July 1 2004

Budget time for most municipalities and some shockers for all of us! Jo'burg city council will spend R1.9 billion this coming financial year. Of this about R900 million will go towards upgrading existing infrastructure - which is in dire need of repair. Obviously this money has to come from somewhere - us! Water will go up by 9% and property rates by 8,5%. More and more "informal settlements" (squatter camps) are sprouting up all over, and government's promise of free water obviously carries a cost.

22% of this money will come from property rates. R3.2 Billion is earmarked for salaries alone and another R469 million (24%) will be spent on electricity. 80% of the budget will go towards upgrading current infrastructure. R449 million will be spent on water and road repairs will take about R239 million. Quite rightly the DA protested the increase in rates saying "The tariffs are above inflation. It's unfair to residents to put up the tariffs when the council is losing millions in uncollected accounts". Uncollected money - another sore point. Mbeki himself now got involved in trying to get the mess sorted out. Johannesburg council has lost billions of Rands with bill mess-ups and not billing at all.

And in other areas it's not much better. Rustenburg municipal tariffs are increasing by 9%. Their total budget comes to R525,35 million. Making provision for the future is commendable as these guys expect a 5% increase in Eskom (electricity provider - a parastatal) rates, 5,7% in water and 12,5% in labour costs. Last week I mentioned the rates and taxes increase, now here's a good example -

Land value - R90 000, Water usage 30kl and electricity consumption at 1 000kWh

Okay, does not look so bad now does it? Add your VAT to the total and you end up paying R81.28 more which comes to a 9% increase exactly. Now use this same principal on a property worth R300 000 and see what the difference is.

The Sunday Times reported this past Sunday that first time house buyers shopping around with a pre-approved bond of R300 000 will not find a place to buy. Is this maybe the start of the property market crash? With interest rates going up (minimal for now) and service fees rising above inflation all over the place, who will be able to afford to stay in their houses? Government officials and the very rich, that's it. The average South African home (between 80 and 400 square meters) used to cost around R200 000 in 2000. The same will set you back nearly R500 000 now. To qualify for a 20 year bond on a house like that, you will need to have an income of over R15 000 a month. How many youngster earn that? Goodness, I barely make a living on a R125 000 bond.

One investor bought 37 townhouse units in 2000. He managed to sell only 6 in 18 months at an average 60% profit. The others he's renting out as furnished units. Business is business. The market is right so these guys are making a killing. At 39 years of age he's hoping to retire at age 45. Section title townhouses are going for R600 000 in Amanzimtoti, in Nelspruit you will struggle to find something decent in the same price class (who wants to live there?) and in Bloemfontein (of all places) townhouses are going for R750 000 to R850 000!

Those guys from over the big blue water, you're too late if you wanted to buy something for retirement!

And South African soccer is in turmoil with only six honest referee's left. Someone spilled the beans on corruption in soccer and the cops have been quick in rounding up the guilty ones. Amazing what a big international scandal it was with cricket (Hansie)? Aren't the world watching the hosting nation for the 2010 world cup?