Republic of South Africa

American Journal of Economics and Sociology, The, Dec, 2000 by Godfrey R. A. Dunkley

Some details of this ordinance were given in the first edition of Land-Value Taxation Around the World (1955), but warrant repeating in part. Site (land) value is defined as follows:

"Site value of land" shall mean the capital sum which the land or interest in land might be expected to realize if offered for sale on such reasonable terms and conditions as a bona fide seller would require, assuming that the improvements, if any, thereon, or appertaining thereto, had not been made. The site value of land shall include any value due to any franchise, license, privilege or concession attaching to the site for the time being. [4]

The earlier Transvaal Ordinance effectively prevented flat rating or total value rating. Johannesburg was the first to adopt site-value rating in 1918, followed by other municipalities. By 1955, there were 20 of the 60 urban municipalities on site-value rating and by 1979, all the major municipalities in the Transvaal had followed suit.

The other provinces gradually followed the lead of the Transvaal. By 1979, 60 of the 125 largest municipalities in South Africa were on site-value rating, and by 1984, of the 112 cities with a total value of over R30 million, 62 were on site-value rating. These accounted for 70 percent of the total value of rating in the RSA. By then, only two of these largest cities were still on flat rating, namely Cape Town and Port Elizabeth. The others, on composite rating, all collect a larger percentage from land values than from improvements. It would be safe to say that less than 15 percent of the total rates in the RSA come from improvements. Towns and villages with a total value of less than 1130 million only account for 2.4 percent of the municipal revenue in the RSA so can have little impact on conclusions given. A large percentage of these low value, low growth towns are on flat rating. [5]

Two surveys on rating in South Africa by the present author show that the cities which collect rates on site value only have drawn twice the percentage of increased capital investment compared to those which rate total value. The first survey covered a twenty year period from 1959 to 1979, and the second a ten year period from 1974 to 1984. The second survey was staggered by five years from the first to allow for differences in updating of valuation rolls. The Transvaal Ordinance calls for a three year update while the Cape Province allows for ten year updating. This staggering had little effect on the results.

II

Rating Surveys

THE FINDINGS OF the two surveys on rating in South Africa are given in Chapter Fourteen ("Effects of Municipal Rating on Progress") of That All May Live, [6] and may be summarized as follows:

a. In the period 1951 to 1984, the number of cities and towns on flat rating reduced from 187 to 61, while those on site-value rating increased from 36 to 98 in the same period. Some changed to and some from composite rating and a few were absorbed into larger towns in that period.

b. In the first survey--1959 to 1979, the cities on flat rating showed a total value increase of 536.5 percent over the twenty year period, while those which were on site-value rating for the full period showed an increase of 940.3 percent. Those which changed to site-value rating showed an even larger increase, namely 1,013.2 percent.