cities

Cities construct, acquire, operate and maintain assets for service delivery or city development
purposes. Every year, the nine cities create more than R10-billion in new assets. As their asset
portfolios grow, municipalities need to manage effectively the increasing assets and associated
lifecycle costs. Increasingly, municipal assets and capital investment are being used to increase local
revenue and taxes.
Figure 7.12: Summary of municipal assets (2013)
ESTIMATED VALUE OF SACN CITIES INFRASTRUCTURE AND BUILDINGS
R 589.69 billion 52% R 306.52 billion
in replacement value remaining service or economic potential in carrying value
Source: SACN (2013)
Many of the cities have innovative examples of securing revenue through property leases and
developments (Urban LandMark, 2009; 2012). They include the following:
• Nelson Mandela Bay has a lease agreement for the football stadium built for the 2010 FIFA
World Cup. The lessee has strictly enforced event and performance targets, and rent is used to
fund the operations of the Mandela Bay Development Agency.
• Newton Junction in Johannesburg was launched in 2014 as a retail and commercial property
development on municipal-owned property. Atterbury secured a long lease through a
competitive tender process that required the developer to meet minimum requirements for
inclusionary space for arts and culture tenants, to satisfy the heritage conservation requirements
for heritage assets on the site, and to make a financial contribution to the management and
activation of the Newtown Cultural Precinct.
• The City of Johannesburg is also exploring transit-oriented property developments on a number of
municipal-owned properties along the Corridors of Freedom. These are public transit facilities that
make provision for expansion by private developers who are selected through a tender for a long-term
development lease. For example, the Watt Street interchange near Alexandra will consist of a large bus
and taxi interchange, as well as space for retail and housing developments by private partners.
The use of financial incentives and disincentives
Fiscal instruments can be used to incentivise certain behaviours from the private sector and
households. For example, the current electricity and water tariffs encourage resource efficiency, as
consumers pay more if they consume more.
The dilemma for cities is finding the right balance between charging enough to encourage resource
efficiency and keeping tariffs sufficiently low to maintain competitiveness, while ensuring that a section
of the population gets services for free (SACN, 2015). If priced right, tariffs can generate revenue for
cities, reduce their operational costs, and improve living conditions for residents. Cities need to find the
level at which the tariffs bring about behavioural change but do not risk the city’s competitiveness or
268 State of South African Cities Report 2016