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MEDIUM TERM REVENUE AND

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The city's strategy for economic development has set the city on a development path that prioritizes investment in infrastructure and promotes partnerships and investment in the private sector. The recently adopted Economic Development Incentive Policy seeks to attract development to the city by offering incentives with a long-term perspective in growing the city's revenues. Furthermore, a R6 billion economic catalyst project, Keystone Park is being developed as a logistics and light industrial precinct at the Hammarsdale interchange. The construction phase is expected to create 3,500 jobs and over 6,000 direct jobs during operation.

Figure 4: Percentage Contribution to GDP in 2014 (Constant 2010 prices) Source: Global Insight
Figure 4: Percentage Contribution to GDP in 2014 (Constant 2010 prices) Source: Global Insight

MAYOR’S REPORT (BUDGET SPEECH) 1

The 2016/17 budget was developed to contribute to the municipality achieving the strategic objectives set out in the Integrated Development Plan. This program has created over 11,000 jobs in the City by providing temporary employment and will continue to do so in the future.

COUNCIL RESOLUTIONS 1

  • BUDGET RELATED RESOLUTIONS
  • ESTIMATES OF INCOME AND EXPENDITURE
  • RECAPITULATION: VALUATION OF RATEABLE PROPERTY
  • EXEMPTIONS, REBATES AND REDUCTIONS
    • RESIDENTIAL PROPERTY
    • PUBLIC BENEFIT ORGANISATIONS
    • LIFE RIGHTS SCHEMES AND RETIREMENT VILLAGES
    • SCHOOLS NOT FOR GAIN
    • BED AND BREAKFAST UNDERTAKINGS
    • GUEST HOUSE UNDERTAKINGS
    • BACK–PACKER LODGES, HOLIDAY ACCOMODATION AND STUDENT ACCOMMODATION
    • NATURAL AND OTHER DISASTERS
    • NATURE RESERVES AND CONVERSATION AREAS
    • ECONOMIC DEVELOPMENT
    • SPECIAL RATING AREAS
    • CONSULATES
  • PHASING IN OF RATES
  • DATE OF OPERATION OF DETERMINATION OF RATES That this determination comes into operation on 1 July 2016
  • FINAL DATE FOR PAYMENT OF RATES
  • ADMINISTRATION CHARGE ON ARREAR RATES
    • OTHER TARIFFS AND CHARGES
    • SURCHARGE ON WATER CONSUMPTION AND SEWER USER CHARGE
  • DOMESTIC WATER DEBT RELIEF PROGRAM
  • ELECTRICITY DEBT RECOVERY USING THE 80/20% OR 50/50% PREPAYMENT SYSTEM
  • BUDGET RELATED POLICIES (i) RATES POLICY
  • CAPITAL EXPENDITURE ESTIMATE
  • BORROWINGS TO FINANCE THE CAPITAL BUDGET
  • HOUSING/HOSTELS DEFICIT
  • NEW FUNCTIONS/ SERVICES
  • PARTICULARS OF INVESTMENTS
  • REMUNERATION OF COUNCILLORS AND SENIOR OFFICIALS
  • UNFUNDED MANDATES
  • IMPACT OF HOUSING EXPENDITURE ON THE CASH RESERVES
  • FREE BASIC SERVICES
  • OFF BALANCE SHEET FINANCING
  • CATALYTIC PROJECTS

That Board will determine the interest rate on overdue accounts, bearing in mind that the current interest rate is currently at prime plus 1%. i) That other rates and charges as circulated with the budget document in terms of section 24(2)(c)(i) and (ii). iii). That authorization is sought from the Council for the collection of appropriate long-term debt in terms of Section 46 of the Municipal Financial Management Act No 56 of 2003, to partially finance the municipality's capital budget over the MTREF period. i) That the estimated Formal Housing deficit of R 30m for the 2016/2017 financial year be covered from the Tax Fund. ii) That the estimated New Development Housing and Residences deficit of R 457.4m is financed from the Tax Fund. iii).

EXECUTIVE SUMMARY 1

  • INTRODUCTION
  • OVERVIEW OF THE 2016/17 MTREF
  • STRATEGIC PRIORITIES FOR THE 2016/2017 YEAR
  • KEY ISSUES
  • PERFOMANCE, ACHIEVEMENTS AND CHALLENGES
    • SERVICE DELIVERY
    • SERVICE DELIVERY STANDARDS, LEVELS OF SERVICES, OUTCOMES, TIMETABLE FOR ACHIEVEMENTS AND FINANCIAL IMPLICATIONS
  • FINANCIAL PERFORMANCE (2014/15 AND 2015/16): PARENT MUNICIPALITY
    • OPERATING BUDGET
    • CAPITAL BUDGET
  • ALIGNMENT WITH NATIONAL AND PROVINCIAL PRIORITIES
  • FINANCIAL STRATEGY, ONGOING VIABILITY AND SUSTAINABILITY
    • BUILT ENVIRONMENT PERFORMANCE PLAN ( BEPPS )
    • MUNICIPAL SERVICE FINANCIAL MODELLING FOR ETHEKWINI
    • CITY INFRASTRUCTURE DELIVERY MANAGEMENT SYSTEMS (IDMS)
  • MUNICIPAL ENTITIES

The Security Management Unit manages an external security contract to safeguard Council assets. The Safer Cities Unit ensures that every citizen in the eThekwini Municipality is safe and shares a common understanding of community safety issues. o ETA: Transport Unit R1 682m o Metro Police Services R958m o Information Technology R354m o Events R134m o Tourism Marketing R32.7m o Economic Development Sector Programs R27m o Poverty Reduction: Soup Kitchens R42 million o Neighborhood development R51 million Limited funding and exponential growth in the municipality have also increased the backlog rate.

OPERATING REVENUE FRAMEWORK 1

SOURCES OF FUNDING

The stadium has been operated for two years under a service contract with Durban Marine Theme Park. After extensive consultation and consideration of all possible models, the MMS connection with the International Convention Center was preferred.

OPERATING EXPENDITURE FRAMEWORK 1

CAPITAL EXPENDITURE 1

CAPITAL BUDGET

INFRASTRUCTURE EXPENDITURE TRENDS

Security costs for the protection of assets: R 45,3 m Provision for VIP pit latrine clearance: R 43,9 m Water consumption at Ablution facilities: R 72,6 m. Supply of Ablution Blocks: Informal Settlements: R 258,9 m Expansion of Phoenix Waste Water Treatment Works: R 34,3 m Umbilo Waste Water Treatment Works Extension: R 48,0 m Southern Waste Water Treatment Works- Digester Online: R 73.

MAJOR ITEMS OF EXPENDITURE

  • HUMAN SETTLEMENTS, ENGINEERING, TRANSPORT AND INFRASTRUCTURE
  • CORPORATE AND HUMAN RESOURCES
  • GOVERNANCE

ANNUAL BUDGET TABLES

This table makes it easy to see the planned operational performance in relation to the organizational structure of the city. The rationale is that the ownership and net assets of the municipality belong to the community.

Table  A2  is  a  view  of  the  budgeted  financial  performance  in  relation  to  revenue  and  expenditure  per  standard  classification
Table A2 is a view of the budgeted financial performance in relation to revenue and expenditure per standard classification

OVERVIEW OF THE ANNUAL BUDGET PROCESS 2

  • OVERVIEW
  • POLITICAL OVERSIGHT OF THE BUDGET PROCESS
  • PROCESS FOR CONSULTATIONS WITH EACH GROUP OF STAKEHOLDERS AND OUTCOMES
  • SCHEDULE OF KEY DEADLINES RELATING TO THE BUDGET PROCESS

The key to strengthening the link between priorities and spending plans lies in strengthening political control of the budget process. Political control over the budget process enables the government and especially the municipality to manage the tension between competing policy priorities and fiscal reality. Accordingly, the submission of the budget proposal to the council will be followed by an extensive publication of the budget documentation in the council's newspaper, Metro eZasegagasini.

The budgetary timetable for the compilation of the 2016/17 budget cycle was approved well in advance in August 2015. The table below summarizes the main deadlines related to the budget process that had to be reviewed and amended because local government elections were not held until August 2016.

OVERVIEW OF ALIGNMENT OF BUDGET WITH IDP 2

  • KEY NATIONAL AND PROVINCIAL GUIDING DOCUMENTS
  • DEVELOPMENT CHALLENGES
  • MUNICIPAL STRATEGIC PRIORITY AREAS
  • POLITICAL PRIORITIES AND LINKAGES TO THE IDP
  • IDP OVERVIEW AND KEY AMENDMENTS
  • IDP REVIEW PROCESS AND STAKEHOLDER PARTICPATION
  • LINK BETWEEN THE IDP AND THE BUDGET

The municipality is currently working with its international partners to develop the Sustainable Development Goals and Indicators that would be adopted in 2016. In the speech, the Prime Minister listed the priority interventions that remain the basis of the Provincial Growth and Development Plan. The PGDS is currently under review to ensure that the plan meets the goals of the National Planning Commission and the SDGs.

These priorities lead to the creation of structures that support, feed and link other actions and activities – the building blocks around which actions and priority setting take place. All operational and capital programs in the 2016/17 medium-term budget were assessed using a priority mechanism developed to ensure alignment with the municipality's development strategy.

MEASURABLE PERFORMANCE OBJECTIVES AND INDICATORS 2

KEY FINANCIAL RATIOS / INDICATORS

Capital cost to operating expenses (the measure of the cost of borrowing in relation to operating expenses) compares favorably with the acceptable norm of around 10%. The ratio measures short-term liquidity, i.e. the extent to which current liabilities can be paid from current assets. Despite the current economic climate, the municipality maintained its investment grade credit rating of AA- in the long term and A1+ in the short term with a positive outlook.

The long-term rating indicates that the municipality has very high credit quality, very strong protection factors. The short-term rating means that the municipality has the highest certainty of timely payment, short-term liquidity and risk factors are extremely low.

FREE AND SUBSIDISED BASIC SERVICES

While the 1.2:1 ratio is below the 1.5 to 2.1 norm typically set for municipalities, there is enough money to meet creditors' obligations. Details of the initiatives proposed by the council in this regard are detailed below. Assistance to eligible households is governed by municipal budget policies, which are reviewed annually based on modeling the effects of tariffs on all residential properties.

The cost of this social package is partially funded by the equal share of R2.3 billion provided by the National Government.

DRINKING WATER QUALITY AND WASTE WATER MANAGEMENT

The Blue Drop program provides a comprehensive approach to drinking water quality management and a systematic, transparent approach to consistently providing safe water with a clear focus on public health. EThekwini Metro and Umgeni Water have done well to retain the coveted Blue Drop status for the eThekwini mainline system. The Green Drop Regulation Program aims to certify the wastewater systems of all municipalities and water service providers in South Africa.

The green drop rewards excellence in the management of waste water during its journey from source, transport in sewage networks, its treatment at waste water works and the final discharge to the receiving environment. The Green Drop regulation program was introduced by the Department of Water Affairs to certify the wastewater systems of all municipalities and water service providers.

OVERVIEW OF BUDGET RELATED POLICIES 2

  • ASSESSMENT RATES POLICY
  • CREDIT CONTROL AND DEBT COLLECTION POLICY
  • SUPPLY CHAIN MANAGEMENT POLICY
  • INVESTMENT / CASH MANAGEMENT AND BORROWING POLICIES
  • VIREMENTS BUDGET POLICY
  • ASSET MANAGEMENT PLAN
  • ACCOUNTING POLICY
  • BUDGET POLICY

The policy reflects and represents the context of specific government policy expressed in the provisions of the Municipal Finance Management Act 56 of 2003. The main objectives of the policy are to provide, promote and implement theoretical guidelines, management processes and procedures within supply chain management. Policy highlights include a contract register that ensures procurement plans are in place before work is awarded.

To ensure compliance with § 28 of the MFMA and the municipal budget and reporting regulations, procedures were formulated with regard to the transfer of funds and reporting of the adaptation budget. The purpose of the Asset Management Plan is to improve the management of the City's assets, predict future problems with assets and identify future maintenance costs for all infrastructure assets.

OVERVIEW OF BUDGET ASSUMPTIONS 2

  • KEY FINANCIAL ASSUMPTIONS
  • CREDIT RATING OUTLOOK
  • BORROWING AND INVESTMENT OF FUNDS
  • PRICE MOVEMENTS ON SPECIFICS
  • TIMING OF REVENUE COLLECTION
  • AVERAGE SALARY INCREASES
  • CHANGING DEMAND CHARACTERISTICS (DEMAND FOR SERVICES)
  • ABILITY OF THE MUNICIPALITY TO SPEND AND DELIVER ON THE PROGRAMS
  • COST OF SERVICE DELIVERY VS AFFORDABILITY

The 2016/17 capital budget of R6.6 billion is funded with R3.6 billion from public grants, R2.0 billion from internally generated funds and R1.0 billion in external borrowing. The graph below shows the total capital budget. since 2010 and indicates its funding sources. The dominance of annuity loans within eThekwini's loan portfolio is largely due to the city's ability to obtain competitive interest rates from financial institutions. Cash surplus to immediate needs is invested in short-term money market instruments in the form of a strict investment policy which specifies that cash holdings are only placed across the 'big 4' South African banks and Investec.

Cash and investments are expected to be around R5.0 billion at the end of the current financial year. As the city is the economic center of the province, water needs are growing rapidly.

OVERVIEW OF BUDGET FUNDING 2

  • LOAN DEBT AND INVESTMENTS
  • SOURCES OF FUNDING
  • SAVINGS AND EFFICIENCIES
  • COLLECTION RATES FOR EACH REVENUE SOURCE
  • LEVELS OF RATES, SERVICE CHARGES AND OTHER FEES AND CHARGES

Investments for the municipality are made in accordance with and in accordance with the MFMA's municipal investment regulation, the Council's investment policy and other relevant legislation. The contract register is used to control all payments over R 200,000. The first phase of automating the contract register has been completed, as the contract register is now in JDE's accounting system, and the contract register for 2015/16 comes from the JDE-Lite system. The main purpose of this project is to analyze the consumption trends and prices that must be included in the municipality's SCM price catalogue.

Determining the effective property rate is therefore an integral part of the council's budgeting process. The rate increases are necessary due to the increase in the cost of bulk purchases, maintenance of existing infrastructure, new infrastructure provision and to ensure the financial sustainability of the services.

GRANT ALLOCATIONS 2

With effect from 2011/12, a volume-based waste water charging system based on the percentage of water consumption has been introduced. A fixed rate is charged for non-domestic consumers and a graduated rate for domestic consumers in line with the consumption bands for water. The progressive nature of the existing domestic tiered rate structure for both water and sanitation allows for the needs of the poor.

It is also designed to discourage high levels of water consumption that affect both the water and sanitation portion of a consumer's bill.

LEGISLATION COMPLIANCE STATUS2

All modules on E1 are/are currently being configured for mSCOA.

SERVICE DELIVERY AND BUDGET IMPLEMENTATION PLAN (SDBIP) 2

STATISTICAL INFORMATION 2

CONSOLIDATED BUDGET

DETAILED

BUDGET SUPPORTING TABLES

Figure

Figure 4: Percentage Contribution to GDP in 2014 (Constant 2010 prices) Source: Global Insight
Table  A2  is  a  view  of  the  budgeted  financial  performance  in  relation  to  revenue  and  expenditure  per  standard  classification
Table A3 is a view of the budgeted financial performance in relation to the revenue and expenditure per municipal  vote
Table  A6  is  a  consistent  with  international  standards  of  good  financial  management  practice,  and  improves  understandability for councilors and management of the impact of the budget on the statement of financial position  (balance sheet)
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