Index Executive Mayor tables a R153 million budget for the coming financial year
Date Added: 25 June 2014

BUDGET SPEECH DELIVERED BY THE EXECUTIVE MAYOR OF THE CACADU DISTRICT MUNICIPALITY, COUNCILLOR KHUNJUZWA KEKANA, ON THE PRESENTATION OF THE IDP AND BUDGET FOR THE FINANCIAL YEAR 2014/2015 AT A COUNCIL MEETING HELD ON 28 MAY 2014 .

____________________________________________________________

Speaker of Council
Mayors of local municipalities
Members of the Mayoral Committee
Honourable Councillors
Leaders of all Political Parties
Management and staff members
Members of the Community
Distinguished Guests
The Media
Ladies and Gentlemen

Introduction

Mr Speaker

Just more than a hundred years ago on 08th of January, a group of leading intellectuals, clergymen, teachers, activists and fellow South Africans from across our country met in Mangaung, Bloemfontein to discuss the destiny of Black Africans.

This following, as it was, in the face of the exclusion of the majority African people in the administration and governance of their country.

Today, many historians agree that, that historic meeting in 1912, was a watershed moment, not only in the history of our glorious movement, the African National Congress, but of our country.

We are therefore meeting here today, after a full century of a triumphed people’s movement of resistance and defiant struggle against Apartheid, discrimination and dispossession of our people.

This year is also particularly important to both our nation and our people, as it marks the 20th year of our democracy as well as the 18th anniversary of the Constitution of the Republic.

It is this supreme world acclaimed document, which contains our people’s hopes and aspirations that continues to guide the work of our government and in particular our municipality.

Today, as per the prescripts of the same celebrated Constitution and other laws; we are presenting our annual 2014/15 IDP and Budget for approval by our Council.

Mr Speaker, this budget of Council is aligned to the Cacadu District Municipality’s Integrated Development Plan (IDP) with its vision statement:

“An innovative and dynamic municipality striving to improve the quality of life for all our communities “mission statement and corporate values which are displayed at the end of the speech. The budget reflects the collective determination of the municipality to address with energy the challenges of creating jobs, reducing poverty, building infrastructure and creating an enabling environment for economic growth.

The municipality has a very good corporate governance record and has once more received a Vuna Award for producing seven (7) unqualified audit reports in succession. This achievement is due to the teamwork that exists between management, political office bearers and effective corporate governance structures. I am confident that the municipality will achieve a clean audit outcome this year (2013/2014) emphasizing that Cacadu District Municipality is an institution of excellence.

Mr Speaker, I take pleasure in presenting the budget speech and the Medium Term Revenue and Expenditure Framework for the 2014/15 and outer financial years.

The economy

The global economic outlook remains unsteady – some advanced economies have returned to growth, others continue to lag. The slowdown in quantitative easing by the Federal Reserve has caused further uncertainty to financial markets, currency volatility and capital outflows from emerging markets.

South Africa’s economy has continued to grow, but more slowly than projected a year ago. We expect growth of 2.7% this year.

A weaker exchange rate is a risk to the inflation outlook, but it supports exporters. Sustained improvements in competitiveness require further investment in infrastructure and a range of microeconomic reforms.

South Africa’s economic outlook

After slowing to 2.5% in 2012, South African economic growth continued to underperform in the second half of 2013.

Economic growth is expected to recover somewhat to 2.7 % and to 3.2 % in 2014 and 2015 respectively. However, the Reserve Bank last week forecasted a growth rate of 2,1% for 2014.

This forecast indicates that the amount of money flowing to the National Fiscus will be limited. With all the demands being placed on Government, it is very likely that the amount of transfers from National Government to Local Government will also be curtailed.

Consumers under pressure

Headline consumer price inflation has increased gradually from a recent low of 4.9 % year-on-year in July 2012, but remained within the inflation target range until July and August 2013 when it accelerated notably, peaking at 6.4 %. The marked acceleration in consumer price inflation during the third quarter could mainly be attributed to higher petrol prices and to a lesser extent, higher food prices. A further and sustained weakness in the Rand is also a risk.

Disposable income will therefore remain under pressure. This will affect the ability of ratepayers and consumers of municipal services to pay their municipal bills. Any increases in municipal tariffs should therefore be kept to an absolute minimum.

Interest rate outlook

It is expected that the SARB will keep interest rates on hold in 2014 and only start the rate hiking cycle in the first quarter of 2015. The impact of this will be evident on our investment income.

The National Development Plan

The Minister of Finance indicated that central to the NDP is our commitment to partnership – to a social compact to reduce poverty and inequality, and raise employment and investment.

To make more rapid progress in creating jobs and reducing poverty, we have to grow our economy at 5 per cent a year or more.

To achieve this, and to establish a growth path that is inclusive and rapidly promotes black economic development, a wide range of initiatives are under way:

  1. Accelerated public infrastructure investment,

  2. New spatial plans for cities, improved public transport and upgrading informal settlements,

  3. Support for special economic zones and manufacturing incentives in the Industrial Policy Action Plan,

  4. A tax incentive to encourage youth employment,

  5. Further expansion of public works programmes

  6. A renewed focus on accountability and quality in education,

  7. Phasing-in of National Health Insurance,

  8. Further investment in renewable energy and support for the transition to a low-carbon economy,

  9. Steps to professionalise the public service and overhaul procurement and supply chain management.

Our Province has also embarked on developing a long term vision, currently termed Vision 2030. It is imperative that the Cacadu District Municipality also develops a long term plan to align with the National Development Plan as well as with the Provincial 2030 plan. This plan must look at the development and investment that government needs to make in this District.

Success in implementing these plans will depend on discipline, hard work, cooperation and sustained improvements in productivity, both in the public and the private sectors. Our present circumstances oblige us to live and spend modestly and keep a careful balance between social expenditure and support for growth.

2014/2015 Review of the Integrated Development Plan

In accordance with the Annual Review of the IDP, the District undertook to convene a Strategic Planning Session as a first step in its review process in order to appreciate strategic opportunities, strengths, and challenges and hence develop a broad strategic growth and development agenda.

The primary purpose of the Strategic Planning Session held on 14 and 15 November 2013 has been to closely examine the implications, windows of opportunity within the environment, and assess the district strength, capacity, and capabilities to aptly respond to the demands of the new opportunities within available financial resources.

Political and Management leadership share common positions and views regarding the need for the District:

The objectives/outcomes of the Strategic Planning Session were defined as:

  1. Conduct a Review of the Development Focus [Strategy] of the District to inform its ‘new’ District Development Growth Path;

  2. Review organisational performance in-line with the contextual opportunities and challenges;

  3. Discuss and outline implications for organisational model and operations and discuss potential Development Business Model and it Operating Model; and

  4. Develop a sequenced implementation plan.

The Development Facilitation Model developed by the District is reaffirmed as relevant and that it must be enhanced to meet the requirements of the new demands emerging from the development agenda that integrates national and provincial catalytic programmes/projects.

The refined model places Knowledge Management at the centre the district’s agenda setting drive through multi-stakeholder collaborations and partnerships.

What are the Emerging Strategic Priorities ?

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

External considerations:

Internal considerations:

It is therefore an urgent priority to develop appropriate plans for the implementation of these strategic priorities. It was acknowledged that the CDM 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.

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. There are many multi-year projects which will have to be completed in the 2014/2015 financial year. The 2014/2015 budget is therefore referred to as a transitional budget.

The organisational development studies which will be undertaken during the 2014/2015 financial year will be done within the framework provided for in the Regulations on appointment and conditions of employment of senior managers.

2014/2015 Budget

The financial position of the Cacadu District Municipality is still strong, although it has a weak revenue base. The Cacadu District Municipality achieved unqualified audit reports in seven (7) consecutive financial years reflecting the drive towards financial management excellence in the Cacadu District Municipality. The application of sound financial management principles for the compilation of the CDM’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 2012/2013 financial year the Cacadu District Municipality achieved a spending of R118 million of the total operating budget. The overall forecasted financial performance results for the 2013/2014 year reflect a forecasted total spending of R139 million.

This year (2014/2015) we are tabling an operating budget amounting to R153.7 million which represents a decrease of 17% over the 2013/2014 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 2014/2015 MTREF can be summarized as follows:

Key IDP Interventions

Mr Speaker, the Cacadu 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

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 2014/2015

Revenue

Mr Speaker, the total Operating Revenue Budget is estimated at R153.7 million. Revenue derived from Equitable Share of National Revenue and the Levy Replacement Grant for the 2014 / 2015 financial year amounts to R22.5 million and R57.5 million respectively which has increased by 17% and 3% respectively over the last year. Investment interest and contribution from the accumulated surplus account amounts to R11.5 million and R48 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 61% (R93.4 million) of total revenue excluding grants while non-sustainable discretionary revenue in the 2014/2015 budget amounts to 39% (R60.3 million) of total revenue. The conditional grant funding amounts to 4% (R6 million) of total revenue.

Summary of Expenditure Budgets per Department

As indicated above, the total operating revenue budget is estimated at R153,7 million. This budget is allocated as follows with regard to expenditure:

Infrastructure Development and Planning: R68 132 000 44%

Finance and Corporate Services R43 341 000 28%

Economic Development R20 832 000 14%

Office of the Mayor R13 439 000 9%

Office of the Municipal Manager R 7 964 000 5%

TOTAL R153 708 000 100%

One major component will be the allocation which the District Municipality has set aside for the rendering of Environmental Health Services. The Budget for the Office of the Mayor also includes an amount of R1 155 000 million for the Unemployed Graduates programme.

Project Expenditure

Project expenditure for the 2014/2015 budget amounts to R62.8 million and details are reflected on pages 139 – 142 of the Budget Document. The sources of funding are also indicated.

Offices of the Municipal Manager and the Speaker

The total project budget for the Offices of the Municipal Manager and Speaker is R6,234 million. An amount of approximately R1 million has been set aside for the Moral Regeneration campaign, Training of Ward Committees, Imbizos and Outreaches as well as the capacitation of councillors. An amount of R1,25 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 R3 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 R38,27 million has currently been set aside for projects. An amount of R15,318 million has been earmarked for fire services. The contribution to local municipalities will be R3 million. A satellite fire station is currently being constructed in Hankey (Kouga). A R1 million contribution will be made for that fire station. The District Municipality has commenced with the planning of a fire station in Sanddrif, Koukamma. An amount of R4,5 million will be used to construct the station in the new financial year. The construction of the fire station in Somerset East has already commenced. An amount of R1,3 million has been set aside to complete that project. Currently, the budget for the fire station at Bushmans River Mouth is R2,4 million. However, more funds are needed to realize this project. The District will also be procuring fire equipment and embarking on training of the fire fighters of the municipalities. This will amount to R1,3 million. It will also continue with the standardization of fire hydrants. An amount of R1,8 million has been set aside for this.

With regard to water and sanitation, two of the major projects are the Jansenville Water Treatment Works of R2,19 million and the Nieu Bethesda Water Treatment Works at R2 million.

An amount of R4,5 million has been set aside for the construction of the Inter-City Bus Terminal in Graaff-Reinet. However, to properly implement this project, additional co-funding will be required from the Camdeboo Municipality and other potential developers on the site. An amount of R2,1 million is earmarked for the study into the rural roads in the District.

The District Municipality has decided to resuscitate the Paterson Emergency Centre project. An amount of R5 million has been set aside for this project in the new financial year. The Rietbron EPWP project is coming to an end early in the new financial year and an amount of R1,2 million has been rolled over for this project. The District Municipality will be embarking on a new Expanded Public Works Project in conjunction with Sundays River Valley Municipality. An amount of R1,236 million has been allocated for this.

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 R4 million has been allocated for the District Development Agency. Tourism promotion and development including creative industries has been allocated an amount of R5,4 million. These include support to LTOs, Tourism Infrastructure Investment in local municipalities, Tourism Sector Development support, Tourism Education as well as Destination and sub-branding signage.

Small, Medium and Micro Enterprises will benefit to the amount of R2,23 million. An amount of R2 million has been set aside for the Agricultural Mentoring Programme. The District Municipality will also be finalizing various studies and initiatives with regard to the REDI programme. This will amount to R1,7 million.

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 R13,73 million. Of this, an amount of R10 million has been set aside for the relocation to Kirkwood. The remaining portion is primarily to deal with the procurement of furniture and equipment.

Conclusion

Mr Speaker, I believe that the budget that is tabled here today meets the aspirations of our stakeholders, addresses service delivery challenges, responds to our legislated responsibilities, supports and capacitates local municipalities and addresses economic growth.

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 2014/2015 medium term budget and annexures

for Council’s consideration in terms of Section 24 (1) of the Municipal Finance Management

Act.

K E KEKANA
EXECUTIVE MAYOR