Rand Aid is reviewing how levies are structured and how the Levy Stabilisation Fund (LSF) is to be used in its life-right villages.
According to CEO Gert Coetzee, the goal is to make levy increases more predictable while ensuring funds are used to benefit residents across all villages.
“After completing my first budgeting cycle at Rand Aid, it became clear that the current system does not always achieve its original purpose of smoothing levy increases. We therefore looked at ways to make the process simpler, more transparent and more sustainable,” he says.
Why the fund is being reviewed
The LSF was introduced in 2011 to help protect residents from unusually high levy increases.
The fund grows through a small allocation from the resale of life-right units – after refunds to departing residents and refurbishment costs have been deducted. Since its creation, more than R26 million has been allocated to the fund across the villages, with about R4.4 million currently remaining.
However, the growth of the fund depends on factors that cannot be predicted – such as when residents leave units, the size of the units sold and refurbishment costs. This can cause large differences in how much funding is available at different times and in different villages.
Differences between villages
Because villages have different numbers of units, the benefits residents receive from the fund can also differ.
In practical terms, when the same amount is drawn from each village’s fund, residents in smaller villages receive a larger benefit per unit than residents in larger villages. The current ‘silo’ approach can lead to inequality in how much assistance each resident actually feels.
Proposed changes to levy calculations
To make levy increases more stable and easier to manage, Rand Aid proposed that levies focus only on day-to-day operational costs.
Under the proposal, levies would include:
– Operational expenses – such as rates, water, security and administration
– The contribution to recuperative care
– The contribution towards the head office administration
The following items would no longer form part of the levy calculation:
– Planned maintenance and infrastructure improvements
– Major asset purchases
By separating these costs from levies, annual increases can be more closely linked to realistic inflation levels.
How the fund would be used in future
The LSF is not being removed. Instead, it is proposed that the remaining funds be pooled and used for planned maintenance and infrastructure improvements across all Rand Aid villages, rather than being limited to individual village funds.
“This would allow Rand Aid to plan larger projects more strategically and ensure that funds are used where they are most needed,” says Coetzee.
Next steps for the transition
To ensure this new system is fair and clear, the following steps are being followed:
– Detailed cost breakdown: Management is providing village committees with a list that identifies exactly which costs are operational and which are infrastructure.
– Consultation: Management will continue to discuss the application of the fund with the village committees and the RAA Residents Committee.
– Trustee approval: As the fund is held by the RA Welfare Development Trust, the final decision on using and pooling these funds rests with the Trustees.
This process aims to create a more stable levy structure for residents while ensuring long-term maintenance needs across the villages are properly supported.
