JOBURG ADVOCACY GROUP (JAG)

Working for best practice governance in the City of Johannesburg P.O. Box 28557 Kensington 2101 011 614 0690

Attention: Ms V. Mafoko The Director-General Department of Cooperative Governance and Traditional Affairs By e-mail: mpra@dplg.gov.za

22 July 2011
Dear Ms Mafoko, Re: Objections to the proposed Municipal Property Rates Amendment Bill The Joburg Advocacy Group (JAG) is an independent civil society group working for best-practice governance, social justice and environmental protection in the City of Joburg. We advocate on a wide range of issues on behalf of all of the citys people. We would like to register the following objections to the proposed Municipal Property Rates Amendment Bill:

Proposed amendment to the Preamble to the Municipal Property Rates Act (Act 6 of 2004), which reads: "AND WHEREAS income derived from property rates is a major source of general municipal revenue and that revenue is not linked to a specific municipal service or the erection of infrastructure related to that municipal service; ". We object to this proposed amendment on the basis that it opens up the potential for abuse of revenue generated by the collection of rates by the citys administration, which may then use this revenue for any non-designated general purposes, including what the Auditor-General has called irregular, fruitless and wasteful expenditure in the city.

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While the need for cross-subsidisation between areas of the city is accepted without question, there is legal precedent to suggest that 40% of rates revenue raised in a particular area should be used in that area, while the remaining 60% may then be used for valid and auditable development purposes. As many ratepayers in the city are experiencing a progressive collapse of both infrastructure and services in the areas in which they live, and as mismanagement of public funds is of growing concern, a provision such as this is likely not only to exacerbate local government inefficiency and lack of accountability, but to fuel growing ratepayer anger at receiving no tangible benefits from the regular and diligent payment of rates.

We therefore urge you to reconsider this amendment to ensure that a reasonable proportion of rates revenue raised in a particular area is spent in that area, and that reporting on the financial management of the balance of that revenue is both traceable and impeccable. Proposed amendment to Section 2(b) of the Act, which reads:

'business or commercial property means( a) property used for the activity of buying, selling or trading in commodities or services and includes any office or other accommodation on the same property, the use of which is incidental to such activity: or (b) property on which the administration of the business of private or public entities takes place;"; We object to this amendment as it leaves a great deal of room for interpretation.

The Deputy Minister has said that this amendment is indented to define businesses such as bed and breakfast establishments and guest houses as commercial enterprises which, in our opinion, is valid. However, what is not made clear is how this will affect professionals such as attorneys, graphic designers etc. working from home. Will their properties then be considered as commercial properties and will rates then be levied accordingly?

Also, it is unclear how this will affect owners of second properties who have purchased these properties for investment purposes and who rent them out. Will all such properties then be considered as commercial properties and will rates be levied accordingly? Would this amendment affect all owners of rental properties, including those who have only one secondary property and those who own multiple properties and who could rightly be classified as landlords? We further urge the department to re-consider this revision in classification as, together with rapidlyrising tariffs, potential increases in rates on rental properties will be passed on to tenants. This will not

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only make rental property increasingly unaffordable for those who cannot afford to buy their own properties, but will also lead to it becoming increasingly scare as landlords divest themselves of properties that have less and less investment value to them. Based on this, we urge you in the strongest possible terms to reconsider this proposed amendment.

Thank you for your consideration and kind regards,

Lee Cahill Founding Member

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