Cape Town Tariff Increases – Moneyweb

It is vital for Moneyweb readers to grasp three important aspects of Cape Town’s proposed Invested in Hope Budget 2025/26 that various reports have overlooked.

Firstly, households should analyze their electricity consumption for a precise estimate of their possible total monthly bill increase. The two case studies on household bills shared by Moneyweb reveal significantly higher percentage increases calculated at zero electricity usage.

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Cape Town’s notable electricity price relief is set to benefit households in all property value ranges, with Eskom’s 11.32% national increase scaled back to just 2% for Cape Town’s Domestic and Home User customers.

While many households in the R3 million to R7 million property value range are experiencing unusually high bill increases this year due to tariff reforms and essential infrastructure investments, total bill increases can significantly decrease when electricity consumption is taken into account, owing to Cape Town’s generous price relief benefiting higher-consumption households.

Contrary to the reported 20-30% increase for a R3 million home’s total monthly bill in Moneyweb’s illustration, the actual increase on the total bill can fall to as little as 3% when 750 units of electricity usage are considered.

Read:
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More challenges for Cape Town homeowners due to new tariffs

It is also recognized that, due to how cross-subsidisation functions, Cape Town’s unprecedented R39.7 billion infrastructure budget and the various tariff reforms may result in steeper increases for more valuable properties.

The City of Cape Town has acknowledged the feedback from residents in higher-value properties and understands that not all residents in homes valued between R3 million and R7 million are wealthy.

Many individuals purchased and paid off their homes years ago; while they now own a valuable asset, their income may not reflect that value.

Residents serviced by Eskom do not benefit from the electricity savings, which help offset the city-wide cleaning charge for ratepayers in city-supply areas.

This leads us to the second point that is frequently unclear in reporting: city-wide cleaning is not a new charge for over 70% of residents in city-supply areas, who have historically funded cleaning and other services through a 10% fee included in electricity purchases.

Read: Like Cape Town, Tshwane to implement mandatory city cleaning tariff

The city realizes that this is a completely new charge for residents in Eskom-supply zones, who have previously enjoyed subsidies from other ratepayers.

Changes to the budget

For these reasons, the city has proposed changes to the budget that will considerably diminish tariff increases for homeowners, particularly in the R3 million to R7 million range, such as:

• Extending property rates relief by broadening the ‘first R450 000 rates-free’ benefit beyond the current R5 million threshold to encompass all homes valued under R7 million;
• Raising the qualifying criteria for pensioner rebates from the current R22 000 monthly income to a new threshold of R27 000 monthly income; and
• Reducing city-wide cleaning charges for properties valued between R1.5 million and R7.5 million.

Initial modeling suggests these measures could lower annual increases by an additional two to three percentage points for properties in the R3 million to R5 million range, and potentially up to a 10-percentage-point reduction for properties priced at R6 million to R7 million.

For pensioners earning less than the new income threshold of R27 000 per month, the relief will be even more significant.

Perspective

A final aspect for Moneyweb readers to contemplate is the comparison of total monthly bills among South Africa’s major cities for 2025/26.

Read: Operation Vulindlela 2.0: Ramaphosa targets municipal reform

From a value-for-money perspective for residents, it is noteworthy that Cape Town is presenting an infrastructure budget that is 63% higher than Johannesburg’s while also significantly expanding policing and cleaning operations, providing electricity price relief, and maintaining the lowest monthly bills among South African cities across various typical household scenarios.

This situation will only improve further with the additional support measures being considered by the city.

This crucial insight has often been discounted due to higher property values in Cape Town, but consider this: a R1 million asset retains its value regardless of its location. Specifically in Cape Town, the municipal account linked to this property will be lower, and its value is more likely to appreciate.

While one may acquire larger or more ornate properties elsewhere for less, a Cape Town asset is situated in a city that operates efficiently, invests for future improvement, and still offers lower costs than other areas.

Additionally, after accounting for a 25% higher property value, Cape Town’s monthly bills remain significantly lower than those in Johannesburg for properties spanning from R1 million to the upper-middle tier.

It’s important to acknowledge that while ratepayers in other cities pay more yet receive inferior services and infrastructure, in Cape Town, residents benefit from lower bills and a vibrant, functioning city.

We thank ratepayers for their contributions toward Cape Town’s developments, ensuring our metro remains a sustainable, thriving city of hope for all.

Councillor Siseko Mbandezi serves as Cape Town’s Mayoral Committee Member for Finance.

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