Categories: News

Steep Municipal Tariff Hikes Impact Major South African Cities, with eThekwini Experiencing the Sharpest Increases

Published by
Martin du Toit

In the latest draft budget proposals for the 2023/24 financial year, several major cities in South Africa are revealing substantial tariff increases for residents. The proposed increases cover property rates, electricity, water, sanitation, and refuse removal. These hikes have been primarily attributed to above-inflation Eskom, water board, and salary increases, as noted by many of the municipal mayors.

The most significant impact is expected to be felt by residents of eThekwini Metropolitan Municipality, as they face the steepest tariff increases among the major metros. While most cities have drafted electricity price hikes in line with Eskom’s approved 18.49% increase by the National Energy Regulator of South Africa (Nersa), eThekwini has proposed a massive 21.91% electricity tariff hike, a full 3.32% higher than Eskom’s suggested increase. Additionally, the city’s water tariff is set to increase by a considerable 14.9%. eThekwini Mayor Mxolisi Kaunda cites Umgeni Water’s approved 13% tariff increase for bulk water as the primary cause, but no explanation has been provided for the substantial electricity hike.

In contrast, the City of Cape Town has managed to provide some relief for its residents by reducing Eskom’s 18.49% municipal rate increase to 17.6% through the absorption of approximately R15 million per month. Cape Town’s mayoral committee member for finance, Siseko Mbandezi, states that around 70% of the city’s tariff income will be allocated to purchasing bulk electricity from Eskom, while the remaining 30% will be invested in service delivery and putting an end to load shedding. Furthermore, the City of Cape Town has proposed a 1.1% decrease in property rates due to the new 2022 valuation roll that will come into effect in July. The first R450,000 of property value for properties valued at less than R5 million will be exempt from rates, offering residents some financial relief.

The City of Johannesburg, on the other hand, has tabled a 5.3% property rate increase, which, when combined with the new valuation roll increase (12%), will result in an average rate hike of around 17%. The table below showcases the proposed tariff increases across several major metros.

It should be noted that the City of Ekurhuleni’s planned 15% increase in residential electricity tariffs was tabled before Nersa announced Eskom’s municipal tariffs, leaving room for potential adjustments.

Table 1: Proposed Tariff Increases Across Major South African Metros

MunicipalityRatesElectricityWaterSanitationRefuse Removal
City of Joburg5.3%18.65%9.3%9.3%7%
City of Cape Town-1.1%17.6%8.6%8.6%5.5%
Nelson Mandela Bay5.0%18.49%6.0%6.0%6.0%
Buffalo City8.0%18.65%9.86%5.3%5.3%
Caption: Table 1 displays the proposed tariff increases for various municipal services, including property rates, electricity, water, sanitation, and refuse removal, across several major South African cities.

The proposed electricity tariffs are subject to Nersa’s pending finalization of its tariff guideline. In April 2023, Nersa proposed that municipalities should only increase electricity tariffs by 15.1% starting in July. The final guidelines are expected to be published in May.

Under Nersa’s current proposal, if the 15.1% guideline is approved, municipalities – including the major metros – will be required to limit their increases to this amount unless they can provide compelling reasons and a motivation to deviate. This may include a cost of supply study, which has only been fully implemented by four out of 176 municipalities.

The tariff hikes have raised concerns among residents and businesses, who are already grappling with the economic impact of the COVID-19 pandemic. The increases will likely result in higher costs for essential services, putting additional financial pressure on households and businesses alike.

The significant disparities in proposed tariff increases among the major metros may also exacerbate existing socio-economic inequalities. As the cost of living continues to rise, those residing in areas with higher tariff hikes will face an even greater financial burden.

It remains to be seen whether the final guidelines issued by Nersa will provide any relief for South African residents. In the meantime, the proposed tariff hikes have sparked heated debates on the need for improved efficiency and transparency in municipal management and the allocation of resources.

Martin du Toit