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High rates will ‘kill investment’

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Sapoa is scrutinising the way municipalities are pushing up commercial rates and taxes

An ever-increasing commercial property rates environment “kills investment” and has negative consequences for job creation.

This is according to the South African Property Owners Association (Sapoa) which has been “vocal” in challenging these increases in the country’s municipalities.

Speaking at the association’s annual conference in Durban last week, Sapoa president Peter Levett said a recent example of this watchdog role – performed by Rates Watch, a team of consultants that focuses on key municipal property costs – was in May this year when Sapoa highlighted its legal position to the City of Joburg on “a number of issues”, including commercial property value disputes.

According to Sapoa’s latest Rates and Taxes Report for January to December last year, rates and taxes on commercial properties have increased by almost 250% since 2005, and now account for just under a quarter of a company’s total operating costs – second only to the cost of electricity.The combined cost of rates and taxes and electricity makes up more than half of a company’s total operational costs, the report stated.

On the issue of increases, Sapoa chief executive Neil Gopal said Sapoa members contributed significantly to the provincial rates bases, and therefore believed it to be “in the interest of both ourselves and municipalities across South Africa to partner on this matter”.

“As a sector, commercial and industrial property wants to contribute in a positive way towards the efficient functioning of municipalities.”

For this reason Levett told the conference it was “heartening” to note that the discussions resulted in Joburg mayor Herman Mashaba deciding that commercial property owners who had lodged objections to their property valuations did not have to pay the higher amount until the objection process was finalised.

Municipalities and property owners are urged to partner with each other to address municipal
cost disputes. Picture: Pixabay

Also discussed at the conference was the issue of land reform. Levett said land expropriation without compensation was a “major issue” for the commercial property industry, and that the State had not used its expropriation powers to redistribute land.

Since 2008, Sapoa had noted a significant downward trend in the pace of redistribution of land measured by hectares, he said. He explained redistribution had peaked at 5000ha a year in 2008, but by 2016/2017, it was “almost zero”. Therefore, clear policies that identified the purposes of land redistributions needed to be finalised.

Levett added that the association supported a land expropriation process where the rights of present and future landowners were balanced against the need to ensure stability and economic growth.

He also said budget constraints had not been the main barrier to redistribution and that there was therefore no need to amend the constitution.

“The most important constraints to effective land reform identified by the panel, have been corruption, diversion of land reform budgets to elites, lack of political will and the lack of training and capacity.”

Levitt said Sapoa believed that, as a first step, municipal and State land within urban areas should be identified for development, and this could be done in partnership with the public and private sectors.

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