City of Tshwane adjusts budget to intensify pro-poor agenda

22 February 2018

Whilst campaigning during the local government elections, we promised our people that DA local governments will lead the way in providing quality services to all their residents, through sound financial management, by adopting innovative solutions to challenges faced by the city and reprioritising resources to where they are needed most.

We made this promise with the full understanding that the stabilisation of the municipal finances is the critical foundation on which to continue making progress in the delivery of services to our people. This will, in turn, be to the benefit of attracting investment into our beautiful city and providing better services to our people.

In doing so, it must be emphasised, that we made no budget cuts to this fully funded and balanced budget unanimously passed by Council last year.

As part of the 2018/19 Integrated Development Plan and Budget process plan approved by Council, National Treasury team conducted the mid-year visit with the City on 29 and 30 January 2017. The visit took place as part of a National Treasury programme to assess the performance of the city as required in terms of Section 72 of the MFMA, and before the tabling an Adjustments Budget in terms of Section 28 of the MFMA. Some of the resolutions from the meeting include:

- The City to ensure that 2017/18 Adjustments Budget is funded and to start aligning the City’s financial sustainability plan to budgeting.

- The City to invite National Treasury at quarterly engagements related to the implementation of the financial sustainability plan. 

The proposed adjustment of the 2017/18 Service Delivery and Budget Implementation Plan (SDBIP) and Adjustments Budget being presented at today’s Council Meeting of the City of Tshwane follows an assessment of the performance of the municipality during the first half of the financial year, taking into account the following realities:

- Financial performance for the first half of the financial year including;

- Additional revenues that have become available; and

- Unforeseeable and unavoidable expenditure.

- Service delivery performance during the first half of the financial year;

- Annual performance assessment of the previous financial year and progress on resolving problems identified in the annual report; and

- Performance of municipal entities.

Three principles were used guide the recommendations for the adjustments of the SDBIP, these were; under-performance of capital projects which directly contribute to the SDBIP targets; correction of ownership of KPI’s as a result of the micro structure alignment and the findings and recommendations of Internal Audit and the Auditor-General.

Income

Based on the mid-term results, revenue is expected to increase by R450,8 million mainly because of the following:

- Increase in property rates (R90 million)

- Increase in interest on investments (R50 million)

- Increased grant allocations and roll-overs from other spheres of government (R344 million)

- Increase in other revenue (R66 million)

- Income from the sale of water, however, have to be reduced as a result of a decrease in the consumption of water following the introduction of water restriction last year.

Expenditure

The total operating expenditure will increase by R679,5 million, to address some of the shortfalls on, for example, contractually obligated expenditure. The City has contractually obligated expenditure that must be honoured such as the lease and rental of the fleet utilised by the City (R200 million) and expenditure on leased buildings including Tshwane House (R127 million). The expenditure was increased to accommodate such. The City is in a process of reviewing these contracts for operational efficiencies.

Furthermore, expenditure will increase as a result of additional grant funding in respect of the following:

Bus Operating Subsidy for Mamelodi amounting to R72 million

Funding for Housing: Top Structures amounting to R225 million

The cost of bulk electricity purchases is estimated to increase by R123 million in line with consumption patterns and increases in electricity losses.

On the capital side:

The budget was reprioritised to accelerate some of the projects and to accommodate some of the unforeseen and unavoidable expenditure. Housing and Human Settlement’s allocation increased by R129,4 million amongst others to fund:

- Olivenhoutbosch Ext 60 project.

- Acquisition of land in Hammanskraal and acquisition of Plot in Leeufontein

- Provision from the sale of the Mayoral Mansion which proceeds are earmarked to fund construction of low cost housing.

Additional allocation amounting to R30 million was included in the Adjustments Budget for Social Infrastructure Grant for the construction of Community Halls at Hammanskraal, Winterveldt and Mabopane.

The allocation for the Revitalisation of City’s industrial and economic nodes (Rosslyn, Babelegi, Enkandustria, Garankuwa) was moved out of the City Manager’s Office to specific projects within Housing, Transport and Utility Services.

Since taking over the running of the city, cash and cash equivalents at the end of the year improved from R1.1 billion in 2015/16 financial year to R2.1 billion in 2016/17 financial year. Unauthorised expenditure reduced from R1.6 billion in the financial year 2015/16 to R634 million in 2016/17 financial year.

We continue to work hard to stabilize the city’s finances, for example, in September last year, the City approached the North Gauteng High Court to set aside the so-called Tshwane Broadband contract with Thobela Telecoms on the grounds that the previous administration entered into this contract unlawfully. The Auditor-General (A-G) found the deal to be irregular, and determined its value at R2.736 billion. The A-G finding prompted the Msimanga administration to investigate the procurement of the deal. This matter is still before the courts and we will brief the public in due course.

The Adjustments Budget and revised Service Delivery and Budget Implementation Plan is in line with creating a City that is open, honest and responsive. The DA-led multiparty will continue ensuring that funding exists for all planned projects—new unfunded mandates, which could compromise the quality of service delivery, will be resisted.

Issued by Samkelo Mgobozi, Spokesperson to the Executive Mayor of Tshwane, 22 February 2018