Joburg rates will rise in July

The City of Johannesburg has taken a decision to cushion its residents from high rate increases by not matching the tariff hikes by Eskom and Rand Water for the 2025/26 financial year.

Instead of matching the proposed increase of 12.74% from Eskom, the city will limit its electricity increase to 12.5%.

The electricity surcharge will remain at R270 and will only be charged once a month, and not every time a consumer loads electricity. However, residents will be paying more from July 1 for refuse removal, property rates and water.

According to finance MMC Margaret Arnolds, the city has had to do a tough balancing act, juggling between prioritising the provision of basic services and ensuring that the most impoverished communities were protected.

“Tariffs are the lifeblood of local government finances. They make it possible for the city to clean our streets, electrify informal settlements, maintain infrastructure and expand all services. We also recognise that every rand charged must be justifiable, we don’t want to take the money and not clarify what we have done with it,” she said.

Arnolds said her administration has to be fair and responsive to the economic realities faced by residents and business.

“The work we do in setting these tariffs is not done in isolation. It is done within the framework of the government of local unity, a multiparty coalition committed to placing the people of Johannesburg above party politics.”

Group CFO Tebogo Moraka said residents should not be worried about steep increases, revealing that discussions are being held at a national level.

“As metros, we are distributors of energy and water, so we get our tariff increases from the generators. We also need to play our part and ensure that the systems we are using are efficient. If there is efficiency, there could be savings that we can pass on back to the residents.”

Moraka said the city’s financial footing was still fragile but with the plans the city had communicated to the National Treasury regarding its collections, managing of water and electricity losses, and expenditure, he was confident the city would see a full financial recovery in the medium term.

“We are still stable, and you can see this with our credit ratings. Even your banks are still investing in the city in terms of loan funding and capital expenditure. We would want that to move forward and ensure that we are liquid sufficiently and be able to reinvest our own cash into our infrastructure.”

He conceded that the size of the city posed a challenge, indicating the capital expenditure budget should ideally be sitting at R15bn.

“At the moment, we are limited in terms of what we can invest and that is the reason that we are in talks with DPSA (department of public service & administration) to look at off-balance sheet investments. Big metros, in particular Cape Town, eThekwini and ourselves, are self-reliant in terms of where we are going to get funding.

“Whatever plans we have as the City of Johannesburg we rely on tariffs and the collections thereof. We do not have the luxury of SOEs (state-owned enterprises) in terms of bailouts and the like. Understanding the terms and where the city is coming from when we set these tariffs is quite important.”

Moraka criticised the outcry over tariff increases, particularly for water and electricity.

“Eskom is the generator of electricity and we are a distributor, we’ve got the distribution networks. As a generator, their tariff increase has got an impact on what we set as the distributor. If the tariff approved by Nersa is 12.74% for the generation of electricity, then the city has to set a cost-reflective tariff.”

He said they decided not to increase tariffs at the same rate, saying this was the result of key deliberations with the Treasury.

“In their view, we should increase at the same proportion as what the bulk generators increase by. But our argument was that we are already seeing an overburdened resident and business in the City of Johannesburg and we must plough back into their interests and ensure efficiencies within our own systems. So whenever there are leakages, we must intervene.”

Moraka said there are engagements with the ministers of energy and water and sanitation to convene talks with Nersa and Rand Water over their tariffs to bring relief to residents.

“Those tariffs come through us and we pass them onto the residents and residents see the city as the one that is increasing rates without understanding properly how these tariffs are set. We don’t just sit and decide to increase percentages, there are costs that we have to take into account otherwise we will be running at a loss that we can’t afford.”

He said the stagnation of the economy was an achilles heel that was causing this ripple effect.

“The economy has only been growing at about a percentage each year for the past five years and this is a concern. Once we start increasing tariffs at these scales in an economic environment that is not growing sufficiently, we are overburdening residents and businesses.

“But it is something that is being engaged on on a national, provincial and city level to see how we can work as all three spheres of government to ensure affordable services to consumers.”

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