Now that the dust has settled somewhat following the local municipal elections and most of the new town and city councils are up and running, it’s time to take a look at why such elections are particularly important for property owners, investors and developers, says Bill Rawson, Chairman of the Rawson Property Group.
The main reason, he says, is that property owners are the backbone of local economies. “The huge bulk of the revenue earned – and spent – by SA’s municipalities comes from those who own land, homes, offices and factories within their boundaries and pay property rates and fees for services such as water and electricity supply, rubbish removal, public transport and the maintenance of local roads, parks and streetlights.
“These owners thus have a very strong right to expect that their ‘partners’ in the towns and cities that they finance manage things in such a way that the value of their properties and businesses will at least be sustained, but preferably actually enhanced by local economic growth, job creation and property demand.
“Of course they also have a great deal to lose when this is not the case, as the properties they have worked so hard to pay for and the businesses they have established can lose value very rapidly when local authorities are mismanaged or municipal revenue is misappropriated.”
Rawson says that when potholes don’t get fixed, for example, or public areas become littered and overgrown, water and electricity grids fall into disrepair, accounts don’t get sent, arrears don’t get collected and services become increasingly unreliable, a town soon becomes a less-than-pleasant place to live or work.
“This will cause housing demand to drop, usually at exactly the same time that an increasing number of homeowners are trying to sell in an attempt to recoup at least some of the money they have invested, and prices will fall.
“Then very soon there will be far fewer residents with less money to spend and the local economy and rates base will go into decline, meaning that there is even less revenue available to provide services to anyone and it becomes increasingly difficult to halt a spiral of deterioration.”
Unfortunately, he says, there have been all too many instances of poor municipal management and financial administration in recent years, with corruption and the lack of capacity in this sphere being most clearly evidenced by the fact that only a small percentage of local authorities have been able to achieve clean audits.
“The June report of Auditor General Kimi Makwetu showed, for example, that only 54 out of 272 municipalities audited (19,8%) were able to achieve clean audits for the 2014/15 financial year – despite several major initiatives to improve financial discipline at this level of government.
“The AG’s department also noted that those municipalities with clean audits accounted for only 39% of a total municipal budget of R347-billion in 2014/15 – which means that there were question marks attached to the expenditure of billions of rands contributed by the ratepayers – the property owners – in four out of every five SA municipalities.”
And it is in such situations, notes Rawson, that local elections take on a particular importance for such property owners, “because they provide a peaceful and economically viable opportunity to dismiss those who are mismanaging your town or city and replace them with people you believe will do a better job of building up the local economy - and of protecting your interests and investments in the process.
“Well-run municipalities should be able, for example, to attract new industries and corporations and also create the conditions for entrepreneurs and existing local businesses to flourish. This will not only increase employment but also the demand for all sorts of property, from rental apartments to family homes, shops, offices and land for new housing or industrial estates.
“The value of those properties will then start to rise and that will stimulate even more investment, development, job creation and property demand. And as the rates base of the town then expands, thanks to an increasing number of property owners, there should be an increasing amount of revenue available for the council to provide quality services to everyone, and to make the town an attractive and prosperous place to live.”
