Date: 04/03/2004
Source: Department of Provincial and Local Government
Title: N Botha: Debate on Property Rates Bill, NCOP
SPEECH BY MS NGW BOTHA, MP, DEPUTY MINISTER FOR PROVINCIAL AND LOCAL GOVERNMENT, OPENING DEBATE ON THE PROPERTY RATES BILL IN THE NATIONAL COUNCIL OF PROVINCES (NCOP), 4 MARCH 2004
Introduction
Today is the last sitting of the National Council of Provinces before the General Election on 14 April. Members of this House will look back with pride at the amount of work they have been able to accomplish during their term of office. Very important and progressive pieces of legislation have been passed by this House. Such legislation have strengthened our democracy and consolidated our new system of local government. Indeed, this House has every cause to celebrate 10 years of freedom and democracy.
Background
We have so much to celebrate as a country because, when our ANC-led democratic government came into power in 1994, it inherited a system of local government that was completely dysfunctional. It was structured along racial lines that served to exclude and marginalize majority of our people from participating in our country's economic and political processes. Despite the fact that there were over 1,000 municipalities, there were still vast rural areas that did not fall under any local authority at all. There were some municipalities that did not have financial statements or even a single computer.
In 1995, municipalities were restructured along non-racial lines and many parts of the rural areas were included. The number of municipalities was reduced to 843. The system was, however, not workable as there were too many municipalities for the size of the country and vast majority had little or no revenue base and were largely dependent on grants from national government. In order to address these challenges and to create financially viable and sustainable local government, the country was re-demarcated into 284 wall-to-wall municipalities. The creation of 284 municipalities allowed us to bring in those rural parts of the country that were still outside the system, and allowed us to achieve economies of scale in administration and service delivery.
After the new demarcation and amalgamation, every municipality should be a single economic unit to which both suburbs and townships contribute their labour and from which both benefit. Under the new system, people from townships and rural areas have the opportunity to share the revenue they are helping to generate. There is now a better basis for allocating developmental funding which helps create conditions for attracting investors.
Regulatory Framework
In the last six years, national government has worked on creating new governing structures and the formulation of policy and legislation frameworks for local government. The White Paper on Local Government, the Municipal Structures Act, the Municipal Demarcation Act, the Municipal Systems Act and the Traditional Leadership Governance Framework Act create framework for good governance within which a strong local government sphere is built.
One of the biggest challenges facing us, as a country, is the area of municipal finance. Substantial progress has been made in this regard with the passage of the Municipal Finance Management Act. The Property Rates legislation is yet another important building block in this local government transformation process. Together, these pieces of legislation seek to broaden the revenue base of municipalities, improve administration of rates, and general management of municipal finances.
South Africa has what President Thabo Mbeki refers to as "the dual economy" - one advanced and skilled, becoming more globally competitive while the second is mainly informal, marginalized and unskilled. Government has pursued a dual policy of development programmes and expanded public works programmes aimed at redressing the needs of the second economy on the one hand, and, on the other hand, the modernisation of the first economy to create necessary surplus needed to enhance the second.
Although our government succeeded in the first decade in providing housing, health care and social services directly to marginalized communities, many still remain at the periphery of the mainstream economy. Government has adopted a deliberate policy aimed at stimulating the economy in order to alleviate poverty. Through a programme of investing in infrastructure, we pursued twin objectives of providing basic services and addressing infrastructure backlogs we inherited, while at the same time creating conditions for sustainable employment.
In the past 10 years, national, provincial and local government instituted various programmes to address underdevelopment and poverty. Implementable strategies and programmes were put in place to address challenges in areas, such as food security and basic nutrition, water and sanitation, electricity and energy provision, housing and shelter, land reform, transport, education, health care, SMMEs and social cohesion, among others.
These initiatives saw massive amounts of public sector resources set aside for service delivery and infrastructure investment through intergovernmental programmes and transfers such as the Consolidated Municipal Infrastructure Programme (CMIP) and the Equitable Share. The 10 Year Review shows that majority of our people have directly benefited through greater access to basic services such as shelter, water, electricity and basic sanitation.
Central to the success of all government interventions in the second decade, will be a robust, sustainable, effective and stable system of local government. Municipalities will need to create resilient and competitive local economies that are capable of creating long-term work opportunities and a sustainable economic and revenue base. It is against this background that national government has allocated R47.3 billion over the next three years to the local government sphere (an increase of R3,9 billion).
It is within these last ten years that we have also established and consolidated all the core systems of developmental local government. These systems aimed at enhancing community participation in governance issues, integrated development planning, service delivery and performance management. Many of our achievements are attributed to this new system of developmental local government.
The Property Rates Bill
The Property Rates Bill seeks to balance the need for municipalities to be able to generate sufficient revenue to perform their constitutional objectives and stimulate local economic development with the need to deal with the plight of the very poor. One of the main issues that the White Paper identifies with regard to property rating is the treatment of the poor in the rating of their property. In the ten years of democratic governance, 1,6 million houses have been built for the poor throughout the country. It is important that we retain people within the formal housing market, and that we take measures to ease the burden of the poor against the changes in the labour market and the economy in general.
The Property Rates legislation, thus, specifically excludes the first R15, 000 of residential property from rating. This is true for all residential properties irrespective of the value of the property. The value is subject to review in order to take inflation into account to provide for relief to the poor. In this respect, we have noted the report of the select committee requesting that a further investigation be conducted to assess the appropriateness of this threshold. The department undertakes to look into this matter. However, any amendment to the legislation will be determined by the outcome of such an investigation and assessment.
The Bill has other aspects that deal with poor individuals. The rates policy must take into account the effect of rates on the poor and provide measures to alleviate the rates burden on them. Municipalities may use exemptions, rebates or reductions to provide relief to indigent property owners and pensioners.
In addition, the Property Rates Bill excludes land reform beneficiaries from payment of rates for a period of ten years, provided the property does not change hands. Even after the lapse of 10-year grace period, it is highly unlikely that property in rural areas will be levied as the R15, 000 exclusion (as amended to take account of inflation) will still apply. It is therefore highly unlikely that rates will be levied in rural areas where values of property are so low, that the cost of administration will outweigh the revenue generated.
Another exclusion provided for is 30% of the market value of public service infrastructure. This is infrastructure intended for public good and is essential for the delivery of basic services such as water and electricity. This exclusion will thus assist national government's objective of delivering free basic services.
The Bill seeks to find a balance between the need for a coherent national framework for property rates that will foster national macro-economic balance, the need for municipalities need to shape their rates policies by consultation with major stakeholders.
Community Participation
It then becomes imperative that councillors and communities, including the private sector and civil society formations, forge partnerships to make sure the bill is implemented in the way it is visualised. People, in short, have to get involved in governance issues in their municipalities.
The Property Rates legislation requires municipalities to consult communities when formulating their rates policies that will inform decisions on the treatment of the different categories of property. The Bill does not mandate preferential treatment of any category of property, but leaves that to the individual councils to decide based on local conditions and circumstances, and in consultation with their communities.
Conclusion
The Property Rates Bill is not a wealth tax, as some would like us to believe. It is founded on the principle our system of local government, which now has a much greater service delivery and developmental role. To fulfil this role, it has to have adequate revenue, hence government decided to review the local government financial system.
On behalf of the Ministry for Provincial and Local Government and the Department, I wish to thank the Chairperson and members of the Select Committee on Local Government Administration for their co-operation and speedy, but meticulous manner in which they dealt with this piece of legislation. We also wish to thank officials of our department, representatives of various organisations and SALGA for their invaluable contributions and insights, which resulted in this sound piece of legislation, which now I commend to this House.
I THANK YOU.
Issued by: Department of Provincial and Local Government
4 March 2004
Source: Department of Provincial and Local Government
Title: N Botha: Debate on Property Rates Bill, NCOP
SPEECH BY MS NGW BOTHA, MP, DEPUTY MINISTER FOR PROVINCIAL AND LOCAL GOVERNMENT, OPENING DEBATE ON THE PROPERTY RATES BILL IN THE NATIONAL COUNCIL OF PROVINCES (NCOP), 4 MARCH 2004
Introduction
Today is the last sitting of the National Council of Provinces before the General Election on 14 April. Members of this House will look back with pride at the amount of work they have been able to accomplish during their term of office. Very important and progressive pieces of legislation have been passed by this House. Such legislation have strengthened our democracy and consolidated our new system of local government. Indeed, this House has every cause to celebrate 10 years of freedom and democracy.
Background
We have so much to celebrate as a country because, when our ANC-led democratic government came into power in 1994, it inherited a system of local government that was completely dysfunctional. It was structured along racial lines that served to exclude and marginalize majority of our people from participating in our country's economic and political processes. Despite the fact that there were over 1,000 municipalities, there were still vast rural areas that did not fall under any local authority at all. There were some municipalities that did not have financial statements or even a single computer.
In 1995, municipalities were restructured along non-racial lines and many parts of the rural areas were included. The number of municipalities was reduced to 843. The system was, however, not workable as there were too many municipalities for the size of the country and vast majority had little or no revenue base and were largely dependent on grants from national government. In order to address these challenges and to create financially viable and sustainable local government, the country was re-demarcated into 284 wall-to-wall municipalities. The creation of 284 municipalities allowed us to bring in those rural parts of the country that were still outside the system, and allowed us to achieve economies of scale in administration and service delivery.
After the new demarcation and amalgamation, every municipality should be a single economic unit to which both suburbs and townships contribute their labour and from which both benefit. Under the new system, people from townships and rural areas have the opportunity to share the revenue they are helping to generate. There is now a better basis for allocating developmental funding which helps create conditions for attracting investors.
Regulatory Framework
In the last six years, national government has worked on creating new governing structures and the formulation of policy and legislation frameworks for local government. The White Paper on Local Government, the Municipal Structures Act, the Municipal Demarcation Act, the Municipal Systems Act and the Traditional Leadership Governance Framework Act create framework for good governance within which a strong local government sphere is built.
One of the biggest challenges facing us, as a country, is the area of municipal finance. Substantial progress has been made in this regard with the passage of the Municipal Finance Management Act. The Property Rates legislation is yet another important building block in this local government transformation process. Together, these pieces of legislation seek to broaden the revenue base of municipalities, improve administration of rates, and general management of municipal finances.
South Africa has what President Thabo Mbeki refers to as "the dual economy" - one advanced and skilled, becoming more globally competitive while the second is mainly informal, marginalized and unskilled. Government has pursued a dual policy of development programmes and expanded public works programmes aimed at redressing the needs of the second economy on the one hand, and, on the other hand, the modernisation of the first economy to create necessary surplus needed to enhance the second.
Although our government succeeded in the first decade in providing housing, health care and social services directly to marginalized communities, many still remain at the periphery of the mainstream economy. Government has adopted a deliberate policy aimed at stimulating the economy in order to alleviate poverty. Through a programme of investing in infrastructure, we pursued twin objectives of providing basic services and addressing infrastructure backlogs we inherited, while at the same time creating conditions for sustainable employment.
In the past 10 years, national, provincial and local government instituted various programmes to address underdevelopment and poverty. Implementable strategies and programmes were put in place to address challenges in areas, such as food security and basic nutrition, water and sanitation, electricity and energy provision, housing and shelter, land reform, transport, education, health care, SMMEs and social cohesion, among others.
These initiatives saw massive amounts of public sector resources set aside for service delivery and infrastructure investment through intergovernmental programmes and transfers such as the Consolidated Municipal Infrastructure Programme (CMIP) and the Equitable Share. The 10 Year Review shows that majority of our people have directly benefited through greater access to basic services such as shelter, water, electricity and basic sanitation.
Central to the success of all government interventions in the second decade, will be a robust, sustainable, effective and stable system of local government. Municipalities will need to create resilient and competitive local economies that are capable of creating long-term work opportunities and a sustainable economic and revenue base. It is against this background that national government has allocated R47.3 billion over the next three years to the local government sphere (an increase of R3,9 billion).
It is within these last ten years that we have also established and consolidated all the core systems of developmental local government. These systems aimed at enhancing community participation in governance issues, integrated development planning, service delivery and performance management. Many of our achievements are attributed to this new system of developmental local government.
The Property Rates Bill
The Property Rates Bill seeks to balance the need for municipalities to be able to generate sufficient revenue to perform their constitutional objectives and stimulate local economic development with the need to deal with the plight of the very poor. One of the main issues that the White Paper identifies with regard to property rating is the treatment of the poor in the rating of their property. In the ten years of democratic governance, 1,6 million houses have been built for the poor throughout the country. It is important that we retain people within the formal housing market, and that we take measures to ease the burden of the poor against the changes in the labour market and the economy in general.
The Property Rates legislation, thus, specifically excludes the first R15, 000 of residential property from rating. This is true for all residential properties irrespective of the value of the property. The value is subject to review in order to take inflation into account to provide for relief to the poor. In this respect, we have noted the report of the select committee requesting that a further investigation be conducted to assess the appropriateness of this threshold. The department undertakes to look into this matter. However, any amendment to the legislation will be determined by the outcome of such an investigation and assessment.
The Bill has other aspects that deal with poor individuals. The rates policy must take into account the effect of rates on the poor and provide measures to alleviate the rates burden on them. Municipalities may use exemptions, rebates or reductions to provide relief to indigent property owners and pensioners.
In addition, the Property Rates Bill excludes land reform beneficiaries from payment of rates for a period of ten years, provided the property does not change hands. Even after the lapse of 10-year grace period, it is highly unlikely that property in rural areas will be levied as the R15, 000 exclusion (as amended to take account of inflation) will still apply. It is therefore highly unlikely that rates will be levied in rural areas where values of property are so low, that the cost of administration will outweigh the revenue generated.
Another exclusion provided for is 30% of the market value of public service infrastructure. This is infrastructure intended for public good and is essential for the delivery of basic services such as water and electricity. This exclusion will thus assist national government's objective of delivering free basic services.
The Bill seeks to find a balance between the need for a coherent national framework for property rates that will foster national macro-economic balance, the need for municipalities need to shape their rates policies by consultation with major stakeholders.
Community Participation
It then becomes imperative that councillors and communities, including the private sector and civil society formations, forge partnerships to make sure the bill is implemented in the way it is visualised. People, in short, have to get involved in governance issues in their municipalities.
The Property Rates legislation requires municipalities to consult communities when formulating their rates policies that will inform decisions on the treatment of the different categories of property. The Bill does not mandate preferential treatment of any category of property, but leaves that to the individual councils to decide based on local conditions and circumstances, and in consultation with their communities.
Conclusion
The Property Rates Bill is not a wealth tax, as some would like us to believe. It is founded on the principle our system of local government, which now has a much greater service delivery and developmental role. To fulfil this role, it has to have adequate revenue, hence government decided to review the local government financial system.
On behalf of the Ministry for Provincial and Local Government and the Department, I wish to thank the Chairperson and members of the Select Committee on Local Government Administration for their co-operation and speedy, but meticulous manner in which they dealt with this piece of legislation. We also wish to thank officials of our department, representatives of various organisations and SALGA for their invaluable contributions and insights, which resulted in this sound piece of legislation, which now I commend to this House.
I THANK YOU.
Issued by: Department of Provincial and Local Government
4 March 2004
Advertisement
EMAIL THIS ARTICLE SAVE THIS ARTICLE FEEDBACK
To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here
