The Durban Chamber of Commerce and Industry has warned the eThekwini Municipality that its development levy policy is having a detrimental impact on investment and driving projects out of the city.
Chamber CEO Palesa Phili raised the issue of the levy during a recent meeting between the business body and the City.
Both the chamber and developers said the policy had been in effect for a year and was hobbling the industry.
Speaking at a meeting called to brief business about tariff increases, Phili said the levy was a serious concern.
A policy document shows that the levy was approved by council on April 26, 2023.
The document states the purpose of the policy is to promote transparency, consistency, fairness, and predictability of development charges. It will apply equally across all developments and will bring fairness to developers and the City.
“A development charge is a once-off charge levied by a municipality on the landowner/developer as a condition for approving land development applications. It is imposed to cover the costs incurred by the municipality when installing new infrastructure or upgrading existing infrastructure. It relates only to the cost of bulk engineering services,” it said.
The document states that the scope of a development determines the development charge liability for the bulk engineering services that are provided by the municipality.
“Without this policy, developers would not be held accountable for the infrastructure costs associated with their projects, leaving the municipality to bear the burden of these costs,” said the document.
The municipality, the document continued, may grant exemption or subsidise categories of landowners or land developments where development charges may be reduced or waived on application; these include beneficiaries of the land development, people who are primarily indigent, and dependent on pensions or social grants for their livelihood.
Phili, speaking at the meeting, said the levy would devastate the property sector in the city.
“I would like to get some clarity, CFO (Dr Sandile Mnguni). I see that you did not talk about the developers’ levy. For the past few years we have been saying we cannot be having the developers’ levy, it is not good for development.
We are already losing quite a lot of development that is moving up-north into the Ilembe district, which is a big challenge for us,” she said.
Neil Gopal, the CEO of the SA Property Owners Association (Sapoa), said as a result of this policy there would be fewer developments in the city and developers were already shifting away.
He said the industry was concerned about the need to pay the levy as there had been no clarity on what exactly the charge was for.
“Developers are being requested to pay for infrastructure charges with no clarity on whether the development charge is earmarked or ring-fenced for the specific scope of the infrastructure linked to the development and related development charge,” Gopal said.
“It is obvious this ‘development charge’ appears to be an additional ‘tax’ on land and property development.
“We are not opposed to a surcharge, provided the law is complied with and developers know precisely what they will be getting in terms of tangible services, in return for the surcharge,” he said.
City manager Musa Mbhele, during he meeting, defended the policy.
Responding to concerns raised by Phili, he said other municipalities were also charging such levies.
“That is a phenomenon across the country, that the levies are charged. The principle is that he who causes land use change will obviously have to contribute to infrastructure improvement.”
Citing an example, he said: “If your development is putting more vehicle trips on that road and the road is constrained and our programme was meant to develop somewhere else. All we are saying is that help us to widen that road so that we also accommodate your development.
“That is the sense behind it. It is not necessarily intended to punish the developers and we are very flexible about cost contribution. The principle is help us improve functionality of the city by contributing a portion toward the functionality of infrastructure.”
Mbhele said in certain instances the municipality paid 70% of (the bulk infrastructure costs) and the developer paid 30%. He added that other municipalities did not do that.
“We are saying we understand that development is very nomadic, so we are very sensitive to those things,” said the city manager.
The Mercury