Adjustments Budget 2017: Stabilising Tshwane's finances will be the springboard upon which we accelerate the delivery of services
Financial stability is vital for any institution aiming to realise a developmental agenda and implement the change that so many of our people need.
This will go a long way in creating opportunities for work for many within our borders and to relieve some of the tensions that have arisen over the last week with respect to xenophobia, which is in part occasioned by the scarcity of employment opportunities.
In preparing the adjusted budget for Council's consideration it was clear that the previous administration did not prioritise the betterment the lives of the people they were elected to serve.
This has had real implications for the City's finances and its capabilities.
By not investing in proper supply chain processes, the previous administration wilfully allowed for millions of rands to be looted from Tshwane's coffers.
This is most aptly evidenced by the Checkpoint "Shoe Polish Debacle" to the tune of millions of rands.
Weak supply chain discipline also allowed for a panel to be set up to circumvent due process in the botched City Hall renovations that will require more money to fix.
A deficit in supply chain controls allowed for exorbitant amounts of money to be spent on upgrades to the Mayoral Mansion.
These so called capital projects were prioritised and notice that not one of the examples listed above are to the benefit of the people of Tshwane.
This is why we have an open bid adjudication process to ensure the public money isn't pilfered at the expense of our residents who need services.
In "service" to their mandate to service the people of Tshwane, the previous administration recognised that a bus service was necessary. But it ends there. The
A Re Yeng bus service is a fiscal blackhole into which billions of rands were ploughed yet seeing them on the roads is a rare sight.
This means that we inherited a bus service that costs billions and makes almost nothing in return.
That is "service delivery" as the previous administration conceives of it. Fear not, we will fix it.
The previous administration in all its "wisdom" got the City into the PEU smart meter contract that costs the City almost R1 billion a year for substandard, faulty meters whose "smarts" are questionable.
That is previous administration's conception of "value for money" for you. Be patient with us, we are fixing it.
A R100 million power station was to be built in Mamelodi. To date there is nothing resembling a functional power station yet the money was spent.
Fear not people of Mamelodi. We will ensure that your community is electrified.
These are just a few examples extracted from, what seems like, an endless list of failings to the benefit of the ANC and only the ANC and not the people of Tshwane.
A financially viable city will go a long way to addressing the systemic problems with the drug trade and the associated illicit activities that accompany it.
That being said, I, and this administration, have never and will never condone the use of violence, destruction of property and vigilantism. We condemn these in the strongest terms possible. It must be noted that such conduct only serves to compound the problem of drugs and illicit activity in the area and makes it that much harder to diligently engage with the substantive issues that underlie this unrest.
The drug trade, drug abuse and all associated crime are an issue that the City has been seized with and this is evidenced by the Anti-Drug Unit we established last year after assuming office. This unit has had some success and is continuously intensifying its efforts to get drugs off our streets not just in Pretoria West but everywhere in the city, including the CBD. The issue will be swiftly dealt with by the Inner City Rejuvenation Initiative we announced last week.
We appreciate the elements of xenophobia that have punctuated these protests and we are committed to dealing with crime perpetrated by all members of this society which is not limited to foreign nationals or South African citizens. Crime is crime is crime – and we will deal with it wherever it may fester and no matter who perpetrates it, and we will deal with it appropriately and within the ambit of the law and due process.
That being said, we wish to put before Council an adjustments budget to deal with these issues as well as many more challenges we currently face.
In order to get to this point, it was critically important to fully appreciate the complete and utter mess that we inherited from the previous administration.
The poor political leadership and financial management of the past have put considerable strain on the City's ability to function and provide the services our people need.
Therefore turning around the City's finances is our apex priority so that we can deal with the infrastructure that the former administration made no provision for, which is evident from the lack of planning and adequate budget allocation towards preventative infrastructure maintenance for water apparatus.
To put this in context, a meagre 4% was allocated for preventative maintenance of water infrastructure. For a metro this size it is almost criminal, because it has a real and meaningful impact on the City's ability to deal speedily with water interruptions.
To address this in part, the City has made an initial R13 million investment into the restoration of water infrastructure in the last two weeks and has tendered for a R2 billion contract to refurbish, upgrade and replace some of the ailing infrastructure that was neglected.
This, in real terms, means that more people across the city will have reliable access to water for their everyday use.
This is not unique to our water woes and is indicative of the poor and irresponsible use of the City's money by those too preoccupied with vanity projects such as the City Hall refurbishments, which were botched.
Despite this less than desirable picture, I wish to reassure the people of Tshwane of this administration's commitment to turn the City's finances around.
Achieving these ends will require us to adhere to the two guiding principles of stabilisation and revitalisation that will help us realise our commitment to better, more efficient service delivery.
The stabilisation of the capital's 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.
This is why I have convened the Economic Summit, currently under way, to address these very priorities. This specifically speaks to providing stable, reliable, decisive and progressive political and administrative leadership that will inspire confidence in the markets and encourage informal, small to medium and large enterprise to see our city as one that is competitive and complementary to their business and create jobs for the scores of unemployed people in Tshwane.
However, we have to be smart about how we use the funds we currently have to get the best possible value for money in the interests of bettering the lives of our people.
During the mid-year assessment visits held on 30 and 31 January 2017, National Treasury raised concerns regarding the City's financial status and, therefore, recommended that the City must table a funded 2016/17 adjustments budget for approval by Council.
The adjustments budget endeavours to provide for a more realistic and accurate picture due to compelling realities in the implementation of the planned budget during the financial year. As part of the financial turnaround strategy, departments were requested to review their current activities and deliver services in an effective, efficient and economical manner. The expenditure levels were accordingly reduced and aligned to realistic anticipated revenue.
In so doing, we identified services that were non-negotiable. One of these is the Tshwane Wi-Fi, which we would like to state categorically is here to stay despite misinformation peddled in the media to score political points.
"The tabling of the proposed 2016/17 adjustments budget is being conducted in terms of the relevant stipulations of the MFMA, and more specifically Section 28 of the MFMA. The implementation of this adjustments budget is to ensure effective and efficient financial management and business planning, aligned to deliverable key imperatives as contained in the five-year strategic IDP," said Msimanga.
"The adjustments will reprioritise the budget to service the needs of the many people of Tshwane who are desperate for services after administration treated the City's budget as a piggy bank for vanity projects at the expense of real and meaningful strides to improve the lives of our people. The adjustments budget is also necessary to ensure that the budget is aligned to the new macro organisational structure as approved by Council on 24 November 2016," added Msimanga.
In concurrence with this, the MMC for Finance, Cllr Mare-Lise Fourie, said: "Cost containment measures were implemented by departments to eliminate wasteful expenditure, reprioritise spending and identify savings in areas such as engagement of consultants, travel and subsistence costs, office furnishing costs, advertising or sponsorship costs, catering and events-related costs, and overtime, among others."
Cllr Fourie added that additional funding and reprioritisation will only be considered subject to –
- savings identified in other programmes and projects;
- additional grants being received from an external source;
- submissions that relate to external funding sources being accompanied by proof of confirmation from the relevant transferring department or institution; and
- appropriation of funding from national and/or provincial departments being accompanied by acceptable documentation as per MBRR.
The main challenges experienced during the compilation of the 2016/17 adjustments budget were summarised as follows:
- The City ended the 2015/16 financial year with an operating deficit of about R2 billion, which means that the City had a funding compliance gap that must now be addressed within the 2016/17 adjustments budget.
- Based on the mid-term results, it is clear that the City will not achieve its budgeted revenue targets due to various factors, such as under-billing, decline in electricity sales, reduction in water revenue due to water restrictions, increased distribution losses, etc.
- Ensuring that provision for all non-cash items, such as depreciation and provision for leave, is adequate.
The table below summarises the outcome of the 2016/17 adjustments budget:
|Total revenue (excluding capital transfers and contributions)||29 578 240||29 204 536||(373 705)|
|Total expenditure||27 647 570||28 073 996||426 426|
|Surplus/(Deficit) before transfers recognised – capital||1 930 670||1 130 540||(800 130)|
|Transfers recognised – capital||2 370 209||2 416 086||45 878|
|Surplus/(Deficit) for the year||4 300 879||3 546 626||(754 252)|
Summary of the proposed adjustments budget
- Electricity sales reduced by R506,9 million based on the current sales trends, past financial year performance and the accommodation of the shortfall resulting from lower tariffs approved by NERSA.
- Water fees reduced with R429,4 million based on the actual outcome of the trend of the first half of the 2016/17 financial year as a result of water restrictions, which also required Rand Water purchases to be adjusted downwards.
- Interest earned on outstanding debtors increased by R207,4 million owing to growth in the debtors' book.
- Other revenue line items were adjusted in line with the mid-term results.
Grant funding increased by R32,4 million as a result of additional funding received during the adjustments budget and approved rollover funds from the 2015/16 financial year. The grants are appropriated in the 2016/17 adjustments budget as follows:
Additional allocation amounting to R24,9 million on the following grants:
- Social Infrastructure Grant – R20 million top-up amount on the construction of community halls at Hammanskraal, Winterveld and Mabopane
- Sport and Recreation – R1 million for additional books
- Tirelo Bosha Grant – R3,9 million for research and development on e-bikes, the hear screen solution and the Tshwane Application programme
Approved rollover funds amounting to R6,5 million on the following grants:
- Public Transport National Grant (PTNG) – R3 999 487
- Human Settlement Development Grant (HSDG) – R251 598
- Research and Technology – R74 688
- Sport, Recreation, Arts and Culture (Community Libraries) – R1 122 769
- Broadband/Wi-Fi Grant – R1 086 882
The following unspent conditional grants were rejected for rollover to the 2016/17 financial year and must be returned to the National Revenue Fund:
- Municipal Human Settlement Capacity Grant (MHSCG) – R1 035 104
- Integrated City Development Grant (ICDG) – R29 477 260
- Integrated National Electrification Programme (INEP) – R199 351
- Financial Management Grant (FMG) – R93 292
- Municipal Disaster Recovery Grant (MDRG) – R1 447 864
- Energy Efficiency and Demand-side Management Grant – R7 000 000
- Human Settlement Development Grant (HSDG) – R19 800 000
- Sport, Recreation, Arts and Culture (Community Libraries) – R2 745 061
An amount of R36,3 million on the ICDG has been moved to the capex budget to fund inner city regeneration projects.
The Gautrans Grant, amounting to R12 071 107, has been moved to the opex budget to pay for the feasibility study being done on the projects.
All grants received should be spent according to the grants' conditions as stated in the Division of Revenue Act (DoRA).
- Employee-related costs were approved at R7,7 billion for the 2016/17 financial year and increased by R235,5 million, mainly for provision for leave payments as per the GRAP standard.
- Debt impairment was recalculated and increased by R158,5 million based on collection levels.
- Adequate provision was made on depreciation and asset impairment requirements in terms of the GRAP standard.
- Finance charges increased by R226,4 million, owing to an allocation of
- R70 million for interest rates swaps, an allocation of R11,9 million for interest on leases and to accommodate increases on interest on long-term loans.
- The budget for the bulk water purchase was reduced by R142 million due to the water usage restrictions implemented within the city. The bulk electricity purchase was reduced by R60,8 million due to a decline in sales revenue.
- Contracted services and other expenditure items were reduced to address the funding compliance gap.
A capital budget of R4,46 billion was approved by Council for the 2016/17 financial year. The 2016/17 capital adjustments budget amounts to R4,52 billion. That is an increase of R59,3 million, which is mainly attributed to additional allocations, transfers from the operating budget and external funding rollover.
With this adjustments budget, the City is confident that it will be in a position to create jobs, deliver better services and realise the much-needed economic emancipation of our people.
Press statement by
Executive Mayor of Tshwane