Select Committee on Finance

Presentation by the Ekurhuleni Metropolitan Municipality

City Manager: Mr. Patrick Flusk

Municipality’s Budget• 2008/09 Budget Approved May 2008• 2008/09 Budget Adjusted August 2008

– Capex Budget close to R3 billion– Opex Budget: R12.8 billion (excluding internal charge-

outs)

• 2009/10 Budget currently being compiled• To be tabled to Council February 2009• Final approval April 2009• Salary cost less than 30% of budget• Maintenance cost almost R1.4 billion (11% of

budget)

Financial Issues

Current Service Delivery Backlog (estimated)– 205 000 houses @ R43 000 = R8.8 billion– 130 000 serviced stands @ R17 000 =R2.2

billion (water, sanitation and toilet only)– 2 050 km roads @ R3,9 billion– R2,5 billion electricity (R1,2 billion for housing

and R1.3 billion for bulk)– TOTAL: R17.4bn

Social PackageFree Basic Services – Water and Electricity

  Water Residential Users 6 kl per month

Water Indigents 9 kl per month

Sewerage Residential Users 6 kl per month

Sewerage Indigents 9 kl per month

Electricity Residential Users on Tariff A 100 kWh per

month

Refuse Removal Indigents First step free

Assessment Rate Rebates

Residential 40% Rebate

Indigents 100% remission on land value up to R20 000

Pensioners with gross monthly income up to R8 000 will qualify for additional remissions of between 40% and 100%.

Financial Issues• Affordability of Capital Programme

– Between R2b and R3b per year for the next 3 years– Long term financing strategy shows limited capacity

for internal funds after 2011 unless major improvement in income levels are achieved (excluding loan funds of R3 billion to be taken up).

– Greater reliance on external grants from 2011 onwards.

– Achievement of backlog eradication goals dependant on higher levels of grant funding.

– Possibility of using grant funding for higher gearing levels to be further discussed with NT.

Financial Issues• Grant funding: Additional grants are required to meet

the eradication targets.– MIG and PHB:

• MIG – DPLG Business Plan approvals to be re-considered. MFMA Circular 14 process is supported.

• PHB – Grants to be gazetted for three year period to enhance budget and planning process.

– Impact of grants: consider the following:• Capacity to spend – EMM is currently improving spending levels,

but capacity to spend more than R2b (all sources) per year is still being developed.

• Impact of future operating budgets – The maintenance of assets has an impact on the operating budgets. One needs to consider how much increased spending on maintenance can be absorbed in the operating budget without impacting too negatively on tariffs. Can there be a special maintenance grant?

INCOME – 2008/09 FINANCIAL YEAR  ANNUAL BUDGET  YEAR–TO–DATE % 

Property Rates R 2,453,503,030 R 780,114,399 31.80%

Plus Penalties Imposed R 206,022,075 R 33,608,022 16.31%

User Charges for Services R 6,966,566,564 R 2,393,952,775 34.36%

Rent of Facilities and Equipment R 46,182,168 R 13,718,442 29.71%

Interest Earned - External Investments R 219,283,026 R 63,615,795 29.01%

Interest Earned - Outstanding Debtors R 260,000,002 R 143,979,301 55.38%

Fines R 96,928,502 R 32,592,281 33.63%

Licenses & Permits R 28,198,035 R 8,495,474 30.13%

Income for Agency Services R 157,923,733 R 51,295,789 32.48%

Operating Grants & Subsidies R 2,302,627,102 R 635,355,626 27.59%

Capital Grants R 499,379,942 R 43,209,335 8.65%

Other Income R 67,727,160 R 17,042,827 25.16%

Gain on Sale of Assets (Gains on disposal of investments R 0 R 880,471 0.00%

OPERATING INCOME GENERATED R 13,304,341,339 R 4,217,860,539 31.70%

Less: Income foregone R 717,807,590 R 201,319,262 28.05%

TOTAL OPERATING INCOME R 12,586,533,749 R 4,016,541,277 31.91%

EXPENDITURE – 2008/09 FIN YEAR  ANNUAL BUDGET  YEAR–TO–DATE % 

Employee Related Costs - Salaries & Wages R 3,055,075,321 R 878,995,069 28.77%

Employee Related Costs - Social Contributions R 675,930,401 R 201,938,435 29.88%

Less Employee Costs Capitalized -R 109,300,184 R 0 0.00%

Remuneration of Councillors R 60,325,690 R 17,628,659 29.22%

Bad Debts (Provision for Bad Debts) R 909,249,388 R 303,083,128 33.33%

Collection Costs R 92,506,968 R 20,209,689 21.85%

Depreciation R 469,787,430 R 156,595,810 33.33%

Repairs and Maintenance - External R 983,849,850 R 361,241,156 36.72%

Repairs and Maintenance - Internal R 494,995,054 R 129,904,909 26.24%

Interest Expense - External Borrowings R 189,738,868 R 7,196,721 3.79%

Bulk Purchases R 4,098,177,318 R 1,295,903,350 31.62%

Contracted Services R 543,012,047 R 139,378,303 25.67%

Grants & Subsidies Paid R 53,512,250 R 21,077,856 39.39%

General Expenses - Other R 1,345,575,563 R 257,585,512 19.14%

TOTAL OPERATING EXPENDITURE R 12,862,435,964 R 3,790,738,599 29.47%

Capital Expenditure

Revenue Collection

• Target of 95% collection levels for 2008/09 financial year• Currently 91% payment level• Staff arrears being deducted from salaries where

employees have agreed in writing• Indigents debt being monitored on monthly basis• All registered indigents’ status re-verified this year

MFMA Compliance• EMM is doing well with regards MFMA.• Compliance key deliverable in all S57 performance agreements.• Quarterly reporting to Mayoral Committee regarding compliance with

various MFMA Sections.• Budget and Treasury functioning under CFO (appointed August

2004).• SCM compliance being monitored on an ongoing basis.• All bids committees established and fully operational.• AFS submitted to AG on 29 August 2008, audit currently nearing

completion. AG report expected end November 2008.• Section 71 reports submitted on a monthly basis, copied to NT and

PT.• Annual report (draft) submitted to AG on 29 August 2008, and to

Mayoral Committee during November 2008. Final containing AG’s report to be submitted to Council January 2009.

Spending with regards to Conditional Grants

Amount allocated per

DORA

Amounts transferred

Expenditure to date

Reasons for variance

MIG 378,634,000 130,000,000 69,042,768

Tenders awarded, implementation in

progress PTIS (Public Transport Infrastructure Services) 7,637,000 0 1,258,327

INEP 8,962,000 0 213,000

Other 13,750,000 750,000 1,268,232

Total 408,983,000 130,750,000 71,782,327

Relationships with National and Provincial Departments

• Regular interaction with National and Provincial Treasury, DLG and other sector departments.

• Participating in DLG’s SAICA advisor programme to enhance financial skills of the municipality.

Partnerships

• Economic – Banking sector support to SMME’s and low cost

housing – Exxaro & Impala Platinum Refinery has set up a

SEDA -Ekurhuleni base metal incubator focusing on Beneficiation

• Social– Demilitarization project

• Governance– OR Tambo International Airport renamed– MOU with OR Tambo District finalised

Capacity Constraints

• Organisational capacity = 17133• Scarce and priority skills

– Engineering– Planning– Accounting – Auditing

Learnership Programme

• 130 students : qualification will range from NQF level 2 – NQF level 3– Mechanical Engineering– Electrical Engineering– Building and associated trades(plumbing, bricklaying,

capentry and painting)– Boiler making– Auto electrician

Bursary Programme & Other Programmes

• 40 Student to be finalised for– Civil Engineering– Mechanical engineering– Electrical engineering– Architecture

• 30 Students – Work Integrated Learning with UoJ• EPWP - 2 year programme started in August 2006 with

38 learners. Qualification is on NQF level 2 and NQF level 4.

• Finance Interns (20)

Special Programmes• Development and transformation

– Sustainable Development Project for Nigel (pilot in partnership with DBSA, J&J Trust, ABSA and UCW)

• Model for supply and demand will be finalised through the participation of multiple stakeholders

• Community based planning as a tool for the IDP – ward based IDP plans

• Roll out of Dreamfields – soccer development at schools• Skills development linkages between factory and education sector• Leading and borrowing needs of workers and communities

– SDBIP leveraged as the primary tool for assessing performance• Full alignment between individual and departmental measures• System developed for input and extract of reports• Indicators and measures improved• Audit of information, audit of results part of cycle on performance

Alignment of IDP to Provincial GDS:EMM Planning Framework

Local; Provincial (PGDS etc); National Guidelines (NSDP etc)

EGDS 2025

5-Year IDP

Annual IDP Multi Year Budget

SDBIP

Implementation

Performance Assessment

Annual Report

WARD PRIORITIES

Overview of 5 year plan

• Presented to Council 29 June 2006 by Executive Mayor taking key developmental challenges into account– Economic Development, Infrastructure provision and planning to

favour underdeveloped areas (20 Priority Township Programme)– AsgiSA focus, enterprise development, cooperatives and job placement– Local Aids Council– Women and youth focus– 17 Customer Care Centres – Batho Pele– Developmental programme at ward level (halving poverty and

unemployment)• Growth and Development Summit Outcomes (2 September 2006)

– Partnerships with private sector, provincial and national govt– Implementation of the Human Settlement plan– Integrated transport system highlighted– Accelerate land release

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Purpose of SDBIP Reviews

• Quarterly review of service delivery to focus on:– Delivery on IDP strategic priorities

• The inputs made into the SDBIP System developed will be used for this. It is expected that the inputs will be signed off by the head of the department before this review

• Cluster reports reviewed and explained by DCM’s– Assessment of Budget Spend and Review of Payment Levels

• The CFO reports on these matters– Receive reports on Audit of information previous Quarter results

• Chief Audit Exec reports on this– Consider Improvements to Service Delivery

• City Manager to report on these

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Value Chain: Performance on Service Delivery

Dept BudgetPlanning integrated

Deliverables cascaded

Performance agreements in place

Implement Deliver Manage

Planning and finalization Old year and New Year

Performance Agreements on website June

SDBIP reports to Portfolio Quarterly

Indiv Perf review to serve at portfolios

Annual report to include Performance Reports

Process on transparency

November to March finalization of plans all department in Readiness by April for delivery

May June July to June

SDBIP , IDP & Budget on Website May

Thank You!