The trouble with administered prices in municipalities
When municipal servants plan to spend billions, small business owners, home owners, and ordinary citizens who are these days generally strapped for cash are entitled to wonder where the money comes from.
Even Cape Town, which has saved a great deal of money over the years, is planning to spend millions. But, given the circumstances of its ratepayers, many think it would have been politic to spend at least some of it on those who provided it in the first place.
The administrative pricing of electricity, domestic water and property rates, allows the City to charge what it costs without having to consider cutting back on expenditure, which would be the reaction of any household or private business.
Administered prices, unlike those that exist in a free market that move up and down according to the supply and demand, go up according to the needs as defined by officials. They seldom go down.
How much administered service prices in municipalities have increased in recent years was made clear this week in Parliament in a presentation by the South Africa Reserve Bank. It was alarming.
According to the Bank, electricity prices are 177% more than they were a decade ago. Rates and taxes have increased by 118%. Municipal water now costs 213% more than it did in 2010.
Granted the Bank was reporting nationally, and of course Cape Town is better than most, but still the figures show that municipal officials are immune to market reality.
In plain language, ratepayers everywhere are asking a fundamental question of their municipalities: “Have your wages and salaries gone up by as much as the prices you charge on the services you are paid to provide”.
Very few people in the private sector can say that their pay has almost trebled in the past 10 years (the price of water has) or even merely doubled (as is the case for electricity).
If municipal salaries have increased as much, then there is something seriously wrong and ratepayers are right to be concerned.