Property Rates Bill: review; environmental sector & public service infrastructure submissions

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Cooperative Governance and Traditional Affairs

04 August 2003
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Meeting Summary

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Meeting report

PROVINCIAL AND LOCAL GOVERNMENT PORTFOLIO COMMITTEE
5 August 2003
PROPERTY RATES BILL: REVIEW; ENVIRONMENTAL SECTOR & SENTECH SUBMISSIONS

Chairperson
: Mr Y I Carrim (ANC)

Relevant Documents:
Local Government Property Rates Bill (B19-2003)
Overview of Deliberations on the Municipal Property Rates Bill
Sentech submission on Property Rates Bill
Environmental Sector submission
Proposed amendments to the Property Rates Bill for Sound Environmental Management
Draft Committee Programme

SUMMARY
The Committee was presented with an overview of deliberations on the Property Rates Bill from April to June 2003 that summarised the status of the debate on key policy issues. The Department is busy with extensive amendments to the tabled Bill. The Committee will also need to factor in issues from the as yet untabled Communal Land Rights Bill and the Traditional Leaders Bill. During the next week, the Committee aims to take a decision on conceptual issues that it is able to decide on.

The Environmental Sector argued for an expanded view of protected areas. Sentech made reference to coming legislation on communications convergence and argued for a wider definition of public service infrastructure dealing with telecommunications.

MINUTES
Introduction by Chair
The Chair explained that the committee would be operating with skeletal force due to the fore-coming election campaigning. He pointed out that in order for the committee to run more efficiently it was important for the members to read all the submissions.

The Chair explained that Parliament was currently prioritising the passing of the Municipality Systems Amendment Bill and that would have an effect on the Property Rates Bill. He said that the current document is on hold because of all the deliberations. He stated that there had never been such a challenging Bill. This was apparent from the public forums which have shown that the public are very confused about the Bill, for whom it was meant and the implications of the Bill.

He emphasised that only if one has private ownership of land, is one eligible for Property Rates. The ODA would give a summary of the deliberations since April then submissions would be heard from Sentech and the Environmental Sector.

Thereafter, discussion would be centred on coming to concrete decisions or at least decisions. Their approach would be to get clarity on all conceptual issues by 12 August. He explained that the committee would not work clause by clause until the department had presented the amended Bill.

Overview of Deliberations on the Municipal Property Rates Bill
Mr Nico McLachlan (Organisation Development Africa) explained that the purpose of the presentation was to provide the committee with an overview of deliberations from April to June 2003, summarising the status of the debate on key policy issues and to assist in preparing the agenda to go forward. The overview covered the public workshop at Benoni, the public hearings and consideration of submissions and the ODA briefing on conceptual issues, clause by clause briefings by the department, ODA briefing on public service infrastructure and the ODA briefing on conservation land, exclusions, exemptions, reductions and rebates (see document).

Way forward
Mr P Smith (IFP) was concerned about the process in view of the Bill being amended by the Department. He wanted to know about movement on the proposals currently on the table.

Mr Carrim explained that since the Benoni workshop there had been progress. He added that the relevant parties know the progress of the committee. He pointed out that the Property Rates Bill would be taken further when the Communal Land Rights Bill was introduced into parliament because of its impact on the Bill. They could not proceed until the White Paper on Traditional Leadership and Governance Bill is submitted which was soon. He concluded that the Committee would deal with these issues when they had made clearer decisions and they would call on the relevant departments to come and make presentations.

Mr Smith asked his question about concrete proposals on the table.

Ms Jackie Manche (Deputy Director-General: Institutional Reform and Support, DPLG) commented that government had approved the Communal Land Rights Bill. Mr Mizilikazi Manyike (Director: Municipal Finance Policy) explained that there were revised clauses in the Communal Land Rights Bill. As the Bill had not gone to Cabinet it was problematic to work with it. He stated that the department had worked with what was discussed at Benoni.

Mr Carrim said how should the committee take the process forward and make productive use of time available.

Mr Machlalan commented that the process should include an agenda with clear points of conclusion. The ODA together with the department should come out with clear proposals. Mr Carrim added that Parliament should be part of this.

Mr G Grobler (DA) commented that the last two meetings had been a waste of time and that he was glad that clear dates had been highlighted. He felt that meetings were in shambles.

Mr Carrim suggested that this was because submissions had not been clear. He said that some things could be decided now. For example, rental value was a no no. A conclusion could be taken on the land versus land and improvements debate. The Bill should consider municipalities when deciding land versus land and improvements debate. This issue would be dealt with during the all-day meeting on Thursday. The decision should be kept open until then and should allow for a uniform rate as opposed to a variable rate. The Committee should allocate Friday to settle to issue completely.

Mr Grobler wondered if the Committee was not jumping the gun.

Mr Carrim said that there were also other issues to deal with. There was still a debate on exclusions which would be item two on Thursday's agenda. Public Service Infrastructure and schools would be dealt with on Wednesday.

Ms Manche commented that it is not easy to deal with because schools were not Public Benefit Organisations (PBOs). She pointed out that there were problems with definitions and that the definition of PBO was too wide and expansive.

Mr Carrim agreed that the definition was too wide. He said that the committee would deal with independent schools and churches. He went on to say that the committee should agree that religious places of worship be exempt from paying property rates. On Wednesday interested parties must come and motivate why these entities should pay property rates. He believed that they should just be excluded.

Mr B Solo (ANC) agreed on the exclusion of religious places of worship because of the role they played within communities. Mr Smith also agreed but brought up a point of procedure because the committee was meant to be discussing process.

Mr Carrim said that the committee would start with Public Service Infrastructure (PSI), thereafter exemptions and exclusions. Thursday would be valuations and there would be no meeting on Friday. The committee should be clear on policy issues that party study groups must work through. He remarked that he was rather sympathetic to the Organised Agriculture submissions after reading their submissions. He closed by saying that Wednesday onwards was still not clear.

Sentech submission
Mr Joseph Claassens, representing Sentech, said that Sentech was in support of the Public Service Infrastructure submission with reference to part (f) of the definition of 'public service infrastructure' outlined in Clause 1 and referred to in Clause 15(2)(a).

Sentech is wholly owned by the state and reports directly to the Department of Communications. They are responsible for providing broadcasting signal distributions. Their infrastructure comprises of primarily transmission stations, towers and masts.

Sentech proposes that the definition 'public service infrastructure' be amended to include 'telecommunications and broadcasting transmission towers, masts or lines and transmission stations forming part of a signal distribution or a telecommunications system serving the public across a municipal boundary.'

The company also submitted that there would be a negative impact on their profit margin with the public bearing the cost.

Discussion
Mr Carrim asked the Committee to look at part (f) of the definition of 'public service infrastructure' outlined in Clause 1.

Mr Claassens said that the current definition is in danger of excluding infrastructure that provides broadcasting signals. The added cost of property rates would be an added cost for the public. He explained that the issue is further complicated by the initiative of the Department of Communication's work on the Communications Convergence Bill. They are changing the definition of what communications is.

Mr Smith asked what happens if Sentech becomes a privately owned PSI - noting that there are privately owned PSI.

Mr Carrim said that the definition of PSI currently allows for both public and private PSI.

Ms Manche pointed out that they are talking about public and not private.

Mr Carrim said that this has implications for exclusions. The Bill refers to state-owned PSI and the majority party thinking is that there must be a compelling argument for private PSI to be exempt.

Mr Smith asked for more clarity about partially-owned PSI. He said that there should be provision for the partially-owned and there should be a more clear definition of the word 'state'.

Ms Manche explained that a company that is 51% state is still considered state property.

Mr Smith said it was an issue of control.

Mr J Ngubeni (ANC) agreed that Mr Smith was bringing up a good point, which should be looked into at a later stage. He went on to say that the Committee should get clarity on the Communications Convergence Bill and they should define communications. Does that Bill have input on that?

Mr Claassens said that if the definition of communications infrastructure would be included under broadcasting and telecommunications infrastructure he would be comfortable. Broadcasting is part of communications infrastructure.

Mr Carrim said that the change of the definition is basically an add-on. He felt that the committee could give a tentative response.

Ms Manche explained that once an entity stopped being a state entity then it automatically became a private entity and became subject to income tax. She added that a decision has not been taken on the status of towers and masts - in other words the issue was still up for scrutiny.

Mr Claassens asked for clarity on the issue of movement across municipal boundaries. He explained that the basic difference between a mast and a tower is that the former is usually steel and the latter is concrete but both have antennas and they cross boundaries.

Mr Smith asked if Sentech was responsible for military communications. He went on to ask why crossing municipal boundaries mattered because the military had their own communication system that was national.

Mr Carrim commented that many people have issues with the concept of municipal boundaries.
Ms Manche agreed that public utilities had issues with municipal boundaries.

Mr Carrim said that the ODA and the department must decide on the criteria. The Chair said that he felt that public utilities were exaggerating the impact. He listed four points to debate. 1 What criteria would be used? 2 What is the current practice locally and internationally? 3 Is there a common theme/set of issues being raised? 4 What would be the cost forgone if the Committee forgoes rates on PSI?

Environmental Sector submission
Mr Mark Botha, representative from Conservation Partnerships, explained his position as being the channel for conservation proposals and to provide assurances for Protected Areas and threatened ecosystems. The aim of the submission (Conservation Rates Relief for the Environment: Outlining Proposals and Costs to Municipalities) was also to indicate which municipalities were most affected and quantify revenue foregone.

The submission's three proposals were to exclude secure protected areas, take effect into account by minimising pressure on threatened ecosystems and to encourage investment in 'land care' through issues like alien clearing, fire management and rehabilitation.

Mr Botha explained that the process of securing Protected Areas would be clear and systematic which would in turn ensure that there would be no mismanagement. Priority areas would be identified rigorously, property contracted into State-protected areas for a long period (30 years), registered on title deeds and exclusion from rates would only occur if in compliance with the contract.

Mr Botha motivated that this approach would reduce pressure on threatened ecosystems and would encourage sound land management.

He summarised the costs of these proposals as being loss of possible revenue, audit costs borne by provinces - mostly restricted to wealthier municipalities. The benefits would be a reduction in the need to enforce environmental laws and municipal bylaws, the reduction of alien clearing costs, the reduction of fire losses , an increase in water supply and increased support of rural economies.

Mr Botha proposed an amendment to the definition of 'protected area' and the inclusion of clauses 2 (h) and 2 (i) to act as penalties and incentives in the encouragement of sound conservation management and protection of threatened ecosystems.

Discussion
Mr Ngubeni asked about the commercial activity in areas such as wetlands. He also asked if the MEC for Local Government or MEC of Environmental Affairs has more power.

Mr Botha clarified that the rebate would be on conservation area alone and that all other surrounding land would be subject to rates. The MEC of Environmental Affairs would consult with the members of the provincial cabinet.

Mr Smith asked what the 1% forgone revenue was based on. He also asked if the Minister was a sufficient substitute.

Mr Botha said that the rate of 1% was based on a hypothetical rates framed by the land only rating. He went to explain that municipalities restrict land use and use very different approaches to police land use and thus regulations are failing us. The Minister would ensure a uniform land use system and rates can be used to drive positive land transformation.

Mr Grobler asked about the status of game farmers.

Mr Botha explained that the game itself would not be rated but the land would have to be identified. Commercial operations are different to land conservation.

Mr Machlalan commented that the submission was clear and that consideration for exemptions and exclusions had a very specific idea of what protected areas were.

Ms Manche responded by questioning the definition of protected areas and how the committee could get the country to meet the international laws on land under conservation. She pointed out that it was an interesting approach to negotiate to put private land under rules and regulations of the state. Currently South Africa does not meet some of its conservation requirements and this approach could tackle that. She stated that the submission did not answer the question of how to begin to allow the Minister to exempt those areas. She said it should be remembered that some municipalities do not have the infrastructure to maintain sound management of conservation and national resources. It is an issue that must still be looked at.

Mr Smith asked if 15(2)(e) is not similar to the definition.

Mr Botha pointed out that the Protected Areas Bill allowed for the provision of protected areas and that they wanted to be consistent.

Ms Koekie Maphanga, a Department of Environmental Affairs and Tourism representative, commented that the Bill has categories and threatened ecosystems was a subcategory of protected areas.

Mr Carrim asked about provincial legislation on protected areas that already exists. He wanted to know what would be the effect on provincial legislation.

Mr Botha replied that Section 9 & 12 of the new act makes room for any area of old legislation to be made relevant to any new legislation therefore the Act does not allow provinces to create categories.

Mr Carrim asked if there was no scope in the new Bill for provincial legislation to exist. Must the Minister confer with the MEC?

Mr Botha said that the Bill does allow for provincial legislation but that future legislation would be national and not provincial.

Ms Maphanga explained that the department was trying for a uniform system to proclaim and deproclaim a protected area. The MEC could still initiate this but national norms and standards had to be met. Thus there could still be province-specific legislation.

Mr Ngubeni said that he did not see the reason for moving to provincial legislation.

Mr B Komphela (ANC) asked whether the MEC did not have stronger relevance in the province. The current proposal renders the province inert which was a problem because the national person was not there. The province should have power over its own affairs.

Mr Botha explained that he was satisfied that the provincial competence was included because the Bill covers national and provincial.

Mr Carrim commented that the Bill should retain the province competence.

Ms Manche said that there was a difference in the definitions.

Mr Carrim pointed out that the Environmental Sector's proposed Clause 3(2)(h) and (i) have an impact on small municipalities and highlighted that the suggested clauses prescribe:
(h) take into account the effect of rates on encouraging sound management & conservation of natural resources and sustainable land-use; and
(i) take into account the effect of rates on promoting the conservation of Threatened Ecosystems as listed by the Cabinet member responsible for the Environment.

Mr Ngubeni said that 2(h) should be adopted because it does not limit small municipalities and that it is more useful.

Mr Carrim agreed because it would make municipalities more sensitive to what is going on.

Mr Smith asked about the possibility of having one clause instead of two because he could not see the difference between protected areas and threatened ecosystems.

Mr Carrim pointed out that the two clauses dealt with a lot more issues and that they should be clearer.

Ms Manche challenged this by pointing out that the submission explained exactly what the two clauses meant. She asked for a repetition of the explanation given.

Mr Botha explained the intention as a separation of biodiversity and protected areas. 'Protected areas' is defined as places with fences and biodiversity is defined as something that happens across the country. He explained 'threatened ecosystems' as something that happened in specific geographical areas. For example alien bush happens across all landscapes whilst threatened ecosystems do not. He pointed out that a threatened ecosystem is more limited and easier for municipalities to manage.

Mr Smith asked why environmental concerns are more important than all the rest.

Mr Komphela said that the two separate clauses cover the magnitude of the environment issues and basically two clauses were much clearer.

Mr Carrim said that he supported one clause but that he saw the benefit of two clauses.

Ms Zora Ibrahim, ODA representative, said that the ODA understood the reasoning behind Mr Botha's presentation. She said that Clause 8 on differential rates includes protected areas and questioned whether it should be expanded.

Ms Botha said that his submission is not just talking about rates. The Bill could not allow for differential rates due to degradation. He pointed out that the expanded view of protected areas was needed in order to include threatened ecosystems.

Ms Manche said that the department did not have a problem.

Mr Carrim brought the committee's attention back to Section 15(2)(e) of the Bill.

Mr Smith asked about exemption of land and not improvements. What is seen as land?

Mr Botha explained that conservation does run commercial enterprises because of reduced state grants. He motivated for not rating all the land - just the commercial enterprises on it.

Ms Manche commented about property and as opposed to land. She pointed out that there are retail businesses in conservation areas. She asked about land declared as protected areas but privately owned. She also asked about private property and how it met national norms and standards. Is it excluded or exempted?

Mr Botha said that if property does not meet national norms and standards it would be deproclaimed automatically and fall into the rates net.

Mr Carrim said that national legislation had to be more prescriptive than other legislation. He noted that municipalities do dramatically different things and the committee needed to teeter towards a stronger national framework - in other words, municipalities cannot do their own thing. It should either be an exclusion or it should be removed. He went on to say that in order to be proclaimed you must meet national norms and standards, if not, the Minister will deproclaim you.

Ms Maphanga said that any proclamation of de-proclamation must be based on the national legislation and this is the criteria.

Mr Carrim said that the Bill must be in line with the Conservation Bill and that the issue of exemptions versus exclusions should be discussed.

Ms Manche said that the Chair had raised the issue of not being prescriptive in the Bill. Instead of being an exclusion, prescribe it as an exemption. Exclusions remove the entity from the tax base and exemption means that you get preferential treatment.

Mr Smith said that a mandatory exemption should still get valued because they will then know what the penalty is. Exclusions make more sense and it sends an unambiguous message. Mandatory exemptions means more choice.

Mr Komphela disagreed with Mr Smith and agreed with Ms Manche because once excluded and entity cannot be returned.

Mr Carrim said that exclusions value property but national legislation says that we must exclude. Property must be valued and national legislation must somehow make up for it to municipalities. By looking at the definition of constitutional constraints in section 229 is it necessary to do this based on 229. Prescribed exemption means do value and exclusion means do not value. If the Bill includes exclusions then prescribed exemptions would fall away. He asked Ms Manche what the difference was and whether, if you are excluded, is it for life? What were the exclusions as distinct from exemptions. He reminded the committee that wording is a big issue.

Mr Smith said that commercial business is an issue because national parks run programs that are not profit generating. He also asked about the public sector that is subsidised, that generates income.

Ms Manche commented that these entities are treated as state-owned property. She explained that the department was reluctant to make special categories because the trend is that everyone is going to pay rates.

Mr Carrim asked how one values market value. For example what about huts at a nature reserve? They are valuable because of the land around it and not necessarily because of the structure. He asked how the balance is achieved.

Ms Manche said that some properties had been valued because they change hands. She said that you could put a market value on the properties.

Ms Carrim replied that market value will be very high because it will be based on the rating of the land in the municipality.

Ms Manche said that municipality rating will rate those buildings.

Mr Carrim said that the issue would be dealt with tomorrow and adjourned the meeting.

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