It is sobering to realise that when the latest extension of South Africa’s State of Disaster ends on 15 June – and there’s every likelihood that it will be extended again – the emergency regulations brought on by the Covid-19 pandemic will have been in force for more than 450 days.
The severest impact came with the harsher lockdowns of last year, measurable in job losses, bankruptcies, the depletion of business and household resources, destitution for many, and deepening poverty for millions.
And the pain lingers. Economic growth was already pitifully low, and unemployment high, even before the pandemic; a national recovery will have to contend with far more than the damage brought on by the measures intended to confront the coronavirus plague.
For all the billions of rands poured into relief efforts, the impact of the economic hammer blows of 2020 continues to be felt by households and businesses – and the jobless millions who must count on them for any hope of clawing their way back to even a minimum of income security.
Fortunately, however, legislators foresaw just such conditions – if not the scale of the Covid-19 scourge – when, in 2004, they approved a provision in the Municipal Property Rates Act to confer relief through an exemption from paying, or a rebate on, municipal property rates.
As my senior colleague, IRR chief of staff John Endres, wrote last week, the act explicitly states that residents whose property is situated within an area affected by… a disaster within the meaning of the Disaster Management Act, 2002’’ can apply to their municipality for rates relief.
This is the basis of the IRR’s appeal to Minister of Cooperative Governance and Traditional Affairs, Nkosazana Dlamini-Zuma to exert her influence in the local government sphere in support of exemptions and rebates. Delivering such relief would be ‘a clear win-win for lives and livelihoods in this time of national disaster’, as IRR head of campaigns Gabriel Crouse put it in a letter to the minister earlier this month.
Encouragingly, the IRR is not alone in thinking along these lines.
Significant debt write-offs
In the first week of May, City of Johannesburg mayor Geoff Makhubo announced that the city would offer significant debt write-offs to qualifying ratepayers through its debt rehabilitation programme.
Minimising the effects of the Covid-19 pandemic in cities, he said, had become an active feature of post-Covid urban management strategies.
Mkhubo said: ‘As a response, the city … approved a debt rehabilitation programme that includes additional relief measures for ratepayers amidst the ongoing Covid-19 pandemic.
‘The new programme includes an increase in the qualifying property value from R600 000 to R1.5 million following calls from residents for the city to review the terms and conditions of the initial relief programme, which was first launched in 2019.
‘The improved relief programme will see qualifying ratepayers receive immediate relief through a 50% debt write-off.’
This is a good start, setting an important precedent for other cities and towns to make what amounts to an immediate, practical contribution.
As Crouse pointed out in his letter to Dlamini-Zuma, the three-fold advantage of implementing the exemption provided for in existing legislation is that it will:
- boost household incomes, particularly for poor ratepayers;
- boost business survival rates – and hence job preservation – in both urban and rural areas, whether in formal, informal, industrial or residential precincts; and
- relieve municipalities of the burden of attempting to collect bad debts, which exist chiefly as nominal assets on municipal balance sheets, since, in reality, countless households and businesses teeter on the edge of bankruptcy.
‘Get the economy going again’
As Endres wrote last week: ‘Exempting citizens from their rates payments for the duration of the disaster would be a quick way to put money back in the pockets of consumers. It would stimulate demand and get the economy going again. It would benefit the poorest households disproportionately.’
In addition, exemptions and rebates ‘would also make a great difference in the fortunes of businesses teetering on the edge of bankruptcy. By offering businesses some relief on the rates they pay, municipalities can help preserve going concerns, save jobs, safeguard tax contributions and stabilise supply chains.’
Touching on the third of the three-fold advantage, Endres noted that ‘counter-intuitively, exemptions can also help municipalities’.
‘By granting exemptions, municipalities can save themselves the cost and effort of chasing after rates that are unlikely to be paid in any event – and thus help to reduce bad debts.’
The sums involved are significant: as at 30 June 2020, municipal debt was estimated to be in the region of R191 billion. Taking away the ‘actual realistically collectable amount’ of R33.4 billion leaves a considerable R157-odd billion in bad debt clogging up local government books.
But would there be a risk of municipalities bankrupting themselves by granting residents rates relief?
No, Endres argues. ‘Across all 257 municipalities, property rates contributed 16.1% of total income, equivalent to R18.6 billion. But municipalities have shown themselves unable to spend the money collected in any case, underspending their expenditure budgets by five times the value of the property rates they collect.’
According to the national Treasury, he points out, as at 30 June 2020 South Africa’s municipalities reported “net total underspending of R96.9 billion or 20.1% of municipalities’ total adjusted expenditure budgets”.
‘Unparalleled opportunity’
Thus, ‘the sensible course of action for municipalities is to exempt ratepayers from paying rates … (and so) support homeowners and businesses, and clean up their bad-debt backlogs’.
Taken together, as Crouse put it to Dlamini-Zuma, the disaster-relief provision in the Municipal Property Rates Act of 2004 offers ‘an unparalleled opportunity to act for the betterment of all’.
Ratepayers can apply for a property rates exemption by e-mailing their municipality, or using this online form on the IRR’s website.
[Image: Steve Buissinne from Pixabay]
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