Tariff increases MUST be cost reflective, affordable and aligned to inflation.

1. We refer you to the entire contents of the letter addressed to The Municipal Manager Knysna Municipality, for the attention of the Chief Financial Officer, dated 15 March 2023, by Dr K Naidoo, Deputy Director-General: Policy, Governance and Administration of The Department of Cooperative Governance, which makes reference to the above and specifically states the following:

“Significantly high increases in the market values of properties require that the municipality reasonably reduces the cent in the Rand rates to curb excessive rate payable by property owners”  

“The practice of reducing the cent in the Rand Rates when a new valuation roll is implemented and where property market values increase significantly, MUST BE INSTITUTIONALISED, and become best practice” and “…, it is not sufficient to keep the cent in the Rand rate unchanged when property market values have increased significantly”

We submit that the proposed property rates tariff remaining unchanged from last year is unconstitutional and goes against the above recommendations, which is a MUST not a MAY and therefor the KNYSNA MUNICIPALITY is opening itself to protracted customer disputes wrt the billing of rates and taxes and service charges specifically for assessment rates, electricity and water. 

As a result the municipality runs the risk of an ever increasing debtors book and unpaid bills which will DIRECTLY IMPACT ON THE PROJECTED EXPENDITURE AND SERVICE DELIEVERY, FOR WITHOUT A REALISTIC REVENUE STREAM in the MTREF Draft Budget 2023/24 the proposed expenditure, which has increased by 12.7% in line with the increase in Revenue (13%) will result in an unfunded budget which is against the MFMA.

2. We too refer you to MFMA Circular No 122, paragraph 2.2 Re-enforcing the 2023 Divisions of Revenue Bill, (DoRA) to facilitate improved intergovernmental relations

“Towards enforcing a system of good intergovernmental relation as envisaged in the Chapter 3 of the Constitution and subsequent related legislation, the National Treasury would like to remind municipalities of Section 31 of DoRA that articulates the facilitation of personal liability for unnecessary litigation.”

3. The proposed tariff increases will result in disinvestment in our Town, with many residents moving to towns that are more affordable. Knysna will become a GHOST TOWN!

The weak economic growth our town has experienced post Covid, has put huge pressure on the consumer’s ability to pay for services, which is evidenced by the large debtors book the municipality currently has!

Disinvestment will have a ripple effect on businesses which will shut down causing job losses, increased unemployment and this will further cripple our Towns economy and the Municipalities ability to derive revenue, and therefor provide services.

4. According to the Municipal Property Rates Act and the Provisional Treasury recommendation, when introducing a New Valuation Roll the property rates tariff has to be adjusted downwards to ensure that the tariffs are both fair and equitable across all consumer bases. 

NO downward curbing of the cent in the Rand rate has taken place, despite exorbitant increases in the market value of properties.

5. The tariff increases proposed are above headline inflation! The recommendation by National and/or Provisional Treasury of between 4.7% and 5.3% MUST be considered when preparing the 2023/24 MTREF municipal budget (refer circulars of National Treasury – MFMA Circular No 122 dated December 2022, MFMA Circular no 123 dated 3 March 2023 and WC Provisional Treasury Circular MUN NO. 5/2023) where it specifically reminds municipalities of the setting of cost reflective tariffs that are affordable to residents.

6. The Draft Budget proposes an estimated revenue of R1 217 118 289 billion (13% increase on LY) and expenditure of R1 215 686 185 billion (12.7% increase on LY), with a surplus of a mere R1 432 104. The revenue is based on an average increase of 33% of property rates revenue which is based on the market value of properties reflected in the new valuation roll which is completed unrealistic, with some properties experiencing a 50% to 100 % increase in value with others a 300% increase in market value.

7. The Knysna Municipality Draft Budget MTREF 2023/24 proposes the following revenue source increases with effect from 1 July 2023:

Services charges:

Water 9% 

Electricity 18.5% 

Sanitation 5.3%

Refuse 6.0%

Assessment Rates - the tariff remains the same as LY resulting in an increase as per the increase in property value from GVR 2017 TO GVR 2023 

8. WE ARE A TOURIST DESTINATION TOWN AND OUR ECONOMY RELIES ON OUR TOURISTS! The proposed tariffs will result in rentals skyrocketing and make our rental market less attractive to Tourists wanting to visit over a week or more!