Warning on business tariffs

The Msunduzi Municipality has proposed a 12 % increase on water, 17% on electricity, 9% on sanitation and 12% on waste removal.

The Msunduzi Municipality has proposed a 12 % increase on water, 17% on electricity, 9% on sanitation and 12% on waste removal.

Published Mar 25, 2024


Durban — Organised business in the KwaZulu-Natal Midlands has cautioned against what it regards as unreasonable tariff increases. It warned that local government should not seek to overcharge businesses to cover for its inefficiencies.

This was in response to the tariffs announced by Msunduzi Municipality for the new financial year which will start in July.

The municipality has proposed a 12% increase on water, 17% on electricity, 9% on sanitation and 12% on waste removal.

The Pietermaritzburg and Midlands Chamber of Business (PMCB) said the increases published by the municipality had not been properly thought through and were likely to hurt businesses in an already difficult operating environment.

In a comprehensive response, PMCB CEO Melanie Veness outlined how the chamber represented a significant percentage of the rates base in Pietermaritzburg.

“Business consumes 70% of the total electricity consumption in the city, so we are significant stakeholders,” she said in a letter.

She said a directive from National Treasury stated that municipalities should set their tariffs in a cost-effective fashion.

Veness added that the economy was growing at just under 1% and the business community and residents were still struggling to recover from the cumulative effects of Covid lockdown, the 2021 riots, the recent floods and the unprecedented levels of load shedding.

“We wish to strenuously object to all the tariffs in excess of 5.1%. These tariffs cannot possibly be cost-reflective,” she said.

Veness said that the current water rate was already high enough, adding that the fact that Msunduzi Municipality was charging the rate was a reflection of the operational inefficiencies in the organisation.

According to organised business, excessive increases mad it more difficult for city businesses to compete and increases such as the ones published by the municipality made the city uncompetitive and unattractive from an investment perspective.

“If we create the kind of operating environment in which businesses are paying higher tariffs than those in neighbouring municipalities, then we are making it more difficult for those businesses to compete with their competitors in those areas, which limits their growth and thus employment, and will make us unattractive from an investment perspective.

“It is imperative that we make it easier for existing businesses to operate, and to make our city attractive to investors as well, so that jobs can be created. In order to do this, our offering must be competitive,” Veness said.

She advised on the importance for the municipality to consider both current and future revenue streams, and to consider how best to counter unemployment and hence ease the burden of having to supply free basic services to so many households.

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

Veness warned the municipality against killing the goose that laid the golden egg , in the form of high tariffs.

“While the Pietermaritzburg and Midlands Chamber of Business acknowledges the need for a fiscally viable municipality (without it, our city cannot function, and a functioning city is imperative for a conducive operating environment) we are deeply concerned about the state of Pietermaritzburg,” Veness said.

She lamented how on a regular basis her office received complaints about failing infrastructure (electricity, water and sanitation), the poorly functioning call centre, billing errors, poorly maintained verges, roads full of potholes, street lights that did not work, litter and grime.

“The list just goes on and on, and so we are of the strong opinion that our resources are not being properly managed and given our prior experience, excessive tariffs make no difference whatsoever to service delivery.”

The PMBCB said it was unacceptable to overburden the few ratepayers who were paying for services instead of widening the net by making the environment more business-friendly with reasonable tariffs.

The chamber said it was hopeful that its views would be given due consideration, followed by a response.

Sunday Tribune