Oudtshoorn, 10 May 2016 – The Oudtshoorn Municipality has between 25 April 2016 and 5 May 2016 held a series of public participation meetings to consult with the citizens of the Greater Oudtshoorn about the draft budget and Integrated Development Planning (IDP) review for the 2016/17 financial year.
The Administrator Mr. Kam Chetty gave an overview of the Municipal Status quo since the inception of the Intervention into the Oudtshoorn Municipality in all meetings. He was accompanied by a delegation consisting of the Intervention team, councillors and Municipal officials.
Oudtshoorn brief financial overview
The municipality finds itself in a critical financial position constantly having to manage ourselves out of liquidity and infrastructure failure crises that we find ourselves into. The following needs to be highlighted:
- The cash position has deteriorated over the last 4 years from a positive R48 Million as at 30 June 2011 to a current cash flow deficit.
- Trade Creditors have increased from R11 Million in 2011 to a current amount exceeding R70 Million. This excludes un-estimated contingent liabilities
- Debtor collection is averaging at approximately 96% for the year to date with a projected under recovery of R 16 million in the current financial year placing a further strain on the cash flow.
- The cash flow position remains in crisis and it is anticipated that the status quo will remain past the medium term revenue expenditure framework (MTREF) when financial recovery may be completed.
- The lack of restraint in a variety of procurement processes and service provider appointments has resulted in uncontrolled spending being recorded and in tying up the municipality in low value for money commitments in the medium term.
This MTREF was prepared under very difficult circumstances in a time where the municipality is fighting for its financial survival on a daily basis. It serves to give direction to our municipality on firstly the financial recovery but mainly to build a basis for financial sustainability in the medium and long term. The draft budget also attempts to return normality to the operations and has been prepared with a lot of restraint in all areas of expenditure.
Draft Budget summary for financial year 2016/17; 2017/18 and 2018/19
Capital Budget
The capital budget of the Municipality is funded by means of grants from National government in the amount of R 42.547 Million. The Municipality is not in a position to contribute from its own funding due to the dire financial situation of the Municipality.
Total funded capital projects for the 2016/2017 financial year mainly focus on the following:
- Water Infrastructure R 17.76 Million
- Electricity R 7.9 Million
- Sanitation R 5.48 Million
- Refuse Removal R 4.2 Million
- Roads Infrastructure R 4.25 Million
- Sport facilities R 2.95 Million
Operating Budget
The operating budget for the 2016/2017 financial year amounts to R 579.358 Million which represents a decrease of R 15.58 million or 2.62% over the revised budget for 2015/2016.
The cost drivers of the increase in the budget can be summarized as follows:
- 7.00% increase in the wage bill in accordance with the multi-year wage agreement
- 7.86% increase in the purchase of electricity from Eskom.
- Inflationary pressure and the general increase in the price of goods and services
- Exchange rate fluctuation especially on specialist goods required in service delivery.
- Operational requirements to ensure service delivery standards are complied with, this is specifically in respect of electricity, roads and water and waste water.
Housing allocation for the construction of houses has significantly decreased from R 50.27 Million in the 2015/2016 financial year to R 31.955 Million in the 2016/2017 financial year but will still allow the municipality to expedite the delivery of houses.
Tariffs
Revenue sources remains under strain yet the municipality has no alternative to increase tariffs for the 2016/2017 financial year above the norm to aide in the financial recovery and to ensure that service delivery standards are met.
In an attempt to balance service delivery with affordability and financial recovery, the following tariff increases are necessary:
|
REVENUE CATEGORY |
2016/2017 PROPOSED TARIFF INCREASE |
2017/2018 PROPOSED TARIFF INCREASE |
2018/2019 PROPOSED TARIFF INCREASE |
|
Rates |
10.6% |
10.2% |
9.9% |
|
Refuse |
11.7% |
11.3% |
10.9% |
|
Sanitation & Waste Water |
11.6% |
11.2% |
10.9% |
|
Electricity |
9.75% |
8.00% |
8.00% |
|
Water (Change in policy and blocks) |
11.6% |
11.2% |
10.9% |
Increases in all categories of expenditure have been limited, all general expenditure items have been reduced with 5% and only repairs and maintenance expenditure have been increased slightly from the revised budget in order to meet maintenance and service delivery requirements and to protect the health of assets, thereby preventing current infrastructure from further dilapidation.
A variety of austerity measures, including savings on overtime, standby and other employee related cost, limiting all vehicle related expenses, travelling and subsistence allowances, scaling down on contracted services, cutting back on the social and support grants as well as cutting out all nice to have’s have been implemented and it will continue in the 2016/2017 financial year and over the MTREF to aide in the financial recovery.
Indigent subsidies
Provision is made in the operating budget for the subsidizing of indigents, whose total monthly household income is less or equal to R3300, is as follows;
- 100% of Refuse charge
- 100% of Sewerage charge
- 6000 litres of free water
- 50 units free electricity
A rebate on assessment rates will also be given for Indigent households up to a valuation of R70.000. The indigent subsidy package is in line with the national norm and stretches the affordability threshold of the municipality due to the growing number of indigent households.
Households who qualify and have not yet applied for the indigent subsidy are encouraged to do so before 30 June 2016 at their nearest municipal offices. In order to protect the financial sustainability of the municipality, the provision of free services has been reduced to the prescribed national norm and free water will no longer be provided to non-indigent households.
The figures contained in this draft budget summary for the 2016/2017 financial year are not final. They are subject to inputs, priorities and needs received during the community participation process. Needs are to be considered before the final budget is prepared and submitted to council for approval. The Budget documents were available at all offices and libraries and municipal website www.oudtshoorn.gov.za for information. Submissions were opened until 13 May 2016.