Question NW2879 to the Minister of Finance
04 October 2023 - NW2879
Herron, Mr BN to ask the Minister of Finance
(1)Whether, considering that in terms of the Municipal Fiscal Powers and Functions Act, Act 12 of 2007, a municipal base tariff includes a reasonable rate of return if authorised by a regulator and/or the Minister responsible for the municipal service, and whereas the National Energy Regulator of South Africa is the regulator for electricity services and that the annual approval of electricity tariffs levied by municipalities includes the reasonable rate of return or surplus margin, the City of Cape Town also charges a municipal surcharge on top of its electricity tariffs called a contribution to rates or an unregulated charge, he has prescribed compulsory norms and standards for municipal surcharges on electricity services as provided for in section 8 of the specified Act; if not, what is the position in this regard; if so, (a) on what date(s) were the norms and standards prescribed and (b) will he furnish Mr B N Herron with a copy of the norms and standards; (2) whether he has found that the City of Cape Town complied with the norms and standards as required by section 9(1)(a) of the Act; if not, what is the position in this regard; if so, what are the relevant details; (3) whether the City of Cape Town, on its own and/or as part of a group of municipalities and/or organised local government, applied for and was granted an exemption from compliance with the norms and standards as provided for in terms of section 9(1)(b) of the Act; if not, what is the position in each case; if so, (a) on what date did he gazette the exemption and (b) will he furnish Mr B N Herron with a copy of the notice in the Gazette; (4) whether he promulgated any regulations in terms of the Act, which provide for the municipal surcharge on electricity services currently levied by the City of Cape Town; if not, what is the position in this regard; if so, what are the relevant details; (5) (a) in terms of which provisions of the Act and/or any other applicable law is the City of Cape Town authorised to charge a municipal surcharge on electricity services and (b) what are the consequences to the City of Cape Town for charging a levy on a municipal surcharge on electricity services without being authorised by himself and/or the Act
Reply:
(1) Section 8(1) of the Municipal Fiscal Powers and Functions Act (MFPFA) stipulates that the Minister of Finance may prescribe compulsory norms and standards for imposing municipal surcharges. To date, the Minister of Finance have not prescribed any compulsory norms and standards for regulating the imposition of municipal surcharges. However, the absence of the norms and standards does not restrict a municipality from imposing surcharges in their tariffs given that this is a power given to municipalities in terms of section 229 of the Constitution and the Municipal Systems Act (MSA). Furthermore, if a municipality decides to levy a surcharge, approval is done by the municipal council in terms of a tariff policy, pursuant to section 75 of the MSA and will also be subject to section 8 of the Municipal Fiscal Powers and Functions Act (MFPFA), as soon as norms and standards for municipal surcharges are prescribed by the Minister of Finance. The National Treasury is currently reviewing the possibility of introducing compulsory norms and standards in terms of section 8 of the MFPFA and has appointed a service provider to assist with the development of compulsory national norms and standards for regulating municipal surcharges on electricity.
- Not applicable.
- Not applicable.
(2) It is not yet necessary for the City of Cape Town (or any other municipality) to comply with section 9(1) of the MFPFA given that the norms and standards referred to in section 8 of the Act is yet to be prescribed by the Minister of Finance. As soon as these norms and standards are prescribed, all municipalities levying surcharges on municipal services will however be required to comply with this provision.
(3) See response in (2).
- Not applicable.
- Not applicable.
4. See response in (1).
(5)(a) Various pieces of legislation regulate the levying of municipal surcharges:
The Constitution
Section 229 of the Constitution indicates that a municipality may impose—
(1) subject to subsections (2), (3) and (4), a municipality may impose
(a) rates on property and surcharges on fees for services provided by or on behalf of the municipality
(2) The power of a municipality to impose rates on property, surcharges on fees for services provided by or on behalf of the municipality, or other taxes, levies or duties—
(b) may be regulated by national legislation.
The Municipal Fiscal Powers and Functions Act (MFPFA)
Section 8 of the MFPFA gives power to the Minister of Finance to prescribe compulsory national norms and standards for imposing “municipal surcharges”. Furthermore, when levying surcharges, municipalities are required in terms of section 9(1)(a) of the MFPFA to comply with any norms and standards contemplated in section 8 of the MFPFA.
The Municipal Systems Act (MSA)
Section 4(1)(c)(ii) of the MSA indicates that the council of a municipality has the right to finance the affairs of the municipality by imposing surcharges on fees, rates on property and, to the extent authorised by national legislation, other taxes, levies and duties. In section 74(2)(f), the Act provides that a municipal tariff policy must reflect at least the following principles: “(f) provision may be made in appropriate circumstances for a surcharge on the tariff for a service”. In terms of section 94(1), the Minister responsible for Local Government may regulate the following matters: “(d) criteria to be taken into account by municipalities when imposing surcharges on tariffs for services and determining the duration thereof;”.
(b) Once norms and standards for municipal surcharges are prescribed for a specific municipal service as per section 8 of the MFPFA, any municipality that does not adhere to such norms and standards (e.g. exceeds prescribed levels) will be in non-compliance with the Act, except if the Minister of Finance has given approval to such municipality in terms of section 9(1)(b) to be exempted from complying to any of the norms and standards as contemplated in section 8 of the Act.