Tabling of the mid-year budget and performance report for the 2023-2024 financial year by the mayor of KwaDukuza, Cllr. Lindile Nhaca at the occasion of the full council meeting on 25 January 2024 at the KwaDukuza Town Hall
Speaker of council;
Whip of Council;
Members of the Executive Committee;
Members of Council;
Representatives of the Local House of Traditional Leaders;
Auditor General of South Africa, Senior Manager, Mr. Martin Coates, and Assistant Manager Mrs. Zainab Ebrahim,
CoGTA Chief Director, Municipal Finance, Dr Joey Krishnan;
Chairpersons of the Performance Audit Committee, Mr. Meyiwa;
Chairpersons of the Audit Committee, Ms N Mchunu;
Municipal Manager and Senior Management;
Interest groups;
Members of the fourth estate;
Ladies and Gentlemen
Speaker of council, it is my pleasure to rise once again before this august house to reflect on our mid-year budget and performance for the 2023-2024 financial year which covers the period between July 2023 to December 2023.
Allow me to request members of council to pay special tribute to all those who lost their lives during the festive season, and to those who perished during the recent flood disaster which ravaged most parts of the province including KwaDukuza. May their spirits find eternal peace.
Ladies and gentlemen, the detrimental consequences of climate change in recent years have undeniably become a significant threat to social security, to our economy, and to our means of survival. Heavy rains continue to torment our people even today.
Critically, the Minister of Cooperative Governance and Traditional Affairs (CoGTA) earlier this week announced that KwaDukuza will be among three other municipalities in the province to be reviewed by the President for potential declaration as a disaster area. Considering the damages suffered, this decision carries great significance.
Our teams in collaboration with ward councillors have already finalized the physical assessments and the administration is working on recommendations and quantifying the damages.
The reality is that our communities are facing economic difficulties and uncertainty with the escalating costs of commodities which are adding more strain to cost of living, particularly on those who are less privileged.
True to form, the ongoing conflict between nations in the Middle East and Eastern Europe poses a challenge for governments to fulfil their obligations, which consequently impacts development priorities and consequently impact those at the receiving end.
The disaster of 2022 and the resulting harm to local infrastructure has also impeded the overall growth of the economy, yet we are steadily recovering.
Economic recovery
On a positive note, the past six months saw a steady upturn of our local economy, and investors in our area have expressed favourable sentiments. As local government, we were thrilled to learn of the highly anticipated debut of the Club Med Coastal Resort with an impressive valued at R2 billion. Furthermore, we joyously commemorated the grand opening of the Magwaza Mall in Shakaskraal and the opening of the new extention of Ballito Junction. These advancements signify that KwaDukuza continues to be an appealing choice for prospective investments.
Feedback from multiple stakeholders also indicates that the 2023 Holiday Season was a resounding success.
The season saw an influx of visitors heading to our shores. We hosted families from all walks of life and their safety was assured with the festive season plan that was adopted by council.
Our teams were able to manage the high influx of travellers and we wish to commend all role-players who assured the safety of our patrons, although there were few incidence reported especially drowning within high risk areas which some are associated with the recent floods.
The timely opening of the M4 Bridge, as well as the successful coordination of events like Ballito Big Week and Ballito Rage, played a crucial part in the tourism economy front. Additionally, there were several other factors which contributed to the improvement of our figures and the attraction of more visitors who spent money in our region.
We believe that these positive economic advancements have made a significant contribution to the municipality's rates base and overall revenue.
Madam Speaker, I wish to appreciate this opportunity and accordingly wish to present a summary of the Mid-Year Budget and performance assessment as required by Section 72 of the Municipal Finance Management. The report in essence is presented with deep analysis of the year-to-date revenue and expenditure. I therefore take this opportunity to thank the Finance team for the sterling work in preparing this report.
Revenue and Expenditure
Ladies and gentlemen, the revenue collected by the municipality during the Mid-Year assessment amounted to R1,2 billion which is a negative variance of approximately R43 million or -3%. The total expenditure amounted to at R1,1 billion, which is a negative variance of R149 million or -12% for the Mid-Year review.
Revenue analysis
On revenue, there are various reasons for the R 43 million negative variance under revenue which are reflected on the report which includes Property Rates, Service Charge, Interest on External Investments, Operational Transfers & Subsidies.
The main contributing factors to the underbilling include Electricity Revenue Service Charges, Rental income, Interest on Outstanding Debtors, Fines, Penalties and Forfeits, Agency Services amongst other factors.
Expenditure analysis
On expenditure, there are various reasons for the negative variance of R149 million or -12% as reflected on the report, amongst others includes:
- The employee related costs which show a negative variance of R26,4 million, which is 9%.
- Finance charges reflect a negative variance of R2,4 million.
- Bulk purchases reflects under-expenditure of R 3,5 million.
- The energy loss in the municipality is considerably higher than the industry standard of 6% to 12% and is at 26.47%.
- The ongoing rise in Energy Loss is a cause for concern. I anticipate a significant turn-around over the next five months as we implement various strategies funded by Vuthela.
- Secondly we made a commitment to host an energy summit, and I kindly request that this summit takes place before March 31, 2024. I urge management to collaborate as a team to ensure that our summit is inclusive and focused on finding solutions, ultimately leading to a reduction in energy loss and enhancing our energy security.
Capital budget
Council has granted approval for a capital budget of R 950.8 million for the present fiscal year. The majority of these funds have been allocated to improvements in the electrical system, initiatives related to road infrastructure, and the development of community recreational facilities. Subsequently, the capital budget was increased to R 1.1 billion during the Special Adjustments Budget, following the approval of the rollover Disaster Response and Disaster Recovery Grant receipts.
For the Municipal Disaster Response Grant - 400 capital projects were identified where 22% expenditure being reflected at the end of December.
For the Municipal Disaster Recovery Grant – the Municipality was further allocated a capital allocation of R19,1 million for the Reconstruction and Rehabilitation of Infrastructure that was damaged due to the impact of storms that occurred in 2019.
Municipal Infrastructure Grant (MIG) capital allocation is R 47,1 million with 46% expenditure being reflected. R27,8 million has been received as a first tranche of MIG.
Disaster action plan
I wish to inform this august house that it has been precisely fifteen months since we received our initial funding for disaster recovery. The council made a decision to request roll-over for several projects. These roll-over requests were submitted to the national Treasury because the projects involved significant infrastructure and the estimated implementation period was not considered in the event that the grants were rejected. Thankfully, the roll-over applications were indeed granted.
However, it is extremely disheartening that we are still dealing with projects that are significantly long overdue. In relation to this matter, I want to highlight the inadequate performance of contractors. As the political head responsible for oversight, I have no obligations nor interest in supporting any of the contractors, and as a result, I have been impartially pointing out underperforming contractors on various platforms. I have been actively engaging in this practice with honesty and fairness.
I urge all political parties to approach these matters with objectivity rather than using them as opportunities for political gains.
The Municipal Manager is well aware of my dissatisfaction regarding the implementation of certain projects. I would like to emphasize the following key issues as a bone of contention:
- Some of our staff and engineers have displayed sub-par workmanship and a lack of quality assurance.
- There has been a slow response in holding contractors accountable for their poor performance and breach of contracts.
- The practice of awarding contracts to companies with outstanding projects has resulted in overcommitted contractors.
- Failure to address underperforming contractors and subcontractors who demand payments before completing their projects.
- There are concerns regarding certain civil engineering staff members who are not prioritizing the council's best interests.
Madam Speaker, I humbly request to use this platform to implore the accounting officer together with the acting ED for Civil Engineering, and Director PMU to take the necessary steps in addressing the inadequate performance of our project contractors.
I am eagerly looking forward to receiving a comprehensive report that outlines the steps that will be implemented to ensure the timely completion of all four projects, including those that were initially funded by the grant.
To prevent the necessity of an additional extension, it is imperative that we take steps to avoid it. I will not endorse any request for an extension unless the management has effectively dealt with the contractors' inadequate performance.
Liquidity ratio
Ladies and gentlemen, our reserves stand at around 2.1 months' worth of cash availability as of December 2023, representing a slight increase from the 2-month coverage recorded at the end of June. It is crucial to closely monitor the collections throughout the fiscal year to maintain financial sustainability.
Debt analysis
Consumer debtors amounted to R339,4 million as at 31st December 2023. This indicates a decrease of R2,4 million since 30 June 2023. The debtors collection rate for December 2023 is sitting at 100.23 and looks better than the collection rate for the 2022/23 financial year which was 95.95%. This clearly indicates progress in terms of debtors collection which is done in terms of the Credit Control Policy.
The total debtors balance for both consumer and sundry debtors is R 377m. Sundry debtors are continuously increasing due to poor collection under rental income generated in areas such as Rocky Park flats which is owing R3.69 million in December 2023. Therefore, rentals are the biggest contributor in terms of poor collection under this category.
There is a pressing necessity to conduct data cleansing to guarantee that all occupants possess legitimate lease agreements, there is a caretaker in charge of managing the building, and to ensure that tenants without lease agreements are either provided with new ones or vacate the premises.
Credit analysis
The creditors aging reflects a total of R 12,9 million outstanding payments at Mid-Year as per the financial system. Upon analysis, the total creditors outstanding as at 31st December 2023 amounts to R 127,242 million to date.
Creditors ageing excludes a long outstanding debt related to iLembe District Municipality for water and sanitation which was accounted for as an accrual from 1 July 2023, amounting to R 13.1 million. An amount of R150 thousand is paid monthly to settle the debt, while the request for an agreement of debt is finalized between IDM and KDM.
The municipality does make an extra effort to ensure that creditors are paid within 30 days as per MFMA, there are however instances where certain payments may be delayed due to queries, whereas only when queries are resolved payments will be processed.
As I close, I invite the Council to consider all recommendations as required by Municipal Budget and Reporting regulations as set out in the item.
Thank you!
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