Real Estate Investor Magazine South Africa March/April 2020 | Page 39

The good, the bad & the ugly
After thorough studying of the Bill by various affected
stakeholders, some developers and associations have made
comments about how they think this bill will affect the
property sector financially and otherwise.
South African Property Owners Association (SAPOA) CEO,
Neil Gopal, hopes that double taxation with regards to the
enactment of the bill will not be suffered by the various
developers as they already pay high commercial property
municipal rates. Meanwhile, local developments company,
Sedgley developers’ Director, Mark Batchelor, believes that the
centralisation of guidelines for local governments on how they
charge local developers is a great idea.
“Development charges are
a once-off charge levied by
a municipality on the land
owner as a condition for
approving land development
application.”
“The principle of setting a standardised framework to guide
local authorities on how much, and what aspects to charge,
developers for in order to create serviced/zoned land is good
in my opinion. Many of the smaller local authorities do not
have the expertise to create "best practise" service provision
agreements from first principle,” says Batchelor.
“The other key aspect of the Bill is to ensure that services
contributions are ring fenced to fund the physical provision of
these and do not become a source of "general revenue" for the
local authority leading to underserviced developments, service
delivery protests, and developers being unwilling to consider
housing (and other) much needed projects,” He added.
Is it worth it?
On whether or not this bill is needed in South Africa, Batchelor
says: “A well drafted Bill entrenching what this bill entails would
help to create regulatory certainty which is very important
when considering long term, location bound, investment such
as property development. However, it would take some time to
implement such a bill with sound principle.”
Batchelor’s views about the bill do not differ much to the
sentiments shared by Gopal, who believes that the Treasury’s
plan is not a terrible one.
“The Treasury plan is not necessarily a bad idea, if
the Bill provides a constitutional basis for municipalities
to levy development charges in a more uniform way.
eThekwini’s property surcharge plan several years back was
unconstitutional in our view, that is why we opposed it. This
bill seems to provide a constitutional basis for levying the
development charge,” says Gopal.
Gopal adds that the development charges must be
integrated into the overall municipal fiscal system, particularly
every aspect that involves the financing of municipal
infrastructure. Developers should not be required to pay twice
for capital expenditure on establishing or maintaining service
infrastructure.
Batchelor adds: “The Bill provides far too many exceptions
which are simply a ‘back door’ for local authorities [and even
for the Minister] to bypass the provisions when they deem it
necessary.”
“This allows for political meddling in what is actually
a straight forward engineering/ accounting exercise of
providing essential services to grow the country. An example
of this is that in the draft Bill the local authority can exempt
the developer from development contributions but must then
identify where the funding for these services will come from.
An alternative would be the elimination of all exemptions, with
the local authority having to find the funding to reimburse the
developer where they deemed the project socially important.”
“This would mean the Council having to debate (during
the allocation of Council tax resources) which, and how many,
subsidised schemes they can support at the expense of other
costs seeking funding from the overall budget. It is just too easy
for a town planning official to sign off a zero contribution with
the services funding "to be provided by the Council general
revenue" without having to be part of the tough process
of allocation of scarce resources during the budget against
demands such as policing, hospitals, education etc. Allowing
development without service provisions is a disaster that is
very evident throughout the country at present.”
“I'm not even convinced that providing an exception "with
Ministerial approval" is desirable because for the Minister
to be involved in specific local development decisions is
cumbersome and undesirably political. The provision for
the developer to install the services (outside the actual
development) and to recover any excess cost over a period is
good as it ensures that the funding is spent on the services
specifically, which the Council can inspect and take over, prior
to issuing a clearance,” concludes Batchelor.
While this bill remains under scrutiny, it is safe to say that it
has absolutely nothing to do with the South African Revenue
Services. It is, however, another way for the South African
government to get businesses to cooperate in building
a developed country, through local municipalities. Of all
the powers given to local municipalities and government,
democracy always prevails, the freedom given to various
communities to study and give comment on the proposed bill
so that adjustments be made by parliament should the bill be
found irregular with the lives of general South Africans, and in
this case local development companies.
SOURCES Sedgley developments, SAPOA
SA Real Estate Investor Magazine MARCH/APRIL 2020
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