FOR THE YEAR ENDED 30 JUNE 2013
City of JohannesburgANNUAL FINANCIAL STATEMENTS
PRESENTATION TO INVESTORS
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Agenda
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Strategic Overview
Financial Analysis
Treasury Management
Political Overview
Questions
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Political Overview
Mr. Geoffrey MakhuboMMC Finance - City of Joburg
Presentation to
Investors
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GDS 2040
Eradicate poverty
Building Sustainable
human settlements
Good Governance
Building and growing an inclusive
economy
Social inclusion through
support and enablement
Ensuring resource
security and environmental sustainability
Our Promise this Term of Office and Beyond …….
During this term of office we have outlined the policy that was translated into GDS 2040
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High quality of life & development-driven resilience: poverty eradication;
food security; health, literacy/skills, safe & secure City
Resilience, liveable, sustainable urban environment: eco-mobility; Sustainable Communities, climate
change resilience, environmental protection
Labour-absorbing, resilient & competitive economy: job intensive economic growth;
SMMEs; increased competitiveness; smart city
Leading metropolitan government: efficient, responsible, accountable metro;financial sustainable & resilience; citizen
participation; customer & citizen care
• Resilience
• Sustainability
• Liveable
What do we intend to achieve through GDS2040
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• Safe neighbourhoods
• Safe complete streets that accommodate pedestrians, bicycles and joggers which will also reduce green house gas emission
• A City where everybody can live, play and work together.
• Reduced CBD congestion and parking
• Bustling economic nodes with convenient stops and stations
Towards Joburg 2040
7Mindful of the Operating Environment
• Growth in emerging markets remain fairly pedestrian
• Consumers continue to be under pressure as reflected by lowdisposable income
• Labour tensions
• Unemployment levels continue to be high, especially youthunemployment
• Fragile five affected by US’s decision of postponing tapering ofquantitative easing programme
• Inflation continues to reflect upside risks due to the depreciation ofthe Rand
• Wage settlements continue to surpass CPI
• Service Delivery protests
• Accelerated population growth in Cities
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Achievements
We continue to make significant achievements despitenumerous challenges:
• Turned around City Finances
• Significant strides in service delivery
• Unqualified Audit
• Leading City in implementing EPWP
• Implemented Community Based Planning
• Ten year R100 billion capital program beenimplemented
• Implementation of 30 year Growth & DevelopmentStrategy
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“The City is financially in good shape”
10Conclusion
“WE DELIVERED ON OUR PROMISES”
STRATEGIC OVERVIEWPRESENTATION TO INVESTORS
CITY MANAGERTREVOR FOWLER
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We are committed to a promising future
Joburg – a world class African city of the future - a vibrant, equitable
African city, strengthened through its diversity; a city that provides real
quality of life; a city that provides sustainability for all its citizens; a
resilient and adaptive society
What we said
13And this is what we did Operating Context
•Every year, the City commits significant resources to support service delivery.
•Johannesburg became the first municipality in South Africa to pass a multi-year
capital budget of R30.1 billion.
•The magnitude of these figures indicates Johannesburg’s commitment to high
quality service delivery and confidence in its future as a leading metropolitan
municipality.
2012/2013 2013/2014 2014/2015 2015/2016
Operational and Capital Budget Rmillion
Oprational Budget
Capital Budget
14Operating Context
• We are mindful of developmental challenges (poverty, unemployment,
spatial and income inequality) and opportunities that lies ahead - remain
committed to tackle and further enhance service delivery to our residents
• Johannesburg’s post apartheid spatial patterns reinforce the Apartheid Development
Trajectory, we still have excluded townships with poor people (Orange Farm,
Zandspruit, etc.)
• The unemployment rate is at approximately 25% and the youth unemployment at
approximately 32% which is atypical of a city that attracts youth looking for
employment opportunities.
• Food Security (and the linked question of food resilience) is a citywide challenge; with
estimates of the proportion of food insecure residents as high as 42 % of the City’s poor
• Given the strong link between the City’s economy and that of South Africa, the impact of
a struggling global economy resulting in a slowdown of the GDP to 2.7% during 2012 is
also felt locally. Within Johannesburg, the slow-down of the economy was evident in the
moderate rate of economic growth at 2.5% in 2012, down from 3.5% in 2011.
15Recap: Joburg 2040 Strategy
• Joburg 2040: A roadmap for a resilient, sustainable and liveable city - ourlong-term response to emerging challenges and opportunities
• It does not only provides a vision for the future, but importantly, it defines clear outcomes against
which to measure our progress.
• Through the four pillars of economic growth, sustainable services, human and social development
and good governance we strive toward minimal resource reliance and increased preservation of our
natural resources.
• This entails reducing pollution, improved waste management, efficient land use through appropriate
urban spatial development, all supported by consistent stakeholder engagement practices.
• 2012/13 was our first year of implementing the ‘Joburg 2040’ GDS.
• To give tangible expression to the commitments we have made in the GDS, we are spending over a
R100 billion toward infrastructure development over ten years, thereby enabling Johannesburg to
make a decisive break with apartheid era spatial planning.
• Further, our targeted flagship programmes are designed to address short and medium-term
challenges whilst maintaining focus firmly on our long-term vision of ‘Joburg 2040’.
162012/13 Key Focus Areas: Flagship Programmes
Priority programme Programme enablers
Financial sustainability and resilience
Enhancing revenue.
Optimising customer service centres and channels to enhance customer care.
Creating sound financial management environment.
Shift to low carbon infrastructure
Promoting ‘Demand Side Management’.
Smart metering.
Energy generation and sales (energy mix)
Gas to landfill.
Timing of use management at household level.
Integrated waste management
Separating waste at source.
Composting of organic waste.
Recycling initiatives.
Greenways and mobility
Quality service delivery of Rea Vaya BRT.
Restoring pedestrian bridges and dams to protect lives and livelihoods.
Re-sealing of roads and promoting road safety and public transport usage.
Upgrading gravel roads.
Introducing managed lanes, walking, cycling and other recreational activities.
Integrating different modes of public transport – especially with rail.
Sustainable human settlements
Providing basic services to vulnerable households.
Upgrading marginalised areas/ areas of high deprivation.
Formalisation and security of tenure.
Enabling housing typologies (e.g. social housing, revitalisation of rental stock) that support Transit Orientated Development.
Urban water management
Reducing water losses.
Introducing stormwater management programmes.
Implementing water demand management strategies.
Diversifying sources of water (e.g. rain water harvesting) to address water scarcity and to increase revenue.
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Priority programme Programme enablers
Citizen participation and empowerment
Promoting community-based planning and budgeting.
Reviving 1-stop Centres targeted at citizen partnerships and engagements and citizen empowerment.
Strategic communications and marketing
Devising an integrated communication and marketing strategy to support the City Strategy.
Promoting the ‘Buy, Sell, Invest and Visit’ initiative.
Entrenching and positioning Johannesburg as an ideal destination.
Human capital development and management
Introducing efficiency and productivity benchmarks, assessment and monitoring instruments.
Creating labour stability.
Integrating the COJ Group Human Capital Governance Framework and strategy.
Aligning talent management in support of the City’s imperatives through a skilled workforce (by developing, retaining and acquiring the appropriate skills).
Establishing a municipal academy / university.
A safe, secure and resilient City that protects, serves, builds and empowers communities
Promoting community-based policing and partnerships.
Implementing ‘smart technology’ (implement disaster management centres).
Promoting and facilitating life-long learning.
Introducing safe social spaces for cultural interaction.
Promoting public safety.
Introducing a ‘healthier lifestyles’ programme.
Economic growth
Promoting area-based development.
Implementing the Oasis in Soweto initiative, Alexandra and Ivory Park etc.
Accelerating the implementation of a skills hub.
Introducing Joburg Broadband.
A city where none goes hungry
Subsidising food programmes to ensure safe, affordable food for all (people’s restaurants, new markets, food exchanges and so forth.)
Introducing Agri-resource centres.
2012/13 Key Focus Areas: Flagship Programmes
18Service Delivery Performance: Sustainable Services
• Positive progress towards increased public transport use, roads
decongestion, and reducing carbon emissions
• Rea Vaya world class, affordable and reliable mode of public transport,
with an average of 35 953 passengers daily
• 16 489 457 Metrobus passengers in 2012/13
19Service Delivery Performance: Sustainable Services
• Moving towards low carbon infrastructure, minimal resource reliance
and increased preservation of our natural resources.
• Over 27 091 solar water heaters installed in various communities & 19598 smart
meters also rolled out
• Improved waste management practices with over 90 000 tonnes of waste diverted
from landfill sites
• Unaccounted for water reduced from above 34% to 31.4%
20Service Delivery Performance: Sustainable Services
• We are responding to the housing challenge through sustainable human
settlements:
• We delivered 3470 mixed housing opportunities in 2012/13
• 5 343 New public lights installed
• 3 307 first-time electricity household installations
• City awarded 2012 National Arbor City Award, 1st Place Gold Award and two
additional Gold Awards at the UNEP-endorsed Liveable Communities Awards
21Service Delivery Performance: Economic Growth
• The City recognises the need to create an inclusive economy, remain
competitive, innovation and increased investment
• During the year, a total of 3 967 SMMEs were supported through our SMME development
programmes.
• During the year, the City created 36 588 work opportunities through EPWP – earning Kamoso
Award for excellence in the implementation of the EPWP programme
• 900km broadband fibre rolled out and a spring board towards bridging digital divide
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• We are building a City that is safe, secure
and resilient; and that protects, serves,
and empowers our communities.
• 7,129,049 people - utilisation of libraries, sports,
recreation centres
• Health services continue to surpass targets and
evident in reduction of HIV infections - child
immunisation at 94.3% and HIV infections down
to 16.4%
• Joburg 10+ deployment and encouraging
performance in 5% reduction in assaults and
robberies in CCTV coverage areas (Inner City)
• ESP: 114,016 Individuals were connected with
at least 1 social service
• Established six agri-resource centres in Regions
A, C and G and food gardens in 2 Regions
• The City further provided ‘hub-and-spoke’
support for small scale producers in Orange
Farm and Poortijie.
Service Delivery Performance: Human and Social Development
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• We are building a City that is safe, secure
and resilient; and that protects, serves,
and empowers our communities.
• At least 20% risk reduction in fires and
flooding incidents throughout the regions
• The compliance levels in terms of by-law
enforcement in outlets for dangerous
goods and Flammable liquids had
increased to 74% against the target of
68%.
• It was also recorded that the mortality
rate was reduced by 4.2% against the 5%
target.
• Visible service delivery in 35 Wards
enabling quick identification and
resolution of service delivery breakdowns
at ward levels
Service Delivery Performance: Human and Social Development
24Infrastructure Investment
• The City’s capital expenditure for the 2012/13 financial year of R4.3
billion, biased towards water, electricity, roads and transportation
infrastructure services.
• Approximately R1. 2 billion on maintenance, upgrades and new infrastructure to enhance
service delivery: e.g. replacement of near redundant pipelines; public lighting, upgrade of
electrical network
• R594 million towards roads and storm water infrastructure - gravel roads upgrade to surfaced
standards; resurfacing, rehabilitation and reconstruction of roads & conversion of open
stormwater rains into underground systems (in Diepsloot, Ivory Park, Braamfischerville and
Orange Farm)
•92% expenditure recorded by end of 2012/13 FY: difference mainly as a result of delays in
procurement of BRT busses in support local content and job creation
25Putting Johannesburg on the map
Host of Major events such as :
• African Cup Of Nations 2013
• Metropolis Annual Mayor’s Meeting
• Joburg Open
• C40 Global Summit
• One Young World Summit
• World Anti-Doping Summit
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“The City is financially in good shape”
27Conclusion
“WE DELIVERED ON OUR PROMISES”
FOR THE YEAR ENDED 30 JUNE 2013
ANNUAL FINANCIAL STATEMENTS PRESENTATION TO INVESTORS
GROUP CHIEF FINANCIAL OFFICERREGGIE BOQ0
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Financial Sustainability & Resilience
•Our finances remain stable
• A strong financial position with a net surplus of R3.4 billion
• A progressive increase in the City’s total assets
• Progressive increase in cash and cash equivalents
• Spending R30.1 billion of the R100 billion capital program over the next
three years
• State of responsiveness to billing issues has improved, through open days
and , revenue step change resulting in resolution of queries
• Collection of 92% of all billed revenue
• An unqualified audit opinion
• Higher allocation of Internal Generated Funds to Capex
30Revenue for the year ended 30 June 2013
Increase in revenue collected
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
June 2011 June 2012 June 2013
17,782,015
22,684,402
25,378,503 The increase of revenue collected is attributable to improving return on collection effort as a result of:• Open days, • Revenue step Change Programme • Resolution of queries and.
17%
55%
20%
2%
6%Revenue Composition
Property rates
ServiceCharges
Grants andsubsidies
Interestearned
Other
Total Revenue
R35bn
31Financial Performance year ended 30 June 2013
Increase in Capital expenditure• In 2012/13 financial year the City
began gradually to scale up capital investment toward the target of R100 billion.
• There is an increase in the percentage spent from 89% in the prior year to 93% in the current
• This trend continues in future years with R7,6 billion budgeted for the 2013/14 year.
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
June 2011 June 2012 June 2013
2,747,438
4,614,681
3,438,456
• The achievement of a surplus is in line with the City’s Growth and Development Strategy towards achieving financial sustainability and resilience.
• Surpluses will be augmented with contributions from private investors, national and provincial government towards target of spending R100billion on infrastructure over 10 years
Surpluses Generated
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
June 2011 June 2012 June 2013
3,812,518 3,749,203
4,548,057
32Financial Performance year ended 30 June 2013
Total assets
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
June 2011 June 2012 June 2013
47,440,465
56,374,108 60,191,121 The increase of assets over the
years mainly due to:growth in PPEincrease in cash and cash
equivalents
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
June 2011 June 2012 June 2013
695,161
2,220,393
5,401,407
Over the past 3 years the City has intentionally worked towards building up cash resources through the implementation of more stringent cash management practices including weekly and monthly cash projections which are proactively monitored
Cash and cash equivalents
33Prudential ratios
0.85
0.9
0.95
1
1.05
Actual Target Actual Target
30-Jun-13 30-Jun-12
1.04
1
0.92
1
Current ratio
1.85
1.90
1.95
2.00
2.05
Actual Target Actual Target
30-Jun-13 30-Jun-12
2.022
1.92
2
Solvency ratio
34.00%
36.00%
38.00%
40.00%
42.00%
44.00%
46.00%
Actual Target Actual Target
30-Jun-13 30-Jun-12
38.77%
45%
41.21%
45%
Debt: Revenue
34Prudential ratios
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Actual Target Actual Target
30-Jun-13 30-Jun-12
36.59%
30%35.76%
30%
Remuneration: Expenditure
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Actual Target Actual Target
30-Jun-13 30-Jun-12
2.19%
7%
1.63%
7%
Maintenance: Expenditure
4.20%
4.40%
4.60%
4.80%
5.00%
5.20%
5.40%
5.60%
Actual Target Actual Target
30-Jun-13 30-Jun-12
4.69%
5%
5.44%
5%
Interest: Expenditure
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Group Balance Sheet as at 30 June 2013
2013 2012 2011
R '000 R ‘000 R ‘000
Net Assets and Liabilities
Net Assets 30,420,512 27,006,777 22,650,989
Non-current liabilities 16,358,977 16,067,284 15,753,187
Current liabilities 13,394,792 13,283,207 9,036,217
29,753,769 29,350,491 24,789,476
Assets
Non-current asset 46,294,826 44,126,224 40,776,422
Current assets 13,879,455 12,231,044 6,660,810
60,174,281 56,357,268 47,437,232
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Analysis of Annual Financial Statements – Income Statement
2013 2012 Growth
Actual Actual Variance
R'000 R'000 %
INCOME
Property rates 6 034 946 5 412 614 11%
Service Charges 19 220 098 18 135 473 6%
Grants 6 823 877 7 540 386 -10%
Interest received 561 710 433 721 30%
Other 2 186 980 2 718 218 -20%
34 827 611 34 240 412 2%
EXPENDITURE
Employee related costs 7 561 093 6 974 444 8%
Allowance for impairments of current receivables 2 850 709 2 191 637 30%
Depreciation and amortization 1 997 802 1717 514 16%
Finance Costs 1 477 487 1 598 227 -8%
Bulk Purchases 11 113 587 10 159 070 9%
Contracted services 1 882 488 1 978 748 -5%
Other 4 396 836 4 770 605 -8%
31 473 837 29 390 245 7%
Other adjustments 160 414 146 842
Taxation -75 732 -382 328
NET SURPLUS/(DEFICIT) after taxation 3 438 456 4 614 681 -25%
37Audit Opinion
Qualified Qualified Qualified Unqualified
2010 2011 2012 2013
• 2 Entities achieved clean audits
• Action plan to respond to AG-SA findings
CLEAN
AUDIT –
HERE WE
COME!!
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“The City is financially in good shape”
39Conclusion
“WE DELIVERED ON OUR PROMISES”
FOR THE YEAR ENDED 30 JUNE 2013
TREASURY OPERATIONSPRESENTATION TO INVESTORS
GROUP HEAD: TREASURY & FINANCIAL STRATEGYKHOMOTSO LETSATSI
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Liquidity Management
42Liquidity : Year- end Cash position
Liquidity Position
• The City’s cash and cash equivalents held at balance sheet date were as
follows over the last five years
• General Banking Facilities and Commercial Paper not issued due to
positive cash balances throughout the year under review
2008/2009 2009/2010 2010/2011 2011/2012 2012/2013
Cash balance (R’000 000)
AMOUNT
43Long Term Debt
• Main lending sources are depicted above
• Raised a R1.3 billion bilateral loan through Absa
• Total liability book for 2012/13 financial year is R12billion
• Successfully redeemed R1.7billion of bonds through the Sinking Fund
• Sinking Fund coverage ratio of 50.06% as at balance sheet date
BANKS31%
DFI12%
BONDS54%
Finance Leases3%
Funding Mix
44Medium Term Capital Funding
• Spending R30.1 billion of the R100 billion capital program over the next 3years
• Launching Green bond in the current year in support of Climate ChangeInitiatives
2013/2014 2014/2015 2015/2016
FUNDING SOURCE (R’000 000)
Loan Funding
CRR and Surplus Cash
Grants and Contributions
45Credit Rating
Agency Rating Outlook
Moody’s A1.za/P-1.za Negative Outlook
Fitch AA-.zaf/F1+.zaf Stable Outlook
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“The City is financially in good shape”
47Conclusion
“WE DELIVERED ON OUR PROMISES”