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BUDGET INDABA DRAFT BUDGET 2020/2021
Purpose of the Budget
Section 152 of Constitution:• Provide Democratic and Accountable Local Government• Provide Services to Communities• Provide Social and Economic development• Promote Safe and Healthy Environment• Encourage Community and Organisations Involvement
This is achieved through:• Preparation, Implementation and review of IDP and PMS.• Preparation and Implementation of Annual Budget
• The National Treasury year on year issue guidelines to municipalitiesthrough (MFMA) circulars and in the 2020/21 financial year the guide ison circular 98 and 99 for medium term revenue and expenditureframework (MTREF).
• The tabled budget is in line with the MFMA and Budget and ReportingRegulations.
• The 2020/21 MTREF focus evolves from the following strategicdocuments:• integrated development plan review 2020/2021;• municipal strategies sector plans and policies;• institutional analysis; and• spatial development framework.
• NERSA regulatory frame that inform electricity tariff
Overview
• The National State of Disaster and subsequent lockdown comes amidst already dire macroeconomicconditions which have seen South Africa slump into a technical recession and downgraded to sub‐investment grade (“junk” status) and worsening already high levels of unemployment
• The declining economic growth which might be impacted on further by the Corona virus pandemicand international companies closing down as a result, the deteriorating state of the finances forstate‐owned entities, continued high unemployment and water and electricity shortages will putpressure on the ability of municipalities to raise revenue.
• Municipalities will be impacted negatively due to a loss of revenue streams as businesses,households and communities reel from the economic fallout caused by COVID‐19.
• Revenue streams will remain actively protected to mitigate the financial impact of COVID‐19.understanding that most business and households will feel the financial impact of COVID‐19 and willlikely reprioritize our own spending patterns;
• In response to the impact of COVID‐19, STLM are currently considering the reprioritization of thefunding allocations for the 2020/21 and 2021/22 financial year. Given the prevailing circumstances,as a municipality we may be under pressure to grant some form of relief to consumers, such as ratesholidays, etc
Socio Economic Impact
2017-2022 TOP PRIORITIES
• Water• Electricity• Sanitation• Refuse Removal• Roads and storm water• LED • Youth and Social Development • Human settlements • Public Safety • Sports, Parks and Recreation• Community amenities
GOALS & KPA’s
The strategic goals of the municipality are:• Provision of sustainable and accessible basic services to all.• Provision a safe, healthy environment.• Promote economic growth and job creation.• Promote good governance, organizational development and financial sustainability.
These goals are implemented through the key performance areas (KPA):
• Infrastructure Development and Service Delivery• Spatial and Community Development• Local Economic Development• Municipal Institutional Development and Transformation• Financial Viability and Management• Good Governance and Public Participation
BUDGET SUMMARY
The total budget amounts to R2,61‐billion which is mad up of R1,93 – billion for opex and R673, 4 – million for capex.
Total operating revenue increases when compared to the 2019/2020 adjustment budget and amounts to R1,92‐billion which is projected to increase to R2, 10‐billion by 2022/2023 financial year.
Total operating expenditure has increased with R117, 2‐million to R1, 93‐billion and projected to increase to R2,20‐billion by 2022/2023 financial year. This reflects an average growth of 7% when compared to the 2019/2020 adjustment budget of R1, 82‐billion.
The operating budget reflects a budgeted deficit, but it does not take into consideration the portion of depreciation to be a offset.
It also include other non cash transactions.
When the above is considered, the budget does reflect a surplus of R5,4 million
The projected cash and cash equivalents for 2020/2021 increased from R487,6‐million to R652,9‐million when compared to the 2019/2020 budget and steadily decreases to R526 8‐million in
Elements of Annual Budget
BUDGET ASSUMPTIONSBUDGET ASSUMPTIONS
2020/21
Interest rate: Borrowing 9,75%
Growth in Local Economy 0,9%
Inflation 4,5%
Employee related cost 6,25%
Collection Rate 95%
Provision Bad debts 2%
Bulk Purchases: Electricity 6,9%
Bulk Purchases: Water 7,2%
SOCIAL SAFETY NET – PROTECTING THE POOR
TOTAL COMBINED EXPENDITURE
FINANCIAL YEAR OPEX CAPEX TOTAL
2019/2020 1,634,022,102.00 R 389,402,559.00 2,023,424,661.00
2020/2021 1,746,577,836.00 R 333,910,325.00 2,080,488,161.00
AVERAGE TARIFF INCREASES (RESIDENTIAL)
SERVICE % INCREASE IN REVENUE
Electricity 6.23%
Refuse 6.7%
Water 7.2%
Sanitation 8.1%
Property tax 5,8%
KEY CAPITAL EXPENDITURE
SERVICE 2019/2020 2020/2021 2021/2022
R 92,1 million for Economic and Environmental services R 92,6 m R 114,6 m
R 198,2 million for Water Networks R 265,9 m R 334,5 m
R 158,7 million for Electrical Networks R 169,6 m R 72,0 m
R 51,6 million for Sanitation R 14,7 m R 17,2 m
R 17,2 million for Waste Management R 38,7 m R 28,3 m
R 56,6 million for Community & Public Safety R 36,5 m R 33,3 m
R 98,6 million for Governance & Administration R 28,8 m R 80,4 m
2020/2021 Level of services (Indigent support)
Per month per household
Rand value per month
Budget cost of providing FBS
Free basic electricity 50 kWh R 53.14 R 11 350 704Free basic water 4 kl R 41.52 R 8 868 672Free refuse removal Free R 151.51 R 32 362 536Free sewerage Free R 118.51 R 25 313 736
Free property tax (value of +‐ R300 000)
FreeR 254.13 R 54 282 168
TOTAL +/‐ 17 800 R 618.81 R 132 177 816Free basic water to all (0‐6kl) (+/‐37 350) R 27 913 896
TOTAL PER ANNUM R 160 091 712TOTAL PER MONTH R 13 340 976
OPERATING BUDGET 2020/2021
Revenue By Source Adj Budget 2019/20
Budget Year 2020/21
Property rates 395 507 806 413 511 428
Serv ice charges - electricity rev enue 650 544 523 724 178 589
Serv ice charges - w ater rev enue 109 259 208 117 901 547
Serv ice charges - sanitation rev enue 72 469 670 78 530 446
Serv ice charges - refuse rev enue 78 975 975 84 479 602
Rental of facilities and equipment 2 045 967 1 973 781
Interest earned - ex ternal inv estments 42 351 012 38 530 857
Interest earned - outstanding debtors 6 177 438 6 629 996
Fines, penalties and forfeits 17 503 423 18 355 120
Licences and permits 9 449 009 9 627 610
Agency serv ices 22 375 150 23 605 180
Transfers and subsidies 209 112 628 235 995 480
Other rev enue 42 921 321 49 846 351
Transfers and subsidies - capital 99 901 597 122 219 500 Total Revenue (incl capital transfers) 1 758 594 727 1 925 385 487
Adj Budget 2019/20
Budget Year 2020/21
Surplus/(Deficit) for the year -58 238 354 -8 804 882
Expenditure By Type Adj Budget 2019/20
Budget Year 2020/21
Employ ee related costs 598 110 431 638 863 655
Remuneration of councillors 24 211 293 24 412 525
Debt impairment 21 121 150 22 177 206
Depreciation & asset impairment 212 738 041 212 738 040
Finance charges 36 905 963 50 000 346
Bulk purchases 516 448 552 584 003 282
Other materials 61 166 617 55 752 508
Contracted serv ices 234 380 731 224 604 609
Transfers and subsidies 2 130 000 2 237 750
Other ex penditure 109 620 303 119 400 448 Total Expenditure 1 816 833 081 1 934 190 369
Electricity tariffs, R724,178,589 , 35%
Property rates, R413,511,428 , 20%Other Revenue, …
Grants & subsidies : Operating, R235,995,480 , 11%
Grants & subsidies : Capital, R122,219,500 , 6%
Water tariffs, R117,901,547 , 6%
Sanitation Tariffs, R78,530,446 , 4%
Refuse Tariffs, …
Licenses and permits, R9,627,610 , 0%
Other income, R56,476,347 , 3%
Interest earned ‐ External investments, R38,530,857 , 2%
Income from agency services, R23,605,180 ,
1%
Fines, R18,355,120 , 1%
Rental of facilities and equipment, R1,973,781 , 0%
TOTAL REVENUE R1 925 385
REVENUE 2020/2021
R 638 863 655Employee related costs
33.03%
R 24 412 525Remuneration of
councillors1.26%
R 22 177 206Debt impairment
1.15%
R 212 738 040Depreciation & asset
impairment11.00%
R 50 000 346Finance charges
2.59%
R 584 003 282Bulk purchases
30.19%
R 55 752 508Contracted services
11.61%
R 224 604 609Grants and subsidies
0.12%R 2 237 750
Other expenditure9.06%
TOTAL OPERATING EXPENDITURER1 934 190 369
OPERATING EXPENDITURE2020/2021
WHERE DOES THE MONEY COME FROM TO FUND THE BUDGET (OPERATING REVENUE)
Municipal Revenue – R1 925,4bn
Service charges ‐ Electricity R724,2mService charges ‐ Property Rates R413,5mService charges ‐ Water R117,9mService charges ‐ Sewerage R78,5mService charges ‐ Refuse R84,5mGovernment Grants R236,0mOther R270,8m
HOW WILL THE MONEY BE SPENT? (EXPENDITURE)
Municipal Expenditure R1 934,2bn
Governance & Admin R423,2m
Refuse R129,2m
Economic & Environmental
R139,3m
Water R111,6m
Sewerage R104,3m
Electricity R746,2m
Other R26,0m
Community & Public Safety R254,4 m
HOW DOES THE MUNICIPALITY MAINTAIN ITS ASSETS?
Repair & Maintenance R107,7m , 5,57%
New Assets R352,1m , 52,3%
Renewal of Assets
R211,0m , 31,3%
Upgrading of Assets R110,3m,
16,4%
SOCIAL SAFETY NET – PROTECTING THE POOR FREE BASIC SERVICES FOR INDIGENT HOUSEHOLDS
Basic Services R160,1m p.a. R618,81 per
household per month.R13,3m pm.
Electricity 50 kWh limited to 20 amp
Water 10kl Free
Refuse Removal Free
SanitationFree
Property Tax Free
Capital Expenditure - Functional Adjusted Budget
Budget Year
2020/21Governance and administration 51 600 781 98 627 900
Ex ecutiv e and council 795 000 1 300 000
Finance and administration 50 765 781 97 327 900
Internal audit 40 000 -
Community and public safety 35 396 774 56 626 100
Community and social serv ices 20 525 908 33 176 100
Sport and recreation 6 443 990 21 530 000
Public safety 7 421 719 1 920 000
Housing 1 005 157 -
Economic and environmental services 91 097 809 92 123 400
Road transport 90 497 809 92 023 400
Env ironmental protection 600 000 100 000
Trading services 286 548 059 425 751 831
Energy sources 91 671 042 158 710 981
Water management 87 079 433 198 173 100
Waste w ater management 76 447 484 51 617 750
Waste management 31 350 100 17 250 000
Other 303 000 275 000
Total Capital Expenditure - Functional 464 946 423 673 404 231
Funded by:
National Gov ernment 85 727 360 122 219 500
Prov incial Gov ernment 220 000 -
Transfers recognised - capital 85 947 360 122 219 500
Borrow ing 150 140 526 285 000 000
Internally generated funds 228 858 537 266 184 731
Total Capital Funding 464 946 423 673 404 231
Electricity, R158,710,981 ,
24%
Road Transport, R92,023,400 , 14%
Community & Social Services, R33,276,100 , 5%
Other Trading, R275,000 , 0%
Water, R198,173,100
, 29%
Sport and Recreation, R21,530,000 ,
3%
Waste Water Management, R51,617,750 ,
8%
Public Safety, R1,920,000 ,
0%
Waste Management, R17,250,000 ,
3%
Executive & Council,
R1,300,000 , 0%Finance and
administration, R97,327,900 ,
14%
TOTAL CAPEXR 673 404 231
CAPITAL EXPENDITURE2020/2021
The capital budget constitutes R673‐million for the 2020/2021 financial year and equates to R2,0‐billion over the MTREF.
A substantial portion of the capital budget will be funded from borrowings at R285, 0‐million. Funding from own funds amounts to R266, 2‐million and government grants and donation to R122, 2‐million.
CAPITAL EXPENDITURE2020/2021
CAPITAL BUDGET 2020/2021R 673 404 21
HOW WILL THE MONEY BE SPENT? (CAPITAL PER ASSET
TYPE)Roads & Stormwater
R 83 643 400(12,42%)
Water R 167 493 100
(24,87%)
Electricity R 158 445 981
(23,53%)
Sanitation R 29 330 000
(4,36%)Sportsfields & RecreationR 13 750 000
(2,04%)
Community Facilities R 47 386 100
(7,04%)
Waste Management R 9 150 000(2,56%)
IT Equipment R 15 490 300
(2,03%)
Land & Buildings R 7 343 350(1,09%)
Office Equipment R 1 060 000(0,16%)
Plant & Equipment R 117 852 000
(17,5%)
Vehicles R 16 090 000
(2,39%)Intangible Assets
R 4 750 000(0,71%)
WHERE WILL THE MONEY BE SPENT ON SERVICE DELIVERY? (CAPITAL)Roads & Stormwater – R92,0million (Main Projects)
• New roads & Stormwater (R46,9m) – Ward 1, 2, 3, 4, 6, 8, 11, 12, 16, 19, 21, 23, 25,26• Upgrade taxi Rank & laybyes (R8,5m) – Ward6, 10, 13, 25• Roads reseal (R14,5m) – Ward1‐3, 8, 10‐17, 20‐23• New roads & stormwater in low income areas (R22,1m) – Ward 2, 6, 8, 23
Electricity – R158,7 million (Main Projects)• Replace cables in problem areas (R15,0m) – Ward 12, 18 and where required• Replace mini substations (R4,7m) – Ward 2, 12, 13, 19, 23• Electrification – Overhead lines, Substations 7 switching stations (R123,4m) – Doornkop, Mhluzi, Ward3, 11, 13• Highmast Lighting Low income areas (R10,7m) – Ward 2,6, 8, 15, 17‐20, 23, 25, 28
Water – R198,8 million
• Replace old water pipes (R100,5m) – Middelburg/Mhluzi, Hendrina/Kwazamokuhle• Construct reservoir (R52,7m) – Vliegveld, Graspan• Replace Equipment (R30,7 m) – Vaalbank, Middelburg Dam, Kruger dam• Water Network (R5,5m) – Ward 17, 23
WHERE WILL THE MONEY BE SPENT ON SERVICE DELIVERY? (CAPITAL)
Waste Water Management – R51,6 million (Main Projects)• Networks (R11,3m) – Ward 2, 16, 17, 21, 232• Upgrade Boskrans sewer plant & equipment (R31,0m) • Bulk sewer networks (R5,2m) – Ward 16, 17• Rural sanitation (R1,0m)
Waste Management – R17,3 million (Main Projects)• Containers & Bins (R1,6m)• Extend Landfill site (R9m) ‐ Middelburg• Refuse Compactors & trucks (R6,7m)
Community facilities – R53,9 million• New MPCC (R24,8m) ‐ Rockdale, Kwazamokuhle• Cemeteries (R7,8) ‐ Low income areas, Ward 8, 11• Renovations/upgrade sport facilities (R3,2m)• Develop & Upgrade Parks (R18,1m) – Ward 11, 12, 16, 18, 19, 25
How is the Capital Budget going to be funded?
Government grants and public
donationsR122,2m
Internal reservesR266.2m
External loansR285m
SERVICING OF STANDS2020/2021
Area Project description Sewer Water Electricity Dennesig North P2000115: Bulk Sewer & Collection Network Den North W17: 550 4 500 000 Dennesig North Dennesig Electrification MV Network 1 816 233 Dennesig North Dennesig Electrification LV Network 1 000 000 Komati LV Highmasts Low income areas W04 (731/...) 1 650 000 Kwazamokuhle (Mawag) P1200163: New sewer network Hendrina/Kwaza W02: 546 1 000 000 Kwazamokuhle (Mawag) P2000159: New Water Network Kwaza W02: 566 1 890 000 Kwazamokuhle (Mawag) MV Electrification of Kwazamokuhle Ext 4 and 6 1 869 400 Kwazamokuhle (Mawag) LV Electrification of Kwazamokuhle Ext 4 and 7 1 355 000 Mhluzi x 2 (Industrial Node) P2000027: New Sewer Network Mhluzi W23: 550 5 000 000 Mhluzi x 2 (Industrial Node) P2000028: New water network: Mhluzi ext 2: 560 5 000 000 Mhluzi x 2 (Industrial Node) MV Electrification of Muhluzi Ext.2 Industrial 1 076 346 Mhluzi x 2 (Industrial Node) LV Electrification of Muhluzi Ext.2 Industrial 779 423 Newtown LV Highmasts Low income areas W17 (731/...) 1 650 000 Node D (Industrial Node) P1900159: Plan & Design Sewer Network X23 Node D W21: 550 5 000 000 Node D (Industrial Node) P1900162: Bulk Water Reticulation Ext 23( Node D) W21: 560 5 000 000 Node D (Industrial Node) Node D Electrification MV network 1 210 890 Node D (Industrial Node) Node D Electrification LV network 900 330 Rondebosch P1900161: Bulk Water Reticulation Ext 42 W16: 560 700 000
Rondebosch Building of Switching station and provision of links 2 500 000
Total 15 500 000 12 590 000 15 807 622
Sewerage8,1%
Property Rates5,8%
Electricity6,23%
Refuse Removal6,7%
Water7,2%
TARIFF INCREASES
Indigent HOUSEHOLD Affordable Range HOUSEHOLD
Service Units Current Account
Increased Amount
Proposed Account
Rates R300 000 market value (Free) R 0.00 R 0.00 R 0.00
Electricity: Basic Levy Single phase R 0.00 R 0.00 R 0.00
Electricity: Consumption
300kwh (50 kWh free) R 393.09 R 37.34 R 430.43
Refuse Erf <995m² (Free) R 0.00 R 0.00 R 0.00
Sanitation Erf <995m² (Free) R 0.00 R 0.00 R 0.00
Water 20kl (10kl free) R 132.00 R 9.37 R 139.90
Vat 15% R 78.76 R 6.79 R85.55
Total Increase of 8.62% R 603.85 R 52.03 R 655.88
Service Units Current Account
Increased Amount
Proposed Account
Rates R500 000 market value
R 400.13 R 24.26 R 432.46
Electricity: Basic Levy
Single phase R 71.20 R 4.44 R 75.64
Electricity: Consumption 500kwh R 733.14 R 69.65 R 802.79
Refuse Erf <995m² R 142.00 R 9.51 R 151.51
Sanitation Erf <995m² R 109.63 R 7.08 R 118.51
Water 25kl R 237.16 R 14.21 R 251.37
Vat 15% R 193.97 R 16.00 R 209.97
Total Increase of 8.21% R 1 887.23 R 155.02 R 2 042.25
Middle Income HOUSEHOLD Large HOUSEHOLD
Service Units Current Account
Increased Amount
Proposed Account
Rates R700 000 market value R 552.75 R 44.67 R 597.42
Electricity: Basic Levy Single phase R 71.20 R 4.44 R 75.64
Electricity: Consumption 1200kwh R 2 091.81 R 198.72 R 2 290.53
Refuse Erf <995m² R 142.00 R 9.51 R 151.51
Sanitation Erf <995m² R 109.63 R 8.88 R 118.51
Water 30kl R 303.16 R 18.16 R 321.32
Vat 15% R 407.67 R 35.96 R 443.63
Total Increase of 8.71% R 3 678.22 R 320.34 R 3 998.56
Service Units Current Account
Increased Amount
Proposed Account
Rates R1 500 000 market value R 1 237.25 R 73.50 R 1 310.75
Electricity: Basic Levy Three phase R 96.10 R 5.99 R 102.09
Electricity: Consumption 1800kwh R 3 275.25 R 311.15 R 3 586.40
Refuse Erf >995m² 203.23 R 13.62 R 216.85
Sanitation Erf >995m² R 242.60 R 19.65 R 262.25
Water 60kl R 724.36 R 43.36 R 767.72
Vat 15% R 681.23 R 59.07 R 740.30
Total Increase of 8.15% R 6 460.02 R 526.34 R 6 986.36
Thank you