Ability to Pay Municipalities should develop a system of targeted subsidies to ensure that poor households have at least a minimum level of basic services. (Refer to Indigent Policy) Fairness Tariff policies should be fair in that all people should be treated equitably. Transparency Tariff policy should be transparent to all consumers and any subsidies and concessions must be visible and understood by all consumers. Local Determination of Tariff levels Municipalities have the flexibility to develop their own tariffs in accordance with these principles. Consistent Tariff Enforcement. A consistent policy for dealing with non-payment of tariffs must be developed. This must be targeted and enforced with sensitivity to local conditions. Ensure Local Economic Competitiveness. Municipal tariffs must not unduly burden local business through higher tariffs, as these costs affect the sustainability and competitiveness of such businesses.
These policy principles were incorporated into the Local Government Municipal Systems Act No. 32 of 2000. In terms of section 74 (2) of the Local Government Municipal Systems Act 2000, the Municipality's tariff policy must reflect at least the following principles, namely that:
Tariffs must be set at levels that facilitate the financial sustainability of the service, taking into account subsidisation from sources other than the service concerned. A service is financially sustainable when it is provided in a manner that would ensure its financing from internal and external sources is sufficient to cover the costs of the initial capital expenditure required, operating the service, maintaining, repairing and replacing the physical assets used in its provision:
The Municipality must have access to adequate sources of revenue to enable it to carry out its functions. The Municipality must:
Financial sustainability requires that the Municipality must ensure that its budget balances. This means that the Municipality must ensure that:
The Municipality realises that no bailout will be provided to it if it exceeds its budget or fails to establish proper financial management controls. Councillors must set realistic budgets. The Municipality believes that all members of the community have the right to have access to at least a minimum level of basic services.
Therefore, there is a need to subsidise poor households, who are unable to pay even a proportion of service costs. Effective and Efficient usage of Resources.
Resources are scarce and must be used in the best possible way to reap the maximum benefit for the community. However, there are no mechanisms available to ensure that the Municipality's decisions will ensure effective allocation of resources. It is therefore important that the community provide the necessary checks and balances. They can do this by participating in the budget process. In addition, performance audits should be carried out by the office of the Auditor-General or outsourced to a private firm. Efficiencies in spending and resource allocation will ultimately increase the access of the poor to basic services. Accountability, Transparency and Good Governance. The Municipality must be accountable to the community for the use of its resources. Councillors must be able to:
Budgeting and the financial affairs of the Municipality must be open to public scrutiny. The community should be part of the decision-making process about how revenue is raised and spent. Community participation in budgeting should include those groups in the community, such as women, who face particular constraints in participating. It must also include a capacity-building component to ensure that people understand the prioritisation process (why resources are allocated to one area rather than another).
The power of a Municipality to impose rates on property, surcharges on fees for services provided by or on behalf of the Municipality, or other taxes, levies or duties:
Section 10G(7)(a)(ii) of the Local Government Transition Act No. 209 of 1993, as amended, and the Kwazulu-Natal Joint Services Act No.84 of 1990, authorises the Municipality to levy and recover, by resolution supported by a majority of the members of the Council levies, fees, taxes and tariffs in respect of any function or service of the Municipality. It further authorizes the Municipality, when it determines property rates, levies, fees, taxes and tariffs to:
In respect of service charges from time to time by resolution, amend or withdraw such determination and determine a date, not earlier than 30 days from the date of the resolution, on which such determination, amendment or withdrawals will come into operation;
The Local Authorities Ordinance (Ordinance No. 25 of 1974) contains the following provisions:
Interest charged at 18% per annum (1.5% per month), must be paid to the Municipality on rates that have not been paid within thirty days from the date on which such rates became due. The interest rate charged should be higher than the rate payable by the Council to its bank in respect of an overdraft, for the period during which such rates remain unpaid after the expiry of the period of thirty days;
Rates that are outstanding for more than two months should incur a 10% collection charge (Local Authorities Ordinance, Section 171);
The Council may charge interest on any other amount due to it that may not have been paid within thirty days from the date on which such amounts became due. The interest rate charged is one percent higher than the rate payable by the Council to its bank in respect of an overdraft for the period during which such amounts remain unpaid after the expiry of the period of thirty days. Interest may not be charged on:
Section 160 of the Constitution of the Republic of South Africa 1996 determines that a Municipality may not delegate the power to impose taxes, tariffs and other charges. Such tariffs must be approved by decision of a majority of the Councillors in a Council after taking into consideration all the required factors.
In respect of the provision of water and sanitation services, the Water Services Act of 1997 determines that a Municipality/Water Services Authority must supply water and sanitation services in terms of conditions set by the Municipality/ Water Services Authority. The conditions that a Municipality must set must provide, amongst other things, for the determination and structure of tariffs. These powers must be read with section 21 of the Act in terms of which the Municipality must pass bylaws that provide, amongst other things, for the determination and structure of tariffs and the payment and collection of money due for water and sanitation.
In terms of section 9 of the Electricity Act 1987 (Act No 21 of 1987) the holder of electricity licence may not charge any consumer with other tariffs than those specified in the schedule of approved tariffs in its licence. Further, an authority of an electricity licence is obliged to supply electricity within the area of supply mentioned in its licence, to every applicant who is in a position to make satisfactory arrangements for payment thereto.
The Local Authorities Ordinance regulates the determination of property rating tariffs. It determines as follows:
The property rates may be levied in terms of any of three systems, namely:
In terms of section 74 of the Municipal Systems Act, 2000, the Council must adopt and implement a Tariff Policy that complies with the provisions of any applicable legislation on the levying of fees for municipal services provided by or on its behalf. The Tariff Policy may differentiate between different categories of users, debtors, service providers, service standards, geographical areas and other matters as long as the differentiation does not amount to unfair discrimination. Section 75 of the Act requires that the Council adopt by-laws to give effect to the implementation and enforcement of its Tariff Policy. Such by-laws may differentiate between different categories of users, debtors, service providers, services, service standards and geographical areas as long as such differentiation does not amount to unfair discrimination.