Category Archives: News and Reviews

Ekurhuleni focused on creating a better future

Written by Robert Brand, Friday, 04 May 2012

Talking about the future strategy for Ekurhuleni, work stream facilitator for Social Development and Cohesion, Hlula Msimang asked public participants to consider where they find themselves now and to think about where they would like to be in the future. And then to devise a means of crossing the divide to reach their goals.

The current performance issues that the metro faces include:

  • Population growth and urbanisation;
  • Public health services that are overstretched;
  • A public education system that is underperforming;
  • Social fracturing and inequality;
  • Poverty and unemployment are rife;
  • Housing;
  • Social infrastructure and amenity backlog;
  • Safety and security.

Msimang’s presentation focused on creating a future Ekurhuleni taking into consideration population growth and migration. Migration he said presented the metro with an enormous challenge especially in terms of available space and land.

“There is not enough land available in Ekurhuleni, and with a growing population the demand is going to increase further. With the population growth comes the shrinking of space, which is why the metro has to examine the possibility of high-density housing and appropriate service delivery.

Our health infrastructure is catering to people who come from outside Ekurhuleni’s boundaries to access our health services, which is why our services are becoming stretched.”

Ekurhuleni is already an urban environment and unfortunately as the influx increases, informal settlements will continue to grow. Already the metro cannot meet the backlog and demand for RDP housing.

Msimang highlighted the education crisis and said it is critical to ensure that every child that goes through the schooling system can read, write and do arithmetic, so that they can grow up and learn skills to create an income stream.

“People must acquire skills in order to get jobs, it is the only way out of poverty. Education is the best escape out of poverty. We live in a changing and advancing world, jobs demand a certain level of skills that people must have in order to quality for employment.”

Long-term risks and opportunities

His presentation also centred on the following:

  • There is a large youth population – young people under the age of 35 make up 60 percent of Ekurhuleni’s population.
  • Climate change is conducive to change in our communities.
  • Available resources (financial and other) in the private sector and other spheres of government.
  • Advances in ICT offer an opportunity for modernised delivery of services for a smart city.
  • Existing infrastructure for further developments.

There metro’s main concern is reduction of poverty, but it is important to address the core problems. But how does one break the cycle of poverty? Which brings one to the point of low-cost housing. Housing is an emotive issue, but it can be used to build integrated and sustainable communities, where sport and culture play a major part, Msimang said.

Safe and secure cities are high on the agenda, but policing is not the only answer to reducing crime in a community. Community involvement and neighbourhood watches can play a big role to ensure residents’ safety. Looking out for our neighbours is one way of contributing towards a safer community. More importantly, we have to grapple with the root causes of crime, such as alcohol abuse and drug addiction. We also have to undergo a mindshift to make to changes that we want to see in a future Ekurhuleni. People resist change, but that is the only way things will improve in our city.

The tax base of the city is very thin, we don’t have the resources or the capacity. Also, the global recession has impacted on us, with factories being forced to close down resulting in big job losses. The infrastructure in our city needs to be developed as part of our 2055 goals and technology has to play a pivotal role in the achievement of our dreams for the world-class city of Ekurhuleni.

Block Tariff Structure in Municipalities

A recent Water Research Commission study, led by Nelson Mandela Metropolitan University’s Professor Stephen Hosking, looking into the municipal water tariffs of 15 South African municipalities, found that the primary driver of water service tariffs is the quest to balance tariff revenues with explicit financial costs.

Given that the national government requires this balance, and it is a prudent financial practice, the question arises whether this aspect of municipal water service management is in a sound and healthy state.

The water supplied by South African municipalities may be categorised into nontariff water, water charged at average financial cost (the tariff level), and water charged to balance total revenue with total financial cost.

Nontariff water relates to all water losses and water services supplied at no charge or without national government subsidy support.

Water services are charged at their average financial cost of production to government, selected businesses, other municipalities and residents whose tariffs are paid on their behalf by national government.

The remainder of water service users are charged in a way that balances total revenue with total cost, namely full-tariff-paying residents and businesses not qualifying for average cost tariffs. Revenue, and captured consumer surplus from this group, are increased by means of price discrimination. Those who are prepared to pay more for their water are charged more for it, and the latter are targeted in terms of how much they demand. The more service demanded, the higher the unit rate charged.

South African Local Government Association water services manager William Moraka confirms that the increasing block tariff structure enjoys wide-spread support among municipalities.

Municipalities argue that it works in such a way as to recover their costs, it enables them to cross-subsidise the poor’s low water-service use with extra payments made by the rich owing to their high water-service use, and it curtails demand for water and capital to build new water infrastructure – both scarce resources.

Along with national government subsidies, this cross-subsidisation has contributed to improved water services to those previously excluded from them.

Unfortunately, not all the findings of the survey were as positive. It was also found that the financial information avail- able to calculate the water service tariffs was often inadequate, costs of provision of services were underestimated and important environmental costs were excluded. More seriously, it was found that there was widespread ignorance and, perhaps, even disregard in some cases of the demand for municipal water services.

The study concluded that the primary current influence on municipal tariff design is compliance with water and municipal governance law and policy.

For many of South Africa’s municipalities, meeting the compliance goals is challenging to the point of being almost overwhelming. The net external cost is not included in the calculation of South African municipal water service tariffs. Many municipalities use limited (if any) accounting information to determine the availability tariff.

Further, there is uncertainty within South African municipalities as to the underlying economic rationale of the water service tariff structure. The use of increasing block tariff structures is appropriate for curtailing individual user demand, but other more targeted instruments are superior for the pursuit of other goals, such as cross-subsidising the cost of providing water services to the poor.

Increasing block tariff structures may redistribute income in unintended ways.

The case studies evaluated show that the municipalities calculate water service tariffs by balancing their tariff revenue and explicit financial costs. It is a cost accounting exercise.

When municipalities pay minimal attention to demand, that is, what residents and business are able and willing to pay for, the link between the supply of and demand for water services is undermined. The main concern that this delinking gives rise to is that there may be unacceptable delays in water supply infrastructure being built, with consumer welfare being compromised as a result.

Hosking’s findings raise the question as to whether the increasing block tariff system is as economically meritorious as is commonly thought. It may well be true that a tariff hike is a cheaper way to solve the problem of excess demand than building a dam, but the question remains whether this gain exceeds the cost of consumer welfare and business opportunities lost through municipalities’ ignorance of the demand they face.

25th May 2012

Bitumen Supply Status 16/01/2013

Listed below are notifications regarding the status of bitumen supplies, after a leak disrupted delivery of crude oil in January last year. Please see notices and updates below. 

For an update on Bitumen Supply Status as at 16 January 2013 provided by Much Asphalt, click here (PDF 112Kb). For details of Chevron SA refinery shutdown, click here (PDF 35Kb). For details of Engen Refinery shutdown, click here (PDF 425Kb).

For an update on Bitumen Supply Status as at 26 November 2012 provided by Much Asphalt, click here (PDF 111Kb)

For an update on Bitumen Supply Status as at 13 September 2012 provided by Much Asphalt (SASOL email regarding bitumen production), click here (PDF 274Kb)

For an update on Bitumen Supply Status as at 27 August 2012 provided by Much Asphalt, click here (PDF 154Kb)

For an update on Bitumen Supply Status as at 23 July 2012 provided by Much Asphalt (SASOL letter regarding NATREF shutdown in October/November 2012), click here (PDF 77Kb)

For an update on Bitumen Supply Status as at 18 July 2012 provided by Much Asphalt, click here (PDF 154Kb)

For an update on Bitumen Supply Status as at 28 May 2012 provided by Much Asphalt, click here (PDF 412Kb)

For an update on Bitumen Supply Status as at 22 May 2012 provided by Much Asphalt, click here (PDF 108Kb)

For an update on Bitumen Supply Status as at 12 April 2012 provided by Much Asphalt, click here (PDF 112Kb)

For an update on Bitumen Supply Status as at 30 March 2012 provided by Much Asphalt,  click here (PDF, 211Kb)

For an update on Bitumen Supply Status (Shut down) as at 29 February 2012 provided by Much Asphalt,  click here (PDF, 14Kb)

For an update on Bitumen Supply Status as at 21 February 2012 provided by Much Asphalt,  click here (PDF, 95Kb)

For article (8 February 2012) about bitumen exports continuing in spite of local shortages, click here (PDF, 17Kb)

For article (2 February 2012) on impact of bitumen shortages on road builders, click here (PDF, 200Kb)

For letter (31 January 2012) from Engen regarding their production, click here (PDF, 15Kb)