neilson, the City of Cape Town’s deputy mayor and the SA Cities Network’s board member that oversees financial research, said the national government, through the Receiver, collected about R100 billion in taxes from his city’s residents, which is five times the amount of revenue the city generates through rates.
He said the R20 billion in revenue was complemented by just R4 billion the city received from its equitable grant allocation from the fiscus.
The National Treasury, he said, could perhaps set up criteria which cities in need of additional funding would be required to meet before they could be allocated further resources.
Last year, the National Treasury turned down a request from eThekweni for it to raise further revenue from a business tax, arguing that the city needed to maximise the usage of its existing resources.
Neilson said collecting debt from residents remained a concern for local government, following the Eskom 16% increase in electricity tariffs last year.
Electricity tariffs, for example, have increased such that last year, they made up 47% of city operating revenue – up from 35% in 2008.
The provision of housing as well as public transport – with it to be devolved from national government to local government – also remained a concern, he said.
Added to this, the significant increase on civil servants’ salary increases, which make up 28% of city expenditure, placed further pressure on spending by cities – having risen 19% in the period of 2010 and 2011.
Sureshi Pillay, a councillor at the City of Tshwane who oversees economic development, argued that even if cities improved tariff collections, a gap would still remain when it came to funding new city projects. – SAnews.gov.za
