Cost-reflective of Water and Power in S.A.

Municipality is advised to implement cost-reflective tariffs and provincial treasures will assist to implement such cost-reflective tariffs

Finance minister Tito Mboweni says that various districts across South Africa do not cost reflective tariff set up, which has contrarily affected the sustainability of municipal services.

Reacting in a composed parliamentary Q&A, Mboweni said that a feasible tax is the one that is cost-intelligent and incorporates every one of the expenses of offering a support, for example, mass buys.

“In response, National treasury has developed a tool for use by municipalities, that id used correctly it will see municipalities charging cost-reflective tariffs that will cover the cost of bulk purchases.

“Treasury through its structures, is also offering technical support to municipalities to assess and set cost-effective tariffs,” he said.

Mboweni said that treasury is additionally working close by the department of cooperative governance and traditional affairs to jointly subsidize an investigation that objectives the best 20 municipal defaulters of Eskom and top 10 city defaulters of the water boards.

“The study is intended to assist municipalities to determine the true cost for the respective services, water and electricity, which will subsequently influence better tariffs,” he said

Problem with some municipalities

Mboweni said districts commonly run into issues when they do not ascertain taxes through logical methods, and simply force a CPI-gradual increment to the earlier year’s tariff.

“There are observations that some rural municipalities that have low revenue bases, have been found to be charging tariffs which are insufficient to cover the cost – or are not cost-reflective,” he said.

“In some cases, as the result of improper methods for setting tariffs, municipal councils reduce the proposed tariff based on their perception of what is affordable to their constituencies. Additionally, municipalities that have high distribution losses may also find it difficult to recover the cost the service.”

In a perfect world, the levies set by districts should take care of the expense of mass buys, and Mboweni said that National treasury reliably advocates this training.

Mboweni said that everyone of the spending plans of regions are evaluated by public and common depositories to decide if the financial plan of the region is subsidized or not.

In the event that the spending plan of a district is not subsidized, both public and common depositories decide the reasons why the spending plan is not supported and survey explicitly whether the tariffs are cost-reflective to cover all the expenditure.

“If the tariffs are cost-reflective then the tariffs will cover all the cost the render that service. If the tariffs are not cost-reflective then the municipality is advised to implement cost-reflective tariffs and provincial treasures will assist the municipality to implement such cost-reflective tariffs.”

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