Kwanalu has expressed much concern about the rating of farmland and has appealed to municipalities and provincial government to consider the economic impact of inappropriate regulations and an irresponsible approach.
SINCE THE INITIAL DRAFTING of the Municipal Property Rates Act (MPRA), the KZN Agricultural Union (Kwanalu) has been extremely concerned about the potentially devastating impact that the imposition of rates on agricultural land could have on the economic viability of farming enterprises, and on the communities, towns and thousands of small businesses interdependent on agriculture for their livelihoods. For this reason Kwanalu, in recognising the right of municipalities to rate all properties within their area of jurisdiction as outlined in Section 229 of the constitution, formed a task team to address the issue and actively participated in the consultative process associated with the MPRA drafting.
This task team has been involved in lobbying legislators and educating members on their rights and obligations in terms of this legislation. Kwanalu’s concerns are echoed in a number of statements and policies, for example: Section 229 of the constitution states: “The power to impose rates on property, surcharges on fees for services provided by or on behalf of the municipality, or other taxes, levies or duties may not be exercised in a way which materially prejudices national economic policies, economic activities across municipal boundaries, or the mobility of goods and services, capital and labour.”
The Provincial Economic Spatial Development Strategy, which was approved by the KZN Cabinet in February, says: “If the process of determining rates does not take account of the economic realities of the existing and emerging commercial agricultural sector, it could damage the agricultural potential of the municipality and discourage investment in agriculture. In attempting to ensure the funding of their administration is adequate, municipalities may precipitate the collapse of their local economy. It is imperative that municipalities obtain their funding in such a way that it promotes development.”
Regrettably it is becoming clear that eight local KZN municipalities are not being sufficiently mindful of the concerns outlined above and which were foreseen by the Kwanalu Rates Task Team upon its formation some four to five years ago. It has also become clear that the Provincial Department of Local Government and Traditional Affairs has failed to adequately support the imposition of the new MPRA both through a failure to issue the necessary regulations, and to exercise and display sufficient leadership to society as a whole on this issue. They are thus failing both the local municipal councils and the communities they serve. Kwanalu wonders whether both municipalities and ratepayers will not, at some stage, be forced to join forces in taking action to force the department to fulfil its legislative and regulatory responsibilities.
1. While the MPRA is in place, certain regulations and procedures are not in place to support the process. For example, prescribed ratio regulations have not been made available and implemented; capped increases on expenditure have not been made available and implemented; provincial appeal boards dealing with valuations have not been appointed; procedures, oversight and censure are clearly lacking with regard to, for example, the consultation process called for in legislation, valuations and the other implementation processes are absent or lacking. Accountability in these areas is unknown. We thus fail to see how municipalities will be held accountable for acting outside of the act, or outside the context of Section 229(2)(a) of the constitution.
2. Section 3(4) of the MPRA states: “When considering the criteria to be applied in respect of any exemptions, rebates and reductions on properties used for agricultural purposes, a municipality must take into account the following: the extent of services provided by the municipality in respect of such properties; the contribution of agriculture to the local economy; the extent to which agriculture assists in meeting the service delivery and development obligations of the municipality; and, the contribution of agriculture to the social and economic welfare of farmworkers.”
It is quite clear that in most instances municipalities are playing mere lip service to these requirements in determining rebates granted to owners of agricultural properties. It is the view of Kwanalu that municipalities should be able to clearly demonstrate how rebates arising from this section are arrived at. The “old mindset and practice” of granting blanket rebates is no longer applicable and appropriate in the context of this new legislation of the municipality which has adequately grasped and implemented a rating policy taking this into account.
3. Valuations are not being performed with any degree of consistency across municipal boundaries. This is manifested on the North Coast where there are huge discrepancies across municipal boundaries in the valuing of the same type of farmland. This cannot be conducive to sound economic policy-making and planning within districts. In one case a timber plantation straddling a municipal boundary has been valued at R3 000/ha by one municipality and R15 000/ha by the other!
4. The provisions of legislation, which limit the amount by which rates revenues may be increased, are being ignored by municipalities and the Department of Provincial and Local Government are apparently failing to express any comment on this issue. In many cases farmers who have been rated before are seeing increases of between 230% and 520% in the rates payable. For example, individual farmers are seeing rates accounts increasing from about R17 000 to R62 000 in a single year; an increase from R100 000 to R300 000 per annum has also been drawn to our attention.
5. Costs of this magnitude are simply not sustainable in agriculture. Kwanalu commissioned an independent report on the impact and sustainability of rating farmland four years ago. The research demonstrated that, typically, agriculture could sustain rates at levels of up to a maximum of 0,5% (before rebates), although in some cases rates as low as 0,2% are likely to cause financial stress on enterprises. In the context of this study and others recently commissioned, we are deeply concerned to note rate randages of between 0,75% and 2% after taking rebates into account. Willingness to participate in debate and consultation on these excessively high rates is generally non-existent, with requests for discussion and debate being dismissed out of hand. How will farmers react? As most farmers are pricetakers, it is inevitable they will seek to cut costs to remain viable. We are concerned that labour retrenchments and a lack of investment in property development will result, both of which will have significant adverse multiplier effects in the agricultural value chain. Simply put, any meaningful development of farmland will lead to a higher rates burden, which farmers may seek to avoid by delaying further capital investment. Kwanalu calls on all municipalities to exercise restraint and carefully consider the economic impact of an irresponsible approach. A strong call is also made to the provincial government to exercise firm leadership, in consultation with organised agriculture, on this critical issue. – Lloyd Phillips Contact Sandy la Marque, Kwanalu CEO, on (033) 342 9393. |fw