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BUSINESS MAVERICK: Property managers claim municipal rates are now extortionate, municipalities don’t see a problem

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The Covid-19 pandemic, lockdown and ongoing recession are throwing into sharp relief issues that have existed for years, but which are now at breaking point and require urgent intervention. The deteriorating relationship between property owners and municipalities is just another example.

A battle is brewing between landlords, who are the owners of immovable property upon which retail, commercial and industrial complexes have been developed, and the municipalities that depend on those landlords and their tenants for a good portion of their income.The tussle is over the fees that municipalities are charging for the provision of services like water, electricity, refuse removal and sewerage.

“It’s a nightmare. Our comments are falling on deaf ears,” says Izak Peterson, CEO of Dipula Income Fund. “The problem is that property owners invest in and renew their properties in the belief that the value of those assets will continue to increase, but when expenses grow faster than the property value, it becomes a zero-sum game.”

“As Salga we are not aware; if there is a specific case, please provide us with the details for us to investigate further and respond appropriately,” says Sivuyile Mbambato, spokesman for Salga. “There is legislation, stipulated procedures and processes that municipalities need to follow.” In Mangaung in the Free State, remuneration costs for all staff will increase by 3.95%, modest at face value. However, the number of staff decreases by 14.27%, meaning that on average, the remuneration per head rises from R405,000 to R492,000, an increase of 21.26% per person.

“There is a misconception that commercial property owners can go on absorbing these exorbitant increases forever. They cannot, and sadly it affects large and small businesses alike as it makes its way into the pricing of goods and services.

 

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