The City of Cape Town said it would introduce relief measures after protests against the proposed huge property rates and taxes increases in the 2025/2026 budget. These measures remain to be seen but it's unlikely to offset increases of over 20% for residents whose properties are valued over R3 million.
The city has received 14,000 comments to the budget and has extended the period for comments. Below are my comments submitted:
Comment on Cape Town's 2025/26 Budget
DA opposes budget increases
In negotiations with the ANC-led coalition, the DA supported the 2% and then 0.5% VAT increases if it received concessions on other matters. But when these were not forthcoming, it turned 180 degrees and opposed the increases citing it was unaffordable to citizens and would worsen the poor economic conditions in the country.
Their main point, though, was Treasury could make savings in various departments by eliminating dysfunctional and unnecessary departments and wasteful expenditure.
When the minister of finance Enoch Godongwana proceeded with the increase, the DA accused them of being indifferent to South Africans' circumstances. It and EFF approached the Western Cape High Court to set aside the 0.5% due to irregularities in the process that led to the vote in the National Assembly. Throughout, ignoring they initially supported the increases, the DA insisted only they defended South Africans from unjustified and inflationary tax increases.
Similar public outrage followed Eskom's request for double digit electricity price increases. Then the DA were among the loudest objectors.
So it's ironic Mayor Geordin Hill-Lewis and City presented the 2025/2026 budget that contains increases in rates and levies (property tax) of 25% and more.
Like the justified accusations against Treasury, Hill-Lewis and officials who drafted this budget are tone deaf, disingenuous and arrogant to insist the increases are sound and necessary. As with every matter when there are objections to its decisions and actions, the city insists they are right and everyone else is wrong.
During a CapeTalk interview with host John Maytham, Hill-Lewis justified the increase. He said it was to pay for services like weekly litter cleanups along main roads (his pet project rather than a priority) and infrastructure expansion and maintenance, specifically water and sanitation which needs it urgently. "The city is falling apart [sic]" he's telling the media to win hearts and minds.
He spoke of middle class owners subsidising poor areas as if it's a novel concept they invented. Cross-subsidisation is the bases of the tax system of most if not all countries that impose income and property tax. (Property tax was introduced in the Cape of Good Hope colony in 1836: Franzen, R, 2022).
Hill-Lewis said Treasury reports, which he says he studies, supposedly show Cape Town has lower taxes than other metros and residents receive good value for money. He defended comparing its property taxes with other metros', which Maytham correctly noted irrelevant. However, because the city's property values are the highest in the country, residents are paying more taxes than Pretoria, etc for property of similar size.
Hill-Lewis hopes if residents are misdirected by how lucky they allegedly are to have a DA administration, they will forget how bad the tax proposal is. But he is wrong. Residents - homeowners, business and non-profits - know the large increase shall have a significant inflationary impact and they cannot afford it.
However, in his PR campaign Hill-Lewis omitted what they can and ought to be doing to save costs, like his national colleagues did regarding VAT. This is the budget's failing: like Treasury, only concentrating on income.
Price shock of large increase
The shock to economies worldwide of sudden large price increases is developing in real time because of the Trump Administration's unilateral large, in China's case, huge tariffs on imports. They too declare it's justified although based on a formula economists criticise as meaningless.
Similarly, the shock to property owners from a large property tax increase shall be felt, not only immediately, but long-term too as the cost is expanded throughout households, businesses and local economy.
"In economics, a price shock refers to an unexpected, sudden, and often large change in the price of a good or service, or a group of goods or services. These shocks can disrupt economic activity and have wide-ranging effects on various sectors." (AI summary.)
The effects include to inflation, growth and employment.
While Trump does not understand how tariffs work, it's also obvious he does not care about the impact even on US citizens. Unfortunately, like him but not as badly, South African politicians, even well-meaning ones like Hill-Lewis and DA, have an incomplete or shaky conception how economics work. We see it all the time with their glib promises of economic growth and job creation.
However, what they do know is how to spend taxpayers' money while themselves being insulated from the impact of price surges by very generous, above-private sector salaries.
An inflation-linked price increase can be accommodated partly because this is what market participants - everyone in the chain from supplier to consumer to investor - expect and plan, ie budget for. Also, they too charge or receive, as the case may be, an inflation-linked increase. Put another way, price equilibrium is achieved - the supplier/consumer price relationship is more or less balanced.
But a price shock from sudden, large increases means the end user, in this case taxpayers/ratepayers, cannot and are unable to cope because their financial circumstances have not changed accordingly. Businesses pass price increases to consumers so their profits are unchanged. They might absorb some of it if they hope to maintain sales but no business can absorb increases significantly above inflation. If they do they will go out of business. They will be impacted, though, by less sales as consumers cut costs.
Unlike government employees who receive annual above-inflation salary increases, employed South Africans (I'm not referring to the executive class) generally receive inflation-linked increases. Retired people, including SASSA pensioners, live on relatively small fixed incomes. They have one or two options when facing substantial price increases. If it's non-essential, they might buy less or not at all. But they have no choice with essentials like food. And taxes.
Impact of large property tax increase
During the CapeTalk interview Hill-Lewis presented himself as a responsible city manager. In response to a question, he said it would be "irresponsible" of him to allow Cape Town to deteriorate like other (ANC-run) municipalities are doing. Responsible means acting diligently, competently and with integrity.
So, despite Hill-Lewis claiming he is responsible and studies economic data, it's obvious he and city never conducted an economic impact study of the large rates and levies increase on citizens (like Treasury never did for VAT), ie no due diligence. They only estimated what it would do for the city's bottom line (again like Treasury). Even basic research (AI assisted if he and his colleagues lacked the inclination to thoroughly research as they clearly did) would provide the answers.
According to a paper by the University of Pretoria Department of Economics' Bonga-Bonga, L et al (2016), "large property tax increases can have several economic consequences, leading to reduced economic activity and potentially offsetting some of the increased revenue for government. These impacts can include decreased business activity, lower consumer spending, and potentially a negative effect on local public services." (AI summary.)
"Reduced business activity: Higher property taxes increase the operating costs for businesses, particularly in areas where businesses rely heavily on property ownership or leasing. This can lead to a decrease in the number of local businesses.
Lower consumer spending: [Large] property tax increases can burden households, particularly those with limited disposable income, reducing their spending power on goods and services. This can lead to a decrease in overall economic activity as consumers spend less, especially when combined with other factors like rising inflation or high interest rates as noted by The World Economic Forum.
Potential negative impacts on public services: While increased property tax revenue can be used to fund public services, it's crucial to consider the broader economic context. If the tax increase leads to a significant downturn in business activity or consumer spending, it may also negatively impact other areas of government revenue, potentially leading to a decrease in overall public services despite the increased property tax collection.
Impact on property values: In some cases, large property tax increases can be partially or fully passed on to consumers in the form of increased rents."
Conclusion: The outcome of the large property tax increase for Cape Town's residents would be less disposable income and discretionary spending, higher inflation and ultimately lower economic growth for the city. But the city would levy the tax regardless of the economic circumstances of and on households and businesses.
Large tax increase is not sustainable
The city's financial security is assured in the short- to medium-term at the expense of the people. But by killing the golden goose, it would damage its long-term sustainability, ironically, the very thing Hill-Lewis says he wants to protect. He has not learnt from the example particularly of Eskom and badly run municipalities where citizens are revolting and finding alternatives.
It's stupefying he, maycos and finance team presented this budget with its large increases at the same time as the VAT protests, which their party was the most vocal about. And it comes at a time the world economic order has been thrown upside down by Trump's tariffs which too shall affect South Africa and likely the US ejecting SA from preferential trade agreements. Despite some sectors of society thinking the Western Cape and Cape Town are insulated from the rest of the country, an independent "well-run bubble", they're not.
Perhaps the above events occurring at the same time as the city's budget was released for comment was coincidental and bad timing. But in what world does Hill-Lewis et al live that they believe such large increases are proper and would be met with meek acceptance?
In an advertorial issued on May 5 titled "Building a thriving Cape Town: Empowering communities through economic access James Vos wrote:
"Cape Town’s economy is on an upward trajectory, thanks to the targeted and strategic actions we are taking. It is a privilege to lead these efforts, but it is also a responsibility carried by all who are invested in economic development in this city: to create avenues of opportunity for all Capetonians".
Note the "we are taking". Vos credits the DA/city almost entirely for Cape Town's economic development. Residents who make the city what it is, workers who bring their skills and business, investors and entrepreneurs who provide the vision, money and space for production are given subordinate credit. He ought to know governments do not create economic growth, jobs and productive capacity. Their role is to provide the environment for the private sector including residents to do that. Local government's specific, constitutional role is to provide the basic infrastructure that enables social and economic development to occur.
The city's budget with its huge property tax increase for the middle class was developed in isolation to what is happening in our society and abroad that will soon impact ours. Vos' solipsism and self-congratulatory boast that, according to him, the DA/city alone is creating economic growth speaks of two things the DA, above all local parties, are susceptible to: Hubris and self-righteousness equal to the gods, and chronic inability to recognise their limitations.
Property taxes
The Municipal Property Rates Act of 2004 empowers municipalities to impose rates on properties based on its market valuation.
However, Cape Town is leading the way with fixed monthly levies for electricity, water, sanitation and cleansing. These increase annually and in addition to consumption charges. Hill-Lewis mentioned a cleaning fee to pay for main road litter cleanup, his pet project.
Property valuation is controversial. Supposedly it's based on the market value of similar properties in the same area sold immediately prior the city's valuation. It's based on size of plot and structure, additions, rooms and so on.
But in reality the city's valuation is on the size of plot as I discovered a few years ago. I asked the Valuation Department why our property and another similar on our road, both which have no additions except a garage, was valued ten to twenty percent more than properties on the road that had extensive extensions including a large two-storey house. After first attempting to obfuscate, the official admitted valuations were based on plot size only. (Our plot is marginally larger than the others so that was not the answer, though. I concluded the valuation was arbitrary.)
Pushed by demand - the causes are well-known - the increase in property values over the last two decades means even modest properties in good to prime middle class areas, especially but not exclusively Southern Suburbs, Atlantic seaboard, Table Mountain Chain environs, Cape Town CBD and nearby, have easily tripled in value. Many were bought decades ago by people who are not wealthy. Many owners are now retirees and elderly and have the misfortune of owning a house they cannot afford because of gentrification and exogenous demand.
Demand for prime property is exacerbated by in-migration ("semigration" is a neologism I don't quite understand) from Gauteng, overseas, and lately, Airbnb and digital nomands. This excludes the new generation of Cape Town's historical citizens who need affordable housing. The city benefits from gentrification and demand push-factors that raise property values while doing nothing to provide relief to what is, in effect, bracket creep. (Treasury was criticised for not adjusting for bracket creep in its original 2025 budget.)
During the CapeTalk interview, Hill-Lewis confirmed that in the proposed budget taxes on properties from R3 million to R4 million shall be increased by around 25%, and more on values above that. Given the protests, he said they would investigate relief for that band but did not respond to the problem: 25%, or anything more than a couple of points more than inflation, is still very inflationary.
Hill-Lewis has gone on a PR offensive explaining why the increase is needed. The DA, as they do, is gaslighting citizens again as they did with Day Zero. The impression he's creating is it's our fault for not understanding public finance, and our fault for not knowing the city's infrastructure is allegedly near collapse. He and his colleagues are displaying the mullishness and arrogance Enoch Godongwana did over the budget, which didn't end well for him.
Middle class subsidising the poor
The other class of migration is economic migrants from mainly Eastern Cape and African countries. Most who don't already have families here erect structures in informal settlements which are expanding at a rapid rate. Constitutionally, local governments must provide free basic electricity and water and access to housing.
Cape Town population is 4.7 million. It has 1.5 million households. 146,000 are in informal settlements. Where informal structures have municipal electricity, they may have prepaid meters. Established informal settlements may have standpipes and water or chemical toilets and refuse collection. The communities are not charged property taxes and consumption charges as residential properties are. Despite being poor, many could (eg satellite dishes atop dwellings indicates disposable funds).
While the Constitution and dignity demands all residents have access to services, the bulk of the burden for paying for it and infrastructure falls on the middle class, about 40% of the city's population (Wikipedia: 60% live in townships and informal settlements). Expecting them to bear more - tax increase above 25% for a group whose properties happen to be worth more than R3 million - is intrinsically unfair. It creates conditions for a voter revolt.
Maytham asked this very question of Hill-Lewis - how it could impact the DA in elections. He replied it would not deter him - it would be "irresponsible" to let the city deteriorate as others in SA have.
It beggars belief Hill-Lewis' religious-like self-righteousness and arrogance blinds him to the ANC's experience in 2024, UK's Conservatives, US' Democrats and other countries' losing parties when they tested voters' tolerance and wallets and ignored them. I thought he was genuinely well-intentioned, if at times wearing his heart on his sleeve. But like the DA, Zille most of all, and politicians of all parties, he forgets who elected him and why.
The Western Cape Government has long complained the province is not receiving its equitable share of the national division of revenue - the government subsidy to provinces and municipalities, a formula based on size of population. Hill-Lewis mentioned division of revenue during the CapeTalk interview.
If Cape Town is not receiving its equitable share, as he indicated, particularly with the influx of economic refugees, the city should demand it, in court if necessary. The DA is not afraid of doing that. They litigated the VAT increase which has been abolished. Hopefully a new budget that prioritises cutting costs and encourages growth shall be presented. Their Cape Town colleagues must do the same.
Property tax increase to pay for failing infrastructure?
Hill-Lewis said the large tax increase was also to cross-subsidise infrastructure upgrades in poor areas and because the city's infrastructure is in bad condition, especially water and sanitation.
In 2006 I interviewed the director of the city's Department of Sanitation for a master's in urban management project (an exercise envisioning/brainstorming a sustainable use for the Athlone Wastewater Treatment Plant and Power Station site). He said new developments were straining the city's stormwater and sewer networks. And developers were not paying (enough) to connect to networks.
Since then development has proceeded rapidly and often controversially under the DA's "red carpet" policy that encourages developments including inadvisable and harmful ones, as high-profile court cases attests, eg River Club about which Hill-Lewis was forcefully pro-development (ditto his predecessors). If we believe him that water, sanitation and other infrastructure is failing, then it's partly due to their own policy.
They - DA - have run the city for 20 years. Why did they not plan and budget for these upgrades before now? Had they done so, property tax increases could have been introduced in a phased manner, say a couple of percentage points above what had been given. That they did not indicates a degree of negligence and irresponsibility.
The drought crisis of 2017 revealed they had ignored warnings for two years at a time the region was receiving below average rainfall. Even when the crisis was upon us, they insisted there was no crisis. They gaslighted households instead but let businesses off lightly.
That Hill-Lewis now says the city's infrastructure is in a bad way can be interpreted in two ways: crying wolf to scare residents into shutting up and paying up.
Or he inherited an administration that for two decades had lied by omission about the state of the city while at the same time promoting Cape Town to investors as a worldclass city, the best in the country, where one is supposedly safe ("peace loving" he said on May 7 despite Cape Town having the highest murder rate in the country), and rolling out the red carpet to developers - their policy - knowing its infrastructure is fragile.
The DA are partly to blame for the deteriorating, infrastructure, at least contributing to its acceleration and neglect. This is no different to other municipalities except by degree. So gaslighting citizens for protesting the tax increase is hypocritical and unacceptable.
It's true old infrastructure, particularly below ground, needs replacing. He has not said how much of it, though. But the city has spent and is spending tens of millions and billions on other projects which are not essential or a priority. Meanwhile, for decades they neglected to find a sustainable solution to pumping raw sewerage into the ocean. Yet they denigrate protesting citizens, including knowledgeable people, who can see the evidence in front of their eyes, for allegedly failing to understand science.
From 2018 to 2020 the city spent, it must be, millions on a kilometres' long network of water supply pipes intended to irrigate sports fields and parks with treated sewer water from the Athlone Wastewater Treatment Plant. It was never commissioned. My queries why we're never convincely answered.
The other project costing billions is the Cape Flats phase of MyCiti. This is a Rolls-Royce-type political legacy project rather than the more modest yet effective public transport system Cape Town really needs. Under construction, it's distinguished by unique and expensive "sky bridges", a developed country conceit (if their bus rapid transit systems even use such) in a struggling developing country. It coincides with original MyCiti routes in the city centre discontinued due to lack of adequate commuters numbers.
Although the national government is paying for the project, the city's taxpayers are bearing an amount too. Not counted is the incalculable cost the result of traffic choas and congestion during the more than three years construction: road users' time, arriving late for work and school, money, fuel, frustration (and carbon emissions), all wasted.
The Cape Town Stadium costs tens of million a year to maintain. The city won't reveal the full annual maintenance cost, but in 2016 staff costs alone were R21 million. That year total maintenance and repair costs including staff were over R60 million. The small revenue it receives from events (R15 million in 2016) does not nearly cover costs. It still is a white elephant.
These are just three examples of wasteful or excessive use of taxpayer money - and there must be many - that could and ought to be better used where it's urgently needed - on infrastructure Hill-Lewis claims is in a bad way.
City improvement districts - double taxation
City improvement districts (CID) provide a paid-for service in addition to what the city provides. This is cleansing - road sweeping and litter removal - and visible security. Residents who live in CIDs cannot opt out and must pay the levy which the city collects on behalf of the CIDs. The levy is based on a percentage of the rates.
The fact is where CIDs operate, usually business districts, they have completely replaced city cleansing services for which residents are already charged in the property taxes. This is double taxation. (CID management are generally well remunerated which comes from levies.) Substantial increases in property taxes - rates and levies - shall mean substantially increased CID levies.
Hill-Lewis has proposed a cleansing levy which will pay for general litter and rubbish cleanup (refuse removal is already a separate levy) including his pet project, main thoroughfare litter cleanups.
Residents who live in CIDs are hit twice - increases in property taxes and CID levy for a service they already pay for.
Budget must cut excessive and wasteful expenditure
I suggested above where cuts could be made - review current and future infrastructure projects and limit it to what is essential. There is a precedent: the unfinished Foreshore flyovers suspended at the time of construction because it was too expensive to complete. (Why was it ever designed that way?)
Similarly, the MyCiti phase under construction from Ottery and Lansdowne to Claremont is a monster: sky bridges, Stanhope Road widened bridge, expropriated houses, multiple lanes either way - out of scale for what is really needed.
But this, like Cape Town Stadium, is a vanity political project where budget deficits are not a concern.
Government at all levels is overstaffed and overpaid. Godongwana revealed part of the reason for the VAT increase was to fund public workers' salary increase. It's one of two reasons for the high national debt, the other is social grants.
The City of Cape Town is no exception. It's hard to know how efficient and effective all levels of the city's workers and structures are but the perception is of a bloated, cumbersome organisation where many workers are underemployed with duplication of duties.
For example, duplication is evident in frontline contact with residents where more than one individual worker - sometimes two or three - and/or department responds to the same query, complaint or fault report. The fault reporting centre just refers the fault/complaint to the attending department anyway. Eliminate the centre, a fairly recent invention, and its staff.
Other evidence of a bloated workforce is by casual observation of city (not contractors) crews on site. Often twice the number of workers needed for the job arrive, half working. The same with EPWP crews. Nowadays contractors perform work previously the city did with city involvement being what I call "supervision from the office" ie no contract oversight.
So, review the number of staff needed throughout the organisation. Since salary cuts would not be possible given public pay grades and staffs' expectations thereof and government's fear of the unions, bureaucratic deadwood should be pruned over time.
GOOD's Anton Louw (May 4) mentioned superfluous subcouncils costing R39.1 million a year. Chairs earn the same as maycos. "[Subcouncils] have no meaningful decision-making powers. They are an expensive form of political patronage and wasteful expenditure." Of ward allocations, they "receive R116 million despite services already centrally budgeted. Allocations should be needs-based."
Another problem with ward allocations is at financial year-ends often unused allocations are spent wastefully on unnecessary projects just to prevent the budget being recorded as unused, which raises an audit query. Multiply that waste throughout the city.
I agree with Louw. On subcouncils and ward allocations alone, R80 million a year could be saved (assume budget cut by half).
Conclusion
I doubt Hill-Lewis and his colleagues, like their national DA colleagues regarding the Budget and VAT, examined each budget line item with an accountant's and economist's eye to find where they could trim the fat.
This analysis is an overview of the budget principles in the same way Hill-Lewis is doing in his media campaign: discussing the principles of a tax increase and its overall impact. He said he is a responsible city manager so taxpayers deserve a reply of whether they seriously examined ways to find savings, and if not, why not. Conversely, he must say why raising revenue was their only solution.
Already, by reducing ward and subcouncil allocations and eliminating duplicated services and workers, there could be potential savings of R100 million and more. I think it's feasible to save five, ten times that if the entire budget is examined. But I doubt they will do so because it's always easier to spend other people's money.
Unreasonable, large property tax increases shall have the opposite effect to what the city expects. It will cause residents to have less disposable income, is inflationary and will lower economic growth. It's not sustainable.
It's troubling the city thought increases up to ten times inflation is economically sound and the public would just accept it. It's tremendously arrogant, but it's an indication of Hill-Lewis' and DA's competence to run the city. (They similarly criticised Godongwane so turnaround is fair play.)
Also, in their thinking, Cape Town's party leadership is divorced from their own party who went to court over the VAT increase. And divorced from reality, especially with elections a year away.
I appreciate living in a well-run city (the working class and poor would have a different view), which I reiterate it's always been - the DA just continued with what was already there. But I can't remember a time when residents are being asked to dig as deeply in their pockets for the same level of service like over this past decade.
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