This budget has been developed to contribute to the achievement of the strategic objectives of the EDP by the Municipality. It is the central engine of the regional economy and plays a major role in the South African economy.
TOURISM
BUILDING PLANS PASSED
ECONOMIC / SOCIAL DEVELOPMENT
In Verulam, planning for the rationalization of the public transport hub is underway. A world-class cruise terminal as part of the Point Waterfront development is on the cards.
BUDGET OVERVIEW: EXECUTIVE SUMMARY
INTRODUCTION
Mega events have become a natural outcome of the huge expenditure on infrastructure, with the city hosting several national and international events. In addition, the city will be the new home of the Soccerex African Forum for the next three years.
STRATEGIC PRIORITIES FOR THE 2013/2014 YEAR
PAST AND CURRENT PERFORMANCE, ACHIEVEMENTS AND CHALLENGES
- SERVICE DELIVERY
- SERVICE DELIVERY STANDARDS, LEVELS OF SERVICES, OUTCOMES, TIMETABLE FOR ACHIEVEMENT AND FINANCIAL IMPLICATIONS
- FINANCIAL PERFORMANCE (2011/12 AND 2012/13): PARENT MUNICIPALITY
The municipality is tackling service delivery backlogs decisively and has made great strides in recent years. The municipality's Metropolitan Police has collected approximately R8.7 million since the start of the amnesty period.
BACKGROUND TO THE BUDGET PROCESS
The following chart compares the annual capital budget with actual spending in the eight months ending February 2013. Approximately R 2.8 billion from all sources to date, representing 57.5% of the budgeted amount.
BUDGET SUMMARY
- MID TERM OUTLOOK: 2013/14 – 2015/16 CAPITAL BUDGET
- BUDGET ANALYSIS EXPENDITURE
- INFRASTRUCTURE EXPENDITURE TRENDS
The capital expenditure at the end of February 2013 is approximately R 1.9 billion, which is 35% of the budgeted amount. The capital budget continues to reflect consistent efforts to address backlogs in basic services and the renewal of the infrastructure of existing network services. To meet the demand for infrastructure; the projected capital expenditure budget for the 2013/14 period is R 5.4 billion. Expenditure on repairs and maintenance amounts to R 2.9 billion for the 2013/14 year, representing 10.2% of the total operating budget, which is above the national average and above that of most metros in the country.
Financial expenses consist mainly of interest repayment for long-term borrowings (cost of capital) and are equal to 4.1% of operating expenses. Revenues generated from fees and service charges form a significant part of the revenue basket for the city accounting for 68.9% of total revenue. Since these rate increases are determined by external bodies, the impact they have on municipal rates is largely outside the city's control.
An increase in the budget is due to an increase in the PTIS grant to finance transport infrastructure for the implementation of the IRPTN. Commissioning of the Electron Rd transfer station and gradual closure of the Bisasar Rd R 120m landfill.
MAJOR ITEMS OF EXPENDITURE
- HUMAN SETTLEMENTS AND INFRASTRUCTURE
- GOVERNANCE
- THEFT OF ELECTRICITY
- UNFUNDED MANDATES AND FUNDING REALITIES
- SALARIES AND ALLOWANCES
- UNACCOUNTED FOR WATER (LOSS IN DISTRIBUTION)
- HOUSING / HOSTELS
As a result, the percentage of salaries and allowances in the total Operating Budget has continuously decreased over the years to a level of 24.7%. In view of the significant investment in the water pipe replacement program, water loss is still a cause for concern. Initiatives to reduce water losses are ongoing and based on the established intervention plan, a performance monitoring and reporting system has been established for each of the identified interventions.
The effectiveness of the implemented measures will be continuously assessed. A review of Durban Transport's institutional arrangements, including the existing operating model, has recently been undertaken. The decision whether Durban's transport service should be run as a council entity, a commercial service or a municipal entity was guided by the company's performance.
The proposed assignment of the transport function to the municipalities will affect the costs for the city as PRASA and bus subsidies are not adequate and this could seriously affect the Local Government Finances. Assigning housing functions with full housing accreditation to municipalities with direct capital inflows would help alleviate the situation.
ALIGNMENT WITH NATIONAL AND PROVINCIAL PRIORITIES
FINANCIAL STRATEGY, ONGOING VIABILITY AND SUSTAINABILITY
- FINANCIAL STRATEGY
- THE MUNICIPAL INFRASTRUCTURE INVESTMENT FRAMEWORK
- MUNICIPAL SERVICE FINANCIAL MODELLING FOR ETHEKWINI
- INFRASTRUCTURE DELIVERY MANAGEMENT SYSTEMS (IDMS)
Implement an Asset Management Plan that will result in scheduled maintenance of the municipality's assets, to enable optimal use of such assets and ensure their replacement. The Municipality's depreciation policy is in accordance with the requirements of the Generally Recognized Accounting Practice Standards (GAAP). The following main indicators form the parameters within which the municipality intends to act in order to achieve the objectives defined in this document.
The municipality must provide a large part of poor households with access to free basic services. The municipality's budget is financed in accordance with the requirements set out in the ZUFMA, thereby ensuring that the municipality remains operational and is able to maintain existing services and gradually expand services. The municipality undertakes that all backlogs in the provision of infrastructure will be eliminated.
To determine the overall sustainability of eThekwini finances, a Municipal Services Financial Model (MSFM) has been drawn up for the municipality. To tailor the Infrastructure Delivery Management System (IDMS) for the local government, the municipality participates in the program as a pilot.
MUNICIPAL ENTITIES
Maintaining financial sustainability is obviously critical to achieving all other objectives and therefore, the results of the MSFM should be used to align capital and operating budget expenditures in order to achieve this long-term financial sustainability. National Treasury assesses that eThekwini Municipality is well ahead with most of the infrastructure delivery process, particularly in relation to infrastructure planning and construction procurement. In doing so, infrastructure delivery will be improved, fully aligned with the National Treasury's infrastructure deployment model developed through their Infrastructure Delivery Improvement Program and will also benefit from the assistance of National Treasury resources.
The park is a strategic asset for the city in terms of both tourism and urban renewal in the Point Precinct. Therefore, the Durban Marine Theme Park Board will lead the organization with its own complement of staff, expertise and resources. All staff employed by the management company will be transferred to the theme park and it is expected that there will be minimal disruption to operations.
In the medium term, it will move into a recapitalization phase with major upgrades required to ensure the park's longevity and continued visitation growth. This idea will form a key part of the strategy going forward without a management company involved and various options will be explored with the city in terms of enhancing uShak as a major draw for Durban.
BUDGET PROCESS
OVERVIEW
Both municipal units have, in accordance with the Municipal Finance Act, submitted their budgets and business plans for consideration by the municipality. The mechanism through which the municipality's needs are identified and prioritized is the integrated development plan (IDP). The first draft of the capital budget for MTEF commencing 2013/14 reflected an oversubscription.
There was a review of capital borrowing and capital expenditure as the trend in capital borrowing is not sustainable given the increased financial charges and the impact on rates. A strategic approach has been taken with regard to capital budget prioritization using the Municipal Services Financial Model (MSFM) and access modeling tools. The intention was to align our budgeting with the priorities arising from the IOP and the National and Provincial priorities for overall sustainability.
During the capital budget prioritization process, the impact of capital projects on future operating budgets was assessed and considered before these projects were approved. Both the operating and capital budgets have been evaluated through a prioritization mechanism that ensures alignment with the municipality's development strategy.
The budget process AS PER MFMA
- POLITICAL OVERSIGHT OF THE BUDGET PROCESS
- PROCESS FOR CONSULTATIONS WITH EACH GROUP OF STAKEHOLDERS AND OUTCOMES
- SCHEDULE OF KEY DEADLINES RELATING TO BUDGET PROCESS
- BUDGET ASSUMPTIONS
- KEY FINANCIAL ASSUMPTIONS
- CREDIT RATING OUTLOOK
- BORROWING AND INVESTMENT OF FUNDS BORROWINGS
- 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
- MEASURABLE PERFORMANCE OBJECTIVES AND INDICATORS
- KEY FINANCIAL RATIOS / INDICATORS
- FREE AND SUBSIDISED BASIC SERVICES
- DRINKING WATER QUALITY AND WASTE WATER MANAGEMENT
- BUDGET RELATED POLICIES: OVERVIEW AND AMENDMENTS
- ASSESSMENT RATES POLICY
- CREDIT CONTROL AND DEBT COLLECTION POLICY
- TARIFF POLICY
- WATER POLICY
- INVESTMENT / CASH MANAGEMENT AND BORROWING POLICIES
- VIREMENTS BUDGET POLICY
- ASSET MANAGEMENT PLAN
- ACCOUNTING POLICY
- FUNDING AND RESERVES POLICY
- BUDGET POLICY
- THE IDP STRATEGIC FOCUS AREAS
- DEVELOPMENT CHALLENGES
- MUNICIPAL KEY DEVELOPMENT DIALOGUES
- 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
- OVERVIEW OF BUDGET FUNDING
- LOAN DEBT AND INVESTMENTS
- SAVINGS AND EFFICIENCIES
Cash in excess of immediate needs is invested in short-term money market instruments in terms of a strict investment policy which stipulates that cash holdings are placed only between the big four South African banks and Investec. In the financial year 2012/13, 99% of the operating budget is expected to be used. The municipality's tariffs are in accordance with the legislation valid at the time of implementation.
The development of the strategic approach for the municipality is guided by - but not limited to - the following; All operational and capital programs in the 2013/14 mid-term budget have been evaluated through a prioritization mechanism that has been developed to ensure alignment with the municipality's development strategy. The municipality is committed to addressing people's needs and values input from communities and stakeholders.
As set out in the Municipal Systems Act (2000), a stakeholder consultation process is required in revising the five-year EDP. Local media (including community newspapers) will be informed of the IDP review and the need for civil society organizations to comment on the document. Investments for the municipality are made in compliance with and compliance with the Regulation on Municipal Investments of the MFPP, the Council's Investment Policy and other relevant legislation.
When making investments, the primary focus is on the risk profile, the liquidity needs of the city and the return on investments.
Assuring SCM effectiveness and efficiency
- INVESTMENTS – CASH BACKED
- GRANT ALLOCATIONS
- COLLECTION RATES FOR EACH REVENUE SOURCE
- LEVELS OF RATES, SERVICE CHARGES AND OTHER FEES AND CHARGES
- DISCLOSURE ON IMPLEMENTATION OF MFMA AND OTHER LEGISLATION
- SERVICE DELIVERY AND BUDGET IMPLEMENTATION PLAN (SDBIP)
- STATISTICAL INFORMATION
The revenue collection rate is the money collected from customers expressed as a percentage of the amount billed. Therefore, the determination of the effective property rate fee is an integral part of the municipality's budgeting process. An assessment date of July 1, 2011 has been set, with the implementation of the assessment list effective from July 1, 2012.
The tariff increases are necessary due to the increase in cost of bulk purchases, maintenance of existing infrastructure, provision of new infrastructure and to ensure financial sustainability of services. The progressive nature of the existing domestic tiered rate structure for both water and sanitation allows for the needs of the poor. The increase in the house renovation tariff for the 2013/14 year is mainly due to salary increases, conversion of temporary staff to permanent employees and increased costs for the purchase of waste bags.
The revised approach will support the cost recovery of bulk infrastructure provision across all sub-regions. The focus of the SDBIP is on both financial and non-financial measurable performance objectives in the form of service objectives and other performance indicators.
