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
Overview • The National Treasury year on year issue guidelines to municipalities through (MFMA) circulars and in the 2020/21 financial year the guide is on circular 98 and 99 for medium term revenue and expenditure framework (MTREF). • The tabled budget is in line with the MFMA and Budget and Reporting Regulations. • The 2020/21 MTREF focus evolves from the following strategic documents: • 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
Socio Economic Impact • The National State of Disaster and subsequent lockdown comes amidst already dire macroeconomic conditions 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 pandemic and international companies closing down as a result, the deteriorating state of the finances for state‐owned entities, continued high unemployment and water and electricity shortages will put pressure 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 will likely reprioritize our own spending patterns; • In response to the impact of COVID‐19, STLM are currently considering the reprioritization of the funding 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 rates holidays, etc
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 ASSUMPTIONS BUDGET 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 Per month Rand value Budget cost of 2020/2021 per household per month providing FBS Level of services (Indigent support) FINANCIAL 50 kWh Free basic electricity R 53.14 R 11 350 704 OPEX CAPEX TOTAL YEAR 4 kl Free basic water R 41.52 R 8 868 672 Free 2019/2020 1,634,022,102.00 R 389,402,559.00 2,023,424,661.00 Free refuse removal R 151.51 R 32 362 536 Free Free sewerage R 118.51 R 25 313 736 2020/2021 1,746,577,836.00 R 333,910,325.00 2,080,488,161.00 Free property tax Free (value of +‐ R300 000) R 254.13 R 54 282 168 TOTAL +/‐ 17 800 R 618.81 R 132 177 816 Free basic water to all (0‐6kl) (+/‐37 350) R 27 913 896 TOTAL PER ANNUM R 160 091 712 TOTAL PER MONTH R 13 340 976 KEY CAPITAL EXPENDITURE AVERAGE TARIFF INCREASES (RESIDENTIAL) SERVICE 2019/2020 2020/2021 2021/2022 SERVICE % INCREASE IN REVENUE R 92,1 million for Economic and Environmental services R 92,6 m R 114,6 m 6.23% Electricity R 198,2 million for Water Networks R 265,9 m R 334,5 m 6.7% Refuse R 158,7 million for Electrical Networks R 169,6 m R 72,0 m 7.2% Water 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 8.1% Sanitation R 56,6 million for Community & Public Safety R 36,5 m R 33,3 m 5,8% Property tax R 98,6 million for Governance & Administration R 28,8 m R 80,4 m
OPERATING BUDGET 2020/2021 Adj Budget Budget Year Revenue By Source Adj Budget Budget Year 2019/20 2020/21 Expenditure By Type 2019/20 2020/21 Property rates 395 507 806 413 511 428 Service charges - electricity revenue 650 544 523 724 178 589 Employee related costs 598 110 431 638 863 655 Service charges - water revenue 109 259 208 117 901 547 Remuneration of councillors 24 211 293 24 412 525 Service charges - sanitation revenue 72 469 670 78 530 446 Debt impairment 21 121 150 22 177 206 Service charges - refuse revenue 78 975 975 84 479 602 Rental of facilities and equipment 2 045 967 1 973 781 Depreciation & asset impairment 212 738 041 212 738 040 Interest earned - external investments 42 351 012 38 530 857 Finance charges 36 905 963 50 000 346 Interest earned - outstanding debtors 6 177 438 6 629 996 Bulk purchases 516 448 552 584 003 282 Fines, penalties and forfeits 17 503 423 18 355 120 Other materials 61 166 617 55 752 508 Licences and permits 9 449 009 9 627 610 Agency services 22 375 150 23 605 180 Contracted services 234 380 731 224 604 609 Transfers and subsidies 209 112 628 235 995 480 Transfers and subsidies 2 130 000 2 237 750 Other revenue 42 921 321 49 846 351 Other expenditure 109 620 303 119 400 448 Transfers and subsidies - capital 99 901 597 122 219 500 Total Expenditure 1 816 833 081 1 934 190 369 Total Revenue (incl capital transfers) 1 758 594 727 1 925 385 487 Adj Budget Budget Year 2019/20 2020/21 Surplus/(Deficit) for the year -58 238 354 -8 804 882
REVENUE 2020/2021 Fines, R18,355,120 , 1% Income from agency Interest earned ‐ External services, R23,605,180 , investments, R38,530,857 , 2% 1% Other income, Rental of facilities and R56,476,347 , 3% equipment, R1,973,781 , 0% Licenses and permits, R9,627,610 , 0% Electricity tariffs, Refuse Tariffs, … R724,178,589 , 35% Sanitation Tariffs, R78,530,446 , 4% TOTAL REVENUE R1 925 385 Water tariffs, R117,901,547 , 6% Grants & subsidies : Capital, R122,219,500 , 6% Grants & subsidies : Operating, R235,995,480 , 11% Other Revenue, … Property rates, R413,511,428 , 20%
OPERATING EXPENDITURE 2020/2021 R 224 604 609 Grants and subsidies R 55 752 508 0.12% Contracted services 11.61% R 2 237 750 Other expenditure 9.06% R 584 003 282 Bulk purchases 30.19% TOTAL OPERATING EXPENDITURE R1 934 190 369 R 50 000 346 R 638 863 655 Finance charges Employee related costs 2.59% 33.03% R 212 738 040 Depreciation & asset R 24 412 525 impairment R 22 177 206 Remuneration of 11.00% Debt impairment councillors 1.15% 1.26%
WHERE DOES THE MONEY COME FROM TO FUND THE BUDGET (OPERATING REVENUE) Municipal Revenue – R1 925,4bn Service charges ‐ Electricity R724,2m Service charges ‐ Property Rates R413,5m Service charges ‐ Water R117,9m Service charges ‐ Sewerage R78,5m Service charges ‐ Refuse R84,5m Government Grants R236,0m Other R270,8m
HOW WILL THE MONEY BE SPENT? (EXPENDITURE) Governance & Admin R423,2m Community & Public Safety Refuse R254,4 m R129,2m Municipal Economic & Other Expenditure Environmental R26,0m R1 934,2bn R139,3m Electricity Water R746,2m R111,6m Sewerage R104,3m
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