Index Budget Speech 2015/2016 by Executive Mayor Kekana to Council Meeting, 27 May 2015
Date Added: 28 May 2015

Introduction

The new society as envisioned in the Freedom Charter is a response to the legacy of apartheid. This inhuman system institutionalised discrimination and segregation on the basis of race. It denied the majority access to political power and imposed an inequitable socio-economic system. A clear understanding of our past enables us to frame our agenda of transformation, which includes:

Honourable Speaker, in response to these challenges, the agenda of this administration is unambiguously one of fundamental socio-economic transformation and redress. It does also require, Honourable Speaker that we focus on ensuring improvement in the quality of services we provide. We should ensure this through investment in repairs and maintenance of our current infrastructure. We also need to ensure that all employees in our district serve the people of the SBDM, with honesty and diligence.

Strategic priorities for growth and development

As outlined by President Zuma in the State of the Nation Address on the 12th of February 2015, Cabinet has agreed on nine strategic priorities to be pursued this year, in partnership with the private sector and all stakeholders. They include:

• Resolving the energy challenge,
• Revitalising agriculture,
• Adding value to our mineral wealth,
• Enhancement of the Industrial Policy Action Plan,
• Encouragement of private investment,
• Reducing workplace conflict,
• Unlocking the potential of small enterprises,
• Infrastructure investment, and
• Support for implementation of the National Development Plan through in-depth, results-driven processes, known as phakisa laboratories.

The first of these laboratories focused on the oceans economy, including off-shore oil and gas exploration and aquaculture opportunities. Already this has led to investment of R9.6 billion in Saldanha Bay. Strategies for improving primary health clinics have also been developed through a phakisa process. The mining sector will be next. These processes draw widely on the talents and expertise of South Africans, from the public and private sectors, and the scientific and research community.

In each of these areas, there are many programmes and interventions underway, and numerous stakeholders and institutions involved. It is therefore important that we as local government align our strategies with national and provincial strategic priorities.

Economic context

Honourable Speaker I turn now to the economic context within which the budget has been prepared. Global economic growth is expected to remain sluggish over the period ahead, rising from 3.3 per cent in 2014 to 3.5 per cent this year. There is considerable variation in economic performances between countries and economic trends are likely to be volatile. In the United States, 3.6 per cent growth is expected this year, but in Europe the outlook remains weak, and could still be destabilised by disagreements between debtor and creditor nations.

In emerging markets and developing economies, growth of about 4.5 per cent is expected. China’s growth is expected to slow to 6.8 per cent this year. Amongst our neighbours in Africa, the recent shifts in commodity prices will benefit some countries and disadvantage others.

South Africa will benefit from the lower oil price, but our major commodity exports have been negatively affected by the global slowdown. Our deepening trade and investment links with sub-Saharan Africa continue to offer favourable growth prospects. Exports to Africa grew by 19 per cent in 2013 and 11 per cent in 2014.

However, our primary challenge is to deal with the structural and competitiveness challenges that hold back production and investment in our economy. The most important of these is the security and reliability of energy supply. Electricity constraints hold back growth in manufacturing and mining, and also inhibit investment in housing and raise costs for businesses and households.

Mainly for this reason, our projected economic growth for 2015 is just 2 per cent, down from 2.5 per cent indicated in October last year. We expect growth to rise to 3 per cent by 2017.

Consumer price inflation peaked at 6.6 per cent in June last year. It has subsequently declined to just 4.4 per cent last month, and is expected to average at 4.3 per cent in 2015, laying a foundation for economic growth.

Higher growth is possible, if we make good progress in responding to the electricity challenge or if export performance is stronger. The best short-term prospects for faster growth lie in less energy-intensive sectors such as tourism, agriculture, light manufacturing and housing construction.

Medium term expenditure and the division of revenue

Honourable Speaker, our Constitution requires an equitable division of nationally collected revenue between national, provincial and local government. This is set out in the Division of Revenue Act and its accompanying Explanatory Memorandum. The allocations are explained in the Budget Review and elaborated in the Estimates of National Expenditure.

The national share of non-interest expenditure is about 48 per cent, provinces receive 43 per cent and 9 per cent goes to municipalities.

Allocations to basic services provided by municipalities have been prioritised, despite the constraints of the budget framework. A new approach is proposed for cities, to support their growth and restructuring and strengthen infrastructure investment. A review of local government infrastructure grants is in progress, which will lead to simplification and consolidation of the financing arrangements.

Over the longer term, progress in municipalities requires local economic growth, property development and revenue capacity, alongside national support. These are key elements in the “back to basics” municipal development strategy.

Financial management: ensuring value for money

Honourable Members, better value for money in public service delivery depends on rigorous financial management, effective systems and an unrelenting fight against corruption.

2015/2016 Review of the Integrated Development Plan

Key IDP Interventions
Honourable Speaker, the Sarah Baartman District Municipality has identified a number of key IDP interventions. These represent flagship programmes that will accelerate the achievement of the principles contained in our Growth and Development Strategy. They are:

Hence the development priorities for the 2014/2015 financial year will remain the same, namely –

Key Challenges and Risks that need to be addressed

Emerging Business Opportunities

The emerging strategies and priorities identified during the 2013 Strategic Planning interventions for our District 2030 Vision are summarized below:

External considerations:

Internal considerations:

Appropriate plans have now been developed for the implementation of these strategic priorities. It was acknowledged that the SBDM will need new skills and competence to implement these strategies and many need to reorganize and reskill employees. It will therefore be necessary to undertake an organisational development study to determine the skills gaps, personnel resources required and the appropriate organisational structure to perform optimally and implement these new activities and programmes. Adequate provision has been made in the budget to review the staff establishment in terms of the regulations on the appointment and conditions of employment of senior managers.

It was also acknowledged that the implementation of the new strategic priorities and the reduction of funding to finance infrastructure and economic development projects would have to be undertaken on a phasing – in approach. Accordingly, no new funding has been made available for infrastructure projects. There are many multi-year projects which will have to be completed in the 2015/2016 financial year.

2015/2016 Budget

The financial position of the Sarah Baartman District Municipality is still strong, although it has a weak revenue base. The Sarah Baartman District Municipality achieved unqualified audit reports in eight (8) consecutive financial years reflecting the drive towards financial management excellence in the Sarah Baartman District Municipality. The application of sound financial management principles for the compilation of the SBDM’s financial plan is essential and critical to ensure that the District remains financially viable and that sustainable municipal services are provided economically and equitably. In the 2013/2014 financial year the Cacadu District Municipality achieved a spending of R137 million of the total operating budget. The overall forecasted financial performance results for the 2014/2015 year reflect a forecasted total spending of R138 million.

The actual approved budget for 2014/15 financial year including project expenditure amounted to R162.8 million. The new forecast for the period is R138 million which represents a decrease of 15%. This is mainly due to under-spending on project expenditure.

This year (2015/2016) we are tabling an operating budget amounting to R145.4 million which represents a decrease of 11% over the 2014/2015 financial year’s adjusted budget. The decrease is mainly due to the reducing conditional grant funds.

The Budget is more than a mere balancing of available revenue to meet expenditure needs. The budget is a policy instrument which seeks to transform our society with huge development needs.

The main challenges experienced during the compilation of the 2015/2016 MTREF can be summarized as follows:

Tariffs

The tariffs and charges were increased by 6%. These however make a very minor contribution to our revenue.

Medium Term Operating and Capital Budgets for 2015/2016 Revenue

Mr Speaker, the total Operating Revenue Budget is estimated at R145.4 million. Revenue derived from Equitable Share of National Revenue and the Levy Replacement Grant for the 2015/2016 financial year amounts to R21.8 million and R58.9 million respectively which has decreased by 3% and increased by 2.4% respectively over the last year. Investment interest and contribution from the accumulated surplus account amounts to R10.6 million and R39.8 million respectively. Conditional Grant funding to finance project expenditure, amounts to only R6 million. It is evident from the details provided in the budget that the municipality is totally dependent on grant funding from the National Treasury and interest earnings to finance its operations.

It is evident that sustainable discretionary revenue amounts to 68% (R91.4 million) of total revenue excluding grants while non-sustainable discretionary revenue in the 2014/2015 budget amounts to 32% (R42.9 million) of total revenue. The conditional grant funding, amounts to 7.6% (R11 million) of total revenue.

Summary of Expenditure Budgets per Department

As indicated above, the total operating revenue budget is estimated at R145.4 million. This budget is allocated as follows with regard to expenditure:

DEPARTMENT

AMOUNT

R’000

%

Infrastructure Development & Planning

55 673

39%

Finance & Corporate Services

45 888

32%

Economic Development

15 126

10%

Office of the Mayor

18 035

12%

Office of the Municipal Manager

9 672

7%

Total

144 394

100%

Project Expenditure

Project expenditure for the 2015/2016 budget amounts to R46.4 million and details are reflected on pages 134 – 136 of the Budget Document. The sources of funding are also indicated.

Offices of the Mayor and the Municipal Manager

The budget for the Offices of the Mayor and Municipal Manager includes the budget allocated for the Speaker as well as the Mayoral Committee and Councillors. Included in this budget, amounts are set aside for the Moral Regeneration campaign, Training of Ward Committees, Imbizos and Outreaches as well as the capacitation of councillors. An amount of R1.1 million has been set aside for special programmes. These include Women Empowerment, Youth Development, Supporting People with Disabilities as well as the implementation of the HIV and Aids Plan. The District will continue to play a pivotal role in ensuring that the Connect with Cacadu programme continues. This will ensure that all libraries in the District have access to free internet and email services as well as a range of other educational and information tools. An amount of R2.2 million has been set aside for this. The Municipal Systems Improvement Grant (MSIG) will primarily be used to develop the capacity of the institution. This amounts to R934 000.

Infrastructure Services and Planning

An amount of R28.4 million has currently been set aside for projects. An amount of R17.9 million has been earmarked for fire services. The contribution to local municipalities will be R4.5 million. The District Municipality has commenced with the fire station in Sanddrif, Koukamma. An amount of R2.2 million has been included in the new financial year to complete the project. The construction of the fire station in Somerset East has been completed and the retention funds are budgeted for. Currently, the fire station at Bushman’s River Mouth is in process and amount of R4.8 million has been budgeted for to ensure completion of the project. Ndlambe Municipality will be co-funding the project at an amount of R1.8 million. The Paterson Integrated Emergency Centre has been budgeted for at R5 million and R8 million in the outer year. The District will also be procuring fire equipment at an amount of R0.8 million. The municipality will also continue with the standardization of fire hydrants. An amount of R1.5 million has been set aside for this, which will be funded from the EPWP Grant.

With regard to water and sanitation, the Jansenville Water Treatment Works and the Nieu Bethesda Water Treatment Works has been completed and retention funds are budgeted for.

The Inter-City Bus Terminal in Graaff-Reinet was budgeted for in the 2014/15 financial year. An amount is expected to be rolled over due additional funding being required to enable the municipality to make the award. A grant from Province of R8 million was received by Coega Development Corporation on behalf of the District Municipality for this project. One of the key focus areas within the budget is Disaster Management due to the high risks associated to this area. The municipality will be embarking on two projects namely, Review Disaster Risk Assessment and Disaster Risk Reduction. An amount of R3 million is allocated for these projects with an additional amount of R2 million in the outer year.

Further amounts have been allocated for planning, feasibility studies, district-wide plans as well as technical support to local municipalities.

Economic Development

An amount of R1 million has been allocated for the District Development Agency. Tourism promotion and development including creative industries has been allocated an amount of R6.3 million. These include support to LTOs, Tourism Infrastructure Investment in local municipalities and Tourism Sector Development support.

Small, Medium and Micro Enterprises will benefit to the amount of R2 million. An amount of R1.5 million has been set aside for the Agricultural Mentoring Programme. The District Municipality has also allocated an amount of R1 million to Local Economic Development initiatives.

Finance and Corporate Services

One major project for this Department will be to support local municipalities to improve their audit outcomes. An amount of R2.5 million has been set aside for this.

All Departments are responsible for Capacity Building and Support of the nine local municipalities in our District and each of their project budgets contain an element of this.

Capital Budget

The Capital Budget of the District Municipality is R5.5 million. Of this, an amount of R4 million has been set aside for the refurbishment of the building and the lifts. The remaining portion is primarily to deal with the procurement of furniture and computer equipment.

Conclusion

Finally I wish to express my heartfelt gratitude to:

- the members of the Mayoral Committee and the Budget Steering Committee for providing the necessary political oversight during the budget process;

- the Municipal Manager and the Directors as well as the officials who have played an important role in the compilation of the IDP and the budget.

Honourable Speaker I now formally table the 2015/2016 medium term budget and annexures for Council’s consideration in terms of Section 24 (1) of the Municipal Finance Management Act.

Councillors, I ask you now to turn to the recommendations which appear on the pages which have been tabled to replace pages 10 and 11 of the Budget Book.

K E KEKANA
EXECUTIVE MAYOR