BUSINESS NEWS - Many South Africans do not know that during a State of Disaster, they can ask their municipality to exempt them from paying property rates, or give them a rebate.
Section 15 of the Municipal Property Rates Act of 2004 foresaw a situation in which a State of Disaster could impose such hardship on property owners they would find it difficult to pay their rates.
The act therefore 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.
As readers will be aware, South Africa has been in a State of Disaster under the Disaster Management Act for more than 400 days. On 13 May 2021 it was extended yet again. The latest extension runs to 15 June 2021, by which time the entire country will have been in a continuous State of Disaster for more than 450 days.
Rates exemption provisions
The government has already attempted with various measures to relieve the hardship imposed by the Covid-19 pandemic and the resulting lockdowns. It made available emergency loan funding for companies, created a temporary relief scheme for furloughed employees and instituted a social relief of distress grant that provided eligible South Africans with R350 in spending money.
But little use has so far been made of the rates exemption provision in the law, even though it would be quick and easy to implement and immediately benefit the many struggling homeowners and businesses impacted by the pandemic.
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.
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.
Perhaps 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.
For reference, as at 30 June 2020, the debt owing to municipalities was estimated to be in the region of R191 billion, of which R33.4 billion was considered the “actual realistically collectable amount”. That left abut R157.6 billion in bad debt clogging up the municipalities’ books.
Would municipalities granting residents rates relief bankrupt themselves? No. 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, 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”.
The amount of underspending almost doubled compared to the previous year (R54 billion in 2018/19), but as the Treasury noted with a hint of exasperation: “This increase is misrepresented by municipalities that do not submit their required mSCOA data strings on time and the fact that many of the submissions do not contain credible data.”
So, the sensible course of action for municipalities is to exempt ratepayers from paying rates. By doing so, they would support homeowners and businesses, and clean up their bad debt backlogs. Municipalities should also utilise the funds they have at their disposal instead of underspending them as they have been doing – especially on municipal infrastructure, which everywhere is crumbling.
Ratepayers wishing to apply for a property rates exemption can do so by e-mailing their municipality, or use an online form like that provided by the Institute of Race Relations.
John Endres is chief of staff at the Institute of Race Relations.