Cape Town. Picture: THINKSTOCK
Cape Town. Picture: THINKSTOCK

There is growing discontent within the DA after the City of Cape Town, which it controls, flatly rejected calls for it to grant residents a rates payment holiday to cushion them against the Covid-19 economic fallout.

City officials are not accountable to the DA as a political party, but must answer to the council.

But senior party members have been calling on the city to follow Stellenbosch’s example and offer a rates payment holiday to property owners as the country battles to contain the rapidly spreading pandemic which has rattled the global economy.

Last week, the DA-run Stellenbosch council approved a payment holiday to ratepayers who can prove that their income has been hit by the coronavirus crisis.

“Why can't Cape Town do what a small municipality, Stellenbosch, has done to assist residents during this [coronavirus] crisis? The city has about R8bn cash reserves,” said one DA MP.

Senior party members are said to be lobbying the city to reconsider its position.

The Cape Chamber of Commerce also weighed on the matter saying with small businesses already hit hard by the effect of the pandemic, and especially the imposition of a national lockdown, it is time municipalities and landlords granted property owners and tenants some breathing space by suspending payments for the duration of the lockdown.

“Rates and rents are a substantial cost of doing business. With all non-essential businesses being forced to close during the lockdown, continuing to pay them will be the nail in the coffin of many small enterprises, ” Geoff Jacobs, the president of the Cape Chamber.

Cape Town’s deputy mayor and mayoral committee member for finance, Ian Neilson, said it is a very “simplistic approach to claim that the city has ‘x’ in the bank and therefore has cash to use”.

“The city's cash reserves are fully allocated in the city's budget. They could not be used for a new purpose without cutting expenditure in already committed budget,” he said.

He said the city is facing a significant risk in the current crisis, in that its income streams could fall sharply over the next months. With the significant shutting down and fall in bus passenger numbers, the MyCiTi bus fare income is falling away. There is also risk of a fall off in payments given the forced closure of the city's cash offices.

“At the same time there is very significant additional expenditure that the city now faces that was not previously anticipated before the crisis. ... The full additional costs of further support to the health system are as yet unquantifiable, but could be significant.”

Neilson said the city's cash flow is likely to turn negative by between R1bn to R3bn a month, depending on how it is managed and the bank balance could be quickly worked away in these circumstances.

“We cannot allow ourselves to get to a point where we cannot pay salaries or pay Eskom for bulk electricity supply. The city's primary responsibility is to ensure that the basic services — water, sanitation, electricity, cleansing — are secured. Even payment holidays to our customers will risk this service provision, because it is at first a cash-flow issue.”

Neilson said there are other ways that the city can assist business continuity and these are being pursued. But, he said, the city cannot take on the task of significant economic support beyond its mandate, when that is the task of the national government, which sits on the national fiscus income of R1.5-trillion compared with the city's R50bn.

The city’s draft budget comprises a R44bn operating allocation and a R8.7bn for capital expenditure.

“Importantly, one of the key messages during this year’s public participation process is the absolute necessity for residents and businesses to continue to pay rates and services,” Neilson said.

He said the draft budget proposes smaller increases of between 3.5% and 4.8%, in line with or below the inflation rate. A social assistance package for rates and services of more than R3bn is also proposed, and the city does not plan to make a surplus on the sale of services or the income from rates. Income is used for service provision, Neilson said.

phakathib@businesslive.co.za

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