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It is clear from the Municipal Property Rates Amendment Bill that the intention is to change the way some residential property is rated so that more types of residential property pay higher commercial rates.

In this respect the Democratic Alliance (DA) welcomes the way in which Deputy Minister Yunus Carrim has eased off from saying that all second properties will not be taxed at commercial rates. This was obviously in response to the firestorm of protest that has resulted from initial reports of the bill.

The Deputy Minister needs to go further though, and clarify exactly which properties that are used for gain he intends to rate commercially. He has said in a statement that the intention is only to change the rating of “guest-houses, bed-and-breakfast establishments, small hotels and the like..” . This does not make clear what the ANC government intends with regard to a holiday flat, for example, that is occasionally let.

That clarification will be helpful to know the Deputy Minister’s intentions, but will not change the DA’s opposition to any redefinition of residential property for ratings purposes.

The risks inherent in hiking rates include raised rents, which will increase the burden on tenants, and a major drop in the property market as investors struggle to offload property that is no longer a good investment. This could potentially devastate coastal towns in particular.

Many retired people have ploughed their savings into second properties and occupy themselves with managing property they own to supplement their savings. It would be deeply ironic to destroy these investments just days after the Minister of Finance pleaded with South Africans to save more.

Questions have been raised about the constitutionality of the bill. Without pronouncing on that, it does seem manifestly unfair. Rates levied on properties should be about land use and nothing else. But the bill would change the emphasis to who owns the land, rather than how it is used.

The bill suggests that different rates should apply to two residential properties situated next to each other, both being used for residential purposes. This will also be difficult to enforce as municipalities do not have the capacity to monitor this type of usage on a regular basis.

It appears that, having allowed municipal government to become a playground for corruption, the ANC government is now looking to extract more money out of ratepayers to get it out of the financial hole it has dug for itself. There is still no guarantee that additional rates raised will be properly spent. The DA believes that the attempt to change the way residential property is defined will be bad, not only for investors, but also for tenants and those who are attempting to supplement their meagre income with rental proceeds.

There are other aspects of this bill which are misconceived and we will thus oppose them and the redefinition attempts when this bill comes before parliament.