Electricity tariff shock

BY Site Admin

THE Nelson Mandela Bay Municipality will hit the hard- pressed consumer with a 22% hike in the electricity tariff from July 1 – up from the 18% originally announced – and an 11% increase in property rates instead of the 9% that was initially mooted.

The water tariff will rise by 12% as opposed to 11% and sanitation and refuse by 11% and not 10% as was initially announced.


This will potentially lead to an increase in the number of people defaulting on their accounts, resulting in the municipality’s failing to meet its collection target of 98%.


The increases, announced at yesterday’s joint meeting of the Mayoral and Budget and Treasury committees, have been condemned by DA caucus leader Leon de Villiers, who said “our current dysfunctional administration is milking the cash cow to death”.


And PE Regional Chamber of Commerce and Industry chief executive Kevin Hustler warned that the “higher-than-expected proposed tariff increases, particularly for electricity, rates and water, would be a major blow to industry and consumers” and could cause some businesses to close their doors.


The budget makes provision for operating costs of R5.65-billion, the major expenditure items being employee costs (30.42%), bulk electricity and water purchases (27.23%), general expenses (11.26%), grants and subsidies paid (10.25%) and maintenance (8.67%).

The major sources of funding are service charges (52.6%), property rates (15.1%) and grants and subsidies from national and provincial government (22.21%).


In a report to the committees, chief financial officer Kevin Jacoby said a provision of R49-million had been set aside to cover potential bad debts. He said provision had been made for adequate funding for maintenance backlogs.

With regard to the capital budget, Jacoby said this had been fixed at R2.2-billion and an additional R470-million would be raised in external loan financing.


As far as employee costs were concerned, Jacoby said the budget was 15.9% higher than the last financial year, with R25-million provided to ensure the implementation of the new wage curve agreed to by the SA Local Government Bargaining Council. An amount of R19- million was also included to cover nine months’ back pay in terms of the agreement.


He said the metro was closely monitoring certain issues that could have a significant financial impact on future budgets. These included:


Maintenance backlogs and the adequacy of budgetary provisions.


Staffing needs and the effect on the personnel budget.


Unfunded mandates such as housing, primary healthcare and libraries.


Maintenance of the current collection rate.


Reviewing and enhancing the level of the Capital Replacement Reserve – he warned this could move into negative territory in the near



Financial implications associated with raising external loan financing.


Responding to the budget, which the DA voted against, De Villiers said that instead of addressing inefficiencies within the administration, acting municipal manager Elias Ntoba “merely looks to ratepayers for more funds”.

He said the poor productivity levels of the traffic department were an example of this, where the budget made provision for R59-million to be collected when this should be R590-million if Mandela Bay achieved what other metros did.


“Nowhere in this budget is there any evidence of what (Ntoba) has done in an attempt to increase revenue, reduce costs and improve productivity and efficiency ... We have created a culture where we do not address the cause of our ills and we merely look for more money to solve our problems.”


Patrick Cull - The Herald

 May 27, 2010
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