Town clerk explains tariff increases

07 Jan, 2022 - 00:01 0 Views
Town clerk explains tariff increases Engineer Moyo

Suburban

THE City of Harare’s rates and service charge increases proposed in the city’s 2022 budget $41,8 billion were calculated based on cost recovery with no profit margin as the budget is a break even budget, acting town clerk Engineer Phakamile Mabhena Moyo has said.

Suburban Reporter

The proposed increases will see ratepayers in the low density suburbs paying an average monthly bill of US$77,30 ($8 116,50) while high density suburbs will pay an average of US$23,15 or $2 387 at the official exchange rate.

Responding to a petition by Ward 41 residents rejecting the budget, Engineer Moyo said the budget was based on council’s strategic objectives which the municipality seeks to address and are funded by residents.

He said the 2022 budget was not only based on inflation trends but a composite of informants namely:

  • The National Development Strategy 1
  • Council Strategic Plan 
  • Vital statistics
  • Stakeholder consultation
  • Obtaining and forecasted macro-economic fundamentals

“The budget is directed by set objectives incorporating the above informants and from there a tariff is derived to absorb the cost of meeting set objectives. 

“For 2022 council produced a budget skewed towards water and sanitation which sought to address a number of issues from increased output, conveyancing and sustainable refuse collection.

“Council tariff setting on water, sewerage and refuse used a cost recovery method where there is a cost build. It is from that cost build up that tariff is determined with inflation figures built in to retain value,” said Eng Moyo

He said in 2021, the nation witnessed a hyperinflationary environment where inflation breached 100 percent.  

The council official agreed with the residents that it was a fact that the spiralling inflation has been on downward trend to 51,5 percent as of September 2021 but it began to rise in October and November.

“We then witnessed resurgence in inflation in the months of October and November when inflation shot up to 54,5 percent and 58,4 percent respectively. 

“Reduction in inflation means the rate at which prices are going up has decelerated to the given percentage. The tariff derived from our costings is what we indicated that it should be indexed to inflation levels to maintain value.”

Eng Moyo said the tariff increase proposals were not speculative but derived from cost build up taking into account various components.

“For example the cost build-up to provide water is made up of the cost of chemicals, fuel, power supply, human resources capital formation and depreciation of fixed asset. 

“These components don’t have a fixed cost but they vary in cost throughout the year and thus prudence directs that this be taken into consideration when tariff modelling. A case in point is the cost of water chemicals which is linked to the obtaining auction rate of the $ to the US$ which has been depreciating from 1US:$80 to 1US:$106,66.

 “As council, we maintain that the proposed charges have been financially modelled correctly and are fair to the residents. Council is alive to the economic plight facing the general populace, but there is need to strike a balance between service delivery and affordability so as to be realistic in tariff setting and ensure future sustainability of service delivery. 

“I hope the above explanation has shed light regards tariff setting,” Eng Moyo wrote to former Ward 41 Councillor Mrs Kudzai Kadzombe, a resident of the area, who was coordinating the petition.

He added that the City of Harare employs a programme based budgeting as directed by Government through the Ministry of Local Government and Public Works.

The programmes are as follows:

  • Governance
  • Water and Sanitation 
  • Social Services
  • Roads
  • Public safety and security
  • Natural resources and conservation 

“The various programmes are not self-funding and any shortfall is offset by property tax based on rating zones. The tariffs in social services are generally below cost for example health services. For 2022 health services tariffs remained static. 

“This was done to promote access to health by all in view of the Covid-19 pandemic. Property rating zones, which give charge for a minimum stand size for a particular zone as per the operative General Valuation Roll vary per suburb. It must be noted that the resultant bill for each residence will be different because properties have different sizes and above that water consumption make the total bill variable,” said Eng Moyo.

 In December, Ward 41 residents rejected the proposed City of Harare 2022 budget pegged at $41,8 billion and petitioned the municipality to lower the proposed rates and service charges increases.

In the petition the residents are arguing that council the proposed rates and service charges increases were not in line with the current rate of inflation.

Ward 41 is made up of Marlborough, Westgate, Bluff Hill, Area D, Avonlea, Goodhope, Willow Creek, Emerald Hill, Ashbrittle, New Adylin, the Red Roofs and Tynwald North.   

The residents contended that some suburbs in the ward have been slapped with a more than 400 percent increase and these include Avonlea, Bluff Hill and Westgate. 

Residents of the three suburbs will pay the highest rates and service charges at $5,719 per month while those in the Redroofs area of Marlborough will pay the lowest at $1,087 per month.  

“The combined residents of ward 41 encompassing the following areas Ashbrittle, Emerald Hill, Avonlea, Bluff Hill, AreaD, Goodhope, Willow Creek, Tynwald North, Westgate, New Adylin, Marlborough and Redroofs of approximately 24 000 residents, have raised an objection to the recently proposed City of Harare Budget tariffs for the year 2022, based on the justification that the rates are beyond the reach of many and are not in line with the prevailing inflation rates,” read part of the petition.

In their objection the residents highlighted that the proposed budget should be adjusted downwards in line with the prevailing inflation rates.

“It is recommended that tariffs be amended in line with obtaining inflation levels to retain the intrinsic value. The proposed 2022 City of Harare Budget therefore formally proposes to adopt and incorporate into the budget the prevailing annual inflation levels. 

“Since the official inflation rates are spiralling on a downward trend, the proposed 2022 rates should be adjusted downwards in line with the prevailing inflation rates,” read the petition.

“According to the Finance Minister Professor (Mthuli) Ncube during (his presentation of) the proposed 2022 national budget, he stated that, ‘Mr Speaker Sir, annual inflation was on a downward path during the greater part of the year to 54,5 percent as at October 2021 compared to 471,3 percent recorded during the same period last year underpinned by a tight monetary policy.

“The official annual inflation from the Minister of Finance (in the) proposed 2022 (national) budget has dropped from 471,3 percent in year 2020 to the prevailing 54,5 percent in the year 2021, with a further anticipated drop in the year 2022 to below 30 percent. The City of Harare proposed 2022 tariffs should therefore be adjusted in line with the prevailing inflation rates,” further read the petition.

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