LOUIS TRICHARDT – Following last week's budget shock, the Makhado Municipality this week defended their decision for an 11% across-the-board in-crease in rates and taxes for the 2003/4 financial year.

In a statement issued by Council, it is argued that the massive increase was brought about by several factors which Council had to contend with when deciding on the percentage increase for the 2003/4 financial year. Among these was the annual Eskom tariff increase.

According to Council, the NER (National Energy Regulator) in January 2002 approved an 8% increase in Escom's tariffs. This was 1,5% more than Council's 6,5% tariff increase for the 2001/2 financial year. In May this year, the NER again informed Council that Escom's tariffs will in January next year increase by 9%. As Council is not allowed to increase their tariffs during the course of the year, it is stated, Council was therefore forced to bring about the massive 11% to be in line with the general increases of Escom.

"Mathematically speaking, 8% + 9% = 17% and our increase is only 11%, which means we haven't as yet bridged the gap but we still have hope that we will catch up with these financial constraints. We are trying by all means to relieve our residents by not increasing their consumer accounts," the statement reads. The statement also deliberated on the issue of the 11% salary increase to foot Council's exorbitant salary bill to the amount of almost R68 million per year. It is stated that in July 2002, the Bargaining Council had resolved that the salary increase for the 2003/4 financial year would be guided by the CPIX (Consumer Price Index).

"So far the national inflation stands at 11,5% and salaries had only increased by 11% across the board. It must be borne in mind that this is a national agreement, which must be applied nation wide. It must be understood that our Municipality never derived its own percentage – in a nutshell, we are complying with the national agreement resolved at the Bargaining Council yesteryear," the statement reads.

Council also touched on the issue of their proposed development fund. Households in rural areas, which are not charged with assessment rates, are to pay a monthly levy of R10 to insure service delivery in these areas.

"Our Municipality has taken such a giant step after we realized that very soon we are going to be faced with cashflow problems which will lead to the failure to provide services in all our areas," the statement reads.

Whilst Council's comments have been noted, the local Chairman's Association again pointed out that the severe reduction in the CAPEX budget has still not been addressed. The latter has been reduced from just over R30 million to just over R20 million.

According to Mr Jock Veldhuysen, spokesperson for the Chairman's Association on the municipal budget and Area Manager of Standard Bank in the Far Northern Region, Council have also not given any assurance that they will have funds available for damage control and contingen-cies.

With regard to the 11% across-the-board increase, Mr Veldhuysen said that although Escom has levied charges of 8% and 9%, totalling 17%, over the last two years, this was passed on to the consumer through a 6,5% increase last year and an 11% increase this year – making it 17,5%.

" What gap is there to breach?" Mr Veldhuysen asked. Mr Veldhuysen also said that the CPIX being quoted at 11,5% by Council is way off the mark.

"According to various economists and senior government advisors, and if cognisance is given to the errors recently detected in the calculation of the CPIX as indicated by the Minister of Finance, Council's 11% increase is way above the inflation rate and actually very inflationary," Mr Veldhuysen said. Mr Veldhuysen was also very pessimistic about Council's chances of collecting the R10 levy towards a development fund in rural areas. A couple of years ago, Council embarked on a similar exercise but had to write off millions of rands in bad debt because the levies could not be collected.

"This is going to be a very costly exercise and could even be a case of throwing good money after bad. Will this entail increasing the workforce to collect the money and how can we call on poor, unemployed pensioner families in the rural areas to pay R10 to subsidise fat salaries? Our position remains that there is cause for grave concern and that Council is heading for a cashflow crisis in the not too distant future," Mr Veldhuysen concluded.