FINANCES: Electricity Not The Answer
Recent Western Cape Business News
Cape Town relies far too much on its income from electricity sales and this can create major problems in future as electricity becomes more expensive, said Mr Joe Emeran, President of the Cape Chamber of Commerce.
He was speaking yesterday at the annual Business meets the City symposium in Cape Town which was sponsored by ABSA.
Mr Emeran strongly criticised the increases in rates and tariffs in this year’s municipal budget which were all well above the inflation rate.
“Surely the time has come for a fresh look at municipal finances. Does it make sense, for instance, to use profits from electricity to subsidise rates? We pay VAT on electricity but not on rates. So when electricity money is transferred to the rates fund we are paying VAT that could easily be avoided.”
He said the electricity department made a very substantial contribution to municipal overheads and it underpinned the cash flow. This dependence went back to a time when there was no VAT and electricity was relatively cheap. “Things have changed, but has the City adapted its approach to fit the new circumstances? Is the City not still operating on the tired old formulas of the past?
“Electricity is the lifeblood of industry. Electricity creates jobs. It is going to become a lot more expensive. Clearly we need to rethink our whole approach to electricity. We need incentives to use power more efficiently. We need smart meters so that time-of-use tariffs can be introduced for the smaller consumers.”
Mr Emeran said the City should sit down with experts from the private sector and the academic world to explore new ways of doing things. We cannot continue as we are because it is becoming unaffordable. A system that is producing a need for tariff increases between 50 percent and 300 percent greater than the rate of inflation is in need of reworking.”
One solution could be partnerships with the private sector. The partnership between business and the City to create the improvement district in the CBD had been a spectacular success and it had given Cape Town, the best, cleanest and safest CBD in the country.
He urged the City to learn from the success and said “we should be looking at other areas where partnership between municipality and the private sector can improve productivity and produce even better results.”
Mr Emeran said the City did not always appreciate the contribution which business made to the City. “Something like half the City’s rates income comes from business yet we have no voice in the council. All the councillors are elected by residents and if there is to be voting on an issue where the interests of residents are pitted against those of business it will not be difficult to predict the result.”
This was of great concern for there were suggestions of a new tax on business to replace the old RSC levy. Business already paid double the rates on commercial property and he warned that any attempt to introduce a new tax aimed specifically at business would be resisted.
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