The Albany Museum in Somerset Street may have celebrated too soon after a committee in charge of the municipal council's finances put on hold an earlier decision to exempt it from paying rates.
The Albany Museum in Somerset Street may have celebrated too soon after a committee in charge of the municipal council's finances put on hold an earlier decision to exempt it from paying rates.
The museum's director Bongani Mgijima wrote to the municipality in December, pleading for a lifeline: "If the museum does not succeed in getting a 100 percent rates rebate from council it will cease to exist and will have to close its doors, much to the detriment of the public it serves."
When the previous municipal council's Finance portfolio committee examined the museum's financial statements it noted that the museum received R798 000 a year from the Eastern Cape's Department of Sport Recreation Arts and Culture – of which R500 000 goes towards property rates. The committee recommended to the Mayoral Committee – the next level of decision-making in the Council – that the museum be exempt from property rates for the 2011/12 financial year.
They approved the request. Al that remained was for it to go to full council for final approval. The museum and its supporters were optimistic.
However, new councillors tasked with looking after Makana's finances have put the decision on hold, concerned that letting a government institution off the hook could set a precedent for the future.
Not off the hook
At the council's first Finance, Administration, Monitoring and Evaluation Committee meeting for this financial year (it replaces the former Finance portfolio committee), two weeks ago, Chairperson Pierre Ranchhod said, "… the museum is still a government institution and government institutions do receive money. I hope we don't set a precedent here, that soon all government institutions will apply for grants in aid. That we have to be careful of."
The matter had come up again in an update to the committee on the status quo of the request. Accompanying the report were comments from the Finance Directorate to the effect that it supported the exemption and that the new tariff structure had made provision for it.
But a history of shoddy management of financial affairs in the previous council has perhaps encouraged caution by new councillors. Some asked for the request to be deferred, saying they would like to see the institution's financial statements before making a decision.
Ranchhod agreed that the committee needed to see full financial statements to understand the "ins and outs" of the request.
False advertising
The municipality has placed advertisements in Grocott's Mail inviting "deserving organisations" to apply for grants-in-aid "in lieu of rates". Examples of "deserving" organisations included welfare organisations and sporting, arts and culture bodies. This refers to an annual subsidy from the government routed via the municipality. Organisations have to apply for this annually.
Although museums are expressly listed as "deserving" organisations, and the Albany Museum does apply for funding through this route, the rates exemption request is separate. Organisations granted rates exemptions don't have to re-apply every year for this status and are required to provide the municipality with their annual financial statements.
Mgijima's request for exemption was based on the museum's status as a public benefit organisation, confirmed by the South African Revenue Service, which doesn't tax it. In his letter he quoted the provisions of the Municipal Property Rates Act 6 of 2004 and Makana Municipality's property rates policy, which he quoted: "Properties owned by Public Benefit Organisations and used to further the objectives of such organisations are 100 percent exempt from paying rates."
Special treatment
Mgijima also pointed out that four big museums in the Eastern Cape: the Albany Museum, Bayworld, Amathole Museum and the East London Museum, received similar subsidies from the provincial government. The latter three museums were exempt from paying municipal property rates. This, he said, gave them a competitive advantage over the Albany Museum.
Mgijima said the museum, the second-oldest in the country, provides an educational, cultural and scientific service to the Makana Municipality and about 20 000 pupils a year.
According to the Income Tax Act, a public benefit organisation is a non-profit company, trust or association whose activities are carried on "in a non-profit manner and with an altruistic or philanthropic intent".
