Business

Joburg schools in for huge rates shock

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JSE-listed private education group Curro is set to take the City of Joburg to court in relation to current and previous years’ property rates charged to the 19 schools it operates in the metro – and AfriForum has now also started drafting court papers to prevent astronomical rates charges the city plans to implement for all public and private schools from 1 July.

These will result in public schools paying about six times more than before and private schools 10 times more. It also applies to universities and colleges.

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According to education stakeholders and civil advocacy groups, the massive hikes are completely unaffordable and will force schools to close down.

The disputes centre on the categorisation of properties used for education. In terms of the City of Joburg’s current rates policy, schools, colleges and universities are classified in a special “education” category rated at 0.25% of what owners of residential properties have to pay.

This has been the case for several years, but it is about to change.

According to Christo Bokhorst, director at Rates Watch, an earlier change in the Local Government Municipal Property Rates Act, aimed at standardising categories over all municipalities countrywide, provided for a period during which municipalities had to do away with all but a limited number of categories. “Education” is not on the prescribed list.

The City of Joburg has therefore removed this category in the rates policy to be implemented on Friday.

According to member of the mayoral committee (MMC) for finance Julie Suddaby, Joburg’s application to the minister of cooperative governance to retain the category, which the act provides for, has not been approved.

As a result, public schools will from Friday be rated for “public service purpose” and have to pay 1.5 times what residential property owners pay.

Private schools will be rated as businesses at 2.5 times the residential rate.

Bokhorst says this means a private school valued at about R70.5 million that has been paying just over R12 000 per month in the current financial year, must pay more than R126 000 per month from July when classified as a business.

While the City of Joburg is open to municipalities providing relief to categories of rate payers, it chose to offer private schools only a 25% rebate – and nothing for public schools.

Even with the discount, the school in the example will still be liable for almost R95 000 per month in property rates.

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Bokhorst adds that the school must apply for the rebate, and if approved it will only be implemented from the date of application.

The rates bill of a public school with the same valuation will increase from the R12 000 per month to almost R76 000 per month, according to Bokhorst’s calculations.

School principals and school financial managers Moneyweb spoke to said that while government as the property owner pays the rates bills of some schools, others are obligated to pay their rates bills from school fees.

Marius van Zyl, treasurer of Riebeeckrand High School in Randfontein, said although the department is supposed to pay the school’s rates bill, the school governing body decided to pay it from the school fees after the municipality disconnected the power supply a few years ago due to an arrears bill.

If Riebeeckrand’s bill had to increase sixfold, as is happening to similar schools in Joburg, the monthly bill would be more than the total monthly income from school fees, he said.

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The financial manager of another high school near Auckland Park said it is already a battle to collect school fees. Parents earn a maximum of R15 000 a month and pay just over R1 000 per month per child in school fees. The collection rate is currently standing at 35%. She said it will be impossible to impose the kind of increase that would be necessary to cover such a high increase in school fees on these struggling parents and the school would simply have to close.

Rene Kilner from Trusted Utilities said one of her clients owns several educational institutions, including a college valued at R238 million. It is currently paying about R40 000 per month for property rates. When rated as a business, this will increase to R427 000 per month.

The client didn’t know anything about this until last week, when she informed them.

Dr Jaco Deacon, CEO of the Federation of Associations of Governing Bodies of SA Schools (Fedsas), was also surprised to hear about the change in Joburg’s rates policy. He says it is going to be a huge shock for the schools in Joburg.

Melanie Buys from the Solidarity School Support Centre confirmed that schools were not informed about the change and the impact it will have on them.

Morné Mostert, head of local government at AfriForum, told Moneyweb that it sent a letter to the City of Joburg on Friday requesting more information and indicating that it is prepared to go to court if the city proceeds with the implementation on 1 July.

On Tuesday 29  June the city asked for more time to respond. While AfriForum was prepared to give a limited extension, it has also started preparing its court papers.

Mari Lategan, spokesperson for the Curro group, says City of Joburg has incorrectly categorised its schools as businesses instead of “educational” facilities for a few years already.

Despite a verbal undertaking to correct this, the city has failed to put it in writing.

As a result, it has been handed over to Curro’s legal division. Curro will proceed with court action within days unless the city provides a written undertaking to correct the relevant rates bills.

Lategan said Curro also wrote to Joburg Mayor Mpho Phalatse for assistance, but was subsequently informed by the city’s lawyers that it must refrain from speaking to politicians and only deal with the officials.

Suddaby advised qualifying schools to apply for the 25% rebate without delay and to lobby for lower rates or a bigger rebate in a year’s time when the rates policy for the next financial year is discussed at public hearings.

Listen to Suren Naidoo’s interview with Sapoa CEO Neil Gopal in this episode of The Property Pod (or read the highlights here):

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