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Dear resident

We urge all of our residents to have their say on the City’s R49,1 billion draft budget for the 2018/2019 financial year.

Our draft budget indicates important policy decisions and priorities, it determines rates and tariff increases, and specifies how we spend our money on vital programmes and services. It also shows that we are doing everything possible to help our vulnerable residents, with just under R3 billion proposed in rates and tariff relief.

The current water crisis is solidly reflected in this year’s budget: how it has impacted on the City and what it means going forward.

For instance, you will see that we need to increase our water and sanitation tariffs substantially to enable us to continue supplying water and providing sanitation services.

Key proposals for water and sanitation:

  • a substantial increase in the water and sanitation tariffs
  • a water step tariff change from 6 steps to 4 steps
  • the introduction of fixed charge for water based on water meter size.

The tariff structure covers the costs of providing the service. Due to the drought and the associated restrictions we’ve seen a substantial drop in water sales. For instance, the average city consumption is down year-on-year from 900 million litres per day in February 2017 to just over 500 million litres per day, leading to a shortfall in revenue of nearly R2 billion.

The proposed tariff is more punitive in the higher steps but also is cost reflective in the lower steps which previously were cross-subsidised by the higher steps. This is necessary as most domestic users fall within the lower steps meaning we can no longer cross subsidise these steps.

Further to this we are required to reduce our consumption to 450 million litres per day to ensure that we stretch our water supplies in light of the unpredictability of the rainfall. This is also to adhere to the National Department of Water and Sanitation (DWS)’s prescripts requiring the City to cut water usage by 45%.

We have already cut our budget shortfall as far as possible but we can’t afford to cover an even larger anticipated shortfall in future from other City operations.

It is vital to keep in mind that it costs the same to operate our networks whether more or less water is used. Our tariff structure requires greater income certainty and more diverse revenue sources which is not based on the usage alone. So, we are proposing fixed delivery charges for water and electricity, for that matter. It is important to remember at all times that the budget must be balanced, it cannot be planned to over or under recover.

Furthermore, we also need to invest in other water sources, such as aquifer abstraction and water recycling so that we do not rely as much on rainfall.

The cost of water supply has also greatly increased but the tariff has historically been too low to keep up with what is required.

The increase is most notable at the Level 6 restriction tariff. But it is important to note that we’d definitely want to move to a lower restriction level and thus a lower corresponding tariff as soon as we can. This would be dependent on adequate winter rainfall and what is required by the DWS.

Key proposals for electricity:

  • Moving Domestic Tariff customers to Home User Tariff customers
  • Introducing a fixed service charge
  • Adjusting the service fee down to R150 (including VAT) from the proposed R219 amount for 2017/18 and to adjust electricity rates to compensate

A greater income certainty is also required in the electricity tariff structure. Approximately 30% of revenue received from electricity is directed towards repairs and maintenance of the City’s electricity grid, among others. The fixed costs associated with providing electricity to residents remain the same irrespective of how much electricity is used. Previously, a fixed cost was in place.

Thus, as part of revising our tariff structures, the City is proposing a change to electricity tariffs which will affect all households valued at R1 million and over.

The change is aimed at ensuring residents in properties valued above R1 million contribute equitably to the fixed costs associated with electricity supply. Under the current tariff formula those who buy less than 600 units a month are being subsidised by those who buy more. As fixed costs bear no relation to consumption on the property, the City believes it is reasonable and appropriate that those living in properties valued at over R1 million contribute equitably towards these costs.

The model where fixed charges apply, whether for water or electricity have already been implemented for example for water in Durban as a result of their severe drought and Stellenbosch and Drankenstein municipalities, and for electricity by Eskom, City Power and the City of Mangaung for example.

We know that you work hard for your money and we will continue to ensure that your money is spent with great consideration. For comments on the draft budget, please have a look at the budget and send an email to before 4 May 2018. Please find the budget on

Councillor Johan van der Merwe,
Mayoral Committee Member for Finance,
City of Cape Town

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