S.Africa: Johannesburg Falling Apart: I just got out of what appears to be my last hearing in Practice Court for this seemingly never ending “hate crime” trial. To give some history for those who may not know. In 2016 I applied to m arch in the Toronto Homosexual Pride parade as an openly Christian man and desired to share the Gospel of Jesus Christ w ith the participants. This parade after all is funded by three levels of government (you and I pay for it) and it is sup posed to be “inclusive.” In fact two of Pride Toronto’s “values” as stated on the front page of their website is “Divers ity” and “Inclusion.” What could be more diverse than an open Christian sharing the Gospel with Toronto pride participan ts right in their parade? And yes, Christians should go and share the Gospel at the Toronto Homosexual Pride parade and everywhere else where lost souls can be found. “Go into all the world and proclaim the Gospel to the whole creation.” Mark 16:15 Sadly, notwithstanding the p.

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The previous notes in this series show that in Johannesburg:

revenue allocation has taken on a distinct anti-poor dynamic with the number of registered indigent dropping by over 90% in the last ten years.

the city faces a major revenue shortfall resulting in, inter alia, inadequate investment in infrastructure

there is minimal maintenance of existing infrastructure

city agencies like Johannesburg Water and City Power have done more to degrade the road network than the weather or aging

the city is no longer able to generate revenue from on-selling electricity for ESKOM

consumers face continual above-inflation in municipal charges but these do not improve the city’s balance sheet.

the equivalent of more than one-third of non-indigent households in the city do not pay for municipal services. A significant proportion of the population is systematically not billed or under-billed for services they consume

While Occam’s razor indicates that the above trends should probably be attributed to administrative incompetence the systemic nature of the failings suggest that a more considered explanation is required. Some of the trends cannot be explained by simple mismanagement. For example:

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Despite a R7-billion rand Equitable Share Grant allocation the number of household on the indigent register has fallen by more than 90% in the last decade. A drop of this enormity has to be accounted for by deliberate action.

Hikes in service charges do not yield more revenue for the city yet the rate at which tariffs increase is escalating. For example, there has been a 20% increase (in real terms) in water tariffs over the last four years but the revenue the city gets from water sales has not increased. Despite the lack of returns the city now proposes increasing water tariffs by more than four time the current inflation rate. The continued pursuit of tariff increases that yield no addition revenue can surely not be an unintended consequence of policy.

If it is assumed that city management is not defined by financial anarchy is necessary to reconcile the above trends conceptually. One approach is to look to who benefits when the trends are considered in their totality. Part of an answer is then given by the nature of the “transformation” pursued by the city. What the city means by “transformation” has changed over the past few decades. Initially “transformation” referred to addressing the impact of poverty, correcting service shortfalls and the racial imbalances in access to public goods. Clearly, as echoed by the minimal support for the indigent, this is no longer the case . “Transformation” has become synonymous with a form of redistribution that develops a monied elite through the active fostering of tenderpreneurs, appointments to council jobs and allocating contracts to preferred service providers. However given the magnitude of the financial crisis faced by the city this seems an insufficient explanation.

Declining use of the indigent register as the medium for allocating benefits to the poor is probably due to the city’s affection for multiple-deprivation index. Except in so far as an income threshold is coupled to their “poverty index” the city fails to state on which grounds a household can be registered as indigent or what level of benefit that household/individual is entitled to. As the city gives not clarity as to how their ‘poverty index” is calculated it is assumed to be (or is closely correlated) to the multiple-deprivation index that is featured so prominently in the city’s website.

The minimal use of the indigency register (and by implication of support for those registered as being in need) must be read in the context of fiscal support for tackling poverty and lack of access to services. National government current allocates over R7-billion per annum to CoJ for, inter alia, funding access to services support. The R7-billion is made available via the Equitable Share Grant (ESG) a quantum vastly in excess of what is indicated as necessary to support the 22 000 on the indigent register. To give the city the benefit of the doubt and treat it as if it has not entirely abandoned the poor it is postulated that indigent support is directed to “deprived” areas rather than individuals. The multiple-deprivation index serves this objective to a limited extent.

The question then arises as to how the ESG (and other revenue) is used to support indigent communities. CoJ policies and resolutions make explicit reference to subsidies, rebates and “freebies” due to individuals and economic groups – they do not make reference to the same benefits being allocated to specific suburbs or other areas. If some suburbs or areas were benefiting from the subsidies then it would contribute to understanding the city’s revenue shortfall. However given the lack of express decisions along these lines the subsidies would have to be implicit or “hidden”. Here “hidden” refers not to lack of visibility to the beneficiaries but to the lack of transparency in the policy and budgeting process.

Although they do not call them such various city entities (like City Power and Johannesburg Water) acknowledge the widespread use of “implicit” or hidden subsidies. One example of a hidden subsidy lies in charges for water. Households in many parts of the city are billed on the basis of assumed water consumption levels. Depending on the specific area in question households are assumed to consume, variously, 5, 10 or 20KL of water a month and are billed accordingly. However Johannesburg Water states that average consumption by the almost 100 000 beneficiaries is actually ion excess of 50KL a month. On average the estimates imply a subsidy of between 60 and 90 percent depending on the area’s characteristics. Essentially the assumed consumption levels destroy the link between what a household consumes and what they pay the city.

A similar situation arises with respect to electricity sales.

The use of “assumed” values probably also encompasses the determination of property values. Rates payable to the municipality are derived from estimates of the market value of the property in question. If property values are based on assumptions about the area (as per the poverty index) improved properties will receive a further subsidy is in the form of reduced rates and taxes. Presumably city administration will also allow itself the convenience of not billing selected regardless of the actual market value of individual properties.

Inaccurate assumptions about consumption levels and simple failure to bill households are substantial. The collective value of “hidden” subsidies and billing exemptions amount, as indicated above, to the equivalent of municipal charges due from one-third of non-indigent households.

Assumed values with regard to consumption levels and property values is an administrative convenience employed by the city. This convenience may be justified if the cost of accurate evaluation exceeded the revenue potential from correct billing. However this case has not been made (or if it has been made it has not been made public).

The impact of the hidden subsidies on the city coffers is devastating. Not only does it contribute to the massive revenue deficit it undermines the transformation agenda. A substantial sector of non-poor residents benefit from the administrative convenience. The extent to which non-poor households benefit from the hidden subsidies is the extent to which indigent households are deprived of those benefits. Moreover, divorcing payments from consumption levels and property values is problematic in so far as economic sustainability is concerned. Residents benefiting form the administrative assumption are not incentivised to limit consumption, reduce waste etc. The excessive consumption levels and low payment rates have fundamentally undermined the financial sustainability of the city

Unfortunately the economic ruination is not the most detrimental aspect of “hidden” subsidies. Far more problematic is that the allocations via administrative convenience undermine the democratic mechanisms designed for this purpose. There is, for example, no council resolution to the effect that residents in areas where water consumption is assumed to 20KL a month may receive (an average) 60% subsidy on the water they consume. Nevertheless the city puts such a subsidy available into effect at massive scale. Council resolutions specify service charges, define what the indigent are entitled while constraining excessive consumption are trumped by the administration. Similarly the councils indigent policy has been negated by undermined by the allocation of benefits to areas which include non-indigent residents. City administration have essentially taken decision making outside of the arena where accountability can be ensured i.e. it has undermined council and the mechanisms of democratic accountability.

The question then arises as to why Johannesburg City Council tolerates being usurped. Part of the answer lies in the extent to which those who benefit from the hidden subsidies support the ruling coalition and those prejudiced by the increases fall outside that coalition. A more likely explanation is that the Council is oblivious of the extent and impact of hidden subsidies and the administration’s myopia. On the one hand reducing the hidden subsidies now would fundamentally undermine support for the current administration before the next local elections. On the other hand upping tariffs creates the impression that the city is taking remedial action. However by not reducing the hidden subsidies the administration almost guarantees a financial implosion around election time.

Verifying the impact of hidden subsidies and determining the impact of other billing failures requires that the city publishes a sub-region breakdowns of consumption, revenue and property values. In the absence of this data we are left relying on accounts like the above to understand the current situation. The above accounts for much of Johannesburg’s lack of support for the indigent, its inability to raise revenue from trading services and the resulting revenue shortfall. The revenue shortfall coupled to the new transformation objectives explains the poor levels of maintenance and capital expenditure deficit. However to explain the city’s pursuit of revenue via massive price increases on trading service tariffs it is necessary to resort to administrative incompetence.

jlamprecht