The South African Chamber of Commerce and Industry (Sacci) on Tuesday called for the impact of local government-administered costs on the cost of doing business to be reviewed, as small businesses were feeling the financial burden of rising costs.
Small and medium-sized enterprises (SMEs) need reliable energy supply, functioning infrastructure and predictable cost increases in line with inflation.
However, the current cross subsidisation model, which has resulted in municipalities raising revenues through steep electricity tariffs for other municipal expenses, in conjunction with other rising input costs, has imposed a heavy direct and indirect financial burden on SMEs, Sacci CEO Neren Rau said in a statement.
“Electricity tariff charges are used to fund municipal services beyond electricity use, and the expense of electricity infrastructure maintenance presents a critical case for a discourse on municipal financing,” he said.
However, he warned that the elimination of the cross-subsidisation in this area might lead to an increase in other administered charges.
“The financial structure of local government funding needs to be reassessed to prevent an escalation of municipal costs that severely constrain business competitiveness and limit job creation, and to improve financial discipline and transparency,” Sacci concluded.