The Nelson Mandela Bay municipality’s ballooning wage bill could see residents digging even deeper into their pockets to pay 6.5% more for water, sanitation and refuse, while the proposed tariff increase for electricity is 8.6%.
Property rates could also increase 5.5%, in addition to the new municipal valuations which have caused an uproar among many residents who claim the roll is flawed and not based on market values.
The tariffs, if agreed on by council in June, will come into effect from July 1.
While the proposed tariff for electricity is subject to approval by the National Energy Regulator of SA (Nersa), the Nelson Mandela Bay Ratepayers’ Association is having none of it and has already threatened the city with a class-action lawsuit.
In the draft budget for the 2022/2023 financial year, municipal chief financial officer Selwyn Thys wrote that the city’s employee-related costs were a major cost driver and had been considered during the budgeting process.
Thys said salaries and allowances to municipal staff and councillors were greater than 30% of the total budget.
This is not in line with the National Treasury’s guidelines.
Meanwhile, councillors are expected to receive an increase of 5% from July 1.
The city’s poor collection rate of only 69% between July and December 2021 is putting further pressure on the metro, which is battling a debtor’s book of more than R8.5bn.
Of the city’s R15.4bn total draft budget, R13.9bn would be for the operational costs of running the city, while R1.5bn will go towards capital projects.
Thys said the municipality had been faced with significant challenges during the compilation of the draft budget, including:
- The effect of the Covid-19 pandemic and the declining collection rate;
- Escalating employee-related costs;
- Allocating budget for the rehabilitation of vandalised municipal infrastructure; and
- Past years’ decisions of insourcing of security guards.
Thys said these had to be considered as they had a financial impact on the municipality.
On employee-related costs, Thys said provisions were made for annual increments and a general increase in line with the three-year collective agreement between the South African Local Government Association and labour unions.
“In terms of the council’s policy governing long-term planning, the target is to restrict personnel costs to below 30% of total expenditure.
“Personnel costs in the 2022/2023 draft budget represent 27.1% of total operating expenditure, including the non-cash items; however, when the non-cash items are eliminated, the personnel costs to total expenditure sits at 29.7% or 30%.
“It must also be noted that council approved the ‘harmonisation’ of the conditions of service for employees as it relates to the long-service bonus.
“Furthermore, it must be remembered that the employee-related costs are also influenced by the conversion of contract security to permanent employees and other council decisions.
“This is relating to the absorption of contract employees such as call centre staff and tourism board contractual staff members now incorporated into the economic development, tourism and agriculture department,” Thys said.
He was referring to the 2017 council decision to insource hundreds of security guards.
Insourcing was meant to save the municipality money but has backfired, costing millions of rand more.
Dozens of municipal buildings have fallen prey to vandals since 2020, with water pipes and electricity connections stolen and windows smashed.
In January, the council adopted a hybrid security system that would see municipal and private guards dispatched to municipal assets.
But the municipality first needs to find the money to hire the companies.
This is likely to come from the rate hike.
“The management of employee-related costs is further worsened by the absence of an overtime policy for the institution for management to implement,” Thys wrote.
Nelson Mandela Bay Ratepayers’ Association chair Kobus Gerber said the proposed tariff increases were ridiculous and unreasonable.
“Why have most consumers received increases of over 200% with the new property valuations?
“The municipality needs to know that the economy is in pieces.
“It is down and out, unemployment is on the rise and normally when unemployment rises, crime also rises,” Gerber said.
He said the proposed tariffs were unacceptable and the city should have instead considered putting a moratorium on increases for councillors and municipal staff.
“Over and above the highly inflated new valuation they are now bringing 5.5%, it is huge and it is going to kill the economy which is already in tatters,” Gerber said.
He said this would put pressure on an already strained economy.
“People cannot afford this, there is no buying power in the economy and this is why we have approached a law firm in Joburg to see if we can’t launch a class action against the municipality,” Gerber said.
He said legal action would help protect the ratepayer from the municipality.
“We have to take legal action. It [legal action] is certainly coming because they have inflated the rates so high, this will be suicidal for the economy,” Gerber said.
He suggested the municipality consider putting tariff increases on hold until the economy recovers.
“Why should ratepayers keep subsiding the bad decisions of the municipality?
“This is unconstitutional, it is ridiculous,” he said.
Over the next few weeks, residents can comment on the draft budget along with the integrated development plan (IDP) before the council approves the documents.
Budget and treasury portfolio head Tukela Zumani said the budget was crafted under strenuous conditions.
“This government is a pro-poor government but the fact remains these are the material conditions that we are living under.
“We would have liked a more robust budget that speaks more to the conditions of the poor, the fact remains we have very little room to manoeuvre,” Zumani said.
“This budget has been carefully considered.
“There are a lot of factors that were considered, including Covid-19, and these put a strain on the budget.
“It does not help that we have an inflated wage bill and also the fact that our collection rate has decreased.
“All these factors have informed what is in the budget.”
He said he was happy with the budget.
“The budget is subject to public participation and it is very unfortunate that the public participation process has been compressed to three days and that is not something I would have liked for the material conditions,” Zumani said.
He said talks were under way to extend the public participation period.
By law, the city’s draft budget and IDP have to be put out for public comment.
Zumani cautioned that any class action would cause further instability in the municipality.
“I wouldn't support any form of class action.
“I would rather recommend intensive engagement and that is why the participation is the most important part of the budget process because we have to get the buy-in of residents,” Zumani said.
He also extended an invitation to meet the ratepayers’ association.
“A class action will plummet the city into further crisis.
“It will also be irresponsible to embark on this rather than to sit down with us and reach common ground,” Zumani said.
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