eThekwini residents continue boycott amid unresolved dispute, budget reshuffle underway:
The boycott of rates and municipal bills by a group of eThekwini residents will continue as long as their dispute with the city remains unresolved.
eThekwini Ratepayers Movement (ERM) representative Asad Gafar has, however, welcomed the announcement on Friday that the city is reshuffling its budget, and that repairs to flood damaged roads and water infrastructure will begin.
Highlighting the outcome of a full council meeting held on Thursday, during the handover of a new R28 million water reservoir in Shongweni, mayor Mxolisi Kaunda said the municipality was in discussions with ratepayers to find solutions to their problems.
“We are confident that through these engagements, no ratepayers organisation will persuade residents to boycott the payment of rates. Apart from boycotting rates being illegal, residents cannot withhold payment for services that have been rendered,” Kaunda said.
He said the city held a follow-up meeting with the Westville Ratepayers Association last week and had found “common ground” regarding some issues.
The council had approved the revision of the municipality’s electricity tariffs for 2023-24 to a 15.1% increase, a reduction from 18.49% — an issue ratepayers have repeatedly raised during their boycott.
“These are some of the interventions the municipality is making to meet its ratepayers halfway because we recognise the tough economic climate which makes many households unable to meet their monthly financial obligations,” Kaunda said.
But he defended the awarding of a R3.9 million annual salary — just R200 000 less than President Cyril Ramaphosa’s — to municipal manager Musa Mbhele, saying it had been approved by the council pending the approval of Minister of Cooperative Governance and Traditional Affairs Thembi Nkadimeng.
“Currently, the city manager’s remuneration package is far below that of his peers. We wish to reassure residents that the city manager’s salary is in line with the upper limits of remuneration packages of municipal managers,” Kaunda said.
Responding to concerns raised by ratepayers that councillors and city employees owe the municipality for services, he said the debt would be deducted from their salaries and credit control measures and disciplinary action would be taken against them.
“We want to make it categorically clear that our staff members are not allowed to be in arrears for more than 90 days in their municipal accounts, according to schedule 10 of the staff Code of Conduct,” he said.
He said the issue of irregular expenditure that the auditor general has consistently raised against the city — a total of R50 billion over the past five years — was being addressed through the implementation of the city’s Irregular Expenditure Reduction Strategy. The strategy focuses on automating the contract management and procurement cycle, compliance checklists, demand analysis and strengthening of key budget and internal controls.
“We also have an oversight by the Financial Misconduct Disciplinary Board which expedites disciplinary processes for irregular expenditure incurred by errant officials and service providers. However, what we have observed is that most of the irregular expenditure we have incurred, services were rendered. The only challenge is that in some instances, officials failed to follow all supply chain management processes. This does not mean that money has been squandered,” Kaunda said.
He announced that the city has approved 115 water and sanitation projects to be completed in eight months using R200 million in flood relief funds received from the treasury. He added that the city had major plans for the redevelopment of the beachfront.
“It will soon boast upmarket developments which form an integral part of the city’s Proactive Land Release Strategy. In North Beach … the Bike and Bean will transform into North Beach Lifestyle — a world-class restaurant — and the popular Circus Circus is currently being renovated to a stunning fusion of Africanism and Art Deco and will be named Durban Beach Café,” he said.
He said the new fusion restaurant, expected to open in October 2023, would create 45 jobs after construction.
Mini Town will also undergo a transformation comprising a mixed-use R170 million hotel development with spaces for arts and crafts, kiosks for small businesses, retail, a salon and spa and restaurant.
Gafar said the pressure ratepayers had placed on the city had led to it taking action, including the announcement that steps would be taken against staff and councillors who did not pay their bills. The city had reshuffled its budget to meet their demands, he said. However, he said the dispute ratepayers had filed with the city in June remained in force.
“I can say from our side the engagements with the city are still ongoing but I don’t believe we have reached a resolution as yet. The boycott is still on and will continue while we are still in a dispute,” he said.
Gafar said it was important that ratepayers had organised and put pressure on the city to take action to fix infrastructure.
“An association like ours is now making the city do what it is supposed to do — reorganise the budget to meet demands for infrastructure repairs. There are a whole lot of things [that need to be done] but one of the most important is that they have now changed the electricity tariffs to 15.1%. We had pointed out that in order to do this they needed to have a council resolution but the tariff was already implemented on July 1,” he said.
US shifts from a trade war to a subsidy war:
To the dismay of many economists, US President Joe Biden’s administration has retained most of its predecessor’s tariffs and trade barriers.
In fact, contrary to most analysts’ expectations, the United States has imposed additional protectionist measures, such as Biden’s “buy American” policies, resulting in higher costs for American consumers and taxpayers.
During Donald Trump’s presidency, the US imposed a 25% tariff on steel imports and a 10% tariff on imported aluminium. Trump’s administration initiated a trade war with China, withdrew from the Trans-Pacific Partnership (TPP) that former US Presidents George W. Bush and Barack Obama negotiated with 12 Pacific Rim countries, and “renegotiated” the North American Free Trade Agreement, rebranding it as the United States-Mexico-Canada Agreement.
Trump chose to take these and other actions unilaterally, even though pursuing a multilateral approach through the World Trade Organisation would have been far more effective and less likely to harm US allies. The Biden administration, however, has gone even further, fully embracing industrial policy by enacting the $ 430 billion Inflation Reduction Act (IRA), which includes hundreds of billions of dollars in subsidies for green technologies and renewable energies, and the $ 280 billion CHIPS and Science Act, aimed at fostering a robust US semiconductor industry.
According to the White House, the CHIPS Act will bolster domestic semiconductor production and create “tens of thousands of good-paying, union construction jobs and thousands more high-skilled manufacturing jobs” while mobilising hundreds of billions of dollars in additional private investments. To facilitate the reshoring of chip production, the act allocates $ 52 billion to research and development and workforce training and provides a 25% tax credit to domestic manufacturers. By subsidising US-based companies, however, the bill effectively discriminates against foreign and overseas producers. Similarly, the IRA provides a $ 7,500 subsidy to purchasers of US-made electric vehicles (EVs), giving American-made models an advantage over their Chinese and Japanese rivals.
But studies have repeatedly shown that subsidies often harm the countries implementing them. Such measures tend to reduce competition, stifle innovation, raise costs, and disadvantage exporters who rely on imported inputs. Worse yet, when one country introduces subsidies to enhance the competitiveness of domestic producers, other countries typically counter with protectionist policies of their own. And retaliation and tit-for-tat escalation damages the economies of other countries and their trading partners.
It is already clear that the coming subsidy war will have no clear winners. Depending on the size of retaliatory foreign subsidies, they may nullify some (if not all) of the competitive gains that the initial subsidy aimed to provide.
This dynamic is particularly evident in sectors such as semiconductors, batteries, and EVs. In response to Biden’s industrial policies, for example, the European Union has recently greenlit a €43 billion ($ 47 billion) plan to bolster its semiconductor industry, while South Korea and Japan have also rolled out plans to subsidise domestic chip production. Meanwhile, European, Japanese, and South Korean companies are establishing or investing in US facilities to qualify for IRA subsidies and tax credits.
While Biden’s subsidies might enhance domestic semiconductor manufacturing capacity, especially given America’s ability to out-subsidise most rivals, this will come at a cost. Morris Chang, founder of the Taiwan Semiconductor Manufacturing Company, has recently estimated that chip manufacturing is 50% more expensive in the US than in Taiwan, where more than 90% of the world’s high-end chips are currently produced. Chang is sceptical that the existing US subsidies would be enough to close this cost gap. But as Adam Posen of the Peterson Institute for International Economics notes, the true price of economic decoupling is “not so much trade barriers, bad as they are, but reduced productivity growth.”
Moreover, a significant portion of the money spent on industrial subsidies will likely go to waste, increasing the burden on all taxpayers. Redirecting these funds toward education, job training, research, and infrastructure would do far more to enhance industrial competitiveness, both domestically and globally. Regrettably, US Secretary of Commerce Gina Raimondo has recently touted the CHIPS Act as a blueprint for supporting other domestic sectors. Given that other countries will almost certainly respond in kind, it appears that Trump’s trade war with China has morphed into a budget-busting global subsidy war that no one can win. — Project Syndicate
Anne O Krueger, a former World Bank chief economist and former first deputy managing director of the International Monetary Fund, is a senior research professor of International Economics at the Johns Hopkins University School of Advanced International Studies and a senior rellow at the Center for International Development at Stanford University.
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