REPORT TO COUNCIL: 26 MARCH 2014 BUFFALO CITY

REPORT TO COUNCIL: 26 MARCH 2014
2 BUFFALO CITY METROPOLITAN MUNICIPALITY’S
2014/15 INTEGRATED
DEVELOPMENT PLAN REVIEW AND MEDIUM TERM REVENUE AND
EXPENDITURE FRAMEWORK (MTREF) BUDGET
[File No: 1/1/191]
Author: EXECUTIVE MAYOR (ZVN)/AF
1. PURPOSE
The purpose of this report is for Council to approve by adoption the 2014/15
Integrated Development Plan (IDP) Review and Medium Term Revenue and
Expenditure Framework (MTREF).
2. AUTHORITY
This report is for approval by the Buffalo City Metropolitan Municipality Council.
3. LEGAL / STATUTORY REQUIREMENTS
•
The Constitution of the Republic of South Africa, 1996
•
The Municipal Systems Act no. 32 of 2000, as amended;
•
The Municipal Structures Act no. 117 of 1998;
•
The Municipal Finance Management Act no. 56 of 2003; and
•
Circular 58, 66 and 67 of the MFMA.
4. BACKGROUND / REASONING
Council adopted an IDP/Budget/PMS Process Plan, in compliance with section 28 of the
Municipal Systems Act no 32 of 2000 as amended. The plan outlines the process to be
followed in developing Buffalo City Municipality Metro’s Integrated Development Plan
[IDP] and Budget.
In terms of section 30(a) of the Municipal Systems Act, the Executive Mayor of a
municipality must submit the draft Integrated Development Plan to the municipal council
for adoption.
Section 34 of the Municipal Systems Act 32 of 2000 as amended, further states that a
municipal council must review its integrated development plan:
(i)
Annually in accordance with an assessment of its performance
measurements; and
(ii)
To the extent that changing circumstances so demand.
In compliance with the above, Buffalo City Metropolitan Municipality has embarked on a
review to further develop its IDP and Budget towards the 2014/15 financial year in
accordance with the requirements set out in the Municipal Systems Act 32 of 2000, the
Local Government: Municipal Planning and Performance Management Regulations
2001 & 2006 and the Municipal Finance Management Act 56 of 2003.
Annual revisions allow the municipality to expand upon or refine plans and strategies, to
include additional issues and to ensure that these plans and strategies inform
institutional and financial planning. The review and amendment of the IDP thus, further
develops the IDP and ensures that it remains the principal management tool and
strategic instrument for the Municipality.
In terms of Section 16 (1) of the Municipal Finance Management Act (MFMA) No 56,
2003:
“the Council of the Municipality must for each financial year approve an annual
budget for the municipality before the start of that financial year”
In compliance with the above provisions, the Buffalo City Metropolitan Municipality’s
2014/15 reviewed IDP and MTREF Budget has been prepared and submitted to Council
for adoption [Annexure A and B].
In terms of Section 16(2) of the Municipal Finance Management Act (MFMA) No 56,
2003:
“In order for a municipality to comply with sub-section (1), the Mayor of the
municipality must table the annual budget at a council meeting at least 90 days
before the start of the budget year.”
5.
EXPOSITION OF FACTS
5.1
PROCESS UNDERTAKEN
Section 28 (1) of the Municipal Systems Act requires each municipality to adopt a
process in writing to guide the planning, drafting, adoption and review of its
integrated development plan. In compliance with this requirement Buffalo City
Metropolitan Municipality undertook the following activities in line with the
IDP/Budget review towards 2014/15:
Activity
Council
IDP/Budget/PMS
plan for 2014/15
Date
adopts
process
31 July 2013
Purpose
Adoption of Process Plan
Submission of 2013/14 SDBIP
IDP Councillors Workshop
14 August 2013
Outlining the IDP/Budget Review
process in order to ensure
common understanding
External
Representative
Forum Meeting
16 August 2013
Presentation of the IDP/Budget
Process Plan and to provide
feedback
on
2012/13
performance
to
external
stakeholders
Mayoral Imbizo Programme
16-20 September
2013
- Executive Mayor to interact with
communities
- To provide feedback on issues
raised during the last public
consultation process
- To share planned capital and
operating expenditure earmarked
for their respective areas
- To highlight key achievements
of the Metro.
IDP/IGR Cluster Meetings
8-10 October 2013
To present and discuss draft
cluster
situational
analysis
reports.
Executive Mayoral Lekgotla
16-18 October 2013
To review strategic objectives for
service delivery and development
and provide guidance to the
unfolding review process
Metro-wide
Intergovernmental Relations
Session
28 October 2013
To share information and align
planning between BCMM and
sector departments
BCMM
Workshop
12-14 November
2013
To present outcomes of the
Mayoral Lekgotla held on 16-18
October 2013 to all BCMM
Councillors.
External
Representative
Forum Meeting
15 November 2013
To present draft IDP 2014/15 and
MTREF Budget. To report on
2013/14 SDBIP 1st quarter
performance.
IDP Cluster Meetings
6-8 November 2013
To confirm draft IDP Review
2014/15 and MTREF Budget
IDP Cluster Meetings
22-23 January 2014
To confirm draft projects and
programmes for 2014/15 –
2016/17.
Councillors
IDP/Budget
Technical
Planning Session
6-8 March 2014
To consider:
-Update on the Metro Growth and
Development Strategy;
-Mayoral Lekgotla priorities;
-Built Environment Performance
Plan;
-2014/15 Draft IDP Objectives,
Strategies,
Indicators
and
Targets; and
-Draft 2014/15 MTREF Budget
IDP/Budget
Workshop
Councillors
13-15 March 2014
To consider:
-Update on the Metro Growth and
Development Strategy;
-Mayoral Lekgotla priorities;
-Built Environment Performance
Plan;
-2014/15 Draft IDP Objectives,
Strategies,
Indicators
and
Targets; and
-Draft 2014/15 MTREF Budget
- Preparations for IDP/Budget
Roadshows
Council Meeting
26 March 2014
To adopt draft IDP Review
2014/15 and MTREF Budget
27 March – 4 April
2014
To present the draft IDP Review
2014/15 and MTREF Budget to all
stakeholders.
Council Open Day
8 April 2014
To provide feedback to key
stakeholders on outcomes of
IDP/Budget Road-shows
State of the Metro Address
15 April 2014
Executive Mayor delivers the
state of Buffalo City Metropolitan
Municipality
IDP/Budget Roadshows
5.2
STRATEGIC OUTCOMES
All processes undertaken above contributed to the IDP/Budget review towards 2014/15
financial year. During the review process BCMM’s key strategic focus areas were
revisited and they still remain relevant. The strategic focus areas are outlined below:
5.2.1 Strategic Focus Areas
SFA 1: Institutional Restructuring and Stabilisation;
SFA 2: Improve Intergovernmental Relations;
SFA3: Building Citizen Confidence;
SFA 4: Bridging the Digital Divide;
SFA 5: Improving performance, compliance, processes and systems;
SFA 6: Build Sustainable Communities;
SFA 7: Job Creation;
SFA 8: Improving Governance; and
SFA 9: Financial Viability
5.2.3 Priority Issues
Community consultation on the draft IDP review 2014/15 and MTREF are scheduled to
take place from 27 March– 4 April in the three regions of BCMM. Key issues raised by
BCMM residents during the last public consultation which took place in September 2013
relate to housing, water and sanitation, roads and storm water, electricity, community
halls and multi-purpose centres, job creation, cemeteries and solid waste management.
Issues raised have been categorised in terms of the three constituent areas of BCMM
which are coastal, inland and midlands.
Key issues raised by BCMM’s coastal wards, in their order of priority, are as follows:
•
Roads and storm water
•
Housing
•
Electricity
•
Job creation / unemployment
•
Community halls/ Multi-purpose centres
Midland wards raised the following as key issues:
•
Housing
•
Electricity
•
Roads and Storm water
•
Job creation / unemployment
Key Issues from Inland Wards relate to the following:
•
Roads and Storm water
•
Community halls
•
Water and Sanitation
•
Electricity
•
Cemeteries
BCMM is still on track in terms of pursuing the three main strategic focus areas as
economic driver which are detailed below. These are:
o Facilitate growth of SMME Sector;
o Facilitate retention and attraction of investors within BCMM;
o To market the city as a tourist destination in partnership with other stakeholders;
and
o Infrastructure Development for Economic Growth
5.4 2013/14 MTREF BUDGET
The following was taken into consideration in preparation of the MTREF Budget:
(a) Tariffs have been reduced by 0.2% in comparison to those which was approved
by Council in the previous MTREF period, except for electricity and water.
(b) Electricity tariff increase be set at 8,5%.
(c) Water tariff be set at 14.95%. The cost of untreated water to the Municipality
from Amatola Water increased by 9,3%.
The variance relates to the cost
associated with purification and distribution of water to consumers.
(d) Due to the General Valuations, property values increased across the city by an
average of 11%, as a result there is no increase in the property rates tariff.
(e) General expenses has been reduced (consulting fees and telephones) except for
fuel and operating leases.
(f) Repairs and Maintenance be maintained at a steady growth of 7% of the total
operating expenditure with R40m transferred to the electricity capital programme.
The following budget principles and guidelines directly informed the compilation of the
2013/14 MTREF:
• The 2013/14 Adjustment Budget was used as a baseline for the 2014/15 MTREF
Budget;
• The service charges tariff has been calculated taking into consideration the cost
associated with generating the service.
• In addition, the tariffs should take into account the need to address infrastructure
backlogs.
6.
CHALLENGES
The main challenges experienced during the compilation of the 2013/14 MTREF can be
summarised as follows:
•
The Municipality does not have a fully integrated financial system, including the
necessary automated processes linked to budget reforms.
•
The need to reprioritise projects and expenditure within the existing resource
envelope given the cash flow realities in providing an effective and efficient
service to the community at large;
•
Funding future depreciation costs on infrastructure assets based on current
replacement costs.
•
Water and electricity losses continues to remain a challenge.
Risks associated with achieving the 2014/15 MTREF Budget:
• The ongoing difficulties in the national and local economy, affecting the
consumers ability to pay for services;
• The increased cost of bulk water (due to tariff increases from Amatola Water) is
placing upward pressure on service tariffs to residents. Continuous high tariff
increases are not sustainable - as there will be point where services will nolonger be affordable; which will result in an increase in the debt book.
7.
STAFF IMPLICATIONS
The staff implications have been budgeted for and are contained in the detailed budget
report attached as Annexure B.
8.
FINANCIAL IMPLICATIONS
In view of the aforementioned, the following table is a consolidated overview of the
2012/13 Medium-term Revenue and Expenditure Framework (detailed budget report
attached as Annexure B :
Table 1 Consolidated Overview of the 2014/15 MTREF
Total Direct Operating Income
2013/2014
2014/2015
2015/2016
2016/2017
APPROVED
PROPOSED
PROPOSED
PROPOSED
BUDGET
BUDGET
BUDGET
BUDGET
(4,416,652,227)
(4,761,340,651)
(5,247,529,569)
(5,771,100,498)
4,463,211,837
4,749,700,442
5,245,986,083
5,701,896,296
46,559,610
(11,640,209)
(1,543,486)
(69,204,202)
Total Capital Expenditure
1,006,629,040
942,007,423
1,024,127,261
1,069,226,151
Total Budget
5,469,840,877
5,691,707,865
6,270,113,344
6,771,122,447
Total Direct Operating
Expenditure
Sub-Total - (Surplus) / Deficit
The 2014/15 Reviewed IDP and MTREF Budget Financial outlines the service delivery
financial implications for the IDP as well as the three year budget and the detailed report
including funded projects is contained in Annexure C and D.
9.
OTHER PARTIES CONSULTED
9.1
Council
9.2
Mayoral Committee
9.3
IDP Strategic Committee
9.4
Budget Steering Committee
9.5
National and Provincial Treasury
9.6
Other External Stakeholders
10.
RECOMMENDATIONS
It is recommended that:
1. The Council of Buffalo City Metropolitan Municipality, acting in terms of section 24 of
the Municipal Finance Management Act, (Act 56 of 2003) approves and adopts:
1.1. The draft annual budget of the municipality for the financial year 2014/15 and the
multi-year and single-year capital appropriations as set out in the following
tables:
1.1.1. Budgeted Financial Performance (revenue and expenditure by standard
classification);
1.1.2. Budgeted Financial Performance (revenue and expenditure by municipal
vote);
1.1.3. Budgeted Financial Performance (revenue by source and expenditure by
type); and
1.1.4. Multi-year and single-year capital appropriations by municipal vote and
standard classification and associated funding by source.
1.1.5. The revised Draft Integrated Development Plan (IDP) 2014/15.
1.2. The financial position, cash flow budget, accumulated surplus, asset
management and basic service delivery targets are approved as set out in the
following tables:
1.2.1. Budgeted Financial Position as contained in Table 22;
1.2.2. Budgeted Cash Flows as contained in Table 23;
1.2.3. Reserves and accumulated surplus reconciliation as contained in Table
24;
1.2.4. Asset management as contained in Table 25; and
1.2.5. Basic service delivery measurement as contained in Table 26.
2. The Council of Buffalo City Metropolitan Municipality Council, acting in terms of
section 75A of the Local Government: Municipal Systems Act (Act 32 of 2000)
approves and adopts effect from 1 July 2014:
2.1. the draft tariffs for property rates – as set out in Annexure E
2.2. the draft tariffs for electricity – as set out in Annexure E
2.3. the draft tariffs for the supply of water – as set out in Annexure E
2.4. the draft tariffs for sanitation services – as set out in Annexure E
2.5. the draft tariffs for solid waste services – as set out in Annexure E
2.6. miscellaneous draft tariffs as set out in Annexure E
4 The Buffalo City Metropolitan Municipality Council, acting in terms of 75A of the
Local Government: Municipal Systems Act (Act 32 of 2000) approves and adopts
with effect from 1 July 2014 the draft tariffs for other services as set out in Annexure
E.
5 To give proper effect to the municipality’s draft annual budget, the Council of Buffalo
City Metropolitan Municipality approves:
5.1 That an indigent subsidy be granted to registered indigents in terms of Council’s
Indigent Policy.
5.2 That an indigent consumer be given a maximum subsidy on his account of
R441.73 per month, which includes a maximum of 50kwh for electricity and 6kl
for water.
5.3 That free basic electricity be granted for a registered indigent consumer of
50KWh per month.
5.4 That free basic water be granted to a registered indigent of 6Kl per month.
6 The Buffalo City Metropolitan Municipality Council, approves and adopts the Draft
revised budgeted related policies as set out in Annexure F:
6.1 Credit Control Policy
6.2 Indigent Policy
6.3 Tariff Policy
6. That Council note the budget-related policies adopted in the previous financial year
and where no amendments have been made, as listed in Section 2.4 of the report
page number 82 and are available on BCMM’s website at www.buffalocity.gov.za
including the following policies:
• Capital Infrastructure Investment Policy
• Policy on Long-term Financial Planning
• Funding and Reserves Policy
• Budget Implementation & Management Policy (Virement Policy)
7.
That in terms of Section 24(2)(c)(iii) of the Municipal Finance Management Act, 56
of 2003, the measurable performance objectives for capital and operating
expenditure by vote for each year of the medium term revenue and expenditure
framework as set out in Supporting Table SA7 are approved.
8.
That in terms of Section 24(2)(c)(iv) of the Municipal Finance Management Act, 56
2003, the amendments to the Integrated Development Plan as set out in the Budget
Chapter 17 are approved, which had been agreed to at the Councillor workshop
held on 13-15 March 2014.
9. Council notes that the 2014/15 MTREF Budget tabled for adoption is structured in
terms of the then Buffalo City Municipality votes and functions.
10. MFMA Circular 70 and 71, Municipal Budget Circular for the 2014/15 MTREF
attached as Annexure to be noted by Council.
__________________
Z.V. NCITHA
EXECUTIVE MAYOR
ANNEXURES:
A: 2014/15 Buffalo City Metropolitan Municipality Integrated Development Plan Review
B: 2014/2015 Medium Term Revenue And Expenditure Framework (MTREF) Budget
C: 2014/15 MTREF Capital Projects
D: 20143/15 MTREF Operating Projects
E: 2014/15 Tariffs
F: Reviewed Finance Policies

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