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

• The National Treasury year on year issue guidelines to municipalitiesthrough (MFMA) circulars and in the 2020/21 financial year the guide ison circular 98 and 99 for medium term revenue and expenditureframework (MTREF).

• The tabled budget is in line with the MFMA and Budget and ReportingRegulations.

• The 2020/21 MTREF focus evolves from the following strategicdocuments:• 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

Overview 

• The National State of Disaster and subsequent lockdown comes amidst already dire macroeconomicconditions 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 pandemicand international companies closing down as a result, the deteriorating state of the finances forstate‐owned entities, continued high unemployment and water and electricity shortages will putpressure 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 willlikely reprioritize our own spending patterns;

• In response to the impact of COVID‐19, STLM are currently considering the reprioritization of thefunding 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 ratesholidays, etc

Socio Economic Impact

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 ASSUMPTIONSBUDGET 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

FINANCIAL YEAR OPEX CAPEX TOTAL

2019/2020 1,634,022,102.00  R 389,402,559.00  2,023,424,661.00

2020/2021 1,746,577,836.00  R 333,910,325.00 2,080,488,161.00 

AVERAGE TARIFF INCREASES (RESIDENTIAL)

SERVICE % INCREASE IN   REVENUE

Electricity 6.23%

Refuse 6.7%

Water 7.2%

Sanitation 8.1%

Property tax 5,8%

KEY CAPITAL EXPENDITURE

SERVICE 2019/2020 2020/2021 2021/2022

R 92,1 million for Economic and Environmental services R 92,6 m R 114,6 m

R 198,2 million for Water Networks R 265,9 m R 334,5 m

R 158,7 million for Electrical Networks R 169,6 m R 72,0 m

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

R  56,6 million for Community & Public Safety R 36,5 m R 33,3 m

R 98,6 million for Governance & Administration R 28,8 m R 80,4  m

2020/2021                           Level of services                 (Indigent support)

Per month                 per household

Rand value        per month

Budget cost of             providing FBS

Free basic electricity 50 kWh R 53.14 R 11 350 704Free basic water 4 kl R 41.52 R 8 868 672Free refuse removal Free R 151.51 R 32 362 536Free sewerage Free R 118.51 R 25 313 736

Free property tax               (value of +‐ R300 000)

FreeR 254.13 R 54 282 168

TOTAL +/‐ 17 800 R 618.81 R 132 177 816Free basic water to all (0‐6kl) (+/‐37 350) R 27 913 896

TOTAL PER ANNUM R 160 091 712TOTAL PER MONTH R 13 340 976

OPERATING BUDGET 2020/2021

Revenue By Source Adj Budget 2019/20

Budget Year 2020/21

Property rates 395 507 806 413 511 428

Serv ice charges - electricity rev enue 650 544 523 724 178 589

Serv ice charges - w ater rev enue 109 259 208 117 901 547

Serv ice charges - sanitation rev enue 72 469 670 78 530 446

Serv ice charges - refuse rev enue 78 975 975 84 479 602

Rental of facilities and equipment 2 045 967 1 973 781

Interest earned - ex ternal inv estments 42 351 012 38 530 857

Interest earned - outstanding debtors 6 177 438 6 629 996

Fines, penalties and forfeits 17 503 423 18 355 120

Licences and permits 9 449 009 9 627 610

Agency serv ices 22 375 150 23 605 180

Transfers and subsidies 209 112 628 235 995 480

Other rev enue 42 921 321 49 846 351

Transfers and subsidies - capital 99 901 597 122 219 500 Total Revenue (incl capital transfers) 1 758 594 727       1 925 385 487 

Adj Budget 2019/20

Budget Year 2020/21

Surplus/(Deficit) for the year -58 238 354 -8 804 882

Expenditure By Type Adj Budget 2019/20

Budget Year 2020/21

Employ ee related costs 598 110 431 638 863 655

Remuneration of councillors 24 211 293 24 412 525

Debt impairment 21 121 150 22 177 206

Depreciation & asset impairment 212 738 041 212 738 040

Finance charges 36 905 963 50 000 346

Bulk purchases 516 448 552 584 003 282

Other materials 61 166 617 55 752 508

Contracted serv ices 234 380 731 224 604 609

Transfers and subsidies 2 130 000 2 237 750

Other ex penditure 109 620 303 119 400 448 Total Expenditure 1 816 833 081 1 934 190 369

Electricity tariffs, R724,178,589 , 35%

Property rates, R413,511,428 , 20%Other Revenue, …

Grants & subsidies : Operating, R235,995,480 , 11%

Grants & subsidies : Capital, R122,219,500 , 6%

Water tariffs, R117,901,547 , 6%

Sanitation Tariffs, R78,530,446 , 4%

Refuse Tariffs, …

Licenses and permits, R9,627,610 , 0%

Other income, R56,476,347 , 3%

Interest earned ‐ External investments, R38,530,857 , 2%

Income from agency services, R23,605,180 , 

1%

Fines, R18,355,120 , 1%

Rental of facilities and equipment, R1,973,781 , 0%

TOTAL REVENUE R1 925 385

REVENUE 2020/2021

R 638 863 655Employee related costs

33.03%

R 24 412 525Remuneration of

councillors1.26%

R 22 177 206Debt impairment

1.15%

R 212 738 040Depreciation & asset

impairment11.00%

R 50 000 346Finance charges

2.59%

R 584 003 282Bulk purchases

30.19%

R 55 752 508Contracted services

11.61%

R 224 604 609Grants and subsidies

0.12%R 2 237 750

Other expenditure9.06%

TOTAL OPERATING EXPENDITURER1 934 190 369

OPERATING EXPENDITURE2020/2021

WHERE DOES THE MONEY COME FROM TO FUND THE BUDGET (OPERATING REVENUE) 

Municipal Revenue – R1 925,4bn

Service charges ‐ Electricity R724,2mService charges ‐ Property Rates R413,5mService charges ‐ Water R117,9mService charges ‐ Sewerage R78,5mService charges ‐ Refuse R84,5mGovernment Grants R236,0mOther R270,8m

HOW WILL THE MONEY BE SPENT? (EXPENDITURE)

Municipal Expenditure R1 934,2bn

Governance & Admin R423,2m

Refuse R129,2m

Economic & Environmental  

R139,3m

Water R111,6m

Sewerage  R104,3m

Electricity R746,2m

Other R26,0m

Community & Public Safety R254,4 m

HOW DOES THE MUNICIPALITY MAINTAIN ITS ASSETS?

Repair & Maintenance R107,7m , 5,57%

New Assets R352,1m , 52,3%

Renewal of Assets 

R211,0m , 31,3%

Upgrading of Assets R110,3m, 

16,4%

SOCIAL SAFETY NET – PROTECTING THE POOR FREE BASIC SERVICES FOR INDIGENT HOUSEHOLDS        

Basic Services R160,1m p.a.  R618,81 per 

household per month.R13,3m pm.

Electricity          50 kWh limited to 20 amp

Water 10kl Free

Refuse Removal Free

SanitationFree 

Property Tax              Free

Capital Expenditure - Functional Adjusted Budget

Budget Year

2020/21Governance and administration 51 600 781 98 627 900

Ex ecutiv e and council 795 000 1 300 000

Finance and administration 50 765 781 97 327 900

Internal audit 40 000 -

Community and public safety 35 396 774 56 626 100

Community and social serv ices 20 525 908 33 176 100

Sport and recreation 6 443 990 21 530 000

Public safety 7 421 719 1 920 000

Housing 1 005 157 -

Economic and environmental services 91 097 809 92 123 400

Road transport 90 497 809 92 023 400

Env ironmental protection 600 000 100 000

Trading services 286 548 059 425 751 831

Energy sources 91 671 042 158 710 981

Water management 87 079 433 198 173 100

Waste w ater management 76 447 484 51 617 750

Waste management 31 350 100 17 250 000

Other 303 000 275 000

Total Capital Expenditure - Functional 464 946 423 673 404 231

Funded by:

National Gov ernment 85 727 360 122 219 500

Prov incial Gov ernment 220 000 -

Transfers recognised - capital 85 947 360 122 219 500

Borrow ing 150 140 526 285 000 000

Internally generated funds 228 858 537 266 184 731

Total Capital Funding 464 946 423 673 404 231

Electricity, R158,710,981 , 

24%

Road Transport, R92,023,400 , 14%

Community & Social Services, R33,276,100 , 5%

Other Trading, R275,000 , 0%

Water, R198,173,100 

, 29%

Sport and Recreation, R21,530,000 , 

3%

Waste Water Management, R51,617,750 , 

8%

Public Safety, R1,920,000 , 

0%

Waste Management, R17,250,000 , 

3%

Executive & Council, 

R1,300,000 , 0%Finance and 

administration, R97,327,900 , 

14%

TOTAL CAPEXR 673 404 231

CAPITAL EXPENDITURE2020/2021

The capital budget constitutes R673‐million for the 2020/2021 financial year and equates to R2,0‐billion over the MTREF.  

A substantial portion of the capital budget will be funded from borrowings at R285, 0‐million.  Funding from own funds amounts to R266, 2‐million and government grants and donation to R122, 2‐million.

CAPITAL EXPENDITURE2020/2021

CAPITAL BUDGET 2020/2021R 673 404 21

HOW WILL THE MONEY BE SPENT? (CAPITAL PER ASSET

TYPE)Roads & Stormwater

R 83 643 400(12,42%)

Water         R 167 493 100

(24,87%)

Electricity         R 158 445 981 

(23,53%)

Sanitation            R 29 330 000

(4,36%)Sportsfields & RecreationR 13 750 000

(2,04%)

Community Facilities R 47 386 100

(7,04%)

Waste Management R 9 150 000(2,56%)

IT Equipment         R 15 490 300

(2,03%)

Land & Buildings      R 7 343 350(1,09%)

Office Equipment  R 1 060 000(0,16%)

Plant & Equipment  R  117 852 000 

(17,5%)

Vehicles              R 16 090 000

(2,39%)Intangible Assets     

R 4 750 000(0,71%)

WHERE  WILL THE MONEY BE SPENT ON SERVICE DELIVERY? (CAPITAL)Roads & Stormwater – R92,0million  (Main Projects)

• New roads & Stormwater (R46,9m) – Ward 1, 2, 3, 4, 6, 8, 11, 12, 16, 19, 21, 23, 25,26• Upgrade taxi Rank & laybyes (R8,5m) – Ward6, 10, 13, 25• Roads reseal (R14,5m) – Ward1‐3, 8, 10‐17, 20‐23• New roads & stormwater in low income areas (R22,1m) – Ward 2, 6, 8, 23

Electricity – R158,7 million (Main Projects)• Replace cables in problem areas (R15,0m) – Ward 12, 18 and where required• Replace mini substations (R4,7m) – Ward 2, 12, 13, 19, 23• Electrification – Overhead lines, Substations 7 switching stations (R123,4m) – Doornkop, Mhluzi, Ward3, 11, 13• Highmast Lighting Low income areas (R10,7m) – Ward 2,6,  8, 15, 17‐20, 23, 25, 28

Water – R198,8 million

• Replace old water pipes (R100,5m) – Middelburg/Mhluzi, Hendrina/Kwazamokuhle• Construct reservoir (R52,7m) – Vliegveld, Graspan• Replace Equipment (R30,7 m) – Vaalbank, Middelburg Dam, Kruger dam• Water Network (R5,5m) – Ward 17, 23

WHERE  WILL THE MONEY BE SPENT ON SERVICE DELIVERY? (CAPITAL)

Waste Water Management – R51,6 million  (Main Projects)• Networks (R11,3m) – Ward 2, 16, 17, 21, 232• Upgrade Boskrans sewer plant & equipment (R31,0m) • Bulk sewer networks (R5,2m) – Ward 16, 17• Rural sanitation (R1,0m)

Waste Management  – R17,3 million (Main Projects)• Containers & Bins (R1,6m)• Extend Landfill site (R9m) ‐ Middelburg• Refuse Compactors & trucks (R6,7m)

Community facilities  – R53,9 million• New MPCC (R24,8m) ‐ Rockdale, Kwazamokuhle• Cemeteries (R7,8) ‐ Low income areas, Ward 8, 11• Renovations/upgrade sport facilities (R3,2m)• Develop & Upgrade Parks (R18,1m) – Ward 11, 12, 16, 18, 19, 25

How is the Capital Budget going to be funded?

Government grants and public 

donationsR122,2m

Internal reservesR266.2m

External loansR285m

SERVICING OF STANDS2020/2021

Area Project description Sewer  Water  Electricity Dennesig North P2000115: Bulk Sewer & Collection Network Den North W17: 550 4 500 000 Dennesig North Dennesig Electrification MV Network 1 816 233 Dennesig North Dennesig Electrification LV Network 1 000 000 Komati LV Highmasts Low income areas W04 (731/...) 1 650 000 Kwazamokuhle (Mawag) P1200163: New sewer network Hendrina/Kwaza W02: 546 1 000 000 Kwazamokuhle (Mawag) P2000159: New Water Network Kwaza W02: 566 1 890 000 Kwazamokuhle (Mawag) MV Electrification of Kwazamokuhle Ext 4 and 6 1 869 400 Kwazamokuhle (Mawag) LV Electrification of Kwazamokuhle Ext 4 and 7 1 355 000 Mhluzi x 2 (Industrial Node) P2000027: New Sewer Network Mhluzi W23: 550 5 000 000 Mhluzi x 2 (Industrial Node) P2000028: New water network: Mhluzi ext 2: 560 5 000 000 Mhluzi x 2 (Industrial Node) MV Electrification of Muhluzi Ext.2 Industrial 1 076 346 Mhluzi x 2 (Industrial Node) LV Electrification of Muhluzi Ext.2 Industrial 779 423 Newtown LV Highmasts Low income areas W17 (731/...) 1 650 000 Node D (Industrial Node) P1900159: Plan & Design Sewer Network X23 Node D W21: 550 5 000 000 Node D (Industrial Node) P1900162: Bulk Water Reticulation Ext 23( Node D) W21: 560 5 000 000 Node D (Industrial Node) Node D Electrification MV network 1 210 890 Node D (Industrial Node) Node D Electrification LV network 900 330 Rondebosch P1900161: Bulk Water Reticulation Ext 42 W16: 560 700 000 

Rondebosch Building of Switching station and provision of links 2 500 000 

Total 15 500 000  12 590 000  15 807 622 

Sewerage8,1%

Property Rates5,8%

Electricity6,23%

Refuse Removal6,7%

Water7,2%

TARIFF INCREASES

Indigent HOUSEHOLD Affordable Range HOUSEHOLD

Service  Units  Current Account 

Increased Amount 

Proposed Account 

Rates  R300 000 market value (Free) R 0.00 R 0.00 R 0.00

Electricity: Basic Levy  Single phase  R 0.00 R 0.00 R 0.00

Electricity: Consumption 

300kwh (50 kWh free) R 393.09 R 37.34 R 430.43

Refuse  Erf <995m² (Free) R 0.00 R 0.00 R 0.00

Sanitation  Erf <995m² (Free) R 0.00 R 0.00 R 0.00

Water  20kl (10kl free) R 132.00 R 9.37 R 139.90

Vat  15% R 78.76 R 6.79 R85.55

Total Increase of 8.62%  R 603.85 R 52.03 R 655.88

Service  Units  Current Account 

Increased Amount 

Proposed Account 

Rates R500 000 market value 

R 400.13 R 24.26 R 432.46

Electricity: Basic Levy 

Single phase  R 71.20 R 4.44 R 75.64

Electricity: Consumption  500kwh  R 733.14 R 69.65 R 802.79

Refuse  Erf <995m²  R 142.00 R 9.51 R 151.51

Sanitation  Erf <995m²  R 109.63 R 7.08 R 118.51

Water  25kl  R 237.16 R 14.21 R 251.37

Vat  15% R 193.97 R 16.00  R 209.97

Total  Increase of 8.21%  R 1 887.23 R 155.02 R 2 042.25

Middle Income HOUSEHOLD Large HOUSEHOLD

Service  Units  Current Account 

Increased Amount 

Proposed Account 

Rates  R700 000 market value  R 552.75 R 44.67 R 597.42

Electricity: Basic Levy  Single phase  R 71.20 R 4.44 R 75.64

Electricity: Consumption 1200kwh  R 2 091.81 R 198.72 R 2 290.53

Refuse  Erf <995m²  R 142.00 R 9.51 R 151.51

Sanitation  Erf <995m²  R 109.63 R 8.88 R 118.51 

Water  30kl  R 303.16 R 18.16 R 321.32

Vat  15% R 407.67 R 35.96 R 443.63

Total  Increase of 8.71%  R 3 678.22 R 320.34 R 3 998.56

Service  Units  Current Account 

Increased Amount 

Proposed Account 

Rates  R1 500 000 market value  R 1 237.25 R 73.50 R 1 310.75

Electricity: Basic Levy  Three phase  R 96.10 R 5.99 R 102.09

Electricity: Consumption 1800kwh  R 3 275.25 R 311.15 R 3 586.40

Refuse  Erf >995m²  203.23 R 13.62 R 216.85

Sanitation  Erf >995m²   R 242.60 R 19.65 R 262.25

Water  60kl  R 724.36 R 43.36 R 767.72 

Vat  15% R 681.23 R 59.07 R 740.30

Total  Increase of 8.15%  R 6 460.02 R 526.34 R 6 986.36

Thank you