City of Johannesburg residents are in for big water and electricity price increases following a budget presented by MMC for Finance Jolidee Matongo on Tuesday (25 May).
If approved by the City’s metropolitan council, the price hikes will come into effect as from July 2021.
‘Balancing act’
Matongo told the council that the budget was a “difficult balancing act” that took into account “pleas from residents for minimal tariff increases.”
He announced the following price increases for the 2021/2022 financial year:
- 14.59% increase in electricity tariff (increase in 2020/2021 financial year was 6.2%).
- 6.8% increase in water tariff (previous increase was 6.6%).
- 2% increase in property rates (previous increase was 4%).
- 6.8% increase in sanitation tariff (previous increase was 6.6%).
- 4.35 increase in refuse tariff (previous increase was 5.2%).
“There were numerous factors that were considered in recommending the tariffs for the 2021/2022 financial year, including, but not limited to the market values of properties in the General Valuation Roll of 2018,” the MMC said.
“Also included were the ratios as previously determined by Council, the economy of the country and the impact of the pandemic.”
Service delivery
The city had to balance between a call from ratepayers against increases and “the reality of having to ensure that the city has the revenue to continue delivering services to residents.”
Matongo also cited a reduction in budgetary grants to municipalities from the national government as a result of the difficult economic environment.
Johannesburg’s funding model relies on revenue from trading services as well as grants and loans.
“What tends to differ is the share of each of the sources of funding. Furthermore, with new innovations and technological developments, the traditional notion of utilities as ultimate monopolies that can generate excessive revenue is eroding,” the MMC explained.
“For instance, large power users are moving away from the grid, and this means that revenue generated by City Power is at risk going forward.”
Cost-reflective tariffs
In a Parliamentary reply earlier this month, Finance Minister Tito Mboweni noted that some municipalities are not charging “cost-reflective” tariffs for their various services, leading to unsustainable financial models.
“In response, National Treasury has developed a tool for use by municipalities, that if used correctly, will see municipalities charging cost-reflective tariffs that will cover the cost of bulk purchases,” he said.
“Treasury, through its structures, is also offering technical support to municipalities to assess and set cost-reflective tariffs.”