Property Development: Comparison of Municipal Services ... · PROPERTY DEVELOPMENT: COMPARISON OF...

Property Development: Comparison of Municipal Services

Costs: REPORT 2013

PROPERTY DEVELOPMENT: COMPARISON OF MUNICIPAL SERVICES COSTS: REPORT 2013

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Disclaimer

With reference to the contents within this document, the Gauteng Growth and Development Agency (GGDA),

the South African Property Owners Association (SAPOA) and Urban-Econ Development Economists claim that

the following document serves only as a point of reference and not as a direct indication of the cost of doing

property related businesses within the identified study areas. All data was acquired from published municipal

documents as well as from direct municipal sources and all efforts were taken to ensure that the data was

accurate and properly representative of these municipalities. Certain limitations to this study were identified

which reinforces the above statement that that the information detailed is to be used as a point of reference

and not as actual. No warranty or representation is made as to the accuracy thereof and this report is

submitted subject to errors, omissions, and subsequent and future changes. Finally, the municipalities that are

compared differ in size and context, and subsequently, considering the comparative nature of this document,

all figures and findings must not be viewed in isolation to the context and provided written content.


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TABLE OF CONTENTS

Table of Contents ................................................................................................................................................... 1

Table of Figures ...................................................................................................................................................... 6

List of Acronyms ..................................................................................................................................................... 8

1. Introduction .................................................................................................................................................... 9

1.1 Study Areas ......................................................................................................................................... 10

1.2 Outcome of the Study ........................................................................................................................ 12

1.3 Project Approach ................................................................................................................................ 13

1.4 Limitations of the Study ..................................................................................................................... 15

1.5 Report Outline .................................................................................................................................... 16

2. Key Analysis and Cost Comparison ............................................................................................................... 18

2.1 Regulatory determinants of Rates and Tariffs ................................................................................... 19

2.2 Environmental Impact Assessment .................................................................................................... 22

2.3 Zoning and Re-zoning fee ................................................................................................................... 22

2.4 Township Establishment Fee ............................................................................................................. 23

2.5 Subdivision Fee ................................................................................................................................... 25

2.6 Building Plan Fee ................................................................................................................................ 26

2.7 Connection Fees – water, sewerage, electricity ................................................................................ 27

2.6.1 Water Connection Fees .................................................................................................................. 28

2.6.2 Sewerage Connection Fees ............................................................................................................ 30

2.6.3 Electricity Connection Fees ............................................................................................................ 31

2.8 Consumption Charges – water, sewerage, refuse, electricity ........................................................... 32

2.7.1 Water Consumption Charges ......................................................................................................... 33

2.7.2 Sewerage Consumption Charges ................................................................................................... 34

2.7.3 Refuse Consumption Charges ........................................................................................................ 36

2.7.4 Electricity Consumption Charges ................................................................................................... 37

2.9 Vacant Land Rates .............................................................................................................................. 38


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2.10 Property Rates .................................................................................................................................... 40

2.11 Additional Commentary on Application of Rebates .......................................................................... 43

2.12 Comparative Matrixes ........................................................................................................................ 44

2.12.1 Comparative Matrix of the Medium Density Residential Development ................................. 45

2.12.2 Comparative Matrix of the Retail Centre Development .......................................................... 47

2.12.3 Comparative Matrix of the Commercial Office Development ................................................. 48

2.12.4 Comparative matrix of the Industrial Development ................................................................ 50

2.12.5 Final Comparative Matrix for all Development Scenarios ........................................................ 52

2.13 Key Observations ................................................................................................................................ 54

3. Surcharges .................................................................................................................................................... 55

3.1 City of Johannesburg .......................................................................................................................... 56

3.2 City of Tshwane .................................................................................................................................. 56

3.3 Ekurhuleni Municipality ..................................................................................................................... 57

3.4 Mogale City ......................................................................................................................................... 57

3.5 Emfuleni Municipality ........................................................................................................................ 57

3.6 City of Cape Town ............................................................................................................................... 57

3.7 George Municipality ........................................................................................................................... 57

3.8 Msunduzi Municipality ....................................................................................................................... 57

3.9 Mbombela Municipality ..................................................................................................................... 58

3.10 Emalahleni Municipality ..................................................................................................................... 58

3.11 Nelson Mandela Bay Metro ............................................................................................................... 58

3.12 Buffalo City Metro .............................................................................................................................. 58

3.13 Polokwane Municipality ..................................................................................................................... 59

3.14 Mangaung Municipality ..................................................................................................................... 59

3.15 Sol Plaatje Municipality ...................................................................................................................... 59

3.16 //Khara Hais Municipality .................................................................................................................. 59

3.17 Rustenburg Municipality .................................................................................................................... 59

3.18 eThekwini Metro ................................................................................................................................ 59


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3.19 Impact of Surcharges on Development ............................................................................................. 60

4. Municipal Responsibilities and Challenges ................................................................................................... 60

4.1 Approach............................................................................................................................................. 61

4.2 Analysis and Findings ......................................................................................................................... 62

4.2.1 Degree of Suitably Zoned Land ...................................................................................................... 62

4.2.2 Administration Effectiveness ......................................................................................................... 63

4.2.3 Regulation ...................................................................................................................................... 64

4.2.4 Development of New Infrastructure and Maintenance ............................................................... 66

4.3 Summary ............................................................................................................................................. 71

4.4 Gauteng Summary .............................................................................................................................. 73

5. Property Developers: Key Analysis ............................................................................................................... 74

5.1 Approach............................................................................................................................................. 74

5.2 Key Indicators ..................................................................................................................................... 75

Town Planning .............................................................................................................................................. 75

Costs ............................................................................................................................................................. 75

Administration ............................................................................................................................................. 75

5.3 Service Rating ..................................................................................................................................... 76

5.3.1 Town Planning ................................................................................................................................ 76

5.3.2 Costs ............................................................................................................................................... 77

5.3.3 Administration ............................................................................................................................... 78

5.4 Summary ............................................................................................................................................. 79

6. Summarised Comparative profile ................................................................................................................. 81

6.1 Economic Indicators and performance .............................................................................................. 83

6.1.1 Average Annual GVA Growth Rate for all Study Areas ................................................................. 85

6.1.2 Average Annual Growth Rate of the POPULATION FOR all Study Areas ...................................... 88

6.1.3 Average Annual Growth Rate of the Disposable Household Income for all Study Areas ............ 90

6.2 Development Implications ................................................................................................................. 92

7. Overall Study Observations .......................................................................................................................... 93


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8. Recommendations ........................................................................................................................................ 95

9. Way forward ................................................................................................................................................. 99

References .......................................................................................................................................................... 100

Annexure A ......................................................................................................................................................... 101

Annexure B ............................................................................................................................................................. 0

Annexure C ............................................................................................................................................................. 0

Annexure D ............................................................................................................................................................. 2

Annexure E.............................................................................................................................................................. 5


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TABLE OF FIGURES

Table 1-1: Municipal Study Areas ......................................................................................................................... 10

Table 2-1: Development Scenarios used in the Comparative Analysis ................................................................. 18

Table 2-2: Zoning and Re-zoning Tariff Costs ....................................................................................................... 23

Table 2-3: Township Establishment Fee .............................................................................................................. 24

Table 2-4: Subdivision Fee ................................................................................................................................... 26

Table 2-5: Building Plan Fee.................................................................................................................................. 27

Table 2-6: Water Connection Fees ....................................................................................................................... 29

Table 2-7: Sewerage Connection Fees .................................................................................................................. 30

Table 2-8: Electricity Connection Fees .................................................................................................................. 31

Table 2-9: Water Consumption Tariffs ................................................................................................................. 33

Table 2-10: Sewerage Consumption Tariffs .......................................................................................................... 35

Table 2-11: Refuse Consumption Tariffs ............................................................................................................... 36

Table 2-12: Electricity Consumption Rates ........................................................................................................... 38

Table 2-13: Vacant Land Rates for Vacant Land per Municipality ........................................................................ 39

Table 2-14: Vacant Land Rate Rebated for Vacant Land per Municipality ........................................................... 40

Table 2-15: Property Rates per Development Type and Municipality.................................................................. 41

Table 2-16: Rebated Property Rates per Development Type and Municipality ................................................... 42

Table 2-17: A Comparison of Rebates Applicable per Municipality ..................................................................... 44

Table 2-18: Comparative Matrix of Medium Density Residential Development .................................................. 46

Table 2-19: Cost Comparison of Gauteng Municipalities for Residential Development ...................................... 46

Table 2-20: Comparative Matrix of Retail Centre Development .......................................................................... 47

Table 2-21: Cost Comparison of Gauteng Municipalities for Retail Centre Development ................................... 48

Table 2-22: Comparative Matrix of Commercial Business Development ............................................................. 48

Table 2-23: Cost Comparison of Gauteng Municipalities for Commercial Business Development ...................... 49

Table 2-24: Comparative Matrix of Industrial Development ................................................................................ 51

Table 2-25: Cost Comparison of Gauteng Municipalities for Industrial Development ......................................... 51


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Table 2-26: Final Comparative Matrix .................................................................................................................. 52

Table 2-27: Cost Comparison of Gauteng Municipalities for all Development Scenarios ................................. 53

Table 4-1: Data Captured for Municipal Capacity Surveys ................................................................................... 66

Table 5-1: Developers Rating for Town Planning Indicators ................................................................................. 76

Table 5-2: Developers Rating for Costs Indicators ................................................................................................ 77

Table 5-3: Developers Rating for Administration Indicators ................................................................................ 78

Table 5-4: Total Score for Municipality ................................................................................................................. 79

Table 5-5: Total Responses for Each Indicator...................................................................................................... 80

Table 6-1: Comparison of GVA AAGR (2006 -2011) to 2011 Growth Rate for all Study Areas (constant 2005

prices) ................................................................................................................................................................... 86

Table C-0-1: Template of the Developer Survey ..................................................................................................... 1

Table D-0-1: Developer Respondents ..................................................................................................................... 3


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LIST OF ACRONYMS

SAPOA South African Property Owners Association

GGDA Gauteng Growth and Development Agency

LM Local Municipality

KZN Kwa-Zulu Natal

m² Meter Squared

ha Hectare

GLA Gross Leasable Area

mm Millimetre

kl Kilolitre

L Litre

kWh Kilo Watts per Hour

TOU Time of Use

GVA Gross Value Added

GDP Gross Domestic Product

AAGR Average Annual Growth Rate


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1. INTRODUCTION

Urban-Econ has been appointed by a joint initiative of SAPOA and GGDA to conduct a study that

comparatively investigates the municipal services costs of property related business in select

municipalities within the Gauteng Province as well as other municipalities in which SAPOA members

are most active. The study serves as a benchmark to determine both the costs1 of doing property-

related business; as well as to assess possible limitations posed by municipalities that impact

development progress and feasibility.

The study was motivated by concerns raised by stakeholders and developers within the property

development industry as well as from municipal representatives. The concerns are centred on the

need for a comprehensive guide and assessment of municipal services costs impacting and

constraining development. It is important to refer to the guiding legislation on municipal tariffs and

cost which is encompassed in Circular No. 59 for the Municipal Finance Management Act (Treasury,

2012) adapted as follows:

“When municipalities and municipal entities revise their rates, tariffs and other charges for their budgets and

MTREF, they need to take into account the labour and other inputs costs of services provided by

the municipality or entity, the need to ensure financial sustainability, local economic conditions and the

affordability of services taking into consideration the municipality’s indigents policy. Municipalities must also

take into account of relevant policy developments in the different sectors. In considering changes in property

rates, municipalities need to take cognisance of local economic conditions such as the down turn in the

property markets, trends in household incomes and unemployment. Excessive increase in property rates and

other tariffs are likely to be counterproductive, resulting in higher levels of non-payment and increased bad

debts. National Treasury continues to encourage municipalities to keep increase in rates, tariffs and other

charges as low as practically possible. For this reason National Treasury continues to require that municipalities

must justify in their budget documentation all increases in excess of the 6% upper boundary of the South

African Reserve Bank’s inflation target.” (Treasury, 2012)

It is not the purpose of this document to investigate justification of the individual municipalities in

terms of their rates tariffs and fees, but rather to source and assess the current level of fees charged

within the different municipalities and to provide a comparison. The purpose of the comparison is to

identify areas where specific fees are more expensive and others where they are more affordable.

The identification could inform possible focus areas for incentive development or negotiations

between developers and municipalities to assist development promotion and investment retention

as far as possible.

It is important to note the different objectives of the project partners. It is understood that the

GGDA’s motivation for the study is to improve the competitiveness of Gauteng municipalities by

ensuring fees within these municipalities are market related and fair, as well as to inform possible

interventions to promote municipal competitiveness. On the other hand, SAPOA, as a representative

1It is important to note that the true cost for development within each municipality has not been calculated as

there are too many variables to consider. This is as each development will have varying circumstances. Therefore, the costs must be taken as a guideline, and not as a real value.


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of property owners and a key role player in the property industry, it is understood that their

objective is to understand the current level of fees and charges and to find possible interventions or

lobbying information to use in future discussions and interactions with municipalities. Ideally this

document should be the first of a series to be annually updated. Therefore, the time series of

different rate figures could be tracked over a period of time to develop a useful index tool.

When comparing the services costs of development in municipalities, the application fees, tariffs and

development contributions and surcharges for property development have in general been

challenging to identify. Therefore, an investment guideline for property developers and role players

in the property industry, and municipal representatives has been developed. It assists in directing

proposed development processes using a cost comparison, compares town planning application

processes, and assesses causes for the concerns raised at a municipal level.

The first phase of the study analyses the municipal service costs in terms of fees and rates of

development for the focus study areas. The final phases provide context in terms of the challenges

municipalities’ face, with the purpose to provide more clarity on the factors that inflates costs, as

well as those that stymy development within the delineated municipalities. To conclude, a

comparative matrix provides a visual illustration of the services costs and challenges of doing

property related business within all 18 study areas.

1.1 STUDY AREAS

The study area is comprised of 18 municipalities. The municipalities selected represent all districts

and metro municipalities of the Gauteng province. The study was envisioned to also include two

prominent urban property markets of each province; however, budget and time limitations resulted

in narrowing the focus municipalities to the 18 municipalities illustrated in Table 1-1 and Figure 1-1.

Table 1-1: Municipal Study Areas

City/Town Municipality Province

1 Johannesburg City of Johannesburg Gauteng

2 Pretoria City of Tshwane Gauteng

3 Kempton Park Ekurhuleni municipality Metropolitan Gauteng

4 Krugersdorp West Rand DM (Mogale City) Gauteng

5 Vanderbijlpark Sedibeng DM (Emfuleni ) Gauteng

6 Cape Town City of Cape Town Western Cape

7 George George Municipality Western Cape

8 Pietermaritzburg Msunduzi Municipality KZN

9 Nelspruit (Mbombela) Mbombela Municipality Mpumalanga

10 Emalahleni (Witbank) Emalahleni Municipality Mpumalanga

11 Port Elizabeth Nelson Mandela Metropolitan Eastern Cape

12 East London Buffalo City Metro Eastern Cape

13 Polokwane Polokwane Municipality Limpopo


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City/Town Municipality Province

14 Bloemfontein Mangaung Municipality Free State

15 Kimberley Sol Plaatje Municipality Northern Cape

16 Upington //Khara Hais Municipality Northern Cape

17 Rustenburg Rustenburg Municipality North West

18 Durban eThekwini Metro KZN

These study areas are further delineated in Figure 1-1 which visually illustrates the municipalities

relative to one another.

Figure 1-1: Locality Map

Source: Urban-Econ (2012)

The municipalities were selected on the basis of priority in terms of the areas where SAPOA

members are most active and where the development environment is regarded as vibrant. As stated

before, a limited budget and timeframe in which to gather information and provide an analysis

influenced the selection. Priority was determined by the importance of the municipality in terms of

current development. These municipalities therefore provide a baseline for analysis as a starting

point. It is envisioned that for future studies the selected municipalities will be expanded.

Recommended areas for future investigation and analysis are:

Richards Bay municipality


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Lephalale municipality

Bitou local municipality

Giyani municipality

Thohoyandou municipality

City of Matlosana

Maluti-a-Phofung municipality

Kuruman municipality

These areas have been identified as locations of increased property investment and interest for

development in the current market context.

1.2 OUTCOME OF THE STUDY

The key purpose of the study is to develop a situational baseline analysis of the delineated study

areas, and to provide future developers and stakeholders with knowledgeable comparative

information when making investment decisions. Due to the nature of the information the study

cannot be used to inform financial calculations of any specific proposed development as variables

differ by type, site and location and therefore it needs to be viewed generally.

A two part guideline will be developed that will:

1. document the municipal services costs that contribute to the development of residential,

commercial and industrial property, and

2. create a model that measures all municipalities competitiveness in terms of the facilitation

of property development.

The report outlines the service costs that contribute to the establishment of residential, retail, office

and industrial property for each of the delineated municipalities. Furthermore, the process by which

municipalities set these costs is investigated. These cost components include:

EIA, and township establishment costs

Municipal application fees for zoning and subdivision

Building Plan fees

Connection fees for water, sewerage and electricity

Consumption charges for water, sewerage and refuse removal

Consumption rates for electricity

Vacant land rates for residential, commercial and industrial zoned land

Property rates for residential, commercial and industrial developments

Rebates for vacant land and property rates

As a summation of the results, a Comparative Matrix was concurrently created to indicate, compare

and relate the range of service costs of each municipality in context to the other studied

municipalities.


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This chapter on tariff costs is followed by a section on the surcharges prevalent when costing the

development of the four scenarios within each municipality. Both the surcharges and applicable

additional charges for services for each municipality are highlighted. The impact on development

costs for each municipality upon the inclusion of surcharges is indicated.

The report further details and analyses the data gathered from the municipal and developer surveys.

The information has been gathered to provide a comparative analysis from the perspectives of both

municipal respondents and developers. These indicators include:

The extent and availability of suitably zoned land

The effectiveness and efficiency of administration within all study areas

The degree to which overregulation is prevalent and whether property development is

consequently hindered

The extent of infrastructure capacity and development

A final Comparative Matrix incorporating the data gathered from all phases was detailed into a

single visual format.

1.3 PROJECT APPROACH

Relative to the purpose of the study conducted, it was necessary to develop a set of development

scenario’s which would be applied to each municipality under evaluation. These scenarios would

encompass generic predominant development typologies, being: medium-density residential, retail

centre, commercial office and industrial developments to assess the costs for the different key urban

land uses. For purposes of continuity, the scenarios match the scenarios developed for the previous

municipal cost assessment conducted for prominent municipalities in Kwa-Zulu Natal to enable

comparability. Table 2-1 provides a comprehensive indication of the development scenario’s being

applied.

The key concerns and motivation for the study was with regard to the determination of tariffs and

municipal actions that hamper development. Concurrently, the relevant Acts that guide municipal

budgets and tariff setting have been assessed for this financial year. These being:

Local Government: Municipal Systems Act No. 32 of 2000

Local Government: Municipal Finance Management Act No. 56, 2003

Municipal Finance Management Act Circular No. 59, of the Municipal Finance Management

Act No. 56, 2003

Furthermore, the study was conducted from a land use perspective as opposed to a financial

analysis. This is due to the limitations that are outlined below. Because the focus of the study was to

determine the current cost profiles, and not to assess the economic impact of financial losses caused

by high tariffs or delayed application approvals, a comprehensive and true representation of the


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overall financial losses or gains was not included in the study. Essentially, there is not sufficient data

to provide an assessment.

Due to the numerous variables relating to the cost of development for each scenario a

generalisation of information was required to enable a comparison of services costs. The

generalisation required an assumption that land and building costs were assumed constant

throughout all municipalities. Similarly, a standard size for connections relative to development type

and basic consumption rates were applied2. Consequently, the land and build costs, connection fees3

and consumption charges are estimates based on the standardised scenarios enabling comparisons

across all study areas.

The initial phases of the study involved the sourcing of all the rate and tariff policies for the financial

year starting in July 2012. The majority of the development costs were sourced from these

documents and by making calculations as per the prescribed formulae stipulated on the policies. Due

to the fact that the policy document did not sufficiently address all the cost aspects of the

assignment and also due to some ambiguity on the formulae, specialists consulted with municipal

respondents in relevant departments of each municipality to fill data gaps and to ensure an accurate

understanding of the formulae as published in the municipal policies. To achieve this, a cost survey

questionnaire was developed and directed to the relevant departments and respondents within

each municipality.

The latter phases of the study comprised of two surveys, one directed to property developers

identified and conducted by SAPOA, and the other to municipal respondents conducted by Urban-

Econ specialists. Each survey was designed to attain information that assisted in understanding the

process of property development within each municipality, including aspects such as turnover time

of applications and whether overregulation stymied development. During this phase of information

gathering, explanations of tariff costs, as far as possible, for all study areas were gathered and

applied to the development examples. These costs are assessed and compared in the ensuing

sections.

In consideration of the comparative aim of this study, a detailed figure was developed to compare

and summarise the findings of this study. With regard to outstanding information, because minimal

data is still outstanding, it is the view of the specialists that the current profile presented in this

document are as accurate as possible under the limitations posed by the current structure. It is

however important to note the following limitations as described in the subsequent sub-section.

2The connection sizes supplied by SAPOA to consultants for the study “Detailing the Municipal Tariff Cost of

Property-Related Business in KZN” were allocated to the delineated development scenarios for this study. Furthermore, in order to develop a reliable comparison for consumption charges, a generic consumption rate for water, electricity, refuse removal and sewerage consumption was applied across all developments. This therefore allowed the specialists to provide a baseline comparative cost analysis for each municipality. 3 For the majority of municipalities, connection fees are dependent on numerous variables, and will therefore

only be available upon the submission of building plans and concurrent site visit.


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1.4 LIMITATIONS OF THE STUDY

Relative to both the qualitative and quantitative data that was required for this study, there were

limitations to the study to be noted and understood in order to have a contextual understanding of

the results.

Firstly, as aforementioned, the number of municipalities analysed was minimised due to the

limitations in terms of the budget and timeframe for data gathering. This is on account of the

information within the report which is relevant from the beginning to the end of the financial year.

There was similarly insufficient financial capacity to warrant the analysis of increased municipalities.

Data sourced for the study was reliant on verbal explanations by different officials, of which not all

were knowledgeable of the entire developmental process but only have an understanding of the

individual component with which they work. Due to the fact that different respondents had to be

consulted for different development cost components, a margin for error must be allowed, being

caused by differences in interpretation and understanding of the various respondents. Essentially,

responses were subjective and inconsistent due to the subjective interpretation of policy.

However, the information gathered does provide a multi-sided perspective with the respondents

widely consulted to provide the most reliable representation possible.

A limited interest and response rate was observed from developers on the developer’s survey. Due

to limited and unrepresentative information, a number of municipalities were omitted from the

analysis concerning the section of “customer satisfaction”. However, adequate data was available to

warrant a credible analysis of the main metros for the Gauteng province to provide comments.

It should also be noted that decision making on tariff hikes and rate increases are developed by the

financial budget department and approved by the council. Therefore the officials who were

interviewed were not the decision makers and were unable to clarify the rationale of the budget

departments in terms of the tariff hikes and fees charged. Concerning the tariffs that was perceived

by the researchers as above market, when consulted, the respondents indicated that their mandate

is to implement the decisions from the top and were therefore unable, or not permitted, to provide

explanations. This had a limiting impact on the transparency of cost calculation methods and

decision making which again limited the capacity of the research to provide detailed

recommendations on possible mitigations. The costs deemed questionable have been highlighted

throughout the report.

Concerning the final summarised comparative matrix, it must be stressed that the information is

dynamic in nature with a wide variety of influential variable factors which is difficult to illustrate

accurately in a comprehensive scoring system. By scoring the performance of the different

municipalities, the data was essentially simplified and thus, due to the way in which the results for

the comparative matrix’s were calculated, it is important to note that the ‘illustration’ of “most

expensive” or “cheapest” is potentially skewed. Essentially, the number of municipalities being

compared, and the vast range of cost components to be rated, provides a limitation of accurately

conveying whether a municipality is “expensive” or “cheap”. This is as the vast range of services


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costs may place a municipality deemed as expensive as an average scorer. Therefore, the matrix

should not be viewed in isolation, but the content and analysis’s of all indicators need to be read

alongside the matrixes.

Finally, municipalities are not all identically comparable as they do not fall within the same category

in terms of size (area), population, economic activities, availability of resources etc. The fact that

some are metropolitans and others are local municipalities already illustrates that municipalities

could not be commonly compared. The difference in resources available may therefore contribute to

the overall scores received. Essentially, in theory there is less capacity within the local municipalities

as opposed to Metropolitans.

To date, some municipal information is still outstanding due to unwillingness or inability of some

municipalities to participate and respond to repeated queries from the specialist team. This aspect

and the limitations it poses to development will be further discussed in the recommendation

section.

1.5 REPORT OUTLINE

The report follows the following structure:

The cost of property development

» Regulatory determinants towards the setting of tariffs

» Application fees

» Connection fees

» Consumption charges

» Land rates

Deliverable: Comparative Matrixes

Surcharges

» Development surcharges

» Additional surcharges

Deliverable: The impact of surcharges on development

Municipal responsibilities and challenges

» Development capacity

» Administration efficiency

» Infrastructure capacity

Deliverable: Summary of all study areas and summary of Gauteng metro’s and municipalities

Developer Survey

» Town Planning

» Costs of development


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» Administration

Deliverable: “Customer Experience Assessment”

Comprehensive Comparison and Analysis

» Map of performance

» Economic indicators measuring economic performance and development

implications

Recommendations and Way Forward


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2. KEY ANALYSIS AND COST COMPARISON OF MUNICIPAL

SERVICES

This section provides a comparative analysis of the municipal services costs relating to residential,

retail, commercial and industrial developments in the delineated municipalities. Because the

methods used by municipalities vary, for the purpose of a comparison, a standard case scenario of

town planning description has been developed in order to standardise the costs. Table 2-1 displays

the examples applied in the comparative analysis.

Table 2-1: Development Scenarios used in the Comparative Analysis

Type of Development Description of the Development

Medium Density Residential

Developments

20 unit townhouse sectional title duplex (100m² each) on a

0.8ha site

Retail Centre Regional Retail Centre (GLA of 40 000m²) on a 10ha site

Commercial Office 8 floor high-rise office tower block (1 000m² per floor) on a

3200m² site

Industrial Large industrial factory (10 000m²) on a 2.5ha site

To facilitate a clear analysis and towards ease of comparison, this section is arranged into a four-part

succession of the interrelated cost indicators. Firstly, all the application fees relevant to town

planning are listed and analysed. This segment is followed by the costs of connection fees for water,

sewerage and electricity. The costs for consumption of water, electricity, sewerage and refuse are

detailed next. The final section of related tariffs provides the costs for vacant and developed land

rates. Furthermore, in order to provide a baseline for the services costs analysis, it is necessary to

recognise how municipalities determine the tariffs each financial year. This is detailed in the section

below prior to the costs analysis.

For simple analysis and illustrative purpose, a standard approach will be followed with the cost per

indicator for each municipality and development type indicated in a table. In conjunction with the

purpose of the study, the municipality with the highest cost per development type is highlighted,

therefore facilitating a clear-cut comparison. Furthermore and towards the ease of evaluation, the

most affordable and expensive municipality per indicator will be highlighted.

The information from the data collection process has been inputted into the appropriate categories

and analysed. Detailed Excel Spread sheets which provide an insight into the data collection and cost

comparison process are available for perusal upon request. Furthermore, the tariff schedules


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wherefrom the costs were derived are attached as Annexure E. The service costs which were not

attainable from these schedules were assembled from municipal respondents.

2.1 REGULATORY DETERMINANTS OF RATES AND TARIFFS

Prior to the detailed analysis and representations of the municipal services costs of development, it

is central to note how municipalities are directed and guided towards determining the tariffs that

they set each financial year. A basic overview of the regulations which guide municipal budgets and

setting of tariffs is discussed below. As aforementioned, the regulatory documents that are referred

to are the:

Local Government: Municipal Systems Act No. 32 of 2000,

Local Government: Municipal Finance Management Act No. 56, 2003 (MFMA 2003); and,

Municipal Finance Management Act Circular No. 59, of the Municipal Finance Management

Act No. 56, 2003.

Overall, the aim of these Acts is to ensure that municipalities, when developing their budgets and

systems of processes, are aligned with the national aims and strategies previously determined by

government. Thus, it is ensured that an integrated system of processes is achieved.

To summarise, the Municipal Systems Act (2000) is part of a series of legislation that aims to

empower local government to fulfil its Constitutional objectives. Essentially, the Act is intended to:

“provide for the core principles, mechanisms and processes that are necessary to enable municipalities to move

progressively towards the social and economic upliftment of local communities, and ensure universal access to

essential services that are affordable to all; to define the legal nature of a municipality as including the local

community within the municipal area, working in partnership with the municipality’s political and

administrative structures; to provide for the manner in which municipal powers and functions are exercised and

performed to provide for community participation; to establish a simple and enabling framework for the core

processes of planning, performance management, resource mobilisation and organisational change which

underpin the notion of developmental local government; to provide a framework for local public administration

and human resource development; to empower the poor and ensure that municipalities put in place service

tariffs and credit control policies that take their needs into account by providing a framework for the provision

of services, service delivery agreements and municipal service districts; to provide for credit control and debt

collection; to establish a framework for support, monitoring and standard setting by other spheres of

government in order to progressively build local government into an efficient, frontline development agency

capable of integrating the activities of all spheres of government for the overall social and economic upliftment

of communities in harmony with their local natural environment; to provide for legal matters pertaining to local

government; and to provide for matters incidental thereto. (Local Government: Municipal Systems Act, 2000)

Concerning the study, it is identified in the Municipal Systems Act (2000) that the rights and duties

of municipal councils towards determining the fees charged for services, applicable surcharges,

rates on property and other levies and taxes. Relative to the services provided by the municipality, it


20

is stipulated in section 73(1)(a), (c) and (e) that services must be equitable and accessible, financially

sustainable and regularly reviewed with a view to upgrading, extension and improvement (Local

Government: Municipal Systems Act, 2000).

The Act (Local Government: Municipal Systems Act, 2000) further provides the due course

concerning municipal tariffs. This is particularly significant considering the study. It is stipulated in

section 74(1) that the implementation of the tariff policy on the levying of fees must comply with the

provisions of the Act and all applicable legislation – one of these being the Municipal Financial

Systems Act of 2003 (Local Government: Municipal Systems Act, 2000). Furthermore, section

74(2)(d) states that all tariffs must reflect the costs associated with rendering the service, including

capital, operating, maintenance, administration and interest charges (Local Government: Municipal

Systems Act, 2000).

Section 94(1) particulates the regulations and guidelines that the Minister of the Treasury may

provide to regulate, which are amongst others:

Limits on tariff increases.

The criteria that municipalities need to take into account when imposing surcharges on

tariffs for services.

(Local Government: Municipal Systems Act, 2000)

The regulations and guidelines that the Minister is entitled to present are projected within the

Municipal Finance Management Act (2003) and concurrent Circulars.

Subsequently, the Municipal Finance Management Act (2003) sets to:

“secure sound and sustainable management of the financial affairs of municipalities and other institutions in

the local sphere of government; to establish treasury norms and standards for the local sphere of government;

and to provide for matters connected therewith,” (Local Government: Municipal Finance Management Act,

2003).

With regard to the setting of municipal tariffs, it is determined that the Minister may prescribe

inflation projections and uniform norms and standards, as well as to ensure that in terms of the

Constitution, a municipality does not materially prejudice in relation to tariff setting and inflation.

These norms and standards are provided to municipalities in the form of a Circular.

For each financial year, relative to the Municipal Finance Management Act (2003), the National

Treasury develops a Circular which provides a baseline and guide for all municipalities upon which to

develop their budget. This guideline essentially monitors and sets a prescribed or suggested inflation

rate for tariffs, and the development of operating and capital budgets relative to the extenuating

factors that impact the GDP. Fundamentally, the circular takes into account the national policies and

strategies that direct the goals of the country towards foreign investment, job creation and service


21

provision etc. and concurrently provide inputs into the municipal budgetary process to ensure the

aims of national policies are met. As indicated, the

“circular provides further guidance to municipalities and municipal entities for the preparation of their 2012/13

Budgets and Medium Term Revenue and Expenditure Framework (MTREF),” (Treasury, 2012)

For the 2012/13 financial year on which this study is based, it is noted in the Circular No. 59

(Treasury, 2012) that in the context of the unsettled international economic conditions, despite the

resilience that the South African economy has demonstrated, there is no guarantee that the

recovery which the world economy has begun to show, will continue. Similarly, it is specified that at

its best, the recovery will be slow. Therefore, municipalities must still adopt a conservative

approach when projecting their expected revenues and cash receipts (Treasury, 2012). In

concurrence, to be implemented on the 1 July this 2012/2013 financial year, municipalities were

advised to budget for a 5% cost-of-living increase. This report cannot comment on whether the

increases of municipal fees and tariffs did adhere to the increased recommendation of 5% due to the

fact that the cost assessment undertaken is in essence a snapshot of a certain point in time and no

comparable historic information in the appropriate format is available. However should this study be

updated on an annual basis, trend information will become available and the municipal services

costs could be tracked over a certain period.

With regard to the cost indicators specified below, the determinations of these tariffs were not only

to take the above guide into account, but similarly the following:

Inflation forecasts estimated at 5.9% for the 2012/13 financial year, and 5.3% and 4.9% for

the 2013/14 and 2014/15 financial years respectively need to be considered – in conjunction

to the advised 5% increase budgeted from cost-of-living.

The Eskom prices of bulk electricity to increase by 13.5%. Concurrently, NERSA set a

guideline of 11.03% increase for municipalities.

The focus of government has shifted to capital investment in public-sector infrastructure

projects, which through targeted interventions will therefore reduce the cost of doing

business. Essentially, the composition of municipal spending needs to move away from

consumption items to areas of spending that more directly support economic growth and

service delivery. Municipalities need to consider the allocations and provision for national

grants when determining their budget and rates, as well as capital projects.

It was further stipulated that concerning budgetary compliance and benchmarking, benchmark

budget hearings during April and May of this year (2012) were commenced to assess the degree to

which the budgets were realistic, sustainable and relevant.

Furthermore, it was noted by the Minister that considering investment and management issues,

municipalities vary relative to context, and thus the issue of setting a benchmark is inappropriate. An

average performance for all municipalities relative to comparative size and function will however be

assessed to note whether management of funds and capacity are irregular.


22

Therefore, concerning the study, because the indicated cost-of-living has increased by 5%, being

influenced by the CPI inflation, the implications these cost-related guides may have had on the

setting of the tariffs for this financial year should not have been significant. This is as the setting of

tariffs would have had to be aligned with inflation and increased cost-of-living so as to be aligned

with the notions set in the above indicated Acts of financial sustainability and equitability.

2.2 ENVIRONMENTAL IMPACT ASSESSMENT

The only municipality that made mention of an Environmental Impact Assessment in their Tariff

Schedule is the City of Cape Town. The basic fee that is charged is R2 310 which is added to other

application fees when submitted. This does not mean that other municipalities evaluated do not

require an Environmental Impact Assessment. The costs of the assessments are unpublished and

thus unknown as the municipality has no specific charge for this service, and therefore the variables

influencing these costs are unknown. The assessments for the municipalities that do not prescribe

specific charges will be undertaken by private consultants in accordance to the NEMA legislation

which is charged by the consultants directly to the developer.

2.3 ZONING AND RE-ZONING FEE

The costs of zoning and re-zoning associated with each development example are indicated in Table

2-2. Because the calculation criteria for municipalities vary, the costs for this tariff are determined

and calculated by either the site size or total floor area.

In this regard, City of Tshwane calculates the re-zoning and zoning fee relative to the total floor area

of a development. The remainder municipalities set either a single re-zoning fee, or calculate the

total cost by inputting the size of the site as a value into the calculation. The tariffs that are set are,

unless specified, inclusive of the costs of administration and other such expenses for example the

costs associated with site visits and labour.

It is evident in Table 2-2 that the highest costs for retail and industrial development are in City of

Cape Town. eThekwini metro and City of Tshwane show the highest figures of re-zoning costs for

residential and commercial offices respectively.

Zoning and Re-zoning fees for the residential development scenario range between R1 030 and

R8 433. For retail, the highest cost at R37 388 is for City of Cape Town. City of Cape Town also has

the highest cost for industrial development at

R12 462. For commercial development, the costs

range from R9 005 as the highest to R1 030 for the

lowest.

The high costs of R37 388 and R12 462 for City of

High Cape Town 15,133R

4,999R

Low Khara Hais 1,030R

Average

Cost Highlights


23

Cape Town are noted as significantly higher than the tariff charges for the other study areas. The

reason for these high charges is driven by the additional fee of R3 561 per 10 000m². This fee is

added to the rate of R5 341 which is charged for the first hectare. Additionally, the tariff for New

Land-Use Rights for City of Tshwane of R4 503 explains the fee of R9 005.

Table 2-2: Zoning and Re-zoning Tariff Costs

In terms of the comparative requirement of this study, it is important to note that the tariff costs for

City of City of Tshwane, City of Cape Town and eThekwini metro in comparison to City of

Johannesburg are much higher. The single fee for City of Johannesburg is R4 209.

2.4 TOWNSHIP ESTABLISHMENT FEE

Township establishment fees are payable upon the application for the commencement of township

development processes on a designated site. This applies when agricultural zoned land is changed to

urban use. Seven municipalities including City of Cape Town, George municipality, Msunduzi

municipality, Buffalo City Metro, //Khara Hais municipality, Sol Plaatje municipality and eThekwini

metro do not have a specific township establishment fee. These municipalities’ fees for township

establishment are incorporated into the subdivision tariffs or are a part of building plans submission

fees and development surcharges.

Study areas

Medium Density

Residential

Developments

Retail Centre Commercial Office Industrial

GLA (m²) 2,000 40,000 8,000 10,000

Site Size 0.8ha 10ha 0.32ha 2.5ha

Johannesburg 4,209R 4,209R 4,209R 4,209R

Tshwane 4,503R 13,586R 9,005R 9,005R

Ekurhuleni 3,225R 3,225R 3,225R 3,225R

Mogale City 3,940R 3,940R 3,940R 3,940R

Emfuleni 1,600R 1,600R 1,600R 1,600R

Cape Town 5,341R 37,388R 5,341R 12,462R

George 1,761R 21,108R 3,523R 10,554R

Msunduzi 2,710R 9,120R 2,394R 4,560R

Mbombela 4,060R 4,060R 4,060R 4,060R

Emalahleni 3,374R 3,374R 3,374R 3,374R

Nelson Mandela Bay 2,280R 2,280R 2,280R 2,280R

Buffalo City Metro 6,970R 11,615R 3,484R 9,292R

Polokwane 3,106R 3,106R 3,106R 3,106R

Mangaung 1,329R 1,329R 1,329R 1,329R

Sol Plaatje 3,078R 3,078R 3,078R 3,078R

Khara Hais 1,030R 1,030R 1,030R 1,030R

Rustenburg 2,750R 2,750R 2,750R 2,750R

eThekwini 8,433R 21,061R 2,371R 8,433R


24

Study areas

Medium Density

Residential

Developments


Floor size (m²) 2,000 40,000 8,000 10,000


Tshwane 7,267R 16,350R 11,770R 11,770R

Ekurhuleni 5,375R 5,375R 5,375R 5,375R

Mogale City 6,676R 6,676R 6,676R 6,676R

Emfuleni 5,295R 5,295R 5,295R 5,295R

Cape Town N/A N/A N/A N/A

George N/A N/A N/A N/A

Msunduzi N/A N/A N/A N/A

Mbombela 9,985R 9,985R 9,985R 9,985R

Emalahleni 4,218R 4,218R 4,218R 4,218R


Buffalo City Metro N/A N/A N/A N/A

Polokwane 6,794R 6,794R 6,794R 6,794R

Mangaung 340R 2,000,000R 64,000R 42,500R

Sol Plaatje N/A N/A N/A N/A

Khara Hais 2,060R 1,030R 1,030R 1,030R

Rustenburg 6,050R 6,050R 6,050R 6,050R

eThekwini R 342 4,212R 4,212R 4,212R

Unless otherwise stipulated, the fees indicated in Table 2-3, such as zoning and re-zoning, are

inclusive of costs for administration and site visits or consultations etcetera. For example, with

regard to //Khara Hais municipality, it has been stipulated that the fee in Table 2-3 is dependent on

the actions required to establish a township – in this case, re-zoning and subdivision are required

actions and thus the costs are inclusive of all the variables required to complete these actions.

The fee structure of township establishment for residential developments ranges from R340 to

R9 985. The cost of retail, commercial and industrial developments ranges from R1 030 across all

three development scenarios, to R2 000 000 for retail, R64 000 for commercial and R42 500 for

industrial developments.

There is similarly no fee for the establishment of a township for eThekwini metro. The fee for

eThekwini metro as indicated in Table 2-3 is a cost that will only be applicable if the township

exceeds the boundaries as specified in the building plans previously submitted.

With regard to residential developments, a tariff of R342 is payable. For business, commercial and

industrial developments, the tariff of R4 212 is payable following the submission and subsequent

approval of an application for the authorization of the relaxation of building lines. The fee of R342

was considered an outlier as relative to the other charges, it was deemed as exceedingly low and

unlikely. This is the same for the fee of R340 charged by Mangaung municipality of R340.

Table 2-3: Township Establishment Fee

Other than the City of Tshwane and Mangaung municipality, the remainder of the municipalities

which have a tariff for township establishment, charge a single tariff for township establishment –

City of Johannesburg being one of these.


25

Both City of Tshwane and Mangaung municipality

calculate their tariffs by considering the size of the erven

or GLA and development type. This is the driver for the

high tariffs charged by both municipalities. Mangaung

municipality charges R20 per meter squared for both

retail and commercial developments, and R17 per meter squared for industrial developments. The

size of the erven is used for this calculation. With regard to City of Tshwane, a basic fee of R7 267 is

added to the costs of the combined GLA. For the purpose of this study, the Township Establishment

fees for retail, commercial and industrial developments in Mangaung municipality – as well as the

aforementioned residential township establishment fee for both Mangaung and eThekwini, are

going to be considered as outliers as they will distort the data inputted into the comparative model.

City of Tshwane therefore charges the highest township establishment tariff for the retail,

commercial and industrial development scenarios.

With regard to the R2 000 000, R64 000 and R42 000 fees that Mangaung municipality charges for

the retail, business and industrial development scenarios; it must be noted that the municipal

respondent was questioned concerning the exceedingly high tariff costs. The reason for the high fees

could not be established as the respondent does not take part in the decision making process but

only implements the fee decisions imposed. It was noted that these fees may be re-assessed upon

application as the municipality reviews applications case-by-case. Developers should thus take note

and approach the municipality when submitting an application.

Mbombela municipality has the highest tariff for residential development at a basic cost of R9 985.

This cost is applicable as a basic charge for all development types.

2.5 SUBDIVISION FEE

A basic fee for all municipalities with an additional cost per portion or erven subdivided was used to

calculate the subdivision fees shown in Table 2-4. The municipalities wherein this does not apply and

just a basic application fee is applicable are City of Tshwane, Mogale City, Msunduzi municipality and

Nelson Mandela Bay. The tariffs charged by the municipalities are inclusive of administration fees

and labour costs – unless otherwise stated. In conjunction, the tariff indicated for Msunduzi

municipality in Table 2-4 is a basic fee, but an additional fee for each subdivision will be applicable

upon a land survey. This fee is the equivalent of the cost per portion charged by all municipalities

other than City of Tshwane, Mogale City, Msunduzi municipality and Nelson Mandela Bay.

The subdivision fee is only applicable to the residential development scenario. This is as for the

retail, commercial and industrial development examples, the subdivision of erven for development

to ensue in these scenarios is not required.

With regard to the residential example used in this analysis,

subdivision fees range from R536 for Mogale City to the

High Tshwane 11,789R

5,600R


Cost Highlights

Average

High eThekwini 8,009R

2,331R

Low Mogale City 554R

Cost Highlights

Average


26

highest tariff of R8 009 in eThekwini metro. This high fee is driven by a high charge per portion and

per subdivision of R342 which thus inflates the overall cost above the fees charged by other

municipalities. In comparison, the subdivision fee charged by City of Johannesburg is R790, which is

approximately 10 times lower than eThekwini metro.

Table 2-4: Subdivision Fee

2.6 BUILDING PLAN FEE

For all study areas, the Building Plan fees are calculated by multiplying the GLA/m². Other than the

additional charge indicated by the Ekurhuleni metro explained below, the tariffs are inclusive of all

administration fees, labour costs and other operating costs incurred related to the processing of

building plans.

The costs for all development types range from R5 581 to R150 000 for residential developments.

The lowest charges for retail, commercial and industrial developments respectively are R64 321,

R24 250 and R29 830 with the highest at R4 760 000, R952 000 and R1 190 000.

Mangaung municipality has the highest charges for all development examples. These charges were

noted as high and consequently questions were posed to the respondents. The reason for the high

cost is driven by the high rate payable per m². The charge per m² for a residential development is

R75 and for commercial, business and industries, the rate is R119/ m². There was no indication given

as to whether these costs would be altered upon application of building plans.

Study areas

Site Size

Johannesburg 790R

Tshwane 554R

Ekurhuleni 1,205R

Mogale City 536R

Emfuleni 909R

Cape Town 3,659R

George 4,143R

Msunduzi 2,394R

Mbombela 1,240R

Emalahleni 1,350R

Nelson Mandela Bay 2,880R

Buffalo City Metro 3,590R

Polokwane 2,018R

Mangaung 1,783R

Sol Plaatje 5,062R

Khara Hais 1,030R

Rustenburg 800R

eThekwini 8,009R

Medium Density Residential Developments

20 unit townhouse duplex (100m² each) on 0.8ha


27

Ekurhuleni municipality has an additional charge wherein an application charge for a Certificate of

Occupancy is included in the value illustrated in Table 2-5. A tariff of R80 per application per unit or

erven is payable. Alternatively, 5% of the building plan fee is payable should it exceed the R80 tariff.

Table 2-5: Building Plan Fee

The specialists have not been able to acquire the

building plan fees for the Rustenburg municipality.

2.7 CONNECTION FEES – WATER, SEWERAGE, ELECTRICITY

As mentioned in the introductory section, the connection sizes applied to the development

examples were taken from the previous study: “Detailing the Municipal Tariff Cost of Property-

Related Business in KZN”. This is to allow for continuity and comparison with historic results if

required. All connection sizes for electricity, water and sewerage were supplied by SAPOA on the

basis that they were typical to the development type. The connection sizes are applicable as the

development scenarios in this study do not differ to the previous scenarios.

It was noted that the municipalities that have connection fees available within their respective Tariff

Schedules supply a basic charge per connection type and size, or the cost is relative to distance from

Study areas

Medium Density

Residential

Developments


Size (m²) 2,000 40,000 8,000 10,000


Tshwane 22,440R 440,440R 88,440R 110,440R

Ekurhuleni 22,600R 201,390R 66,675R 80,115R

Mogale City 24,200R 575,200R 115,040R 143,800R

Emfuleni 5,581R 187,565R 39,021R 48,305R

Cape Town 55,232R 1,104,640R 220,928R 208,016R

George 88,920R 1,007,076R 204,516R 254,676R

Msunduzi 19,345R 109,769R 32,224R 40,240R

Mbombela 6,250R 120,250R 24,250R 30,250R

Emalahleni 32,262R 64,321R 120,498R 149,910R



Polokwane 41,040R 820,800R 164,160R 205,200R

Mangaung 150,000R 4,760,000R 952,000R 1,190,000R

Sol Plaatje 25,080R 501,600R 100,320R 125,400R

Khara Hais 8,230R 110,830R 24,430R 29,830R

Rustenburg

eThekwini R 29,150 397,750R 87,350R 106,750R

High Mangaung 1,763,000R

269,230R


Cost Highlights

Average


28

infrastructure. Because this exercise relies on hypothetical information, municipalities that require

development specific information are in the profile, cited as requiring a quotation. Therefore, where

applicable, the assumption that the development examples are within the required proximity to

available infrastructure was made.

Where connection fees for water, sewerage and electricity are not given, the reason is due to the

numerous variables that make up the cost for connection fees. The variables are inclusive of the

following:

administration fees

maintenance charges

labour costs

infrastructural contributions

upgrades

connection type

distance from service infrastructure

bulk availability

Furthermore, with regard to residential development, it was presumed that each unit has a single

sewerage connection. This allowed for a comparable cost analysis.

2.6.1 WATER CONNECTION FEES

Water connections for the development scenarios identified two different connection sizes:

75mm/80mm for the residential development, and 100mm/110mm connection for commercial,

retail and industrial.

The extent of the cost of connecting water to a new development is dependent on the variables as

outlined above. Essentially, with regard to obtaining and calculating the actual costs of connections

for water – unless specifically given, the charges do not present a universal reflection of the

expected costs.

Table 2-6 indicates the municipalities which have basic charges for connection fees and those that

require a quotation upon a survey of the site.

The costs for water connection fees range from

R2 537 to R37 348 for residential development,

R2 537 to R45 906 for both retail and commercial

developments, and R2 537 to R73 045 for Industrial

developments. Of the municipalities with a basic

tariff per connection size, Ekurhuleni municipality charges the highest connection fee for residential

and commercial developments of R37 347 and R45 905 respectively.

High Buffalo City 44,714R

24,492R

Low Emalahleni 2,537R

Cost Highlights

Average


29

Buffalo City Metro charges R73 045 for a 100mm/110mm connection size for Industries4. In

comparison, City of Johannesburg charges almost R40 000 less for the same water connection, and

R10 000 and R3 000 less for the highest tariff charges of commercial and residential developments

respectively.

Table 2-6: Water Connection Fees

The municipalities that were unable to assist and only provide a price on quotation are Mogale City,

George municipality, Polokwane municipality, Mangaung municipality and eThekwini metro.

With reference to the high charges for water connection fees for Ekurhuleni municipality and Buffalo

City, explicit reasons for these high charges were not offered by the municipalities. The technicians

instructed that connection charges are dependent on numerous variables, and therefore, when no

site visits are ensued, an estimated figure was given. In the opinion of the research team, an inflated

value was given to ensure that the actual costs do not exceed the estimate, and that the

municipality not be held accountable for a loss incurred for the estimate given. Thus, it is important

to note that cost estimates may vary upon the visit of a developable site.

The connection fees for the Emalahleni municipality have similarly been noted as significantly lower

than the charges for the other municipalities, and have thus, for the purpose of this study been

assigned as outliers son as not to alter the range from which the costs are analysed. The fee of

R73 045 charged by the Buffalo City metro for Industrial connections has been similarly designated

as an outlier for the same reason.

4The connection fee of R73 045 for the Buffalo City municipality is the cost payable upon development of

Industries within the delineated Industrial Development Zone.

Study areas

Medium Density

Residential

Developments


Connection Size 75mm/80mm 100mm/110mm 100mm/110mm 100mm/110mm


Tshwane 16,110R 23,610R 23,610R 23,610R

Ekurhuleni 37,348R 45,906R 45,906R 45,906R

Mogale City Quotation only Quotation only Quotation only Quotation only

Emfuleni 28,050R 30,200R 30,200R 30,200R

Cape Town 5,580R 6,962R 6,962R 6,962R

George 13,584R Quotation only Quotation only Quotation only

Msunduzi 19,597R 27,605R 27,605R 27,605R

Mbombela 28,000R 34,000R 34,000R 34,000R

Emalahleni R 2,537 R 2,537 R 2,537 R 2,537



Polokwane 8,948R Quotation only Quotation only Quotation only

Mangaung Quotation only Quotation only Quotation only Quotation only

Sol Plaatje

Khara Hais 14,100R 17,800R 17,800R 17,800R

Rustenburg 28,280R 27,131R 27,131R 27,131R

eThekwini Quotation only Quotation only Quotation only Quotation only


30

2.6.2 SEWERAGE CONNECTION FEES

The sewer connection fees were all levied on the same 150mm size connection as supplied by

SAPOA in the previous study. As with water connections, there are numerous variables that impact

on the costing of connections for sewerage5.

With reference to Table 2-7, the costs for sewerage connection tariffs from all development

scenarios range from R580 to R12 788. Mbombela municipality charges the highest tariff of R36 620

for a 150mm sewerage connection. This connection cost is with reference to the residential

development scenario. The high charge has been noted by the specialists. The explanation for this

charge is driven by the fact that a sewerage connection for each town house is a standard

connection fee of R1 831. This fee excludes the potential additional charges aforementioned.

Table 2-7: Sewerage Connection Fees

Rustenburg municipality charges the highest

tariff for the remaining three development

scenarios at R12 788. Both City of Johannesburg

and Mogale City supply connection charges only

on quotation, whilst the connection charges for

George municipality and Polokwane municipality are the cost, plus 10%. The cost that is indicated by

both George and Polokwane municipality is the actual cost of connections as well as the variables

that are incalculable without a site visit. The additional 10% is an undeclared surcharge for which the

rationale could not be explained by the respondent interviewed.

5See the introductory section for connection fees.

Study areas

Medium Density

Residential

Developments


Connection Size 150mm 150mm 150mm 150mm

Johannesburg Quotation only Quotation only Quotation only Quotation only

Tshwane 580R 580R 580R 580R

Ekurhuleni 8,362R 8,362R 8,362R 8,362R

Mogale City Quotation only Quotation only Quotation only Quotation only

Emfuleni 3,689R 4,477R 4,477R 4,477R

Cape Town 1,151R 1,151R 1,151R 1,151R

George Cost PLUS 10% Cost PLUS 10% Cost PLUS 10% Cost PLUS 10%

Msunduzi 5,514R 5,514R 5,514R 5,514R

Mbombela 36,620R 1,831R 1,831R 1,831R

Emalahleni 849R 849R 849R 849R



Polokwane Cost PLUS 10% Cost PLUS 10% Cost PLUS 10% Cost PLUS 10%


Sol Plaatje 2,370R 2,370R 2,370R 2,370R

Khara Hais 2,032R 2,032R 2,032R 2,032R

Rustenburg 12,788R 12,788R 12,788R 12,788R

eThekwini 7,250R 7,250R 7,250R 7,250R

High Rustenburg 12,788R

4,982R

Low Tshwane 580R

Cost Highlights

Average


31

2.6.3 ELECTRICITY CONNECTION FEES

On account of the many variables6 and infrastructural contributions to take into consideration when

determining a connection type and fee, ten of the 18 municipalities being analysed provide

connection costs upon either an examination of the development site or submission and application

of building plans, or both. A ball park hypothetical figure could therefore not be obtained from the

majority of respondent municipalities. These municipalities are City of Johannesburg, Ekurhuleni

municipality, City of Cape Town, George municipality, Mbombela municipality, Buffalo City Metro,

Mangaung municipality, Sol Plaatje municipality, //Khara Hais municipality and Rustenburg

municipality. Ekurhuleni municipality provides a basic connection fee for the residential

development scenario.

Table 2-8: Electricity Connection Fees

The municipality that charges the lowest connection fee for all development scenarios is City of

Tshwane at R560, which is a basic charge, irrespective of the size or function. It is important to note

that further charges such as service contributions, maintenance and administration costs are not

included in this tariff. To ensure a comparative analysis, this fee will therefore be considered an

outlier.

The highest charges for the development scenarios are eThekwini metro for residential, commercial

and industrial developments, of R46 740, R362 570 and R314 980 respectively. Msunduzi

municipality has the highest charge for the retail development scenario at R370 295.

6These variables are the same that are included in the water and sewer connection sections.

Study areas

Medium Density

Residential

Developments


Connection Size 80kVA - 120A 400V 3200kVA 11kV 640kVA - 1000A 300kVA - 450A

Johannesburg Quotation only Quotation only Quotation only Quotation only

Tshwane 560R 560R 560R 560R

Ekurhuleni 5,100R Quotation only Quotation only Quotation only

Mogale City

Emfuleni 2,372R 2,372R 2,372R 2,372R

Cape Town Quotation only Quotation only Quotation only Quotation only

George Quotation only Quotation only Quotation only Quotation only

Msunduzi 15,064R 370,295R 108,956R 74,450R

Mbombela Quotation only Quotation only Quotation only Quotation only

Emalahleni R 2,120 R 2,120 R 2,120 R 2,120

Nelson Mandela Bay

Buffalo City Metro Quotation only Quotation only Quotation only Quotation only

Polokwane 29,248R 2,907R 2,907R 2,907R


Sol Plaatje Quotation only Quotation only Quotation only Quotation only

Khara Hais Quotation only Quotation only Quotation only Quotation only

Rustenburg Quotation only Quotation only Quotation only Quotation only

eThekwini 46,740R 145,370R 362,570R 314,980R


32

When calculating the data for the Comparative Matrix, the high costs charged by the Msunduzi

municipality for retail, commercial and industrial connection fees are considered outliers. Specifically

with regard to the fee evident in Table 2-8 for the retail development scenario, upon enquiry, the

municipality was unable to provide an extensive explanation. The driver of this charge is that

connections which have more than 10 000kV are charged R101 per kVa. Furthermore, from the

specialist’s perspective, the improbability of the values of R46 740, R145 370, R362 570 and R314

980 for eThekwini – which were supplied by a municipal representative, are questionable and will

thus similarly be excluded from calculations for the comparison.

Thus, the notion that there was a possible

misunderstanding of the question by the

municipal respondents for eThekwini and

Msunduzi municipalities is assumed. The charges

of these connection fees are deemed as

overestimates and further clarification could not be achieved.

2.8 CONSUMPTION CHARGES – WATER, SEWERAGE, REFUSE, ELECTRICITY

This section provides the consumption charges for each development type. As indicated in the

introductory section, these have been derived using a generalized demand for water, sewerage,

refuse and electricity. The assumed demand is indicated in the top row of each table.

Similar to connection fees, the tariffs for consumption are set taking into consideration certain

variables. Other than the guidelines that are applied by the Minister of the Treasury – as indicated in

the above section which discusses the specific regulatory determinants of tariffs, there are explicit

costs associated with operations which the study areas include in their charges. Generally, these

operating costs are charged in the form of a basic fee and include:

Labour costs

Administration fees

Similarly, the capital projects noted within the annual budgets are funded by tariffs. These are

inclusive of:

Maintenance of service infrastructure

Upgrading of infrastructure

New projects

Furthermore, municipalities are provided with these services by national government and the

private sector. For example, consumption charges of electricity are set by NERSA and supplied by

Eskom, Independent Power Producers or municipalities. Relative to the bulk availability and capacity

of electricity in an area, a municipality may – if agreed on by council, increase the tariff relative to

overall costs. Similarly, capacity and availability are contributing factors to the costs of consumption

High eThekwini 217,415R

54,179R

Low Tshwane 560R

Average

Cost Highlights


33

for water and sewerage. Furthermore, some municipalities outsource service provides such as

private refuse companies. The tariffs are therefore set relative to the costs of the company aligned

with Treasury guidelines.

2.7.1 WATER CONSUMPTION CHARGES

For standardisation purposes, constant consumption of 200kl was assumed across all land-use types.

Thus this implies for the residential development, that each townhouse consumes 10kl of water per

month and is supplied by a communal meter. Although the rate is not a realistic representation of

consumption, it is used to provide a comparison of the services costs for all municipalities among the

development examples.

Table 2-9: Water Consumption Tariffs

The water consumption tariff charges range from R507 to R4 685 for residential developments and

R848 to R4 510 for the other three development scenarios.

Besides //Khara Hais municipality with a cost of R848

for commercial, business and industries, the

consumption charges across the delineated

municipalities for these development scenarios are

comparatively alike. Considering residential

developments, the water consumption costs vary more significantly. The City of Johannesburg has

the lowest value at R507 per 200kl a month, while Sol Plaatje municipality charges R4 685 for the

same amount. The difference is driven by the rate per kilolitre, at R5.56 for City of Johannesburg and

Study areas

Medium Density

Residential

Developments


Consumption Rate (kl) 200 200 200 200

Johannesburg 507R 4,353R 4,353R 4,353R

Tshwane 1,608R 2,378R 2,378R 2,378R

Ekurhuleni 832R 2,727R 2,727R 2,727R

Mogale City 914R 3,306R 3,306R 3,306R

Emfuleni 2,600R 3,300R 3,300R 3,300R

Cape Town 827R 2,604R 2,604R 2,604R

George 869R 3,600R 3,600R 3,600R

Msunduzi 3,001R 3,069R 3,069R 3,069R

Mbombela 931R 3,026R 3,026R 3,026R

Emalahleni 871R 2,474R 2,474R 2,474R

Nelson Mandela Bay Based on Scale Based on Scale Based on Scale Based on Scale


Polokwane 1,389R 3,260R 2,775R 2,806R

Mangaung 2,736R 2,031R 2,031R 2,031R

Sol Plaatje 4,685R 4,510R 4,510R 4,510R

Khara Hais 1,386R 848R 848R 848R

Rustenburg 1,792R 2,342R 2,342R 2,342R

eThekwini 2,558R 2,958R 2,958R 2,958R

High Sol Plaatje 4,554R

2,586R

Low Khara Hais 983R

Cost Highlights

Average


34

R20.55 for Sol Plaatje municipality. Furthermore, Sol Plaatje municipality does not indicate as to

whether a zero cost to the first 6kl of water consumed is allocated.

Sol Plaatje municipality similarly has the highest consumption charges for retail, commercial and

industrial developments at R4 510 per month. With regard to City of Johannesburg, unlike the large

difference in costs for residential consumption, the City of Johannesburg charges approximately

R150 less. An explanation for the high tariff costs charged by Sol Plaatje municipality may be that

when compared to the other study areas, water within the Northern Cape is a scarce resource.

Essentially, where a resource is more prevalent, the charges should be lower.

Table 2-9 indicates that for Nelson Mandela Bay metro, the consumption charge for water is “based

on scale” and unavailable upon request. Essentially, the municipal respondent established that

water consumption charges are dependent on the number of days since the previous metering, as

well as the amount of water consumed which will concurrently fall within an applicable scale and

tariff.

2.7.2 SEWERAGE CONSUMPTION CHARGES

Similar to the demand for water, sewerage is charged at 200kl of water per month, with each

townhouse for the residential development example consuming 10kl, with one sewerage point each.

The method of costing sewerage consumption across municipalities varies. Emfuleni municipality,

Emalahleni municipality, Polokwane municipality, Buffalo City Metro and //Khara Hais municipality

measure the costs relative to the size of the Erven, Mangaung municipality with regard to the

market value of each development, whilst the remainder of the municipalities charge per kilolitre of

water consumed. This is based on the assumption that a large portion of water consumed will

become sewerage.

There are two additional costs applicable, which is a charge per sewer point, and a 60% charge on

water consumed. George municipality and Sol Plaatje municipality charge per sewer point for retail,

commercial and industrial developments. For the same development scenarios, Polokwane

municipality will charge an addition to the cost as indicated in Table 2-10 for sewer points, grease

taps and so forth. This is the reason for the improbable charge of R90 for commercial developments.

Similar to the costing for water consumption, Nelson Mandela Bay is unable to provide a cost for

consumption relative to the development types. Essentially, the costs for sewerage are linked to the

amount of water consumed – hence the charge is based on 60% of water consumed. A computed

formula is used to calculate the monthly charge, thus signifying that the costs vary monthly. As

indicated in Table 2-10, the consumption charges for sewerage across all municipalities are wide-

ranging. The tariff cost ranging for the residential scenario from R72 to R37 178 is explanatory of this

assessment. The costs for retail range from a low R99 to R305 169, R90 to R23 018 for the

commercial development scenarios and R99 to R119 888 for industrial development.

George municipality and Mangaung municipality have the highest costs for sewer consumption

across all municipalities. With reference to George municipality, sewerage consumption for the

residential development example is R37 178 per month. When queried, the municipal respondent


35

clarified that this charge is driven by the charge per unit of R1 561. Similarly, Mangaung municipality

calculates sewerage costs using the market value of the developed property. As clarified by the

municipality, this is the driver for the high consumption charges evident in Table 2-10.

Although these figures were supplied and clarified by municipal respondents, because these charges

are significantly higher and inconsistent with the costs for the remaining municipalities, the

residential charge for the George municipality and Mangaung municipality will be reflected as

outliers in the analysis.

Table 2-10: Sewerage Consumption Tariffs

When comparing this figure of R72 for eThekwini metro to the charges for residential consumption

to the other municipalities, the cost of R72 appears improbable. The driver for the low cost of R72

for sewerage consumption for eThekwini metro is on account of the first 9kl of sewerage effluent

charges at a zero cost, followed by a charge of R3.60 for each sewerage connection. Therefore,

considering the generalised consumption of 200kl and consequently the unrealistic 10kls of

consumption per townhouse per month, this figure is noted as unlikely as it reflects a total charge of

1kl per unit.

The low costs indicated in Table 2-10 of R99 for

Rustenburg municipality is specified by the

municipality as a basic charge, with additional costs

upon development, therefore detailing an explanation

for the questionable low charge.

Study areas

Medium Density

Residential

Developments


Consumption Rate (kl) 200 200 200 200

Johannesburg 1,974R 219R 219R 219R

Tshwane 1,128R 932R 932R 932R

Ekurhuleni 1,621R 1,227R 1,227R 1,227R

Mogale City 2,097R 915R 915R 915R

Emfuleni 770R 1,360R 113R 871R

Cape Town 1,197R 2,002R 2,002R 2,002R

George 37,178R

Msunduzi 1,320R 1,350R 1,350R 1,350R

Mbombela 931R 3,095R 3,095R 3,095R

Emalahleni R 248 R 248 R 248 R 248

Nelson Mandela Bay 60% of Consumption 60% of Consumption 60% of Consumption 60% of Consumption

Buffalo City Metro 3,577R 3,874R 693R 2,543R

Polokwane 1,108R 993R 90R 287R

Mangaung 30,752R 305,169R 23,018R 119,888R

Sol Plaatje 1,548R

Khara Hais 2,178R 18,630R 3,912R 2,411R

Rustenburg 1,883R 99R 99R 99R

eThekwini 72R 1,136R 1,136R

charge per sewer point

charge per sewer point

High Mangaung 119,707R

10,631R

Low Emalahleni 248R

Cost Highlights

Average


36

As previously indicated, the values for both the George and Mangaung municipalities are identified

as outliers. In conjunction, the low fees evident in Table 2-10 for Emfuleni municipality (R113), for

the commercial development in Polokwane municipality (R90), for the eThekwini municipality (R72),

and the costs of R99 for all three development scenarios other than the residential development for

Rustenburg municipality are all, due to the unlikeliness of these low tariffs, classified as outliers. If

incorporated into the analysis as values, the municipalities with “normal costs” will appear as

expensive, thus skewing the analysis.

2.7.3 REFUSE CONSUMPTION CHARGES

Refuse tariff costs are determined differently across all municipalities. Rates are determined relative

to one or a combination of the following7:

developed site value,

size of the erven, or

the litres of refuse produced per week.

The size and value of the sites applied are in conjunction with the pre-determined values.

To ensure that an all-inclusive comparative analysis was made, an assumption concerning the litres

of waste produced per week was made to facilitate a standardized analysis. It was assumed that

each residential unit produced 240L per week, and that retail, commercial and industrial

developments each produced 1 100L of refuse per week8. Table 2-11 illustrates the refuse

consumption tariffs for the delineated municipalities.

The charge for refuse consumption for the residential scenario ranges from R596 to R10 169. R117 is

the lowest charge for the retail, commercial and industrial development scenarios, of which the

costs range to R9 550, R5 762 and R7 192 for the respective developments.

Buffalo City Metro charges the highest refuse removal tariff for the residential development

example. This cost is driven by the fee of R446 per container per unit, equating to R10 169 per

month. Through correspondence with relevant municipal officials, it was stated that this tariff would

be re-assessed upon the completion of the development. Polokwane municipality has the highest

tariff for the retail, commercial and industrial development examples. No explanation for these

charges from the Polokwane municipality could be attained. The high charge for Buffalo City metro is

determined as an outlier.

Table 2-11: Refuse Consumption Tariffs

7Apart from the litres produced, both the developed site value and size of the erven were garnered from the

previous study. 8The litre of refuse produced is not an indication of the amount of refuse an actual development as the

examples would produce. Therefore the tariff values are not an indication of what the actual tariff charges for each development will be, but is instead used as a tool for comparison.


37

With reference to Table 2-11, clarification for the low

charge of R117 for refuse removal from Emfuleni could

not be attained. This low fee has been identified as an

outlier. Similarly, the low fee of R117 for George

municipality is considered as unlikely and thus

established as an outlier. Concerning the fee of R150 for Mangaung municipality for commercial and

industrial developments, it was ascertained by the respondent that the fees were calculated on an

annual basis. Therefore, to calculate the monthly payment, the single annual charge of R18 830 was

divided by 12.

When comparing these high costs to the tariff charges for City of Johannesburg Metro, the removal

of refuse in Buffalo City Metro and Polokwane municipality are more than double in value for

residential refuse removal and thus heavily inflated for all business uses which could have adverse

negative effects for business owners and property owners where these fees could not be recovered

from tenants. For retail, commercial and industrial developments, City of Johannesburg is

respectively nine, five and seven times lower in cost.

2.7.4 ELECTRICITY CONSUMPTION CHARGES

Table 2-12 indicates the consumption tariffs for the residential, retail, commercial and industrial

development scenarios. The values in Table 2-12 is the cost per kWh, enabling a straightforward

Study areas

Medium Density

Residential

Developments


Litre produced per week 240 1100 1100 1100

Developed Site Value 100,000,000R 700,000,000R 52,800,000R 275,000,000R


Tshwane 5,454R 1,250R 1,250R 1,250R

Ekurhuleni 2,169R 1,255R 1,255R 1,255R

Mogale City 2,097R 979R 979R 979R

Emfuleni 1,718R 117R 117R 117R

Cape Town 1,943R 551R 551R 551R

George 2,348R 174R 174R 174R

Msunduzi 2,016R 1,621R 1,621R 1,621R

Mbombela 1,963R 3,114R 3,114R 3,114R

Emalahleni 1,833R 1,696R 1,696R 1,696R

Nelson Mandela Bay 660R 2,076R 2,076R 2,076R


Polokwane 596R 9,550R 5,762R 7,192R

Mangaung 1,400R 150R 150R 150R

Sol Plaatje 893R 526R 526R 526R

Khara Hais 1,516R

Rustenburg 4,842R

eThekwini 2,458R By contract By contract By contract

High Polokwane 5,775R

2,066R

Low Mangaung 463R

Average

Cost Highlights


38

standardized comparison of costs. These tariffs are calculated9 using the connection sizes supplied

by SAPOA for the previous study at a generalized consumption rate of 2 000kWh.

The charges for consumption per kWh range from R0.52 to R1.57 for residential, R0.32 to R1.31 for

retail, and R0.36 to R1.37 for both commercial and industrial development scenarios.

Table 2-12: Electricity Consumption Rates

Sol Plaatje municipality charges the highest cost per kWh at R1.57 for residential development. For

retail, commercial and industrial developments, Mogale City has significantly higher consumption

rates.

2.9 VACANT LAND RATES

As noted in the introductory section, the land value 10 is assumed constant throughout all

municipalities. This is to ensure that the municipal services costs are comparable, concurrently

facilitating accuracy throughout analysis. The values in Table 2-13 are therefore not the true values

of a property development in each municipality, but rather provide an indication of the difference in

9When TOU/seasonal charges for a municipality were relevant in the calculation of electrical consumption

rates, an average charge was determined. 10

The land values applied are derived from the previous study.

Study areas

Medium Density

Residential

Developments


Consumption Rate (kWh) 2,000 2,000 2,000 2,000

Johannesburg 1.21R R 0.56 R 0.80 R 0.80

Tshwane 1.03R 0.32R 0.36R 0.36R

Ekurhuleni 1.09R 0.95R 0.99R 0.99R

Mogale City 0.60R 1.31R 1.37R 1.37R

Emfuleni 1.07R 0.57R 0.57R 0.57R

Cape Town 1.40R 0.55R 0.54R 0.54R

George 0.55R 0.49R 0.49R 0.55R

Msunduzi 0.59R 0.65R 0.59R 0.59R

Mbombela 0.52R 0.49R 0.49R 0.53R

Emalahleni 1.01R 0.63R 0.99R 0.99R

Nelson Mandela Bay 1.07R 0.62R 0.65R 0.65R

Buffalo City Metro 0.54R 0.90R 0.97R 0.97R

Polokwane 0.63R 1.12R 1.12R 1.12R

Mangaung 0.94R 0.87R 0.87R 0.87R

Sol Plaatje 1.57R 0.83R 0.83R 0.83R

Khara Hais 0.53R 0.49R 0.49R 0.49R

Rustenburg 0.53R 0.56R 0.56R

eThekwini 0.75R 0.90R 0.90R 0.51R

High Mogale City 2,325R

1,536R

Low Khara Hais 998R

Cost Highlights

Average


39

rate charges across the study areas. Municipal rates are applied to the municipal rand value of the

vacant property, at a specific rate randage.

These rates are determined by the costs incurred by municipalities relative to the site. Vacant land is

essentially an asset which the municipality services but does not receive developed property tax on.

Therefore, the rates for vacant land are designed as an incentive to develop and force developers

not to let the land lay vacant for a long period. Other than to cover the costs of servicing the vacant

land including service contributions, labour costs etcetera, they further cover all operating costs

such as maintenance and bulk infrastructure upgrades. In essence, the rates are set according to the

value of a site in its entirety – including all variable increasing or decreasing value.

Table 2-13: Vacant Land Rates for Vacant Land per Municipality

As indicated in Table 2-13 the range of costs are significant. City of Tshwane has the highest costs

payable for vacant land for residential (R1 202 800), retail (R15 035 000), commercial (R1 202 800)

and industrial (R1 503 500) developments. In comparison, the lowest costs for residential, retail,

commercial and industrial developments are R39 880, R747 725, R59 818 and R78 900 respectively.

The high charges for City of Tshwane are driven by the vacant land rate of R0.0601 which is relevant

to all zoned land. It was noted that the rate for vacant land for the metro was higher than the other

study areas, but although queried, the municipality had no explanation. It is important to note that

the rates payable to municipalities for vacant land is in general higher than the rates payable for a

developed site. The explanation as aforementioned is that municipalities incur costs on serviceable

Study areas

Medium Density

Residential

Developments


Land value 20,000,000R 250,000,000R 20,000,000R 25,000,000R

Johannesburg 445,840R 5,573,000R 445,840R 557,300R

Tshwane 1,202,800R 15,035,000R 1,202,800R 1,503,500R

Ekurhuleni 596,000R 7,450,000R 596,000R 745,000R

Mogale City 845,600R 10,570,000R 845,600R 1,057,000R

Emfuleni 340,000R 6,375,000R 510,000R 742,500R

Cape Town 242,480R 3,031,000R 242,480R 303,100R

George 100,280R 1,253,500R 100,280R 125,350R

Msunduzi 404,000R 5,050,000R 404,000R 505,000R

Mbombela 445,900R 5,573,750R 445,900R 557,375R

Emalahleni 278,900R 3,486,250R 278,900R 348,625R

Nelson Mandela Bay 446,460R 5,580,750R 446,460R 558,075R

Buffalo City Metro 441,000R 5,512,500R 441,000R 551,250R

Polokwane 455,820R 2,050,000R 164,000R 205,000R

Mangaung 155,920R 1,949,000R 155,920R 194,900R

Sol Plaatje 39,880R 747,725R 59,818R 184,435R

Khara Hais 63,120R 789,000R 63,120R 78,900R

Rustenburg 150,000R 1,875,000R 150,000R 187,500R

eThekwini R 875,200 10,940,000R 875,200R 1,094,000R


40

land which remains unused. The high rates may thus be viewed as encouragement from

municipalities to develop a vacant site.

Emfuleni municipality, Polokwane municipality and Sol Plaatje municipality have a different rate in

the rand dependent on the type of development.

The values in Table 2-13 do not express the rebates that are applicable. The municipalities that offer

rebates on vacant land rates are Mogale City, Emfuleni municipality, Emalahleni municipality and

eThekwini metro as indicated in Table 2-14.

Table 2-14: Vacant Land Rate Rebated for Vacant Land per Municipality

A rebate of R15 000 on the ratable land value for residential vacant land only is applicable in Mogale

City. eThekwini metro and Emfuleni municipality offer the same rebate at R30 000 and R40 000

respectively. The rebates for eThekwini metro and Emfuleni municipality differ in that only vacant

residential categorized land pertains for Emfuleni municipality, whilst all development land types are

applicable for eThekwini metro. In conjunction, Emalahleni municipality offers a 10% rebate on the

value of land already rated. The rebated Vacant Land rate for these four municipalities is illustrated

in Table 2-14.

There are no rebates on vacant land for the remaining municipalities.

2.10 PROPERTY RATES

In order to determine the value of the buildings and infrastructure on each site, typical building costs

were used. These values were then incorporated with the allocated land values to determine the

Study areas

Medium Density

Residential

Developments


Land value 20,000,000R 250,000,000R 20,000,000R 25,000,000R

Emfuleni 339,320R

Mogale City 844,966R

Emalahleni 251,010R 3,137,625R 251,010R 313,763R

eThekwini R 873,887 10,938,687R 1,092,687R 1,094,000R

High Tshwane 4,736,025R

1,622,948R


Cost Highlights

Average


41

total property value11 for each development type reflected in Table 2-15 and Table 2-16. This would

enable a comprehensive comparison of property rates. As aforementioned, the costs that have been

assigned to each development type are not intended to divert from the actual comparative analysis

– the values have been held constant in all municipal areas so that the tariff costs per development

may be compared.

The rates determined by municipalities are essentially determined by the value of a property and the

development type. The value of a property is in turn influenced by not only the annual Circular

provided by the Treasury, but by variables inclusive of administration fees, costs associated with

servicing the land, for example infrastructure upgrades and maintenance and labour costs, the

property location – for example the City of Cape Town charges different rates relative to property

site, increased demand for property and other variables that impact on the value of a property.

Table 2-15 illustrates the property rates payable per annum, with charges ranging from R476 000 to

R1 354 000 for residential, R4 214 700 to R27 034 000 for retail, R317 909 to R2 039 136 for

commercial and R1 655 775 to R10 661 750 for industrial developments.

Table 2-15: Property Rates per Development Type and Municipality

With regard to the range of charges, City of Tshwane has the highest costs for a residential

development at R1 354 000 compared to R501 400 for George municipality and R476 000 for

Polokwane municipality. These costs are relative to the rates randage for all three municipalities at

11

The developed site values are derived from the previous study

Study areas

Medium Density

Residential

Developments

Retail CentreCommercial

OfficeIndustrial

Developed Site Value (Land and Building) 100,000,000R 700,000,000R 52,800,000R 275,000,000R

Johannesburg 557,300R 13,653,500R 1,029,864R 5,363,875R

Tshwane 1,354,000R 18,956,000R 1,429,824R 7,447,000R

Ekurhuleni 740,000R 10,430,000R 786,720R 5,142,500R

Mogale City 1,057,000R 14,798,000R 1,116,192R 5,813,500R

Emfuleni 850,000R 11,900,000R 897,600R 5,830,000R

Cape Town 606,200R 8,486,800R 640,147R 3,334,100R

George 501,400R 4,214,700R 317,909R 1,655,775R

Msunduzi 1,110,000R 14,140,000R 1,066,560R 5,555,000R

Mbombela 743,200R 13,005,300R 980,971R

Emalahleni 768,500R 9,761,500R 736,296R 3,834,875R

Nelson Mandela Bay 744,100R 10,417,400R 785,770R 5,115,825R

Buffalo City Metro 735,000R 12,862,500R 970,200R 5,053,125R

Polokwane 476,000R 5,740,000R 432,960R 2,255,000R

Mangaung 779,600R 27,034,000R 2,039,136R 10,620,500R

Sol Plaatje 912,000R 19,159,000R 1,445,136R 10,661,750R

Khara Hais 1,262,400R 13,255,200R 999,821R 5,207,400R

Rustenburg 530,000R 12,880,000R 971,520R 5,197,500R

eThekwini R 914,000 14,504,000R 1,094,016R 7,353,500R


42

R0.013, R0.005 and R0.004 respectively. Mangaung municipality and Sol Plaatje municipality charge

the highest rates for retail, commercial and industrial properties.

As indicated in Table 2-15, the land rate payable to Mangaung municipality for the retail centre

scenario is significantly higher than the fees charged by the other study areas. The high cost is driven

by the rate of R0.0386. This charge was queried but the respondent was unable to provide an

explanation other than that this rate had been approved by council.

Table 2-16 illustrates property rates after rebates. The values which are highlighted have been

rebated.

Table 2-16: Rebated Property Rates per Development Type and Municipality

After rebates, property rates will range between R401 054 to R1 261 832 (residential), R4 214 700 to

R27 034 000 (retail), R317 909 to R2 039 136 (commercial) and R1 655 775 to R10 661 750 for

industrial developments.

The impact that rebates have on property

rates charges is evident when comparing Table

2-15 and Table 2-16. Table 2-16 indicates City

of Tshwane as charging the highest cost for

residential development; upon the application

of the rebates assigned, a difference of approximately R400 000 for the property rate of residential

developments is projected. This difference is driven by a rebate of R50 000 granted to residential

properties, and an additional 35% rebate on the consequent property tax payable.

Study areas

Medium Density

Residential

Developments


Developed Site Value (Land and Building) 100,000,000R 700,000,000R 52,800,000R 275,000,000R

Johannesburg 445,840R 13,653,500R 1,029,864R 5,363,875R

Tshwane 879,660R 18,956,000R 1,429,824R 7,447,000R

Ekurhuleni 740,000R 10,430,000R 786,720R 5,142,500R

Mogale City 633,946R 14,798,000R 1,116,192R 5,813,500R

Emfuleni 594,108R 11,900,000R 897,600R 5,830,000R

Cape Town 606,200R 8,486,800R 640,147R 3,334,100R

George 401,054R 4,214,700R 317,909R 1,655,775R

Msunduzi 1,110,000R 14,140,000R 1,066,560R 5,555,000R

Mbombela 519,824R 9,349,816R 774,808R

Emalahleni 576,087R 7,321,125R 552,222R 2,876,156R

Nelson Mandela Bay 744,100R 10,417,400R 785,770R 5,115,825R

Buffalo City Metro 735,000R 12,862,500R 970,200R 5,053,125R

Polokwane 475,929R 4,305,000R 389,664R 1,691,250R

Mangaung 779,288R 27,034,000R 2,039,136R 10,620,500R

Sol Plaatje 911,863R 19,159,000R 1,445,136R 10,661,750R

Khara Hais 1,261,832R 13,255,200R 999,821R 5,207,400R

Rustenburg 529,947R 12,880,000R 971,520R 5,197,500R

eThekwini R 912,903 14,504,000R 1,094,016R 7,353,500R

High Mangaung 10,118,231R

4,934,703R

Low George 1,647,359R

Cost Highlights

Average


43

Upon the inclusion of rebates into the calculation of residential property tariffs, the municipality

charging the highest tariff, inclusive of a rebate of the first R45 000 of the market value of a

property, is //Khara Hais municipality. The property rate is R1 261 832 which equates to R5 257 per

month per unit12.

As indicated in Table 2-16, 14 of the municipalities for which data is available have rebates on

residential property rates. Ekurhuleni municipality, Msunduzi municipality, Nelson Mandela Bay

Metro and Buffalo City metro do not offer rebates on property rates. Nevertheless, Ekurhuleni

municipality and Msunduzi municipality offer rebates to developers of newly rateable property. This

is addressed in the next sub-section. Other than rebates granted for residential developments,

Emalahleni municipality and Polokwane municipality award rebates on all four development

scenarios and Mbombela municipality grants a rebate on retail and commercial developments.

2.11 ADDITIONAL COMMENTARY ON APPLICATION OF REBATES

In accordance with the calculation of rebates, this section outlines the rebates applicable,

dependent on certain scenarios. With regard to all municipal study areas, two scenarios in which

discounts are applicable are evident, these being a rebate for developers and the phasing in of rates

for newly rateable property.

Ekurhuleni municipality, Emfuleni municipality and Msunduzi municipality offer rebates for

developers. Concerning Ekurhuleni municipality, a rebate of 75% on property rates for residential

developments is applicable. The rebate will only be applicable upon the submission of an approved

building plan, and if residential dwelling unit/s are under construction and will be used exclusively

for residential purposes. This rebate will only be granted for a period of 18 months, commencing on

the date of submission of the approved building plan, and should an occupation certificate at the

end of the 18 months not be supplied, a reversal of the 75% rebate already granted shall result.

The development incentives granted to developers by the Emfuleni municipality is a 50% rebate.

This rebate however is only applicable upon the submission of an application that decrees the

approval of building plans and the commencement of development. If development has been

hindered on account of a municipal basis, the rebate will still apply. The rebate is temporary and will

be valid for a 12 month period after which a new application must ensue. With regard to Msunduzi

municipality, a developer’s rebate is applicable over three years, and is subject to council conditions.

The rebates stipulated in the Msunduzi municipality Tariff Schedule state that a 66% and 33% rebate

for the first and second year respectively is applicable. No rebate applies from year three onwards.

With regard to rebates for newly rateable or recently developed property, a phasing in of rates

payable will ensue. Municipalities offering a phasing in rebate are Mogale City, Msunduzi

12

This value was determined under the assumption that each unit under the sectional title scheme is valued the same, and in conjunction with the notion that the land and building values are constant across all municipalities as aforementioned.


44

municipality and eThekwini metro. In Mogale City, Msunduzi municipality and eThekwini metro, the

phasing in of rates for newly rateable property is to be spread over three financial years. In the first

year of a newly rateable property, a rebate of 75% is applicable, followed by 50% and 25% for the

second and third years respectively.

Table 2-17 provides an illustration of the rebates applicable to all municipalities.

Table 2-17: A Comparison of Rebates Applicable per Municipality

As indicated in Table 2-17, the number of rebates per municipality ranges from zero to five rebate

options on average with rebates on residential development being most prevalent. Polokwane

municipality presents the highest number of rebates at five.

2.12 COMPARATIVE MATRIXES

The Tables within this section provide a comparison and rating for each indicator of the municipal

services costs as detailed in the previous chapters. Essentially, each Table serves as a guideline for

developers concerning the services costs associated per development type and the relative

indicator. A Table for each development scenario is compiled – medium density residential (Table 2-

18), retail centre (Table 2-20), commercial office (Table 2-22) and industrial (Table 2-24). Finally,

Table 2-26 provides a combined comparison for the tariff and services costs of all development

scenarios across all municipalities.

Study areas

Re

sid

en

tial

De

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pm

en

t R

eb

ate

Re

tail

De

velo

pm

en

t

Re

bat

e

Co

mm

erc

ial

De

velo

pm

en

t R

eb

ate

Ind

ust

rial

De

velo

pm

en

t R

eb

ate

De

velo

pe

rs R

eb

ate

Re

bat

e f

or

Ne

wly

Rat

eab

le P

rop

ert

y

Vac

ant

lan

d R

eb

ate

Johannesburg

Tshwane

Ekurhuleni

Mogale City

Emfuleni

Cape Town

George

Msunduzi

Mbombela

Emalahleni

Nelson Mandela Bay

Buffalo City Metro

Polokwane

Mangaung

Sol Plaatje

Khara Hais

Rustenburg

eThekwini


45

The values for each indicator illustrated in the Tables were surmised by creating a range from 1 – 5.

This exercise was done in order to rank the best performers in terms of affordable costing as well as

to distinguish municipalities where developmental costs are comparatively higher. Each value falls

within a range from 1 – 5, 5 being the lowest cost, and score 1 being the most expensive. The ranges

were calculated by dividing the difference between the highest and lowest cost from each indicator

by five. This value was then added to the lowest cost and so forth, creating a range of 1 – 5.

The values in the final comparative matrix (Table 2-26), which is a summation of the costs of all four

development scenarios, were ranked in the same manner. The values however were deduced by

calculating the average costs for each indicator per municipality for the various developmental

scenarios.

The blocks that have been marked blue are an indication of charges that are fictitious on account of

the need for a quotation by the municipality. These values indicated were inferred by using the

overall average for the applicable tariff cost – excluding the outliers. This was necessary to reflect a

cost which is market-related, as a zero score would be less comparative and consequently produce

an imbalanced analysis.

Furthermore, the blocks that have been marked orange indicate the municipalities that have tariffs

significantly higher or lower than the average costs, and were thus considered outliers. These values

were not included in the calculations of the range used for this analysis. The outliers have been

indicated and detailed in the above sections. The services costs for each municipality deemed as an

outlier scored a single point; as in conjunction with the rankings indicated by the blue blocks, if a

zero score was given, the results would consequently be unreliable.

The few outstanding costs received a zero score.

2.12.1 COMPARATIVE MATRIX OF THE MEDIUM DENSITY RESIDENTIAL

DEVELOPMENT

Table 2-18 indicates the ranking for the services costs relative to the medium density residential

development. The total scores range from the lowest for eThekwini municipality with 31 points, to

Emalahleni municipality whom has the best score with 54 points. The highest possible score for each

municipality is 65 points.

As specified in Table 2-18, the municipalities that have outliers are Tshwane municipality, George

municipality, Mbombela municipality, Emalahleni municipality, Nelson Mandela Bay, Buffalo City

Metro, Polokwane municipality, Mangaung municipality and eThekwini municipality13. eThekwini

municipality (31 points) and Mangaung municipality (39 points) have three outliers each, which are

contributing factors to the low scores received by these municipalities. Similarly, the two

outstanding costs evident by the zero scores for the Rustenburg municipality, are contributions to

the second lowest score (37) received.

13

The explanations for the outliers is provided and detailed within the sections above.


46

3 3 4 4 5 3 5 4 3 4 5 2 4 5 4 5 4 1

4 2 3 3 3 3 3 3 1 4 5 3 3 1 3 5 3 1

5 5 5 5 5 3 3 4 5 5 4 3 4 5 2 5 5 1

4 4 4 4 5 3 1 5 5 4 3 3 3 1 4 5 0 4

Sewer 4 5 2 4 4 5 4 3 1 5 3 5 4 4 5 5 1 3

Water 1 4 1 3 2 5 4 3 2 1 2 2 5 3 0 4 2 3

Electricity 4 1 5 0 5 4 4 3 4 5 0 4 1 0 4 4 4 1

Sewer 3 4 3 3 5 4 1 4 4 5 4 1 4 1 4 3 3 1

Water 5 4 5 5 3 5 5 3 5 5 4 4 4 3 1 4 4 3

Refuse 1 1 4 4 5 4 4 4 4 4 1 1 1 5 5 1 1 4

Electricity 2 3 3 5 3 1 5 5 5 3 3 5 4 3 1 5 0 4

4 1 3 2 4 5 5 4 4 5 4 4 4 5 5 5 5 2

5 3 4 4 4 4 5 1 5 4 4 4 5 3 3 1 5 3

45 40 46 46 53 49 49 46 48 54 42 41 46 39 41 52 37 31

Geo

rge

Msu

nd

uzi

Mb

om

bel

a Study areas

Joh

ann

esb

urg

Tsh

wan

e

Eku

rhu

len

i

TOTAL

Kh

ara

Hai

s

Ru

sten

bu

rg

eTh

ekw

ini

Zoning & rezoning tariff costs

Township establishment fee

Subdivision fee

Emal

ahle

ni

Nel

son

Man

del

a B

ay

Bu

ffal

o C

ity

Met

ro

Po

lokw

ane

Man

gau

ng

Sol P

laat

je

Mo

gale

Cit

y

Emfu

len

i

Cap

e To

wn

Building plan tariff

Connection fees

Consumption charges

Vacant land rates

Property rates

Table 2-18: Comparative Matrix of Medium Density Residential Development

The average score for the residential development scenario is 45. Seven municipalities scored below

average. These municipalities are City of Tshwane, Nelson Mandela Metro, Buffalo City, Mangaung

municipality, Sol Plaatje municipality, Rustenburg municipality and eThekwini. The municipalities

that scored above 50 points are Emfuleni municipality (53), Emalahleni municipality (54) and //Khara

Hais municipality (52). The City of Johannesburg received an average score.

In general, the cost indicator for which the majority of the municipalities scored well for is

subdivision fees. The maximum score attainable for each cost indicator is 90. In conjunction, the

score for subdivision fees is 74 points, thus receiving 82%. The indicators which scored next best

were vacant land rates (71 points), water consumption charges (72), and zoning and rezoning fees

(68). The municipalities scored 67 for both property rates and sewer connection fees.

Considering the comparative aim of this study, Table 2-19 highlights the cost of development within

the Gauteng municipalities for the residential development relative to the average costs and the

highest and lowest charges for all study areas.

Concerning the residential development scenario, it is evident that of the five municipalities within

the Gauteng province, the Emfuleni municipality scores the highest points (53). Both the Ekurhuleni

municipality and Mogale City score “above average” with 46 points each. One may further

determine from Table 2-18 that the Gauteng municipalities, when compared to the other study

areas, are the most affordable for subdivision fees – each receiving a score of 5, as well as for

building plan fees.

Table 2-19: Services Cost Comparison of Gauteng Municipalities for Residential Development

Study areas Total Scores above/below average

Johannesburg 45 Average

Tshwane 40 Below Average

Ekurhuleni 46 Above Average

Mogale City 46 Above Average

Emfuleni 53 Above Average

eThekwini

Average

Emalahleni

31

45

54


47

It is further apparent that the least affordable indicators for the Gauteng municipalities are water

and electricity connection fees, and refuse and electricity consumption charges. Finally, the fees for

township establishment and vacant land and property rates are not consistent in value across the

Gauteng municipalities, some study areas being rated as affordable, and others as expensive.

2.12.2 COMPARATIVE MATRIX OF THE RETAIL CENTRE DEVELOPMENT

As above, with regard to the retail development scenario, Table 2-20 provides the ranking of each

municipality for the cost indicators. The scores range from 29 as the lowest for the Mangaung

municipality, to 52 as the highest score. As is the same for the residential development, Emalahleni

municipality received this high score. There are no scores for subdivision as this indicator is not

relevant to this development scenario.

Table 2-20: Comparative Matrix of Retail Centre Development

For nine municipalities, twelve outliers are illustrated by the orange blocks in Table 2-20. The

municipality that has the most outliers is Mangaung municipality – a total of four. These outliers are

for township establishment fees, building plans, and sewer and refuse consumption charges. As

specified, the explanations for these outliers are provided in the relevant sections above. Alongside

the missing cost which received a zero score, these four outliers contribute to the low score of 29.

Therefore, it is important to acknowledge that the low score for Mangaung municipality is a

guideline and it must be analysed alongside the explanations for these services costs.

The average score for the costs of developing the retail development is 41. Therefore, half of the

municipalities’ fall below this average, of which two are municipalities within the Gauteng province –

City of Tshwane and Mogale City Municipality, scoring 36 and 37 respectively. These scores are

indicated in Table 2-20, as well as in Table 2-21 which provides an indication of the scoring for the

Gauteng municipalities relative to the highest and lowest scoring study areas.

5 1 5 5 5 1 3 4 5 5 5 4 5 5 5 5 5 3

4 1 4 4 4 4 4 4 3 4 5 4 4 1 4 5 4 4

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

4 4 5 3 5 1 1 5 5 5 5 1 2 1 3 5 0 4

Sewer 4 5 2 4 4 5 4 3 5 5 3 5 4 4 5 5 1 3

Water 2 3 1 3 3 5 3 3 2 1 2 1 3 3 0 4 3 3

Electricity 3 1 3 0 4 3 3 1 3 5 0 3 1 0 3 3 3 1

Sewer 5 5 4 5 4 3 4 4 3 5 4 1 4 1 4 1 1 4

Water 1 3 3 2 2 3 2 2 3 3 3 3 2 4 1 5 3 3

Refuse 5 5 5 5 1 5 1 5 4 5 5 5 1 1 5 0 0 5

Electricity 4 5 2 1 4 4 5 4 5 4 4 3 1 3 3 5 4 3

4 1 3 2 4 5 5 4 4 5 4 4 5 5 5 5 5 1

3 2 4 3 5 5 5 3 4 5 4 4 5 1 2 4 4 3

44 36 41 37 45 44 40 42 46 52 44 38 37 29 40 47 33 37

Geo

rge

Msu

nd

uzi

Mb

om

bel

a Study areas

Joh

ann

esb

urg

Tsh

wan

e

Eku

rhu

len

i

TOTAL

Kh

ara

Hai

s

Ru

sten

bu

rg

eTh

ekw

ini



Subdivision fee

Emal

ahle

ni

Nel

son

Man

del

a B

ay

Bu

ffal

o C

ity

Met

ro

Po

lokw

ane

Man

gau

ng

Sol P

laat

je

Mo

gale

Cit

y

Emfu

len

i

Cap

e To

wn


Connection fees

Consumption charges

Vacant land rates

Property rates


48

With regard to the comparisons of the services costs for this development scenario, the indicators

which were most comparable and which scored the best were zoning and rezoning fees, township

establishment fees, sewer connection fees and vacant land rates. Zoning and rezoning received 84%,

a total score of 76 out of 90 points. Both sewer connection and vacant land rates scored 79% (71

points), and the score for township establishment was 64, receiving 74%. The worst scoring cost

indicator is the fees for electricity connection, with 44%. This is partially due to the majority of

municipalities requiring quotations to determine a value.

Table 2-21: Services Cost Comparison of Gauteng Municipalities for Retail Centre Development

It is evident in Table 2-21 that two of the municipalities in the Gauteng province – City of Tshwane

and Mogale City scored “below average”. The City of Tshwane is rated as expensive for property

planning costs and the rates for vacant land and property. Mogale City is equally expensive for

property and vacant land rates. Other than the City if Tshwane, all Gauteng municipalities are rated

as affordable for property planning tariffs. Furthermore, other than Emfuleni municipality whose

charge was deemed as an outlier, all municipalities are deemed as affordable for refuse

consumption. Furthermore, in conjunction to the residential development scenario, the water and

electricity connection fees for the Gauteng municipalities are, when compared to the other study

areas, expensive. This is also the case for the costs to consume water within Gauteng province.

2.12.3 COMPARATIVE MATRIX OF THE COMMERCIAL OFFICE DEVELOPMENT

Table 2-22 provides the same detailed illustration and guideline as the above sections do. However,

this section indicates the scores for the commercial business development example. As is the case

for the retail development scenario, subdivision fees are not applicable and therefore each

municipality received zero points. The scores for this development type range from 32 points for

both the Mangaung municipality and Rustenburg municipality, to the highest score of 47, received

by //Khara Hais municipality.

Table 2-22: Comparative Matrix of Commercial Business Development


Johannesburg 44 Above Average


Ekurhuleni 41 Average

Mogale City 37 Below Average


Mangaung

Average

Emalahleni

29

41

52


49

In total, there are 13 outliers identified. In conjunction to the retail development scenario, there are

four outliers for the Mangaung municipality. Therefore, it is clear that the lowest score of 25

received by this study area is not particularly indicative of the true costs. In conjunction, Rustenburg

municipality has a single outlier, but is missing the costs for building plans and refuse consumption

charges.

The average score for all municipalities is 39 points. Seven municipalities scored below average, as

indicated in Table 2-22, these being all the Gauteng municipalities other than Emfuleni municipality

which scored 41 points, and the City of Johannesburg with 42 points. The points received by the

other low scorers are for Buffalo City metro (38), Polokwane municipality (34), Mangaung

municipality (32) and Rustenburg municipality (32).

Concerning the comparisons of the municipal services costs for this development scenario, the

indicators which scored the best were zoning and rezoning and vacant land rates. These indicators

scored 82% and 80% respectively. The lowest scoring indicator was the indicator for electrical

connection fees which had 43 points, equating to 48%. This low score is due to the requirement of

quotations upon a site visit for ten of the municipalities, as well as the three identified outliers. The

other cost indicators that received a good score were sewer connection fees (78%), and property

rates (72%).

Table 2-23: Services Cost Comparison of Gauteng Municipalities for Commercial Business

Development

4 1 4 4 5 3 4 5 4 4 5 4 4 5 4 5 4 5

4 1 3 3 4 3 3 3 1 4 5 3 3 1 3 5 3 4

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

4 4 4 3 5 1 1 5 5 3 3 1 2 1 4 5 0 4

Sewer 4 5 2 4 4 5 4 3 5 5 3 4 4 4 5 5 1 3

Water 2 3 1 3 3 5 3 3 2 1 2 1 3 3 0 4 3 3

Electricity 3 1 3 0 4 3 3 1 3 5 0 3 1 3 3 3 3 1

Sewer 5 5 4 5 1 3 4 4 2 5 4 5 1 1 4 1 1 4

Water 1 3 3 2 2 3 2 2 3 3 3 3 3 4 1 5 3 3

Refuse 5 5 5 5 1 5 1 4 3 4 4 4 1 1 5 0 0 4

Electricity 3 5 2 1 4 5 5 4 5 2 4 2 2 3 3 5 5 3

4 1 3 2 4 5 5 4 4 5 4 4 5 5 5 5 5 2

3 2 4 3 4 5 5 3 4 5 4 4 5 1 2 4 4 3

42 36 38 35 41 46 40 41 41 46 41 38 34 32 39 47 32 39

Msu

nd

uziStudy areas

Joh

ann

esb

urg

Tsh

wan

e

Eku

rhu

len

i

Property rates

TOTAL

Vacant land rates



Subdivision fee


eTh

ekw

ini

Connection fees

Consumption charges

Mb

om

bel

a

Emal

ahle

ni

Nel

son

Man

del

a B

ay

Sol P

laat

je

Kh

ara

Hai

s

Ru

sten

bu

rg

Mo

gale

Cit

y

Bu

ffal

o C

ity

Met

ro

Po

lokw

ane

Man

gau

ng

Emfu

len

i

Cap

e To

wn

Geo

rge




Ekurhuleni 38 Below Average



Mangaung &

Rustenburg

Average

Khara Hais

32

39

47


50

As illustrated in 2-23, the three municipalities within the Gauteng province who did not receive

scores indicating affordable costs for developing the commercial development scenario are City of

Tshwane, Ekurhuleni municipality and Mogale City. Together with the retail development, the City of

Tshwane is expensive considering planning costs as well as land and vacant land rates. Using the

services costs of the other study areas as a baseline for comparison, when compared, Ekurhuleni

municipality and Mogale City are similarly expensive for township establishment and vacant land

rates. In general, all the Gauteng municipalities charge high costs for water and electricity

connections, and water consumption rates. For both sewer connection fees and refuse consumption

charges, other than Emfuleni municipality whose costs have been noted as outliers, the Gauteng

municipalities are cast as affordable. Significantly, when comparing all municipalities to Gauteng, it is

evident that for property owners in the Gauteng study areas, vacant land rates are the most

expensive.

2.12.4 COMPARATIVE MATRIX OF THE INDUSTRIAL DEVELOPMENT

The ranking and scores for the services cost comparison of the industrial development are illustrated

in Table 2-24. Similar to the retail and commercial business developments, subdivision fees are not

applicable for this development scenario and thus receive zero scores. The scores for these

municipalities range from 32 points to 48 points.

The lowest scoring municipality for this development scenario is Mangaung municipality. Mangaung

municipality was similarly the lowest scoring study area for the retail and commercial development

scenarios. The highest scoring municipality is //Khara Hais, which similarly received the highest score

for the commercial office development.

In total, the average score for all municipalities is 39. The study areas that scored below average

were City of Tshwane, Mogale City, George municipality, Mbombela municipality, Buffalo City metro,

Mangaung municipality, Sol Plaatje municipality and the Rustenburg at eThekwini municipalities.

Therefore, eight of the 18 municipalities scored above average, and one – Ekurhuleni municipality,

received the average score of 39 points. The highest scoring municipalities are the City of

Johannesburg and Emfuleni municipality both with 42 points, City of Cape Town (44), Msunduzi

municipality (41) and Nelson Mandela Bay (41), Emalahleni municipality (47) and Polokwane and

//Khara Hais municipality with 43 and 48 points respectively.


51

4 2 5 4 5 1 1 4 4 4 5 2 5 5 5 5 5 2

4 1 3 3 4 3 3 3 1 4 5 3 3 1 3 5 3 4

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

4 4 4 3 5 2 1 5 5 3 3 2 2 1 3 5 0 4

Sewer 4 5 2 4 4 5 4 3 5 5 3 5 4 4 5 5 1 3

Water 2 3 1 3 3 5 3 3 2 1 2 1 3 3 0 4 3 3

Electricity 3 1 3 0 4 3 3 1 3 5 0 3 5 3 3 3 3 1

Sewer 5 4 4 4 4 2 4 4 1 5 4 1 5 1 4 2 1 0

Water 1 3 3 2 2 3 2 2 3 3 3 3 3 4 1 5 3 3

Refuse 5 5 5 5 1 5 1 5 4 5 4 4 1 1 5 0 0 4

Electricity 3 5 2 1 4 5 5 4 5 2 4 2 2 3 3 5 5 5

4 1 3 2 3 5 5 4 4 5 4 4 5 5 5 5 5 2

3 2 4 3 3 5 5 3 0 5 4 4 5 1 1 4 4 2

42 36 39 34 42 44 37 41 37 47 41 34 43 32 38 48 33 33

Geo

rge

Msu

nd

uzi

Mb

om

bel

a Study areas

Joh

ann

esb

urg

Tsh

wan

e

Eku

rhu

len

i

TOTAL

Kh

ara

Hai

s

Ru

sten

bu

rg

eTh

ekw

ini



Subdivision fee

Emal

ahle

ni

Nel

son

Man

del

a B

ay

Bu

ffal

o C

ity

Met

ro

Po

lokw

ane

Man

gau

ng

Sol P

laat

je

Mo

gale

Cit

y

Emfu

len

i

Cap

e To

wn


Connection fees

Consumption charges

Vacant land rates

Property rates




Ekurhuleni 39 Average



Manguang

Average

Khara Hais

32

39

48

Table 2-24: Comparative Matrix of Industrial Development

As indicated in Table 2-24, 12 outliers were identified, four of which were for the Mangaung

municipality. Concerning this and in conjunction to the other development scenarios, it is evident

that these outliers are reasons for the low score of 32. This is similarly with regard to Rustenburg

municipality which has two outstanding costs.

The indicators that were the highest scorers – essentially the ones which display the most

comparable costs, are sewer connection fees and vacant land rates, both receiving 79%. Both water

and electricity consumption charges were the worst cost indicators, receiving the lowest scores of

50% and 52% respectively.

Aligned with all the development scenarios, and with regard to the industrial development example,

the City if Tshwane scored “below average” for costs. Mogale City similarly scored “below average”

in conjunction to the retail and commercial development scenarios. Table 2-25 further indicates that

the City of Johannesburg and Emfuleni municipality both have a score of 42, six points lower than

the highest scorer - //Khara Hais. Relative to the other study areas, all the municipalities for the

Gauteng province are rated as expensive for water and electricity connection fees, water

consumption charges, and vacant land rates.

Table 2-25: Services Cost Comparison of Gauteng Municipalities for Industrial Development


52

4 3 5 4 5 1 3 4 4 5 5 3 5 5 5 5 5 2

4 1 4 3 4 3 3 3 1 4 5 3 3 1 3 5 3 5

5 5 5 5 5 3 3 4 5 5 4 3 5 5 2 5 5 1

4 4 5 3 5 1 1 5 5 5 5 1 2 1 3 5 0 4

Sewer 4 1 2 4 4 5 4 4 1 1 3 5 4 4 5 5 1 3

Water 2 5 1 3 3 1 3 4 3 1 2 1 3 3 0 5 4 3

Electricity 4 1 4 5 5 4 4 1 4 5 0 4 1 4 4 4 4 1

Sewer 5 4 3 4 4 2 1 3 1 5 3 1 5 1 3 1 5 4

Water 2 4 4 3 2 4 3 3 3 4 3 4 3 4 1 5 4 3

Refuse 4 4 5 4 5 5 5 4 3 4 4 2 1 5 5 5 1 4

Electricity 3 5 2 1 4 4 5 5 5 2 4 3 2 3 2 5 5 2

4 1 3 2 4 5 5 4 4 5 4 4 5 5 5 5 5 2

3 2 4 3 4 5 5 3 4 5 4 4 5 1 2 3 4 3

48 40 47 44 54 43 45 47 43 51 46 38 44 42 40 58 46 37

Study areas

eTh

ekw

ini



Kh

ara

Hai

s

Ru

sten

bu

rg

Msu

nd

uzi

Mb

om

bel

a

Emal

ahle

ni

Man

gau

ng

Sol P

laat

je

Mo

gale

Cit

y

Emfu

len

i

Subdivision fee


Connection fees

Consumption charges

Vacant land rates

Property rates

TOTAL

Joh

ann

esb

urg

Tsh

wan

e

Eku

rhu

len

i

Nel

son

Man

del

a B

ay

Bu

ffal

o C

ity

Met

ro

Po

lokw

ane

Cap

e To

wn

Geo

rge

Concerning the planning costs associated with development, other than the City of Tshwane which is

expensive, the remaining four municipalities have affordable rates. Furthermore, all the Gauteng

study areas, when compared to the other study areas, charge affordable refuse and sewerage

consumption tariffs.

2.12.5 FINAL COMPARATIVE MATRIX FOR ALL DEVELOPMENT SCENARIOS

The final matrix provides a comparable outline of the municipal services costs for all development

scenarios. Essentially, each municipality is in total ranked to create a single cost comparison. As

aforementioned, the average for each indicator per municipality for each development type was

inputted into the calculations for this matrix. Similar to the above tables, the orange blocks indicate

outliers, and the blue blocks indicate the average cost. Furthermore, the same ranking system is

utilised.

A few observations from the table include:

The scores in the Comparative Matrix range from 58 as the highest, and 37 for the lowest. The

municipality identified as the most affordable is //Khara Hais municipality. eThekwini municipality,

with 37 points, is essentially the most expensive when considering development and rates and

application fee costs.

The municipalities that scored well are the City of Johannesburg, Ekurhuleni municipality, Emfuleni

municipality, Msunduzi municipality, Emalahleni municipality, Nelson Mandela Bay metro, and

//Khara Hais municipality and Rustenburg municipality. These municipalities each had 46 or above

points. The average performer is George municipality. The remainder of the municipalities fall below

the average score of 45.

The municipalities that have costs deemed as outliers are indicated in Table 2-26. These

municipalities are City of Tshwane, City of Cape Town, George municipality, Msunduzi municipality,

Emalahleni municipality, Mangaung municipality, //Khara Hais municipality and eThekwini metro.

Table 2-26: Final Comparative Matrix


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Tshwane 40 Below Averge

Ekurhuleni 47 Above Average



eThekwini

Average

Khara Hais

37

58

45

Concerning the comparative aim of this study, Table 2-27 highlights the services costs of

development within the Gauteng municipalities relative to the average costs and the highest and

lowest charges for all study areas. It is evident for the Gauteng study areas, that when considering

the results of the individual cost indicators, the City of Tshwane in total has a “below average” score.

Mogale City similarly scores “below average” for total services costs of all development scenarios.

The most affordable municipality as indicated in Table 2-27 is the Emfuleni municipality, with a total

score of 54 points. Other than water consumption for which the study area is allocated 2 points, the

Emfuleni municipality has affordable charges for all cost indicators. With regard to all the Gauteng

municipalities under analysis, it is apparent that in total, water connection fees, electricity

consumption charges and rates for both vacant and occupied land are comparably expensive. It is

further illustrated in Table 2-26 that the fees for subdivision and refuse and sewer consumption are

“affordable” when compared to the other study areas.

Table 2-27: Services Cost Comparison of Gauteng Municipalities for all Development Scenarios

With reference to the assessments of which of the analysed municipalities are financially conducive

to property development, Table 2-26 provides a guideline for developers concerning services costs

for each study area. Below will outline which indicators for which study areas will require

examination upon development.

Considering the least affordable municipality regarding property development – eThekwini

municipality, when assessed for development potential by developers, the indicators to interrogate

is zoning and rezoning fees, subdivision fees, electricity consumption charges and vacant land rates.

The City of Cape Town is the lowest performer for zoning and re-zoning fees, scoring a 1. eThekwini

metro scores 2 points. Therefore, these metros require prior assessment before zoning and re-

zoning submissions. Despite scoring 3, George municipality similarly charges a high tariff for the re-

zoning of agriculture to retail land use.

Mangaung municipality received a score of one for township establishment as the cost has been

considered an outlier and was therefore not included in the calculations. Nevertheless, as

aforementioned, upon application developers need to query the charge. The City of Tshwane and


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Mbombela municipality also have high costs for township establishment. The City of Cape Town,

George municipality, Msunduzi municipality, Buffalo City metro and Sol Plaatje municipality all

received a score of 3. These scores do not signify high charges, as as indicated in Table 2-18, they are

fictitious scores as an average was applied to these municipalities. Essentially, these municipalities

do not charge a fee for township establishment.

The worst scorer for subdivision fees is eThekwini municipality with 1 point, followed by Sol Plaatje

who scores 2 points. With reference to Table 2-4, it is evident that none of the fees for all

municipalities differ significantly.

As with township establishment fees, with regard to building plan fees, the cost payable to the

municipality of Mangaung has been considered an outlier and must be further queried by

developers. The costs for the City of Cape Town, George municipality and Buffalo City metro should

also be queried further by developers upon development.

With regard to the costs of connection fees, connections for sewerage for the City of Tshwane and

Emalahleni municipality are outliers. The costs are considered as underestimated and municipal

technicians must be consulted. The municipalities who charge high rates for sewer connection fees

are Mbombela municipality and Rustenburg municipality. Concerning water connection fees, the

most expensive municipalities are Ekurhuleni municipality and Buffalo City metro. The electricity

connection fee for the City of Tshwane scores one point (outlier) as the charge appears to be

underestimated and must be re-assessed. In conjunction, the charges by eThekwini metro and

Msunduzi municipality have been identified as unlikely and over-estimated. These outliers must be

assessed upon development.

Again, the Mangaung municipality should be queried with reference to the charges payable for

sewerage consumption. George municipality and //Khara Hais municipality should similarly be

queried regarding sewerage consumption costs for residential and retail development respectively.

Mbombela municipality and Buffalo City metro both scored 1. Concerning water consumption

charges, the only municipality that scored 1 is Sol Plaatje municipality. Nevertheless, the charges

payable to this municipality are not significantly higher than the costs for the other study areas.

Although Buffalo City metro scored 2 points for refuse consumption, as indicated by the

municipality, the refuse charges for residential development may be re-assessed upon development.

The municipalities Polokwane and Rustenburg should be approached regarding the refuse

consumption charges. There are no significantly high charges for electricity, although Mogale City

did score 1 for consumption costs.

Respectively, vacant land rates and land rates for the City of Tshwane and Mangaung municipality

are charged at higher rates than the other study areas. Developers should query these rates upon

assessment of development.

2.13 KEY OBSERVATIONS


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There appears to be a significant imbalance in costing and fees with wide ranging fee structures for

standard services provided by the different municipalities. It is thus difficult to derive an actual

market value and decide which municipalities charge above or below market. The imbalance also

causes a difficult comparison due to the fact that the range is so extensive with outliers both above

and below the average.

It was found that transparency regarding the rationale on the rates and fees and the logic to develop

formulas to calculate the amounts is lacking. Some officials interviewed who work in the

departments that calculate fees on a case- by-case basis could not provide a clear understanding in

terms of the method, rationale and reasoning to derive the due amounts, and therefore cannot

explain to the public in sufficient detail.

It is unclear why a more standardised approach with regard to the techniques and formulae to

determine the fees cannot be prescribed. The research team is in agreement that the formulae

needs to be amenable to the local situation but a resemblance of a standardised approach is still

required.

For some municipalities, it was with great difficulty that the research team identified the appropriate

contact respondents that could provide the information on the rates and fees as required. In most

cases this could be ascribed to inability of switchboard staff to understand the request and match it

with the appropriate respondent. In other cases, the challenge is perceived due to unstandardised

departmental structures and responsibility allocations.

Municipalities also had difficulty to provide ‘’ball park” and generalised costing which is the

requirement of this assignment.

3. SURCHARGES

This section details the surcharges that the 18 delineated municipalities charge for property

development, as well as the additional costs incurred for services. The final analysis will assess the

extent to which additional charges impact property development within these municipalities.

Development surcharges are the additional costs that are incurred during a development process.

The tariff schedules for each municipality do not stipulate as to whether there are specific

development surcharges applicable to the application fees for:

zoning and rezoning,

township establishment,

subdivision, and

building plan fees.


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Municipalities were contacted to acquire the development surcharges for the above-mentioned

applications. The development surcharges that are noted below were thus identified by municipal

respondents. No municipalities from which feedback was received indicated a specific value as an

additional cost for development. Five municipalities did provide values, but these were tariff costs

and not surcharges. These figures were thus not incorporated into this section.

The municipalities whom have explicitly identified no development surcharges are Mogale City,

Emfuleni municipality, City of Cape Town and Rustenburg municipality, whilst Sol Plaatje

municipality indicated that development surcharges are dependent on the application submitted

and will be evaluated case-by-case. Nine municipal responses on surcharges have to date not yet

been received. These municipalities are Ekurhuleni municipality, Msunduzi municipality, Mbombela

municipality, Emalahleni municipality, Nelson Mandela Bay metro, Buffalo City metro, Polokwane

municipality, Mangaung municipality and eThekwini metro.

The surcharges established by service divisions are indicated in the tariff schedules for each

municipality. As detailed in Section 74(2)(1) of the Municipal Systems Act (2000), provision for

additional charges on a tariff may be made in appropriate circumstances. However, the act does not

stipulate which circumstances are deemed appropriate. The surcharges indicated are therefore

applied or charged by being incorporated into the tariff costs for the water, storm water, and

sanitation and power divisions.

All surcharges for each study area that have at this stage of the study been identified are outlined

below.

3.1 CITY OF JOHANNESBURG

The City of Johannesburg indicated no development surcharge that applies to the four development

scenarios and costs. Concerning surcharges for service divisions, the water division has affected a 2%

surcharge for business consumers for the 2012/13 financial year. No other surcharges were stated

by the municipality.

3.2 CITY OF TSHWANE

No development surcharges were identified by the City of Tshwane.

With regard to surcharges within the electricity, water and sanitation service divisions, it is indicated

in the tariff policy for City of Tshwane that any work that is done by the municipality for a consumer


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or body will be charged for the actual expenses inclusive of labour, material, supervision, transport

and the use of equipment. The surcharge that is payable is 13% on the amount with respect to

overhead expenses and administration. This surcharge is applicable to the electricity division. The

water and sanitation divisions charge for the same additional costs at 10% surcharge.

3.3 EKURHULENI MUNICIPALITY

There are no known development surcharges as indicated by municipal respondents or in the

applicable policies and schedules for Ekurhuleni municipality.

3.4 MOGALE CITY

With regard to development surcharges, the Mogale City municipality has identified no surcharges

applicable to the four development scenarios. Furthermore, there are no known surcharges

specified in the applicable policies or schedules for Mogale City municipality.

3.5 EMFULENI MUNICIPALITY

As with Mogale City municipality, the Emfuleni municipality has indicated that there are no

development surcharges for the four development scenarios. There are similarly no known

surcharges identified in the applicable policies or schedules published by the Emfuleni municipality.

3.6 CITY OF CAPE TOWN

The City of Cape Town has similarly stated that they charge no additional fees for any of the four

scenarios. Furthermore, there are no known surcharges outlined within their policies and schedules.

3.7 GEORGE MUNICIPALITY

The George municipality has not indicated development surcharges relative to the development

scenarios. With regard to the additional costs for service tariffs, there is no indication within the

policies or schedules.

3.8 MSUNDUZI MUNICIPALITY


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There has at this stage been no response from the Msunduzi municipality concerning development

surcharges. Furthermore, there are no known additional charges stipulated within the policies or

schedules of the service divisions.

3.9 MBOMBELA MUNICIPALITY

The Mbombela municipality has not at this stage indicated surcharges for the development

scenarios.

Mbombela municipality outlines additional costs payable for the water and electricity divisions. With

regard to the water division, the additional charges for connecting the premises of a new consumer

to the main pipeline are relative to two circumstances. Firstly, the cost of material and labour is

owed, and secondly, a 10% surcharge on an amount determined by the Director of Technical

Services is payable.

Concerning the electrical division, for the costs of connecting to a main supply, a consumer will pay

for all associated costs as mentioned above, as well as a surcharge of 15%. A maximum of R3 763

will be levied for administration charges.

3.10 EMALAHLENI MUNICIPALITY

At this stage of the study, there are no development surcharges identified. With reference to

additional costs applicable for service divisions, a surcharge of 10% on the amount accrued from

labour costs, equipment and transport costs, plus the average of these costs, is payable to the

Emalahleni municipality. This surcharge is only applies to new connections in the electricity division.

3.11 NELSON MANDELA BAY METRO

Concerning development surcharges, there has at this stage been no response from the Nelson

Mandela Bay Metro. Furthermore, there are no known additional charges stipulated within the

policies or schedules for the service divisions.

3.12 BUFFALO CITY METRO

Similarly, concerning development surcharges, there has at this stage been no response from Buffalo

City Metro. Furthermore, there are no known additional charges stipulated within the policies or

schedules for the service divisions.


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3.13 POLOKWANE MUNICIPALITY

There has at this stage been no response from the Polokwane municipality with regard to

development surcharges. Furthermore, there are no known additional charges stipulated within the

policies or schedules for the service divisions.

3.14 MANGAUNG MUNICIPALITY

Mangaung municipality has not responded to enquiries concerning development surcharges.

Additionally, there are no known additional charges stipulated within the policies or schedules for

the service divisions.

3.15 SOL PLAATJE MUNICIPALITY

With regard to development surcharges, the Sol Plaatje municipality has indicated that an additional

charge for applications is payable. These charges are dependent on the application submitted. With

regard to service surcharges, there are no known costs outlined in the policies or schedules.

3.16 //KHARA HAIS MUNICIPALITY

No development applicable surcharges have been noted in //Khara Hais. Similar to Sol Plaatje

municipality, there are no known additional surcharges for services.

3.17 RUSTENBURG MUNICIPALITY

Like Mogale City municipality, Emfuleni municipality and City of Cape Town, the municipal

respondent for the Rustenburg municipality explicitly indicated that there are no development

surcharges payable. With regard to service surcharges, there are no known costs outlined in the

policies or schedules.

3.18 ETHEKWINI METRO

At this stage of the study, development surcharges for the eThekwini metro have not been

identified. Furthermore, additional charges for services are not identified in the policies and

schedules for the municipality.


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3.19 IMPACT OF SURCHARGES ON DEVELOPMENT

Because surcharges are additional costs payable by developers, it is necessary to determine whether

the charges that each municipality has identified as a surcharge will significantly alter the overall

cost of development within a municipality. Due to the fact that the surcharge is an unknown during

the project financial planning phase, it could have a severely unfavourable effect on the project cash

flow.

With regard to development surcharges, of the data the specialists have received, there are no

specific values. Therefore, one may not attempt to calculate what the potential impact may be on

development costs. Concerning the municipalities that have specifically indicated that there are no

additional charges to development costs, it may be ascertained that there will be no impact on

development costs for these study areas. As aforementioned, these municipalities are Mogale City

municipality, Emfuleni municipality, City of Cape Town and Rustenburg municipality.

Concerning the surcharges applicable to the service divisions, because of the variables that affect the

value of the surcharge, the specialists are unable to equate a value to each scenario and quantify the

economic effect thereof on the property industry.

In conclusion, on account of the nature of the data available to the specialists, it is unclear as to the

extent potential development surcharges and surcharges applied to service tariffs may have on the

development costs of the delineated study areas.

4. MUNICIPAL RESPONSIBILITIES AND CHALLENGES

The following section outlines the municipal responsibilities and challenges14 regarding property

development within the delineated municipalities. These responsibilities and challenges include the

turnaround time for applications, whether overregulation and availability of land stymies

development, the level of education and skills within the applicable departments, and infrastructural

maintenance and development. This information is incorporated into four sections:

degree and availability of suitably zoned land,

administration effectiveness,

regulation, and

development of new infrastructure and maintenance.

14

It is important to note that the challenges identified within this section cannot be aligned with all the municipalities under analysis.


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The purpose of this section is to identify possible constraints and causes of rising fees and tariffs as

well as capacity issues that could cause delays in delivery and approvals.

There are a multitude of relevant challenges which range from financial restraints to overregulation

– if stipulated. These responsibilities and challenges will be analysed, thereby enabling both property

developers and municipalities to understand the development environment within each study area,

as well as the challenges present.

Importantly, this section of the study was developed to create an understanding of the municipal

opinions concerning property development and the degree to which it is regarded by municipal

respondents that development within their municipality is stymied by processes, personnel or

extenuating circumstances. It is fundamental to gauge an indication from their perspectives. This is

as it is noted – from a developers’ perspective – the impacts that municipal processes have on

development if they are not adhered to. For example, a delay in the provision of a building plan

approval may have significant financial impacts on a developer which were not previously factored

into and therefore negatively impact the development as well as have negative implications on the

perspective of future investors. Therefore, this section contributes to our understanding of why

these potential challenges occur.

Sixteen of the 18 municipalities being studied have responded. Nelson Mandela Bay Metro and

Rustenburg municipality did not provide feedback requested.

4.1 APPROACH

A qualitative survey directed to municipalities was the approach adopted to gather the information

required for this section. The relevant municipal respondents were identified, contacted and then

presented with the survey questionnaires. This approach enabled the specialists to obtain

comprehensive insight into challenges, concerns and responsibilities prevalent in the study areas.

Relative to the information gathered and the aim of the study, the responses have been collated and

analysed below. It is important to note that a scoring system adopted in the costing and developers

sections will not be applicable to this section due to the qualitative form of information gathered.

Nevertheless, if there are acute discrepancies between the developer responses and scores, and

municipal feedback, the scoring will be adjusted accordingly with an explanation provided.

Furthermore, quotes have been inputted within the text. These quotes are from municipal

respondents and were selected relative to how often the issue or statement was alluded to. In

conjunction, the information has been supplied by municipal respondents and therefore falls under

a confidentiality clause. Consequently, where information is deemed sensitive or confidential, the

respondent and municipality will not be identified and information will be conveyed only in a

combined format.


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Key opinions: degree of suitably zoned land

“There is sufficient zoned land available for all the development examples except for Industrial zoned land... the land that is avaiable for Industries would need investment in bulk infrastructure, which is a big challenge.”

“Developeable land is increasingly becoming a scarce resource. We are seeing agricultural zoned land being transformed to other use.”

“In instances where there is a demand then there are applications for the change in land use. The recent city Spatial Development Plan addresses the concern. There has been a number of applications on the periphery of the City for other reasons – one of them being cheaper land. There is however untaken land use rights in the city and that is sizable.”

In view of the comparative purpose of the study, the Gauteng municipalities have been compared to

the other study areas.

4.2 ANALYSIS AND FINDINGS

4.2.1 DEGREE OF SUITABLY ZONED LAND

Land availability is essential towards the facilitation of property development within an area. Of the

16 municipalities that have for this section responded, nine stated that there is sufficient suitably

zoned land to facilitate development, two municipalities indicated the unavailability of suitably

zoned land as a key problem, and the remaining five provided varying degrees of contention.

4.2.1.1 CHALLENGES

Of the municipalities under analysis, the challenges identified by the study areas that verified their

municipality does not to varying degrees have sufficient zoned land to cater for the development

scenarios are the following:

Developable land is becoming a scarce resource in a few Metro’s whereby the result is the

rezoning of agricultural land to other land uses and the moving of the urban edge.

There is a strain on infrastructure with increased development, and where land is rezoned,

major investment in bulk infrastructure is often required. Four of the municipalities attest

that infrastructure maintenance and development is a key challenge.

There is a challenge of congestion within CBDs, especially with the increase of small

businesses that require office space.

Illegal land uses have become problematic.

Developments have been lost due to land that was not readily available for development to

ensue.


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Key opinion: administration effectiveness

“Most of our processes are documented and staff should know what it is they should and

should not do. We have process flows for the development application business processes and

that is very clear for the staff and the applicant.”

With regard to the Gauteng municipalities and the availability of zoned land conducive to the

development of the residential, retail, commercial and industrial scenarios, all municipalities

responded. These responses provide contending insight into the availability of suitably zoned land.

Dependent on the respondent and municipality, it is confirmed that suitable land is available in

certain areas and but areas of high demand is definitely evident in which suitable land is unavailable

for development, whereby the lack of zoned land has led to loss of property investment.

Nevertheless, where land is deemed unavailable, the required land use rights can be obtained upon

application, however the process takes time and investment in infrastructure would potentially be

required.

4.2.2 ADMINISTRATION EFFECTIVENESS

To determine administration effectiveness within each study area, the specialists enquired the

number of employees within the relevant departments whom dealt with applications. Enquiries

included how many employees had degrees and what these degrees were. Finally, the respondents

were asked whether maladministration was prevalent within their department and if this

consequently deterred property development.

Of the 16 municipalities who responded, 75% did not feel that maladministration hindered property

development. Furthermore, of the four remaining whom referred to maladministration, only one

municipality specifically focused on staff abilities. The other three municipalities cited capacity

issues.

Of the five responses from the Gauteng municipalities, four believe that there is no

maladministration within the department that hinders property development.

4.2.2.1 CHALLENGES


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Key opinions: challenges

“Officials are not 100% committed and capacitated.”

“Yes, maladministration has hindered development.”

“The administrative wheels of such a big organization turn very slowly to the detriment of the developer.”

“The capacity in terms of personnel is not enough to handle the number of development applications received.”

Key opinion: regulation

“All the development management mechanisms currently in place are necessary if we are to

have world-class sustainable cities. The tendency of the private sector is not investing enough

time in the land clearance/development approval processes and when things don’t go their

way, everything becomes labelled as Red Tape.”

The municipalities that have referred to maladministration, specifically with regard to capacity issues

in terms of staff, are the smaller municipalities. From the municipal feedback, it is evident that the

smaller municipalities which have the least number of staff are unable to meet the level of

competitiveness they intend.

4.2.3 REGULATION

The feedback given by municipal respondents is equally distributed between agreement and

disagreement when asked whether regulation or the existence of overregulation hinders property

development. Of the responses, 50% agree with the statement. The remaining eight of the 16

municipalities stated that property development is not hindered by overregulation.

Four of the respondents from the Gauteng municipalities disagreed with the statement that

property regulation hinders development. The responses from the Gauteng municipalities included

the following points:

There is a feeling that developers “ride the system” and this often results in developments

with low standards which the municipality is left to rectify. The regulations in place are

therefore deemed as fundamental.

The Spatial Development Frameworks give a clear guideline to development zones, yet

municipalities are flexible if a proposed development is deemed meritable.


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Key opinions: regulation

“Legislation allows for an inclusive, precise, uniform process – all parties are given sufficient time

to comment on applications; and decisions on whether to approve or refuse an application is

informed by the respective utilities.”

“I think there is a need for regulatory review – appropriateness and whether it is onerous. There

have been recent changes and approvals that should see a change to the current landscape. I

think there should be a much more integrated approach and the creation of a more predicable

environment. If there is over regulation then it must be addressed – this has not been raised as

an issue.”

The regulatory processes are required to comply with Section 19 of the Town Planning and

Townships Ordinance, 1986 (ord 15 of 1986).

One respondent states that whilst the system is fairly rigid which allows for “certainty”, it is

flexible enough to deviate from guidelines if there are specific sites that merit an

application.

The municipality that believes that overregulation stymies development indicates that this is not

concerning all regulation, but specifically with regard to bulk service contribution regulations.

4.2.3.1 CHALLENGES

The key challenges noted by the six municipalities that believe that overregulation hinders property

development within their municipality are as follows:

Lengthy approval processes

Restrictive development plans and policies

Skills capacity of employees


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4.2.4 DEVELOPMENT OF NEW INFRASTRUCTURE AND MAINTENANCE

The upgrading and maintenance of infrastructure is fundamental to the facilitation of property

development. A limited capacity or outdated infrastructure contributes to the inaccessibility of a

study area with regard to development and the prospect of greater costs.

At the current stage of the study, in total, 16 of the 18 municipalities have responded. For each

division, there has been the following number of responses:

Power (12 responses)

Water (15 responses)

Sanitation (15 responses)

Storm water (15 responses)

Roads (14 responses)

It is noteworthy that although 16 municipalities have responded, the surveys were not necessarily

complete, therefore leaving gaps in the data.

Table 4-1 illustrates the municipalities for which there are responses and the missing data. It is

apparent that the challenges within each sector have received the least responses.

From the data received, one my ascertain that there are current or on-going projects within different

divisions for City of Johannesburg, City of Tshwane, City of Cape Town, George municipality,

Msunduzi municipality, Buffalo City Metro, Polokwane municipality, //Khara Hais municipality and

eThekwini metro. The scale and completion of these projects vary according to budget and

importance. Projects provided by each municipality are tabulated in Annexure A. These projects as

indicated in Table 8-2 are both on-going and planned for the 2012/13 financial year.

Table 4-1: Data Captured for Municipal Capacity Surveys


“Lack of adequate staff and occasional lengthy approval processes especially when reports are referred back by Committees for more information or clarity.”

“Partly hindered by overregulation, but most parties who want to proceed with their proposals endured all processes that have to be followed.”

“We have a moratorium on the selling of land placed on local authorities by SALGA for the past seven years which causes serious problems for development.”

“Still awaiting delegation of powers from [omitted] Provincial Government to administrate development applications.”


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Key opinions: projects and development

“We have a R650 million backlog of replacing existing electricity network infrastructure. We are working according to the Master Plan as budget allows… upgrading cables, switch gear, mini substations and substations to strengthen the backbone of the network to be able to accommodate new developments on the edge of urban areas.”

“Had reached full capacity... Upgrade due to development within the area.”

“Additional capacity to cater for planned RDP houses.”

“Most of the projects and upgrades are reactionary to complaints that certain standards are not met.”

With regard to financing, the smaller municipalities are heavily reliant on external funding and

grants, these being the Municipal Infrastructure Grants (MIG), Expanded Public Works Program

(EPWP) and Lotto Funding.

It is noteworthy that for many of the projects planned or on-going, these have resulted from the

need to extend capacity – due to either development or natural increased demand, and due to

outdated infrastructure that requires maintenance or upgrading.

4.2.4.1 CHALLENGES

power water sanitationstorm

waterroads power water sanitation

storm

waterroads

Johannesburg

Tshwane

Ekurhuleni

Mogale City

Emfuleni

Cape Town

George

Msunduzi

Mbombela

Emalahleni

Nelson Mandela Bay

Buffalo City

Polokwane

Mangaung

Sol Plaajie

Khara Hais

Rustenburg

eThekwini

current/ongoing projects Challenges in each sector

Study areas


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“It is a huge challenge to keep a continuous and safe Electricity Supply to our existing consumers… Developers have to pay “Actual Costs” to supply the new developments with an approved Electrical Consulting Engineer’s design to ensure compliance with NRS 048 Quality of Supply to the new consumers.”

“A severe shortage of staff – most of the work has to be done by contractors.”

“There are long delays in getting tenders awarded by Committees who do not understand the technical requirements.”

Key opinion: challenges

“There are challenges with all Municipal services due to rapid development.”

The challenges within each service division and municipality are in general in agreement in that

infrastructure is outdated and problematic, the level of demand has increased and infrastructure

capacity is pressured, skilled personnel are few and budgeting for each division is insufficient or

limiting. These challenges are outlined below.

4.2.4.1.1 ELECTRICITY DIVISION

Access to electricity is mandated as a basic right to all South African citizens. The power divisions for

municipalities are therefore responsible for maintaining accessibility and providing the service of

electricity to all citizens. The challenges within this division for City of Johannesburg, George

municipality, Buffalo City Metro and //Khara Hais municipality to meet this mandate are as follows:

Infrastructure is overloaded and outdated.

Continuous and safe electricity supply to consumers is problematic.

It is often on the onus of developers to contribute to the upgrading or to develop

infrastructure.

A shortage of skilled staff and vacancies.

Delays in development, upgrading and maintenance due to drawn-out tender processes.

Insufficient funding to achieve the objectives of the Master Plan.

Consolidation and compliance between two power providers is at times challenging.

4.2.4.1.2 WATER DIVISION


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Key opinion: challenges

“The DWA requires Gauteng municipalities to reduce water consumption by 15% ... limiting scope for new developments.”


“There are personnel constraints… we have only three people in the subsection. This situation is exacerbated as a result of ‘additional projects’ increasing already heavy workloads, such as the Gautrain project, and support and technical inputs on various issues.”

“Meeting both capacity and effluent standards are a challenge.”

“The hiring of labour and having them work efficiently [is a challenge].”

As with electricity, water is also a basic service to be made available and accessible. The challenges

facing the Water divisions of all municipalities are similar to those of the Power division. As indicated

in Table 4-1, the municipalities for which information is available at this stage are City of

Johannesburg, City of Tshwane, George municipality, Msunduzi municipality, Buffalo City Metro and

//Khara Hais municipality.

The main challenges are as follows:

Water resource constraints which limits scope for development.

Obtaining environmental approvals.

Lack of funds and consequent reliance on external funding.

Lack of internal personnel capacity and skills.

Hired labour and contractors often do not work efficiently.

Aging infrastructure and equipment.

The infrastructure in a few residential areas has not been designed to accommodate the

increased number of users, consequently putting increased pressure on infrastructure.

4.2.4.1.3 SANITATION DIVISION

The access to and provision of sanitation services is in conjunction with the mandate that declares

the provision of water and electricity services as a basic right. The challenges experienced by both

the Power and Water divisions are the same challenges that the Sanitation divisions in the

delineated study areas experience. In conjunction with Water services, the municipalities for which

information concerning Sanitation is at this stage available, are illustrated in Table 4-1. These


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“There is a large backlog in terms of drainage infrastructure, as it is mostly very old or inadequate.”

“The current funding allocation is inadequate to deal with the current system deficiencies and more importantly, asset replacement that have reached the end of its design life.”

“Severe weather events over the last five years that far exceed our design capacity which resulted in major damage of infrastructure… funding inadequacies negatively impact on the ability for us to effectively react to these damages.”

“Yearly expansion of networks within informal areas is addressed, but progress has been slow as funding still remains problematic.”

Key opinion: challenge

“From my side it is always a challenge to get funding for storm water related projects as it is not very high on the priority list…. That is until there is flooding, then there is an emphasis on storm water drainage.”

municipalities are City of Johannesburg, City of Tshwane, George municipality, Msunduzi

municipality, Buffalo City Metro and //Khara Hais municipality.

These challenges are as follows:

An insufficient number of personnel to complete and facilitate projects.

Timeous project approvals and available funding.

There is limited foresight and forward planning in the Budget concerning the upgrading and

maintenance of infrastructure which is intended to cater for increased development.

Inadequate funding.

Outdated and overloaded infrastructure.

4.2.4.1.4 STORM WATER DIVISION

Table 4-1 illustrates the 15 municipalities for which Storm Water division data is available. The

municipalities with outstanding feedback include Mogale City, Emfuleni municipality and Rustenburg

municipality. The challenges for the Storm Water division are in general aligned with the previous

service divisions analysed.

The general challenges for all municipalities are the following:


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Outdated infrastructure.

Insufficient funding for maintenance and infrastructure upgrades.

A shortage of skilled and suitably qualified personnel.

Constraining supply chain management policies.

Slow reaction times to demand.

4.2.4.1.5 ROADS DIVISION

Fourteen municipalities have at this stage provided information on the challenges for the Roads

division. With reference to Table 4-1, the municipalities with information still pending are Mogale

City, Emfuleni municipality and Rustenburg municipality. Equivalent to the Power, Water, Sanitation

and Storm Water divisions, the challenges evident within the Roads division are the same that are

apparent throughout the Service Divisions for all the municipalities discussed. These challenges are:

Outdated and inadequate standard of infrastructure,

unreliable and old machinery,

insufficient funding, and

unskilled personnel.

4.3 SUMMARY

The municipalities that have responded total 16 of the 18 delineated study areas. The two

municipalities whose feedback is outstanding is Nelson Mandela Bay Metro and Rustenburg

municipality. Of the 16 respondents, all 16 provided information for the capacity questions

concerning administration, regulation and zoning and land-use. With regard to the development of

infrastructure and maintenance, Table 4-1 illustrates the nine municipalities whom have responded

– City of Johannesburg, City of Tshwane, City of Cape Town, George municipality, Msunduzi

municipality, Mogale City, Polokwane municipality, //Khara Hais municipality and eThekwini metro.


“The biggest challenge facing the municipality is the need to maintain the almost 7 000km of surfaced network to an acceptable standard within the constraints of a limited budget. The majority of the network is old which puts increasing pressure on resources to be able to do this.”

“The maintenance and upgrading of the un-surfaced network… is an on-going challenge.”

“Resources in the form of personnel and equipment are not adequate.”

“85% of the road network is gravel, [being a huge challenge for the development of the municipality].”


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From the feedback garnered, it is evident that for each municipality – relative to singular

circumstances – the challenges and scope of departmental abilities to facilitate property

development varies. Furthermore, the information gathered confirms the sections and divisions for

which each municipality requires further valuations – an additional study for each municipality

would be necessary to develop an in-depth assessment. Concurrently, this section of the study has

provided an analysis that enables one to determine the fundamental wide-ranging factors that in

general the study areas display and have outlined.

Of the responses that have been submitted, one may determine the following:

Municipalities rely largely on external funding.

The majority of the larger municipalities – specifically the Metro’s – have sufficiently zoned

land, yet there are indications that the rezoning of land and development of new

infrastructure is required when development is to occur.

There are mixed views about the prevalence of maladministration. When maladministration

is acknowledged as discouraging development in some municipalities, the overarching

reasons are capacity issues and a lack of skills.

There are mixed views about whether overregulation is prevalent and whether it stymies

development.

With regard to the service divisions and infrastructure for power, water, roads, storm water

and sanitation, there are general consistent challenges across the study areas. These are

inclusive of budget restraints that result in a backlog of projects, outdated infrastructure and

unskilled or uninformed personnel.

The majority of the challenges in the service divisions are as a consequence of financial

restraints and increased demand and pressure on service provision and infrastructure.

Personnel capacity issues are another challenge, as well as the availability of basic resources.

For example power and water constraints.

Importantly, the information gathered is subjective and therefore poses a limitation towards

determining the true extent to which these perspectives are reliable. There is no further data that

enables specialists to quantify and economically analyse the impacts municipal processes have on

property development. Furthermore, the missing data provides further limitations towards a clear

and complete analysis.

From the information gathered the following key issues have been identified:

Sufficient suitable land is unavailable in areas with high demand and rapid development.

Regulatory process, although slow, is important to ensure developments adhere to all

requirements to ensure quality and sustainable developments. However, this should not be

an excuse to justify unnecessarily delayed approvals.

Limited staff has been indicated as a major capacity issue as municipalities can’t keep up

with rapid development, however it is difficult to actually assess if the capacity available is

sufficient.


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Delayed delegations of powers from top government structures are identified as a source

contributing to local municipalities being unable to perform functions.

Outdated infrastructure that requires maintenance and upgrades is a driver of tariff and cost

inflation.

4.4 GAUTENG SUMMARY

All five of the metro and district municipalities for the Gauteng province have responded, of which

all respondents provided feedback on regulation, administration, zoning and education, whilst only

the City of Johannesburg and City of Tshwane provided data outlining the challenges within divisions

for the service divisions.

To summarise, three of the Gauteng respondents state that there is not sufficient availability of

zoned land for property development this problem is especially evident in the high demand urban

markets. In conjunction to four of the Gauteng respondents who have stated that maladministration

is non-existent within their municipalities, one municipal respondent has indicated that bad

administration is prevalent, consequently stymying property development. One of the municipal

respondents for the Gauteng municipalities feels that overregulation inhibits development within

their vicinity, and that this is specifically with regard to the regulatory policies concerning bulk

service contributions.


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5. PROPERTY DEVELOPERS: KEY ANALYSIS

This section provides insight into the perspective of developers with regard to doing property

related business and undertaking development projects with municipalities. The study focus was to

undertake the analysis for all of the 18 delineated municipalities, however due to limited response

rates, some municipalities were omitted from the analysis. The degree to which developers rate

their experience of developing within a municipality – confirmed as positive or undesirable – will be

analysed in total. The rateable experiences for each municipality are:

• application turnaround times and administration effectiveness and efficiency,

• the degree of suitably zoned land,

• the costs related to town planning, building plan, subdivision, rezoning, connection and EIA

fees,

• the costs related to consumption charges, service contributions and land rates, and

• the efficiency of infrastructure, maintenance and infrastructure development.

5.1 APPROACH

Online quantitative surveys were submitted by SAPOA to a total of 391 selected respondents active

within the South African property industry. To ensure that sufficient feedback was gathered, the

surveys were re-submitted to respondents that have not taken part in the first request, to attempt

to facilitate a more accurate and representative opinion.

The survey15 was constructed with identical questions for all 18 municipalities. Each municipality had

an identical table whereby developers were provided with a rating table to rate their business and

conduct experience with municipalities from 1 – 5, 5 being excellent and 1 being terrible. Annexure C

provides a template of the survey submitted for City of Johannesburg, demonstrating the rating

system as well as the rateable indicators.

In total, 74 (19%) of the total 391 developers responded. In descending order, the municipalities that

received the most feedback are the City of Johannesburg, the City of Cape Town, Ekurhuleni

municipality, and the City of Tshwane. The remaining 14 municipalities did not receive sufficient

feedback to sanction a detailed analysis.

On account of the limited feedback for the 14 municipalities other than the City of Johannesburg,

the City of Cape Town, Ekurhuleni municipality, and the City of Tshwane, these municipalities will

not be included in this analysis as the results for these areas is perceived to provide an untrue

reflection of property development for these study areas will be created.

15

A template of the developer’s survey is available in Annexure C.


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The aim of this section is to provide a “customer feedback” or service rating for the municipalities

analysed. The survey layout enabled specialists to collate the data numerically to ultimately provide

a comparison for each of the rateable experiences. The total percentage for each experience is

tabulated.

5.2 KEY INDICATORS

To determine a comparable service rating for the delineated study areas, the indicators detailed

within the developer survey are collated into sections of town planning, costs, and administration.

These sections are structured to streamline assessment and analysis of the municipalities.

The key indicators are highlighted below.

TOWN PLANNING

The indicators for town planning include:

Application turnaround time

Township Establishment fees

Re-zoning fees

Zoning fees

Building Plan submission fees

EIA fees

Subdivision fees

COSTS

The indicators for Costs include:

Service contributions

Service connection fees

Consumption charges

Development surcharges

Service costs

Vacant land rates

Property rates

Municipal tariffs

ADMINISTRATION

The indicators for Administration include:

Suitably zoned land


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Administration effectiveness

Municipal abilities

Transport efficiency

Security efficiency

Housing efficiency

Infrastructure maintenance

Service contributions

Regulation

5.3 SERVICE RATING

This section provides an analysis of the “customer satisfaction” feedback from developers for the

City of Johannesburg, the City of Cape Town, Ekurhuleni municipality, and the City of Tshwane. The

rating and analysis for each municipality or metro is outlined below. It is important to note that the

ratings are from the perspective of developers and should therefore be considered subjective.

5.3.1 TOWN PLANNING

As aforementioned, the section for town planning in the developers’ survey includes several

indicators. A rating for each indicator was applied to each municipality. These results, which

illustrate the developers’ perspectives concerning the indicators for Town Planning, are illustrated

below.

Table 5-1 shows the total scores for each municipality for the seven service indicators. Furthermore,

the percentage for each indicator is indicated. This percentage is calculated relative to the highest

possible score that each indicator could have achieved. For example, considering re-zoning fees, if all

developers gave a 5 rating, the municipalities in total would have scored 405 points. Thus, 204 points

equates to a 50% score.

Table 5-1: Developers Rating for Town Planning Indicators

With respect to Table 5-1, it is evident that the turnaround times for all four municipalities have

scored the lowest at 148 points, equating to 36%. In conjunction, the highest rating for the service

Town Planning Score %

Application turnaround time 148 36%

Township establishment fees 206 51%

Re-zoning fees 204 50%

Zoning fees 199 50%

Building plan submission fees 213 54%

EIA fees 205 53%

Subdivision fees 208 53%

TOTAL SCORE 1383 49%


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indicators is the costs of building plan submissions. This received a 54% score. It is therefore

apparent that developers feel that the turnaround time of applications for the City of Johannesburg,

the City of Cape Town, Ekurhuleni municipality, and the City of Tshwane is poor. The other service

indicators have a score of 50% or above.

The overall impression developers’ hold for the costs of Town Planning fees and the efficiency of

processing applications is indicated by the total number of votes received for each indicator. More

than half of the votes received for Town Planning are designated to the “average” score of 3. The

remaining 43% of the ratings are distributed across “below average” (22%), “bad” (19%), and “above

average” (7%). The highest score, “excellent”, was not elected by any respondents.

In total, the municipality for whom the developers’ best rated for service and costs within Town

Planning is both the City of Tshwane and Ekurhuleni municipality, each scoring 51%. The City of

Johannesburg with a 49% score and the City of Cape Town scoring 48% follow.

5.3.2 COSTS

The costs for development are related to all additional charges and fees that are not included in

applications for development. Therefore, the results for this section will reveal whether the

developers who responded feel the charges of each indicator for either municipality or metros are

over-priced or reasonable. These cost indicators are mentioned above in the section outlining the

key indicators.

Similar to Table 5-1, Table 5-2 highlights the scores received for all four municipalities being

analysed. These scores are awarded relative to the costs associated with the development of

property. Therefore, each cost indicator has been rated according to value. Similarly, the score as a

percentage is given. The rating system from 1 – 5 as previously described has been applied. Thus,

the indicator with the lowest score is rated as charging the highest costs.

Table 5-2: Developers Rating for Costs Indicators

With regard to all municipalities, the respondents rated the costs associated with property

development with a total score of 1 484 out of 3 255 points, therefore equating to 46%. The scores

highlighted in Table 5-2 range from the lowest at 176 for service contributions, to the highest at 194

Costs Score %

Service contributions 176 43%

Service connection fees 181 45%

Consumption charges 177 43%

Development surcharges 189 47%

Service costs 192 47%

Vacant land rates 194 48%

Property rates 182 45%

Municipal tariffs 193 47%



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for vacant land rates. When including the total possible score for each indicator into the equation,

developers rated both consumption charges and service contributions as the most expensive costs at

33%. Vacant land rates are rated as the most affordable cost.

Pertaining to the scores for the individual indicators, there were no responses for “excellent”. In

total, 24% of the responses were for the “bad” rating, followed by 31% of the responses for below

average. The “average” rating had the highest number of votes with 245 (38%) out of 651. There

were 48 (7%) ratings for “above average”.

With reference to the municipal services costs associated with property development, the

municipality for whom the developers awarded the best rating is the City of Cape Town. The metro

received 468 points for all costs, which equates to 51% when including the number of respondents

who participated in the rating. The City of Cape Town is followed by Ekurhuleni municipality which

scored 50%. The City of Tshwane scored 46%, whilst the most expensive study area is the City of

Johannesburg receiving 39%.

The total score for all municipalities when determining the perspective of developers concerning the

value of costs related to property development is 34%.

5.3.3 ADMINISTRATION

The service rating for administration will illustrate the opinion of developers with regard to the nine

indicators included in this section. Together with Town Planning and Costs, the Administration

section provides an overview of “customer satisfaction” regarding the service that municipalities

provide to property developers.

Table 5-3: Developers Rating for Administration Indicators

Table 5-3 highlights the scores for the four municipalities under analysis. In conjunction with Table 5-

1 and Table 5-2, the scores indicate the perception of developers. Table 5-3 specifically indicates

scoring with regard to administration efficiency and effectiveness.

Administration Score %

Degree of suitably zoned land 182 45%

Administration effectiveness 141 34%

Abilities of municipalities 158 38%

Transport efficiency 175 44%

Security efficiency 177 44%

Housing efficiency 174 44%

Level of infrastructure maintenance 165 39%

Development of new infrastructure 161 38%

Regulation 170 41%



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In total, the City of Johannesburg, the City of Cape Town, Ekurhuleni municipality, and the City of

Tshwane scored 1 503 points for administration. This score, when calculated to include the number

of developers who submitted ratings, amounts to a 41% grade. The service indicator which has the

worst rating is the effectiveness of administration, for which developers rate the service at 34% for

all municipalities. The highest score of 182 out of 405 (45%), was awarded to the indicator detailing

the degree to which developers perceive availability of suitably zoned land.

In conjunction with the indicators for town planning and costs, there were no scores of “excellence”

for the administration service indicators. Of the total ratings for all the administration indicators, the

“below average” rating had the highest number of ratings with more than a third of the total

responses. The “bad” rating followed closely with 34% of the responses. An “average” score was

delegated 176 votes (24%), with “above average” receiving 7%.

With regard to the developer’s perspectives of individual municipalities for the service rating of

administration, as with the ratings for costs, the City of Cape Town has the highest rating. The metro

received a score of 48%. The metro with the lowest score is the City of Johannesburg which scored a

low 34%. The City of Tshwane was awarded 45%, followed by Ekurhuleni municipality with 40%.

5.4 SUMMARY

The study areas for which sufficient data was available were rated from the perspective of property

developers. Service ratings were applied to enable specialists to determine the level of “customer

satisfaction” felt by property industry players. Additionally, the indicators which were rated by

developers were summarised into three key service indicators: town planning, costs and

administration.

From the data received, one may determine that the municipality for which the highest rating was

awarded is the City of Cape Town. This is illustrated in Table 5-4.

Table 5-4: Total Score for Municipality

Of all four municipalities analysed, the City of Johannesburg has the lowest total score of 40%. This

score is lower than the total score awarded at 45%. The City of Tshwane and Ekurhuleni municipality

have an equal score of 47%.

Study Areas ScoresTotal available

points%

Johannesburg 1478 3695 40%

Tshwane 730 1555 47%

Ekurhuleni 773 1635 47%

Cape Town 1329 2705 49%

Total 4310 9590 45%


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It is therefore evident that the developers who responded felt that in total, the City of Johannesburg

offered the worst service considering the costs and efficiency of town planning, development costs,

and administrative efficiency. Essentially, the customer satisfaction is 40%. In total, none of the

municipalities received a score above 50%.

With regard to the responses and ratings for each indicator, Table 5-5 illustrates in what way the

developers responded to each section.

Table 5-5: Total Responses for Each Indicator

It is evident in Table 5-5 that the most commonly using rating was “average” at 37%. For the

remaining ratings, 30% of all choices were for the “below average” score, followed by “bad” with

27% of the responses. For all indicators, none of the municipalities received an “excellent” score,

whilst only 7% of all the ratings were for “above average”.

It is therefore apparent that property developers feel that service satisfaction ranges from “average”

to “bad” in descending order. There were no “excellent” ratings, and only 7% of responses in total

were awarded to “above average” as a service rating. Furthermore, the three municipalities from

the Gauteng province scored lower than the City of Cape Town. Importantly, as aforementioned,

these results are subjective. It has been widely expressed that municipal processes are too slow and

that this causes additional financial constrain to developers due to increasing cost of capital and

interest repayment which could sink a project. For this reason, the recommendations in this

document will deal specifically with administrative effectiveness and improved turn-around times.

Key Indicators bad below av. average above av. excellent total ratings

Town Planning 105 121 296 37 0 559

Costs 159 199 245 48 0 651

Administration 253 257 176 52 0 738

TOTAL SCORE 517 577 717 137 0 1948

% 27% 30% 37% 7% 0% 100%


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6. SUMMARISED COMPARATIVE PROFILE

This section provides a visual illustration in the form of a map to summarise the results garnered

from the data that has been processed and analysed within the previous chapters. The purpose of

the summarised comparative profile is to provide a broad strategic view of the current reality

conducting development business. The profile aims to illustrate municipalities in context to

affordability, capacity to accommodate development and general perception of developers on

conducting business with these municipalities. The data for the 18 delineated municipalities is

provided in Figure 6-1. Each municipality is represented in a block with its associated results. The

cost indicators have been quantified in terms of the different development scenarios illustrated by

means of a colour legend.

The rating was determined by applying a cold academic approach to the raw data and should thus

be viewed in that context. The services costs of property development within the municipalities is

the key influential factor of the profile, augmented by the “customer rating” from developers. The

information gathered from the municipal respondents is not included in this comparison, as as

aforementioned; it is not quantifiable but is included mainly for the recommendations for

development.

The value labelled “costs” is the final score that the study areas received for the costs of developing

property within each municipality. Furthermore, with reference to the results for the developer

service ratings, noted in the matrix as “customer ratings”, all the municipalities other than the City of

Johannesburg, Ekurhuleni municipality, the City of Cape Town and City of Tshwane, have been

awarded the average of 45% as specified in Table 5-4. This was necessary as it was not possible to

provide individual service assessments for the remaining 14 study areas.

Consequently, the results reflected in Figure 6-1 are provided as a visual comparison of all the study

areas, yet should be assessed alongside each chapter. This is as the figures could subsequently be

misinterpreted if the report as a whole is not taken into consideration.

To achieve the final rating for each municipality from 1 to 18, 1 being the highest scorer and the all-

round “best performer” in terms of a “development-friendly environment”, the scores from both

“costs” and “customer ratings” were added.

It is therefore evident in Figure 6-1, that the best performing municipality is Emalahleni municipality,

whilst the lowest municipality is Mangaung municipality. Again, these scores should be assessed

alongside the chapters which provide explanations for the results illustrated.


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Polokwane: Costs (46)(37)(34)(43)

Customer rating (45%)

Rustenburg: Costs (37)(33)(32)(33)


Pretoria: Costs (40)(36)(36)(36)


Nelspruit: Costs (48)(46)(41)(37)


Witbank: Costs (54)(52)(46)(47)


Johannesburg: Costs (45)(44)(42)(42)


Kempton Park: Costs (46)(41)(38)(39)


Vanderbijlpark: Costs: (53)(45)(41)(42)


Pietermaritzburg: Costs (46)(42)(41)(41)


Durban: Costs (31)(37)(39)(33)


East London: Costs (41)(38)(38)(34)


George: Costs (49)(40)(40)(37)


Cape Town: Costs (49)(44)(46)(44)


Krugersdorp: Costs (46)(37)(35)(34)


Bloemfontein: Costs (39)(29)(32)(32)


Port Elizabeth: Costs (42)(44)(41)(41)


Upington: Costs (52)(47)(47)(48)


Kimberly: Costs (41)(40)(39)(38)


11

17

15

5

1

7

9

4

6

16

14

10

3

13

18

8

12

Figure 6-1: Municipal Comparison

Costs: Residential development – See Table 2-18 Retail development – See Table 2-20 Commercial development – See Table 2-22


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Industrial development – See Table 2-24 Customer rating: Service rating by developers – See Table 5-4

In review of the comparative profile, it is evident that a number of smaller municipalities outperform

the larger metros. These include Emalahleni, //Khara Hais and Midvaal. Possible reasons for this

could allude to the fact that these municipalities want to draw development to their respective

areas. In terms of this profile, the best performing metropolitan municipality is the City of Cape

Town, with the majority of Gauteng municipalities scoring average (7.9) to lower (15). It should be

stressed that in order to ensure the competitiveness of Gauteng, municipalities of the Gauteng

province should streamline their processes and ensure their rates and tariffs are market related. It

should also be stated that due to higher demand and thus more rapid on-going development,

Gauteng and other urban municipalities are often under more pressure.

Taking a strategic view, in terms of the rating, it must be stated that overall, there are small

differences in the performance of municipalities that have no identified outliers and thus results are

relatively comparable. A similarity in challenges faced by municipalities is also noted.

6.1 ECONOMIC INDICATORS AND PERFORMANCE

The purpose of this section is to review the key economic indicators and relate the results with the

above Comparative Matrix (Figure 6-1), in order to strategically gauge whether the high municipal

development costs have indeed caused significant economic detriment to development. The

economic indicators will subsequently allow the specialists to address the low or high costs outlined

in Figure 6-1 by determining a comparative economic baseline of the study areas.

The economic indicators employed for all municipalities are the average annual growth rates (AGGR)

for:

The GVA (Gross Value Added)

Population

Household Disposable Income

The period prescribed to these growth rates for the economic indicators is from 2006 to 2011,

therefore providing an indication of the population and household income growth, as well as the

GVA growth for each municipality for the past five years. The data used was sourced from Quantec,

a consultancy that provides economic and financial data.

These indicators are relevant to this particular study as they provide a baseline upon which to gauge

the development across each study area. In summary, household income and population growth

rates are indicative of employment opportunities, access to services, improved living standards and

an increased or decreased demand for output. The average growth rate of the GVA measures the

output of a region over a period of time. The indicators are thus important for planning purposes.

This is as they provide insight into a study area and the trends evident for the economy and social


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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

GVA 2.8% 3.7% 3.0% 4.5% 5.3% 5.5% 5.6% 3.8% -1.4% 2.9% 3.0%

Population 2.7% 4.0% 2.7% 6.0% 5.9% 7.3% 5.2% 2.3% -1.1% 4.2% 5.2%

Household income 1.3% 1.3% 1.3% 1.3% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

GVA Population Household income

rand depreciation

slowdown of the European

low interest rates, high consumer expenditure

global financial and local electricity crisis

structure over a period of time. One will thus be able to determine the degree to which an economy

is/ has been/ will be conducive to development.

The growth rates as opposed to the actual values are used because they provide a more

representative illustration of the study areas. This is as an analysis of the total figures does not

indicate trends. This is as the municipalities vary in size, capacity and role, and therefore this would

create an unreliable analysis of the growth and development within each municipality.

Figure 6-2 provides an illustration of how global and national events have an impact of the national

economy. The contraction of the European economy and global financial crisis coupled with the local

electricity crisis had significant spin-offs on the South African economic climate. These spin offs are

illustrated by the fluctuations of the GVA and population curves in Figure 6-2. It is important to

create a macroeconomic baseline to interpret the economic indicators for each study area as a

consequence of the global and national markets, as these will have direct, indirect and induced

impacts on development.

Figure 6-2: Growth Rate of the GVA, Population and Disposable Income for South Africa between

2001 and 2011 with Global Trends (Constant 2005 Prices)

Source: (Quantec, 2012)

It is evident that the growth rates of the GVA, and population for South Africa are significantly

impacted by the events indicated. This is as consumer and foreign demand and trade have indirect

impacts on both the primary and secondary sectors, specifically manufacturing and mining. These

sectors are also very closely integrated with one another and the tertiary sector. Therefore,

contractions in demand will significantly impact the local economy. Similarly, the degree to which

the economy is diversified and reliant on sectors especially sensitive to trade, lends to how


85

significantly it is impacted. With regard to population, migration trends and population growth are

interrelated to cost-of-living and the ability of an area to provide employment and social security.

Importantly, this section will not provide a comprehensive in-depth analysis of each municipality.

Essentially, the degree of analysis that would be required for such a study is not within the scope for

the analysis.

6.1.1 AVERAGE ANNUAL GVA GROWTH RATE FOR ALL STUDY AREAS

The GVA of a municipality is the measure of the value of goods and services produced. It essentially

provides a value of the output of a region. In contrast to the GDP, the GVA is not used to measure

the national output. This is as the total aggregates of taxes and subsidies on production are not

available on a regional basis. In effect, with regard to the study areas, the GDP as an indicator is not

applicable, therefore providing an explanation for the use of the GVA as opposed to the GDP.

Figure 6-3: Average Annual GVA Growth Rate (2006–2011) for Study Areas (constant 2005 prices)



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Figure 6-3 provides a visual illustration of the difference in average annual growth rates for the 18

study areas. Colour coding is used to more clearly illustrate the range in which each municipality

falls. The average annual GVA growth rates from 2006 to 2011 range from the lowest rate of 0.17%

for the Nelson Mandela Bay metro, to the highest AAGR of 4.35% for Mogale City.

From Figure 6-3, one may determine that the municipalities which have the lowest AAGRs for 2006

to 2011 are Nelson Mandela Bay metro (0.17%) and the Emfuleni municipality (1.08%). The growth

rates for these municipalities fall below 1.5%. It is evident that the majority of municipalities AAGRs

fall within the range from 1.51% to 3% growth. These municipalities are //Khara Hais municipality,

Sol Plaatje municipality, Buffalo City metro, eThekwini metro, Emalahleni municipality, Rustenburg

municipality and Polokwane municipality.

The municipalities that have the highest AAGRs for that period are all within the Gauteng province –

the City of Johannesburg, City of Tshwane and Mogale City. Concerning the remaining municipalities

within this region, Ekurhuleni municipality has an AAGR of 3.14% and Emfuleni municipality a low

1.08%.

Table 6-1: Comparison of GVA AAGR (2006 -2011) to 2011 Growth Rate for all Study Areas

(constant 2005 prices)


Importantly, none of the municipalities had a negative average annual GVA growth rate for this

period. This is significant considering the global financial and local electrical crisis’s in 2009. The

STUDY AREAS AAGR (2006 - 2011) 2011 Growth Rate

City of Cape Town 3.6% 3.0%

George Local Municipality 3.3% 3.6%

Buffalo City Local Municipality 2.5% 2.1%

Nelson Mandela Bay Metro 0.2% 0.6%

//Khara Hais Local Municipality 2.5% 1.6%

Sol Plaatjie Local Municipality 2.1% 2.5%

Mangaung Local Municipality 3.4% 2.4%

Msunduzi Local Municipality 3.1% 2.2%

eThekwini Metropolitan Municipality 2.6% 2.4%

Rustenburg Local Municipality 2.1% 3.6%

Emfuleni Local Municipality 1.1% 2.6%

Mogale City Local Municipality 4.3% 3.9%

Ekurhuleni Metropolitan Municipality 3.1% 3.8%

City of Johannesburg Metropolitan Municipality 4.3% 3.8%

City of Tshwane 4.2% 3.1%

Emalahleni Local Municipality 2.1% 2.4%

Mbombela Local Municipality 3.5% 2.5%

Polokwane Local Municipality 2.4% 1.7%


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impact these crisis’s had on the study areas’ economies was however significant. In 2009, all

municipalities other than the City of Tshwane which had increased growth from 2008 to 2009 of

2.6% and 3.1% respectively, had a negative growth rate for their GVA (constant 2005 prices)

(Quantec, 2012). The municipalities with slowest growth rates were the Emfuleni municipality with

negative 10.4%, Nelson Mandela Bay metro with negative 4.6%, and Emalahleni municipality,

Ekurhuleni municipality, and Rustenburg municipality with negative 4.2%, 3.5% and 3.2%

respectively (Quantec, 2012). The negative 10.4% growth rate for the Emfuleni municipality is a

manifestation of the extreme contraction of the manufacturing sector during this period. In constant

2005 prices, the total growth rate of the GVA for this sector was negative 29% (Quantec, 2012).

The positive growth of 15% from 2008 to 2009 for the construction sector for the City of Tshwane

may be a reason for this positive growth (Quantec, 2012). The construction sector for all

municipalities was high during the preceding years to the 2009 local and global financial

contractions. The construction sector for all 18 municipalities remained at a positive growth

throughout the 2008 and 2009 economic stagnation (Quantec, 2012). For many municipalities, this

sector actually experienced a higher growth rate than the previous year. These municipalities are the

City of Tshwane, with an increase from 10% growth for 2007 to 2008, to 15% growth for 2008 to

2009, Buffalo City for the same periods respectively have growth rates of 9% and 12%, Nelson

Mandela Bay at 6% and 10%, //Khara Hais with growth rates of 10% and 14%, Sol Plaatje

municipality with 4% and 9%, Mangaung municipality with 9% and 13% and eThekwini metro with

7% and 8% (constant 2005 prices) (Quantec, 2012).

As aforementioned, the growth of the GVA is an indication of the output per region. A continued

growth or contraction of output is thus an indication of the degree of development and sustained

activities for sectors of the local economies. Thus, with regard to the growth rates for 2010, in

relation to the AAGRs (2006 – 2011) in basic 2005 prices for all study areas, one will be able to

determine whether slower growth rates for 2006 to 2011 have impacted current output and

development. Table 6-1 provides an illustration of the AAGRs (2006 – 2011) in constant 2005 prices

relative to the 2011 growth for the 18 study areas.

It is thus apparent in Table 6-1 that a total of 11 of the municipalities have a contracted growth for

2011 compared to the AAVR for 2006 – 2011. The most significant decline in growth is evident for

the City of Tshwane with a 1.1% difference in growth (Quantec, 2012). The municipalities who have

an increase in growth of their GVA for two growth indicators are George municipality with an

increase of 0.3%, both Nelson Mandela Bay and Sol Plaatje with an increased difference of 0.4%,

Ekurhuleni metro (0.6%), Emalahleni municipality with 0.3% difference, and 1.5% increase for both

Rustenburg local municipality and Emfuleni municipality (Quantec, 2012). It is important to note that

an increase in growth is not indicative of the municipalities that have the highest output in basic

prices. Instead, as previously discussed, relative to the decline of the GVAs from 2008 to 2009, a

quicker growth rate indicates an increased degree of output from 2010 onwards. These

municipalities, other than George municipality and Emalahleni municipality which both had

increased government activity in the tertiary sector, all showed an increase in output in the primary

and secondary sectors (Quantec, 2012), thus signifying increase demand and development.


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6.1.2 AVERAGE ANNUAL GROWTH RATE OF THE POPULATION FOR ALL STUDY

AREAS

Population growth rates are an important economic indicator. This is as a growth or decline in

population is generally a reflection of the employment and social opportunities within an area. In

conjunction, these opportunities are in general significations of development and general growth.

The reflection of the growth rate of the output of an area relative to population growth is illustrated

for South Africa in Figure 6-2.

Figure 6-5 illustrates the study areas and the AAGR for the population between 2006 and 2011. It is

evident in Figure 6-5 that the population growth ranges from 0.1% for the lowest for the George

local municipality, to the Emalahleni municipality having an AAGR of 4.9% (Quantec, 2012). The

municipalities that fall within the red are, inclusive of George municipality; Nelson Mandela Bay,

Buffalo City metro and Emfuleni local municipality. Six municipalities had AAGRs between 2006 and

2011 ranging from 2.01% to 2.5% (Quantec, 2012).

Figure 6-4: Average Annual Population Growth Rate (2006 – 2011) for all Study Areas



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With regard to the association between employment opportunities and population growth, the link

between the population migration trends for this period and employment losses and creation clarify

the relationship. Furthermore, employment losses and population growth trends similarly indicate

the growth for a region’s GVA. Therefore, to understand the population AAGR’s illustrated within

Figure 6-5, it is necessary to compare population migration trends to employment opportunities.

In concurrence, significant employment losses within the sectors of the economy between 2006 and

2011 are as follows:

The total loss of jobs between 2006 and 2011 within the agriculture sector was more than

half a million at 553 232 (Quantec, 2012). An increased loss of employment within the

agriculture sector contributed to an in-migration trend of rural-based people relocating to

urban centres.

Job losses in manufacturing (203 718) and construction (114 287) are evident for this period

(Quantec, 2012). Considering the areas under analysis, the most significant decreases in

output in constant 2005 prices for manufacturing between 2006 and 2011 is illustrative in

the growth rates of 2008 and 2009 for all the study areas (Quantec, 2012). These sectors are

noteworthy absorbers of the migrant labour force of South Africa, and therefore an

increased out-migration of migrant labourers would be prevalent within areas where jobs

were lost.

There were 4 446 employment losses within the wholesale and retail sector which indicates

a decrease in demand and loss of spending power for the population.

Firstly, before the population growth rate for 2011 is compared to the AAGR (2006 – 2011), it is

important to note that the predominant migration trend noted for South Africa is the relocation of

job seekers to mega-cities and coastal regions (Cross, 2009). This is as infrastructure, employment

opportunities and service provision are key drivers of migration (Cross, 2009). Thus, population

growth for mega-cities and primary service nodes may not necessarily be affected by employment

losses within their region, but by in-migration from other study areas.

Population growth in 2011 for the 18 municipalities, compared to pre-2009, has contracted

(Quantec, 2012). This is specifically with regard to regions whose economies are significantly

impacted by the primary and secondary sectors, in which labour absorbing industries are prevalent.

The municipalities whose population growth for 2011, are greater than the AAGR for the past five

years illustrated in Figure 6-5, are George municipality, Buffalo City, Nelson Mandel Bay metro, and

two municipalities within the Gauteng province being Emfuleni and Ekurhuleni municipalities

(Quantec, 2012). Importantly, other than the George municipality which shows an increased growth

relative to the negative growth rate from 2008 and 2009, the remaining four municipality’s growth

rates have remained constant (Quantec, 2012). For these reasons, the growth rate for 2011 is higher

than the AAGRs. The population growth relative to the two growth indicators for the remaining 13

municipalities shows a decline in 2011. This may be reflective of a stabilising national economy,

therefore resulting in a slower migration of job seekers.


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6.1.3 AVERAGE ANNUAL GROWTH RATE OF THE DISPOSABLE HOUSEHOLD

INCOME FOR ALL STUDY AREAS

Disposable income per household indicates the spending power and welfare of a region. It is directly

linked to inflation rates whereby income out-ways inflation. Essentially, an increased demand for

goods and consequently an increase in output can be expected with a growth in disposable income,

as well as a higher standard of living. With regard to South Africa, this indicator is relevant as

development is aligned with higher standards of living and service and goods demands. Essentially,

the regions in which disposable income per household displays the quickest growth rate would

direct one to the areas wherein development and employment has increased.

Figure 6-5: Average Annual Household Disposable Income Growth Rate (2006 – 2011) for all Study

Areas (constant 2005 prices)


As indicated in Figure 6-7, the AAGRs for household disposable income for all the study areas

between 2006 and 2011 in basic 2005 prices range from 0.2% to 6% (Quantec, 2012). The

municipalities which have had the slowest AAGRs for 2006 to 2011 are Rustenburg municipality

(0.3%), Emfuleni municipality (0.2%), Msunduzi municipality (1.2%), Nelson Mandela Bay


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municipality (0.6%) and Buffalo City (1.9%) (Quantec, 2012). These municipalities fall within the

lowest range of 0.19% to 2%. There are two municipalities that fall within the highest growth range,

these being the City of Johannesburg with an AAGR for household disposable income at 6%,

followed by //Khara Hais with an AAGR of 5.2% between 2006 and 2011 (Quantec, 2012). There

were similarly high growth rates which are above 4% for three of the municipalities within the

Gauteng province – City of Tshwane, Mogale City and Ekurhuleni metro. The AAGR of disposable

income per household similarly fell within this range for the Mbombela municipality whose growth

was 4.4% (Quantec, 2012).

Importantly, when there is increased output, there are induced impacts that impact the growth of

income per household of both households wherein the work force reside, as well as from those

employed by supporting industries. Therefore, an increased growth rate in the GVA of an area

should signify an increase in living standards, and thus disposable income per household.

This pattern is evident for The City of Johannesburg with an AAGR for their GVA between 2006 and

2011 of 4.32% in constant 2005 prices, and an AAGR of 6% for household disposable income

(constant 2005 prices) (Quantec, 2012). In conjunction, the City of Tshwane had AAGRs for these

indicators at 4.25% and 4.4% respectively, Mogale City with 4.35% and 4% growths and Mbombela

municipality showing related growth rates of 3.52% for the GVA in basic prices, and 4.4% growth of

household disposable income (Quantec, 2012). The City of Cape Town and Ekurhuleni municipality

had similar comparability’s between the AAGRs for the economic indicators of GVA and household

disposable income for the 2006 to 2011 years of 3.6% for both indicators for the City of Cape Town,

and 3.14% and 4.2% respectively for Ekurhuleni municipality. Relative to the growth rates for the

other municipalities, //Khara Hais Local municipality had a slow AAGR for their GVA of 2.45%

(constant 2005 prices). In conjunction, the AAGR for increase in household disposable income was

the second to fastest after the City of Johannesburg at 5.2%. This fast growth may be attributed to

the tertiary sector that continued to provide employment opportunities for the 2006 to 2011 period,

at a total of 91% (Quantec, 2012). This sector is predominantly constituted of semi to skilled

labourers which receive a higher income and therefore contribute to the AAGR of total household

disposable income.

A comparison between the AAGR (2006 – 2011) for household disposable income with the 2011

growth rates provides insight into the degree of growth for demand and consumption, as well as an

increased standard of living within an area. These development indicators inherently indicate the

development of an area. Of the 18 study areas, the 2011 household disposable income growth rate

(constant 2005 prices) for seven municipalities is less that the AAGR (2006 – 2011). The most

significant difference between these growth rates is evident for Emalahleni municipality, which is 2%

(Quantec, 2012). This is as the growth of disposable income for this study area fluctuated from 9.3%

growth in 2006, to negative 1.3% in 2009, and a growth of 5.7% in 2010 (Quantec, 2012). These

fluctuations contribute to the average growth of 3.8% (Quantec, 2012). Therefore, the growth rate in

2011 of 1.8% indicates a decline in income levels. The three municipalities with the most significant

difference in growth for 2011 compared to the AAGR (2006 – 2011) are all located within the

Gauteng province. These municipalities are the City of Johannesburg, Mogale city municipality and

Ekurhuleni municipality. The AAGR in constant 2005 prices between 2006 and 2011, compared to


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the growth rate of 2011 for the City of Johannesburg is 6%, and 7.5% respectively. For the same

growth indicators, the Ekurhuleni municipality and Mogale City have difference in growth with 4.2%

and 6.3%, and 4% and 5.8% respectively (Quantec, 2012). This illustrates that household disposable

income, for these municipalities, has not declined. The other eight municipalities for which this trend

is apparent is the City of Cape Town, George municipality, Nelson Mandela Bay metro, eThekwini

metro, Rustenburg municipality, Emfuleni municipality and the City of Tshwane.

6.2 DEVELOPMENT IMPLICATIONS

In context to the key economic indicators as discussed in this section, with regard to the results of

the cost comparison, it is clear that no direct relationship between the economic performance and

the levels of development costing is discernible. A few examples to illustrate this point include the

Gauteng municipalities – other than Emfuleni municipality – that do relatively well in terms of

economic performance, but are also among the more expensive municipalities in terms of

development costs. When considering the Emfuleni municipality which has a low GVA growth,

income growth and population growth, but is the 4th most affordable, it is further apparent that

there is no distinct relationship. In some areas though, the results between the economic indicators

and the perceived accessibility for development relative to costing and performance, were more

compatible. For example, the City of Cape Town is the 3rd most affordable and development friendly

study area, and shows upper-middle to high economic performance among the indicators. Similarly,

//Khara Hais municipality is the second best performer with middle to higher growth rates evident.

Based on these findings, it is clear that the performance of the economy and the municipal fees that

contribute to the cost of development are not easily corresponded. This is as there is no

incontestable direct correlation between these indicators. However, should the economic indicators

be more development focussed, such as the performance of the local construction sector and

development professionals within the development industry such as town planners and engineers

be applied, it is expected that a clearer and more discernible correlation would be achievable and

evident.


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7. OVERALL STUDY OBSERVATIONS

With reference to the findings from each section, the following summary of observations is

presented.

Relative to the individual cost component and municipality, the municipal services costs of property

development within the delineated municipalities vary extensively. It is clear that across the board,

municipalities do not have a specific standard applied to cost calculations, as different techniques

are employed by the various municipalities to arrive at developmental costing. Due to the variations,

it was thus necessary to develop a scoring system that could accommodate the range of costs, and

provide a simplified illustration of the results.

As highlighted in Table 2-18, the final assessment and ratings for the overall services costs indicates

eThekwini municipality as the most expensive municipality and //Khara Hais municipality the most

affordable. These results should however be observed alongside the explanations, as there are valid

clarifications for these results. Furthermore, the tariffs that were not accessible from the tariff and

rates schedules were for connection fees, for which municipalities were mostly unable to provide

values. According to the respondents, this was due to too many unknown variables that are

unavailable or unanswerable for this hypothetical assessment. Therefore, municipalities cannot

provide ‘’ball park” cost figures for cost aspects such as connection fees, because a site inspection is

a prerequisite to compile a cost quotation. Additionally, some of the costs provided do not appear

probable, as in some cases, the values appeared overinflated or very low in comparison to others.

Nevertheless, the results for the study are applicable and serve as a guideline of cost expectations to

developers.

Concerning the self-evaluation of each municipality, it is evident that relative to singular

circumstances, the challenges and scope of departmental abilities to facilitate property development

varies. The information gathered from municipal respondents confirms that in order to create a

comprehensive assessment, a study directed specifically to each municipality would have to be

undertaken. The information could also not be displayed in a combined format as environments are

unique, each with their own challenges. Nevertheless, based on the assessment, the following key

challenges faced by municipalities are summarised:

• Personnel capacity constraints are a key issue within service divisions, administrative and

town planning departments.

• Insufficient funding does not enable all sectors to meet the targets set.

• The level of educated staff is good, yet there are complaints concerning competency and

practical experience in both lower and middle tiers.

• More than 50% of the responses received agreed that regulations in place are necessary,

specifically since there is a consensus among municipal respondents that property

developers at times take advantage of the system and the limitations thereof. Some

municipalities have cited the presence of certain legislature which incapacitates their ability

to rapidly accomplish their responsibilities, thus stymying potential property development.

However, respondents did not indicate which legislature or elaborate on this statement.


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• Most of the infrastructure development that occurs is due to outdated and unmaintained

infrastructure. Projects currently in progress are inclusive of maintenance and replacement

of old infrastructure with new. Furthermore, and importantly, a large proportion of the

projects are initiated out of necessity due to the need to meet capacity demands or to avoid

infrastructure failure.

With regard to the chapter that details the perceptions of developers, it is clear from the results that

the majority of developer respondents do not hold a high regard for the selected study areas, and

thereof, the municipalities enablement of property development. The majority of responses were

given to the “average” rating at 37%, with 30% of the ratings for “below average” and 27% for “bad”.

As is noted in Table 5-5, no respondents gave the municipalities an “excellent” rating. Concerning

the total service rating and customer satisfaction of property developers, the overall score for all

municipalities was 45%.

It must be stressed that the costs associated with development may be used as a comparative

guideline. Importantly, these results are only relevant for one financial year, and thus, it is

recommended that the study be updated annually from 1 July. Concerning the responses from the

municipal respondents and developers, because the feedback was subjective, it is recommended

that this information be used as a base and not an absolute in calculations for cost estimates.


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8. RECOMMENDATIONS

Subsequent to the analysis, the following recommendations have been compiled based on the

insight gained from undertaking the various surveys and extensive interaction with municipalities

and developers. These recommendations are not intended as critique, but aim to provide possible

mitigations to enable both industry players and municipalities to ensure that property development

is better managed, promoted and encouraged. This will be to the benefit of both municipalities who

would benefit from increased tax revenues and developers with increased profit margins.

As discussed in the first part of this study, the discrepancies and extensive variations in unicipal

services costs relative to the property development cost indicators informs the need for a more

standardised approach to costing and calculation methods. This could possibly include the expansion

of the existing circular that is constructed by the treasury, into a manual. The purpose of such a

manual would be to recommend universally appropriate techniques and formulae to determine

specific costs, as well as stipulate which standard deviations from the recommended techniques are

admissible. Due to the unique conduct and environments of municipalities, variations must be

allowed, but must be directed by specific criteria and regulations which are applicable to all

municipalities.

The value of such a standardisation would allow for easier comparison between municipalities, as

well as a better understanding by the public on how the tariffs have been arrived at. Similar to

itemised billing, a more comprehensive understanding of all the direct and indirect costs incurred to

render a developmental service bares the advantage that it could make the public more amenable to

pay the fees and tariffs. This is as a more informed understanding of the scope of work related to

rendering the service would improve perceptions. The increased transparency would also assist to

boost investor and developer confidence in municipalities and their processes.

The advantage of a standardised system for developers and specialists, who may have operations

within different municipalities, is the saving on time and administrative burdens. This is as familiarity

with a standardised system, whereby all parties are aware of the requirements, procedures and

policies of development processes will result in the ease of conducting multiple business ventures

simultaneously in different regions. This could also be extended to developing standardised

application forms – regardless of the municipality – as the requirements and processes are the same.

A standardisation would similarly allow for a greater level of certainty. This would pertain specifically

to better financial planning and budgeting. Limitations of unexpected and unforeseen costs are

perceived to reduce risks which could make investment in development more inviting and lucrative.

An added advantage of standardisation is that it would allow for “levelling of the playing field” to

make municipalities equally competitive and to ensure development is not stymied in any

municipality. In the end all municipalities will benefit from this due to economic momentum being

generated.


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Unless specific and transparent reasons or a justification for otherwise is provided, all regulation

concerning property development should be consistent across all municipalities. This will contribute

to equal development and investment allocation.

Municipal systems of processes concerning the setting of tariffs should be more transparent.

Essentially, the actual reason for the determination of a tariff should be provided in a clear, concise

and timely manner to all industry players and other persons upon request. This will dispel potential

misunderstandings and lengthy and costly processes.

Difficulty to source appropriate development information on costing and other aspects during this

assignment caused concern, as it is assumed that developers and investors find it equally difficult to

source similar information. It is therefore viewed as imperative that municipalities improve access to

information. It is recommended that customer care centres be well trained in terms of

developmental enquiries or that a single knowledgeable individual or specific department is

dedicated to handle public enquiries on all aspects regarding developmental costing. This is to avoid

the public being referred from one individual to the next without making any progress regarding

their enquiry. This person or department would also be responsible to provide timely and

informative information to questions posed. It is imperative that this person or department is easily

accessible during all office hours by various means of communication, including telephone, email

and personal consultation. Unnecessary delays and financial inaccuracies are often a result of

misunderstandings and misleading information, which could ultimately cause development failure or

discouragement. This person or department should be knowledgeable to provide reasons and

explanations for the costing and setting of a tariff. This would not be necessary should the costing

calculations be truly transparent.

Related to the above department, there is also scope and potential for municipalities to provide an

additional income-generating service in the form of development consulting. Developers and

investors alike could agree to pay for such a service where an internal development consultant

handles all queries and drives the application or service, ensuring that deadlines are adhered to and

applications finalised. Such a consultant would also provide continual progress feedback to the

client. Continuous feedback of the progress is imperative, as insufficient feedback is frustrating and

often demotivating to investors and developers alike.

Municipalities need to be aware of the high costs brought on by delays in approvals, as well as the

rendering of services. These costs include, among others, cost of capital (interest), lost opportunity

cost and loss of income. The loss of income could be brought on by an inability to start construction

on time, but also due to the inability of immediately profiting from a specific use that would

generate increased income. To improve the understanding of municipalities, it is recommended that

an economic impact study on the quantification of these services costs be undertaken. Such a study

will provide a detailed and quantified assessment in terms of the costs of delays. It is perceived that

an understanding on the extent of these costs would assist to motivate officials to keep reasonably

to realistic timeframes.


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It is the responsibility of both developers and municipalities to ensure that service installation is of

acceptable standards and aligned with future forecasted demand. This recommendation stems from

municipal experience with poor quality internal services that do not perform optimally and thus

result in lost capacity as municipalities have to repair or upgrade these newly installed services.

The utilisation of information technology could also be investigated as a possible measure to

improve the organisation of submissions and administration. Such a system could be employed to

provide customer feedback, service tracking and notifications. A client could “log-on” to their

application profile and track its progress by seeing what components are still outstanding, and by

receiving an estimate when completion could be expected. Whilst adding to the overall

sophistication of the process, such an IT system could work effectively to reduce administrative

inefficiencies, as a well-developed program would undertake the administration processes

automatically, therefore leaving no room for human error.

An IT system could be used as a monitoring and control mechanism by tracking the number of

applications currently in progress by officials, and flagging overdue responses and approvals. This

could assist to boost overall productivity and transparency within departments. Similar systems are

currently used by the UK town-planning departments. A screenshot of such a system is included as

an example. The development of a system appropriate for the South African environment should be

investigated in more detail.

A universal and representative online IT system could also be developed on a provincial level. This

would assist and guide developers in terms of processes, as well as to identify their appropriate local

authorities and contact persons. An example of such as system is the Planning Portal hosted by the

UK Government. Please refer to their website for more information

(http://www.planningportal.gov.uk/planning/).

http://www.planningportal.gov.uk/planning/


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The implementation of an IT system could also in future evolve into a completely green system

where no hard copy documents would be required and all documentation is saved and kept on

record within the system. This would improve search and traceability of historic and current

applications.

Another progress motivational instrument is the development of a performance-based budget

allocation system. Such a system has been successfully implemented by various leading

governments internationally. The basis of operations of such a system is to incentivise municipalities

to adhere to regulation prescribed timeframes. Proportional to their ability to keep within

timeframes, municipalities are awarded financially or otherwise. This instrument could improve

accountability, as the failure to keep within designated time frames will have negative results. The

objective of such a system is to promote effectively working government machines, as more funds

will potentially be at their disposal, and municipalities will in effect compete in terms of

effectiveness and efficiency.

It is recommended that industry players be involved in decision making systems by participating in

these decision processes and opening up communication channels. A possible platform to achieve

this is on an annual basis prior to the development of the budget, open forums for developers and

municipalities to participate in discussions are hosted. Essentially, all stakeholders will have the

opportunity to motivate their concerns and explanations for actions. This will increase knowledge

and uniformity of the approach to setting tariffs, as well as transparency for both parties. This will

further assist to hedge the current negative perceptions of developers.

Ultimately, with regard to fees and costs, uncertainty could be addressed by developing fee

calculators as online tools. Cost variables could be filled into such an instrument which is developed

from the standard formulae as currently in the tariff documents. As per the requirement of

individual developers, the purpose of the calculator is to generate an estimate of the expected costs

for each unique development scenario.

The above recommendations are intended to ensure that for both municipalities and property

developers, that systems and actions of both parties do not contribute to challenges and stymying of

property development. Furthermore, a simpler and more standardised approach as well as

accountability for actions and inactions will make property development in South Africa appear

more favourable to both local and foreign investors.


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9. WAY FORWARD

In order to ensure the continued relevance of the research, it is suggested the cost analysis be

reviewed annually due to new tariff policies released by municipalities in July of every year. The

following actions to expand on the research and recommendations as noted above should also be

considered:

A method of standardisation that would both be applicable and amenable to all

municipalities would have to be investigated and developed. The deliverable of such an

assessment would be a detailed manual to be dispersed to municipalities.

Ideally, an index on the development costs should be created that will be a useful tool to the

public; however standardisation of the cost calculation methods would be a prerequisite to

enable the development of such an index.

As previously mentioned in the introduction of the report, it would be beneficial to broaden

the study areas to a more representative national sample.

The option of an Information Technology administration system, if agreeable to

municipalities and government, should be further investigated in terms of appropriateness,

relevance, implementation, as well as cost to develop, install and operate.

Development of an online “calculator” system tool to calculate the specific costs could be a

quick win solution. This will assist with addressing the key motivation and rationale for this

study, which is the unavailability of information and uncertainty regarding costs.


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REFERENCES

Local Government: Municipal Systems Act. (2000, November). Local Government: Municipal Systems Act No

32, of 2000. South Africa.

Local Government: Municipal Finance Management Act. (2003). Local Government: Municipal Finance

Management Act No. 56, 2003. South Africa.

Cross, C. (2009). Migration Trends and Human Settlements: Some implications for service centres. Human

Sciences Research Council.

Quantec. (2012). Quantec Development Indicators.

Treasury, N. (2012, March 19). Municipal Budget Circular for the 2012/13 MTREF. MFMA Circular No. 59.


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ANNEXURE A

Table A-1 provides a list of the infrastructure projects both on-going and provisioned for for the 18

delineated study areas. This information was provided by both municipal respondents, and

documents accessed from municipal online archives.

Table A-1 lists each municipality, all service divisions – water, storm water and roads, electricity and

sanitation. The projects for each division are listed alongside.

There are currently no projects available for Mogale City municipality, Emfuleni municipality and

Rustenburg municipality. The information to be provided for by these respondents is still pending

and will be available in the final report.


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Table A-1 Infrastructure Projects

Study Areas Division Project

City of

Johannesburg

Water Waste water treatment works

Olifants Vlei expansion

Gcin'Amanzi water reticulation project

Sewer network upgrades and bulk infrastructure development

New Zandspruit and Lion Park reservoirs

Rehabilitation of Bruma Lake

Storm Water &

Roads

Kliprivier basin storm water management project

Gravel road upgrades specified in IDP

BRT expansion

Power Renewal bulk infrastructure

Sebenza transmission: New geographical Information System

yard

Network development for townships and service connections

electrification of numerous erven and residential nodes

Sanitation

Additional

comments

All divisions Service challenges are dependent on where they are in the

metro. Power and water are the big spenders. There is

continual maintenance and infrastructure upgrading.

Refurbishment vs. new infrastructure is a ratio of 33:66

(approximately) for the 2012/13 financial year.


103


City of Tshwane Water Upgrading of sewers

Lengthening of network and supply pipelines

Upgrading of networks and replacement of old infrastructure

Purification plant upgrades

reservoir extensions

Bulk sewer supply - Franspoort

Storm Water &

Roads

Contributions: services for Township Development

Apies River: Canal upgrading, Pretoria Central

Major storm water drainage systems

Rehabilitation of storm water systems and sidewalks

Rehabilitation of roads in most wards

Corridor upgrades

Upgrading of gravel roads to tar in Wards 51, 52, and 53

Upgrading and development of transport facilities city wide

Power Replacement of obsolete and dangerous switchgear

Sub transmission system equipment refurbishment

LV network within towns

Strengthening 11kV cable network


104


Strengthening 11kV Overhead network

Substations

City of Tshwane Public lighting program

New bulk infrastructure

construction of the new K2 132/11 kv substation

new connections

City of Tshwane electricity Control Room Reconfiguration

Rooivel Power station refurbishment

Sanitation Augmentation of the Moreletaspruit Outfall Sewer

trenchless rehabilitation projects

CCTV inspection and cleaning projects

sewerage for low cost housing

replacement, upgrade, construct waste water treatment works

facilities

Replacement of sewers

Additional

comments

Ekurhuleni

municipality

Water Rainwater harvesting network

Acid mine drainage


105


Programme Boloka Metsi: Installation of intelligent meters and

Infrastructure upgrade

Enhance water management information and revenue system:

Telemetry system and Maintenance system

Storm Water &

Roads

Fak’imali Uzobona: construction of storm water systems and

gravel roads to paved standards in township areas

Hlasel’ ama Potholes: patching of potholes and rehabilitation

and resurfacing

Vuk’ uphile: Roads EPWP job creation programme

Power Palm Ridge electrification project – electrification of Phase 3

Solar Water Heater Project

Chief Albert Luthuli: Electrification of 1355 stands

Upgrade of Daveyton Substation

Sanitation Project Xixima: sustainable sanitation solutions

Phasing out of Dunswart sewer pump station: deal with

environmental pollution

Additional

comments

All divisions The above projects are the flagship projects. Maintenance and

rehabilitation projects will occur continuously

Mogale City Water

Storm Water &

Roads

Power


106


Sanitation

Additional

comments

Emfuleni

municipality

Water

Storm Water &

Roads

Power

Sanitation

Additional

comments

City of Cape Town Water Belville Wastewater Treatment works

Replace and upgrade water network (Citywide)

Storm Water &

Roads

IRT related infrastructure

Non-motorised transport (Citywide)

Reconstruction of metro roads

Power electrification

Replacement of system equipment

Additional system equipment

Refurbishment of Medium Voltage Switchgear


107


New building complex at Bloemhof

Houtbay LV depot

Street lighting (Citywide)

Steenberg Upgrade

Sanitation North Area Sewer

Replace and Upgrade sewer network (citywide)

Additional

comments

Continual maintenance and upgrades of road links, transport

corridors, electrification.

George municipality Water Western Pipeline

Thembalethu Bulk water pipeline

Asazani phase 1 & 2 internal water reticulation

Raising Garden Route Dam Spillway

Storm Water &

Roads

N2 / York bridge widening and pedestrian bridge

Asazani Phase 1&2 internal road network

Cradock Street upgrade

GIPTN infrastructure projects

Bus stops – GITPN

Power new 132kV municipal substation has been commissioned


108


upgrading of the main Eskom supply

Sanitation Gwaiing Sludge handling

Uniondale WwTW Upgrade

Thembalethu / Asazani Pump station and pipeline

Thembalethu/Asazani bulk sewer

Kleinkrantz WWTW upgrade

Asazani Phase 1 & 2 internal sewer reticulation

Additional

comments

Power Economic recession has slowed planned capital expansion

program

All divisions Continual maintenance of infrastructure

Msunduzi

municipality

Water Copesville Reservoir

Storm Water &

Roads

rehabilitation and upgrading of roads

upgrading up gravel roads

new footpaths, curbing and channeling

New England Road (Phase 2) - COGTA/CNL

N3 / Chota Motala Road Interchange -COGTA/CNL

IRPTN - DoT

Power


109


Sanitation Projects at tender stage

Additional

comments

Water and Sanitation Majority of the coming projects are still at tender stage

All divisions for 2012/23, priority has been given to maintenance and

repairs

Mbombela

municipality

Water Additional 1ML/D module at Dwaleni package plant and

refurbishment of bulk line to OMO Reservoir

Backdoor / Mbonisweni water augmentation scheme

Construction of 2.0 Mg/l package, bulk line

refurbishment of internal network

Detailed planning for Upgrade of Karino Bulk Water for

Dwaleni, Backdoor reservoir and Kabokweni OMO Reservoir -

Phase 2

Extension of Zwelisha and Zomba Water Reticulation

Installation of water reticulation from boreholes and package

plants

Msogwaba Water Supply

Upgrading and extension of water network as per Water

Master Plan

internal water connections

Storm Water &

Roads

Equipment upgrades

Assessment & planning for replacement of collapsed storm

water pipes and culverts


110


transport supporting infrastructure

Construction of New links roads

resealing of tarred roads

Design, Reconstruct & tar gravel roads

Power Delta-Anderson Ring Deloading

Distribution and safety equipment

Electrical Network Protection

electrification program

Low Voltage Network Upgrade: Overhead to Underground

(Residential)

Substations maintenance and refurbishment

procurement of equipment

Sanitation Chemical dosing system

Coltshill outfall sewer & servitudes [2.3km]

Hazyview outfall sewer & internal network for Vakansiedorp

internal sewer connections

Sewer Main Outfall Upgrades

Planning and Construction of Kaapsehoop sewerage works and

reticulation


111


Additional

comments

All divisions Refurbishment/upgrade of infrastructure assets

Emalahleni

municipality

Water Replacement of portion of corroded leaking bulk water supply

lines

installation of bulk and domestic water meters

supply and delivery of diesel over pump

upgrading of point A,B,C & D water pump stations

Storm Water &

Roads

installation of storm water management system in the CBD

construction of internal roads in Empumelelweni

installation of storm water management system in Phola and

Ogies

construction of paved roads and storm water in Emalahleni

municipality

Power electrification

Doornpoort Upgrade

Sanitation construction of Hlalanikahle sewer network

upgrading and refurbishment of WWTP Klipspruit

Upgrading of Luthuli/ Botha sewer pump station and outfall

sewer line

upgrading of Phola WWT works

Additional


112


comments

Nelson Mandela Bay

Metro

Water Water Treatment Works - New, Augmentation & Upgrade

Elandsjagt - Upgrade to Restore Capacity

Supply Pipe Lines - Rehabilitation & Refurbishment

Rehabilitation of Reservoirs

Distribution Pipe Lines - New, Augmentation & Upgrade

Improvements to System - Genera

Purchase of Water Meters - Metro

Storm Water &

Roads

Tarring of Gravel Roads

Storm water Improvements in various wards

Storm water Drainage System : Phase 2

Flood Risk and Improvements (Swartkops & Chatty)

Rehabilitation of Infrastructure Salt Pans

Blue Horizon Bay Bulk Storm water

Groundwater Problem Elimination Northern Areas

Programme: Construction of Major Roads

Programme: Rehabilitation of Bridge Structures

Programme: Non-Motorised Transport Facilities


113


Power Miscellaneous Mains and Substations

Network Reinforcements

HV Network Reinforcement - New Substations

Technical Control Systems

MV and HV Switchgear replacement

Line Refurbishment (overhead and HV)

Informal Housing Electrification

Sanitation Regionalization: Sanitation

Reticulation Sewers - Rehabilitation & Refurbishment

Sewer replacement and relining

Maintenance Backlog

Reticulation Sewers - New, Augmentation & Upgrade

sampling stations

Rehabilitation of bulk sewer networks

Chatty Valley Collector Sewer Stage 1

Sewerage Pump Station : Maintenance Backlog, new

equipment

Kelvin Jones WWTW: Upgrade


114


Fishwater Flats WWTW Upgrade

Additional

comments

Buffalo City Metro Water

Storm Water &

Roads

Do not have any storm water projects currently underway

Upgrading of Gonubie link road

Upgrading of Mdantsane roads

Power upgrading cables

upgrading switch cables

upgrading mini substations and substations

Sanitation Quinera Waste Water Treatment Works

Reeston Waste Water Treatment Works

East London Sewer Diversion

Eastern Beach Sewers Upgrades

Bufferstrip Sanitation Upgrades

Waste Water Treatment Capacity (Zwelitsha)

Nord Avenue Pump Station

Inland Rural Sanitation


115


Additional

comments

Sanitation Most of the projects are due to the infrastructure meeting full

capacity

Power

Polokwane

municipality

Water Refurbishment of infrastructure

EPWP projects

Upgrading of water reticulation in the City Cluster

Refurbishment of water inventory -municipal wide

Maintenance of reservoirs

Storm Water &

Roads

12 projects from upgrading from road to tar

5 rehabilitation projects

4 NMT projects

1 IRTP project

2 storm water projects

1 bridge project

1 routine road project

Power working according to the Master Plan as the Budget allows

electrification

upgrading delta substations


116


consumer connections

Maintenance of electricity distribution network

Plant and Equipment

Sanitation sewer regional plant

consumer connections

Maintenance of sewage distribution system

Operations and maintenance of rural water treatment plants

Additional

comments

Mangaung

municipality

Water basic water to stands

naval hill reservoir supply lines

upgrading of pump to Naval hill

refurbishment of water supply systems

Real Loss Reduction Program

Storm Water &

Roads

upgrading and maintenance of roads

upgrading of streets and storm water

upgrading for housing projects

heavy rehabilitation of roads


117


rehabilitation of bridges

Power

Sanitation maintenance of sewer network in specified wards

outfall WWTW

Upgrade bulk sewer for Brandwag project

refurbishment of sewer systems

Additional

comments

Sol Plaatje

municipality

Water Water Zone Metering

Ritchie Water

Storm Water &

Roads

Galeshewe Stormwater infrastructure ward 5 & 18

Bloemanda & Thusano (wards 5 & 6) Roads and Storm water

Sobantu & Tlhageng (Wards 13 & 17)

Power Additional Bulk Electricity from Eskom (80 MVA)

Hadison park and Hall street substations

Electrification

Herlear Injection Equipment

Replacement programme: IT Hardware


118


Sanitation Refurbish and upgrade Ritchie Waste Water Treatment Works

Homevale Waste Water Treatment Works (Upgrade)

Kamfersdam Water Reduction

Riverton Water Purification Works

Additional

comments

//Khara Hais

municipality

Water Provision of Water on Occupied Residential

Provision of Drinking Water in Melkstroom

Raw Water for Schools

A September WTW, Algae Treatment

Construct Water Purif. Works, Melkstr

Replace Worn-out Water Pipelines

Storm Water &

Roads

Resealing of Streets, Phase 2

Road with bridge: R/dale to Paballelo

Lengthen and Tar Dakota Road

Upgrade CBD Storm water System

Paving access road, Leseding

Resealing streets, phase 1


119


Tar Keidebees Streets

Paving of Streets in Paballelo

Louisvaledorp Access Road

Raaswater Access Road

Kalksloot Access Road

15Km of roads resealed 30 June 2014

Power Electricity 512 Houses

Upgrading of Networks

Upgrading of mini substations and sub stations

Electrical Services for CTHC Development

upgrading of mains network

Increase the Notified Bulk electricity supply to SPM

Sanitation Enlarge Main Sewer Line, Rosedale

Extension of Louisvale weg Sewer Works

Replace Obsolete Pumps, Switchgear

Upgrade main sewer, Dawid Street

Extension of sewer line: Myles

water and sewer, 81 plots


120


Additional

comments

All divisions A vast amount of the projects are reliant on external funding.

Rustenburg

municipality

Water

Storm Water &

Roads

Power

Sanitation

Additional

comments

eThekwini metro Water water loss intervention program

western and northern aqueducts

infrastructure to meet backlogs

Storm Water &

Roads

Constant upgrading of sidewalks

maintenance and upgrading of the un-surfaced network

emphasis going forward is on improving and upgrading public

transport and public transport corridors

many on-going storm water infrastructure projects


asset management exercise

upgrade of roads and new access roads


121


Power electricity infrastructure

Sanitation new waste water treatment works and upgrades


Additional

comments

upgrading and maintenance is continual when not limited by

budget constraints, the major capital investments have been

for water and housing


0

ANNEXURE B

Relative to the municipal services costs of property development, Annexure B is an illustration of the rating system and method used by the specialists to

rate each municipality. The method is explained below:

The figures in Table B-1 are the average costs for each municipality for each tariff charge. These values were calculated by aggregating the four

development scenarios for each tariff.

The values highlighted in orange are the outliers and were not included in the calculations for the ranges and determination of performance scores.

This is as they were either much lower, or far exceeded the majority scores, and would consequently result in an unrealistic range for scoring.

As aforementioned, the values highlighted in blue are the costs for which a quotation is necessary. Because these values would be zero, to ensure a

comparable and comprehensive analysis, the municipalities that required a quotation for a tariff were assigned the total average charge for a

particular cost. For example, the average for township establishment across all municipalities for all development scenarios is R5 600, as illustrated

in Table B-1 for City of Cape Town, George municipality, Msunduzi municipality, Buffalo City Metro and Sol Plaatje municipality.

The method of scoring is evident in Table B-2, whereby for each tariff, each value in Table B-1 falls within a range from 1 – 5, 5 being the lowest

cost, and score 1 being the most expensive. The ranges were calculated by dividing the difference between the highest and lowest cost from each

indicator by five. This value was then added to the lowest cost and so forth, creating a range of 1 – 5.

For example: R15 133 – R1 080 = R14 103/5 = R2 820

R1 080 + R2 820 = R3 851

R3 851 + R2 820 = R6 671 etc.


1

Table B-1: Summation Table of Cost Indicators for all development scenarios

sewer water electricity sewer water refuse electricity

4,209R 4,209R 790R -R 5,758R 35,182R 4,662R 480R 3,391R 2,188R 1,686R 1,755,495R 5,123,270R

9,025R 11,789R 554R 165,440R 21,735R 981R 2,186R 2,301R 1,035R 4,736,025R 7,178,121R

3,225R 5,375R 1,205R 92,695R 8,362R 43,766R 4,662R 1,325R 2,253R 1,483R 2,008R 2,346,750R 4,274,805R

3,940R 6,676R 536R 214,560R 5,758R 31,121R -R 1,210R 2,708R 2,097R 2,325R 3,329,391R 5,590,410R

1,600R 5,295R 909R 70,118R 4,280R 29,663R 2,372R 778R 3,125R 517R -R 1,991,705R 4,805,427R

15,133R 5,600R 3,659R 397,204R 1,151R 4,662R 1,801R 2,160R 899R 1,516R 954,765R 3,266,812R

9,237R 5,600R 4,143R 388,797R 5,758R 31,121R 4,662R 2,917R 717R 1,039R 394,853R 1,647,359R

4,696R 5,600R 2,394R 50,395R 5,514R 25,603R 1,342R 3,052R 1,720R 1,213R 1,590,750R 5,467,890R

4,060R 9,985R 1,240R 45,250R 10,528R 32,500R 4,662R 2,554R 2,502R 2,826R 1,015R 1,755,731R 3,548,149R

3,374R 4,218R 1,350R 91,748R 2,120R 248R 2,073R 1,730R 1,809R 988,352R 2,831,398R

2,280R 2,280R 2,880R 74,465R 6,219R 33,750R -R 1,790R -R -R 1,501R 1,757,936R 4,265,774R

7,840R 5,600R 3,590R 344,483R 2,847R 44,714R 4,662R 2,672R 2,233R 4,147R 1,687R 1,736,438R 4,905,206R

3,106R 6,794R 2,018R 307,800R 5,758R 31,121R 9,492R 620R 2,557R 5,775R 1,990R 718,705R 1,715,461R

1,329R -R 1,783R -R 31,121R -R 2,207R 463R 1,775R 613,935R 10,118,231R

3,078R 5,600R 5,062R 188,100R 2,370R -R 4,662R 1,548R 4,554R 617R 2,036R 257,965R 8,044,437R

1,030R 1,288R 1,030R 43,330R 2,032R 16,875R 4,662R 983R 1,516R 998R 248,535R 5,181,063R

2,750R 6,050R 800R -R 12,788R 27,418R 4,662R 545R 2,205R 4,842R 1,094R 590,625R 4,894,742R

10,075R 3,245R 8,009R 155,250R 7,250R 31,121R 781R 2,858R 2,458R 1,530R 3,445,115R 5,966,105R

Khara Hais

Rustenburg

eThekwini

Nelson Mandela Bay

Buffalo City

Polokwane

Mangaung

Sol Plaatje

Cape Town

George

Msunduzi

Mbombela

Emalahleni

vacant land

ratesproperty rates

connection fees consumption chargeszoning &

rezoning

Tariff costs

township

establishme

nt fee

subdivision

fee

building plan

tariffStudy areas

Johannesburg

Tshwane

Ekurhuleni

Mogale City

Emfuleni


2

Table B-2: Range of Costs and Performance Scores

sewer water electricity sewer water refuse electricity

RANGE

15,133R 11,789R 8,009R 397,204R 12,788R 44,714R 9,492R 2,672R 4,554R 5,775R 2,325R 4,736,025R 10,118,231R

1. E - F 12,312R 9,689R 6,514R 326,429R 10,461R 39,146R 8,854R 2,187R 3,839R 4,713R 2,060R 3,838,527R 8,424,057R

2. D - E 9,492R 7,588R 5,020R 255,654R 8,133R 33,578R 7,170R 1,702R 3,125R 3,650R 1,794R 2,941,029R 6,729,882R

3. C - D 6,671R 5,488R 3,525R 184,880R 5,806R 28,011R 5,487R 1,217R 2,411R 2,588R 1,529R 2,043,531R 5,035,708R

4. B - C 3,851R 3,388R 2,031R 114,105R 3,478R 22,443R 3,804R 733R 1,697R 1,525R 1,264R 1,146,033R 3,341,534R

5. A - B 1,030R 1,288R 536R 43,330R 1,151R 16,875R 2,120R 248R 983R 463R 998R 248,535R 1,647,359R

property rateszoning &

rezoning

township

establishme

nt fee

subdivision

fee

building plan

tariff

connection fees consumption charges vacant land

rates

PERFORMANCE SCORES


0

ANNEXURE C

Annexure C is a section of the survey that SAPOA electronically submitted to the developers. The

survey details the fees related to town planning, the costs of development and the administrate

efficiency and effectiveness of municipalities. Table C-1 is specific to the City of Johannesburg.

Each respondent was asked to rate each indicator from 1 to 5. Number 1 being “terrible” and

number 5 being “excellent”. The results from this survey is analysed and presented in Chapter 5.


1

Table C-0-1: Template of the Developer Survey

Study Area’s

2011/12 Rate Experiences (1 – 5) 2002 Rate Experiences (1 – 5)

Yes No 1. Terrible 2. Below average 3. Average 4. Above average 5. Excellent

Yes No 1. Terrible 2. Below average 3. Average 4. Above average 5. Excellent

Please tick appropriate box 1 2 3 4 5

Please tick appropriate box

1 2 3 4 5

City of City of

Johannesburg

Application turnaround time Application turnaround time

Degree of suitably zoned land Degree of suitably zoned land

Costs related to: Costs related to:

Township establishment Township establishment

Re-zoning Re-zoning

Zoning Zoning

Service contributions Service contributions

Service connection fees Service connection fees

Consumption charges (water, sewer, electricity, refuse)

Consumption charges (water, sewer, electricity, refuse)

Development surcharges Development surcharges

Service costs Service costs

Rates:

» Vacant land

» Property

Rates:

» Vacant land

» Property



EIA fees EIA fees

Subdivision Subdivision

Municipal tariffs Municipal tariffs



Abilities of municipalities Abilities of municipalities

Efficiency:

» Transportation

» Security

» Housing

Efficiency:

» Transportation

» Security

» Housing

Level of infrastructure maintenance

Level of infrastructure maintenance

Development of new infrastructure

Development of new infrastructure

Regulation Regulation


2

ANNEXURE D

With regard to the developer respondents to whom the developer survey in Annexure C was

submitted, Table D-1 provides a list of the development firms from whom responses were gleaned.

Evidently, of the 391 developers to whom the survey was submitted, 74 responded and provided

feedback.


3

Table D-0-1: Developer Respondents

1 Capstone Property Group 38 Marnic Developments

2 Investec property 39 Bayswater Homes

3 Sedgeley Developments 40 Intaprop

4 KMH Architects 41 Mitchell DuPlessis Associates (MDA)

5 True North Developments 42 Growthpoint Properties Limited

6 East London IDZ ( Pty) Ltd. 43 Improvon

7 Impendulo 44 AZ Engineering (Pty)

8 Vusani Property Investments 45 Redefine Properties Limited

9 Denel 46 Hunta Property

10 Pentad Quantity Surveyors (Pty) Ltd 47 PMC Professional Consultants

11 S4E 48 Redefine Properties

12 City of Johannesburg Housing Company 49 Renlia Developments

13 Hulett 50 Caliber

14 Monarc Group 51 HEARTLAND

15 Eris Property Group 52 Stefanutti Stocks Building KZN

16 S I P PROJECT MANAGERS 53 Hyprop Investments Ltd

17 MEG Architects 54 Redefine Properties

18 Eris Property Group (Pty)Ltd 55 Circlevest/ IThemba


4

19 Private 56 Element Consulting Engineers

20 UMFA 57 Redefine Properties Limited

21 SGD 58 SiVEST SA (Pty) Ltd

22 Visual International 59 Similan Consult

23 Resilient 60 Edstan & Son

24 Eris 61 Mitchell Du Plessis Projects (Pty) Ltd

25 M&T Development 62 Swish Property Group

26 H L Hall & Sons Properties (Pty) Ltd 63 NRP Properties and Contractors CC

27 THD 64 Plan Associates

28 Stor-Age 65 BvZPlan

29 LANDMARK 66 Cue Group

30 TK Associates 67 Esulwini Property development

31 Growthpoint Properties 68 Vreken Town Planners

32 AL&A (Pty) Ltd 69 SL Managing Consultants cc

33 Redefine 70 Old Mutual Investment Group SA

34 Halls Properties 71 Q fin

35 S-identity holdings 72 Wesson Construction and Development

36 Tyris Realty 73 Tngaat Hulett

37 Clarence De Wet Lesela 74 Growthpoint Properties


5

ANNEXURE E

Concerning the values used to calculate the costs for all indicators used in the analysis, other than

those collected from municipal respondents, the tariff schedules attached provide the methods of

calculations.

The tariff schedules are for the following municipalities:

City of Johannesburg

City of Tshwane

Ekurhuleni municipality

Mogale City

Emfuleni municipality

City of Cape Town

George municipality

Msunduzi municipality

Mbombela municipality

Emalahleni municipality

Nelson Mandela Bay

Buffalo City metro

Polokwane municipality

Mangaung municipality

Sol Plaatje municipality

//Khara Hais municipality

Rustenburg municipality

eThekwini municipality

The tariff schedules for all these municipalities are available online on their websites. Due to the

amount and size of these documents, they are available as annexures in a disc format.

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