Address by the mayor of KwaDukuza mayor of KwaDukuza, Lindile Nhaca at the occasion of the second adjustment budget for the 2023-2024 Financial Year on 28 February 2024

2023/2024 Adjustment Budget Report delivered by mayor of KwaDukuza, Cllr. Lindile Nhaca, at a council meeting held on 28 February 2024 at the Town Hall

Speaker of Council;

Whip of Council;

Members of the Executive Committee;

Representatives of the Local House of Traditional Leaders;

Members of Council;

Municipal Manager and Senior Management;

Members of the Public;

Members of the Media present;

Ladies and gentlemen, 

We hold this important occasion during an interesting period in our democracy, where the entire nation is commemorating thirty years since the non-racial, non-sexist, and democratic government was elected by the people in 1994. The democratic breakthrough was an effort by selfless leaders of the liberation movement who were driven by the aspirations of build a society that is more united and prosperous.

Members, KwaDukuza municipality will therefore hold a number of activities aimed at commemorating the thirty years since the dawn of democracy which was ushered in by countless anti-apartheid revolutionary leaders.

The likes of Chief Luthuli, Oliver Tambo, Steve Biko and many others leaders of the African National Congress played a formidable role in waging the liberation struggle against imperialist forces.

The government of today still continues to deliver to its people and that’s why ladies and gentlemen before I focus on the business of the day, I wish to highlight a few matters of strategic importance as we continue to deliver to our people.

Accolades

Recently, the MEC for Cooperative Governance and Traditional Affairs in KwaZulu-Natal honored KwaDukuza Municipality with two prestigious awards in the following categories:

1. Exceptional financial management and outstanding efforts in maintaining clean townships and managing waste.
2. The MEC acknowledged Shakaville and Lindelani as the cleanest townships in the province, along with their waste management outreach programme.

Additionally, KwaDukuza was recognised as the most financially stable municipality in the province which goes without an argument that we are financially prudent. 

This achievement will further instil confidence among the people of KwaDukuza and seek to reposition the municipality as an attractive investment and tourism destination.

Masakhane Campaign

With the roll-out of the Masakhane Campaign two weeks ago came out very strong and impactful. We appreciate the multi-disciplinary teams that were at work for ensuring that our communities pay for services and that they comply with municipal bylaws.

The offensive once again proves that more needs to be done on the law enforcement front whilst acknowledging the privileges bestowed upon individuals by the Constitution and laws of the Republic.

We are happy that this campaign which was widely communicated on social media was able to expose a lot of wrongdoings which amongst others included meter tempering, business non-compliance and food safety. Some of those who have raised an outcry on media channels have come forth in a point of admission for their wrongdoings and they have already started paying for their services. This is the true spirit of Masakahane!

We remain committed to upholding the law, regardless of any backlash we may face from individuals who take delight in spreading falsehood through their social media platforms.

I wish to congratulate the multi-disciplinary teams for their dedication and resilience during this campaign. We will continue to spread the message and enforce the law until we realise a positive turnaround in our revenue generation stream.

Speaker, allow me to indulge in my report and to seek approval from members of this august house for the 2023/2024 Adjustment Budget. This is the second adjustment during the financial year, delivered in compliance with Section 28 (2) of the Municipal Finance Management Act. It is important for council to note that with this adjustment, the municipal tax and tariffs for 2023/24 will not be affected.

The 2023/2024 Medium Term Revenue and Expenditure Framework Budget has prioritized key strategic concerns that impact our economic landscape. These include but are not limited to the rise in inflation rates and the economic pressures experienced in various sectors. Specifically, the approved budget focused on the following areas, which remain true for the Adjustment Budget:

The municipality's general tariff increases are influenced by the inflation of the Consumer Price Index.

The municipality is also facing a rise in indigent households due to a higher unemployment rate. 

The consumer's ability to settle debt promptly is hindered by the global economic outlook, leading to a conservative revenue projection approach. Eskom's tariff application for the supply of bulk electricity has been approved by the National Energy Regulator of South Africa (NERSA) at a rate of 18.49%.

·      The interest rates for borrowing and investment of funds are also taken into consideration.

·      Additionally, the credit ratings outlook indicates a lower investment grade status.

Total Expenditure

The municipal expenditure during the Adjusted Budget is estimated as follows:

Description	Budget year 2023/24	Adjustment 2023/24
Total operating expenditure	R2,5 billion	R2,6 billion
Total capital expenditure	1,13 billion	1,15 billion
Total	3,72 billion	3,77 billion

Funding Sources

The projected revenue from Property Rates for the upcoming fiscal year is estimated to be R 696 million.

The expected revenue from Service Charges in the budget year is approximately R 1.3 billion. Service Charges comprise income generated from Electricity and Refuse Removal services.

Government Grant allocations

The original budget assumptions remained unchanged. It is important to mention that no extra operational funding was obtained, and the expenses related to the disaster were covered by the existing operational expenditure budget. As a result, there is no impact on the adjustments made to the Council-approved second adjusted budget.

Expenditure

Bulk Purchases

The budget allocated for Bulk Purchases has been raised by R80.8 million, with ESKOM Bulk Purchases seeing an increase of R81 million and a decrease of R200,000 in utility payments for Eskom areas.

The purpose of increasing the budget is to prevent the municipality from incurring unauthorized expenses at the end of the year. As of December 2023, the cumulative energy losses amounted to R175 million, resulting in total losses of 26.47% of electricity purchases, far exceeding the industry norm. 

Considering the current rate of energy losses, as well as other transmission costs and billings, the energy service is currently operating at a loss and poses a significant threat to the council's financial stability. We look forward to holding our energy Indaba in March so that we consider decisive steps in addressing this abnormality.

As a quick win, the Electricity Business Unit must take the lead in replacing faulty prepaid and maximum demand meters promptly, using the Masakhane campaign as a vehicle.

·   Contracted Services - The budget for the contracted services has been increased by R17,5m. The budget has increased from R367m to R384m.

Consultants and Professional Services have been decreased by R8,5 million which mainly relates to projects over the MTREF that have been considered for roll-over.

Contractors – R8m additional budget request which mainly caters for the maintenance of vehicles, buildings, and electrical and road infrastructure.

Outsourced Services – R18m additional budget request will cater for current contractual obligations.

Employee Related Costs - The municipality has decreased the employee related costs by R21m due to a number of factors as reflected on the report.

Impairment Loss – The increase in the budget of R 20,8m relates to provision for non-collection (debt impairment) under exchange and non-exchange revenue.

Interest Dividend and Rent on Land (Finance Charges) – The allocation for the Dukuza Substation Project has been reduced by R4.3m due to the rollover of a R20m loan. Currently, the capital budget allocation stands at R10m.

Bad Debt Write Offs – The municipality has reduced bad debt write off budget allocation by R6.5 million, demonstrating our commitment to financial responsibility. So far, the municipality has written off a total debt amounting to R479,000. This achievement highlights our efforts in managing and minimizing financial losses.

·   Operating Leases – The budget has been adjusted by R1m to cover the leasing of community assets and machinery and equipment. The expenses for renting the OK Mall Building fall under this category. The initial budget only accounted for 6 months of rental costs.

·  Transfers and Subsidies reflects R45,3m decrease in budget allocation which is a direct result of decreasing the Housing Contract expenditure, which has an equivalent revenue stream. It has been established that the DOH will be making direct payments to contractors going forward, hence there’s a need for the reduced budget allocations on both the revenue and expenditure categories.

Capital Adjustment Budget summary

The initial capital budget approved by the Municipality for the current financial year was R 950.8 million. This budget primarily focused on funding electrical upgrades, road infrastructure projects, and community recreational facilities. However, during the Special Adjustment Budgets, the budget was increased to R 1.139 billion.

This increase was a result of approving the unspent grant roll-over application for the R 1.2 billion Disaster Response Grant and the R 109 million Disaster Recovery Grant. Additionally, there were downward adjustments of R 4.1 million to the Municipal Infrastructure Grant (MIG) and R 13.267 million to the NDPG allocation.

During the February Adjusted Budget, the capital budget has been further increased by approximately R 20.7 million in the current Adjusted Budget.

Our disaster expenditure remains a huge concern as we have only a few months to work on outstanding projects. Significantly, as councillors we need to strengthen oversight on disaster projects to ensure that these projects are delivered to our people.

On Energy Sources, the majority of the R20,7m additional budget request, falls under the Electricity Business unit as reflected on the report.

o   A sum of R6 million has been requested from internal funds for the SCADA Project. The purpose of the additional funds is to cover the changes made to the project's specifications.

o   An increase of R2 million has been allocated to the Cluster G MV Network project. These funds have been obtained from the Municipal Fleet budget. An additional R7 million in internal funding has been provided for the Housing Electrification Projects - bringing the total budget allocation to R14,1 million. The project has incurred expenses amounting to R6 million so far. The request is aimed at accommodating TRUs.

o   Ward clusters have received a budget increase of R3.5 million for the installation of new streetlights. The entire budget allocated for the refurbishment of street lights has been fully utilised. The budget allocation for the Dukuza Substation project, funded by a loan, has been reduced by R20m.

o A total of R14 million has been allocated for the funding of Electrical Spares Capitalization.

o   Additionally, an extra budget of R3 million has been requested for the Grid Protection Relays project. The purpose of this funding is to accommodate the necessary modifications to the Relays, enabling them to incorporate SCADA system functionality.

Executive & Council – a total of R395k additional funds have been requested for the Nonoti MV Network Project. The projects which fall under this function are:

o   Ballito Taxi Rank

o   KwaDukuza Taxi Rank

o   Nonoti MV Network

o   and the CCTV Project

Finance and Administration reflects R2,4m decrease in budget allocation.

On Housing, a request has been made for R1.5m to address the flood-damaged areas by improving the Ablution Facilities.

Planning and Development – R5,3m additional budget request as reflected on the report. 

The budget for the upgrade of the OK Mall and Shoprite Checkers Public Parking has been combined into the ABM Infrastructure Upgrade Projects. The ABM Infrastructure Upgrade Project is a long-term project, with the current financial year focusing on the upgrade of the OK Mall Parking.

Waste Management Services are on a downward adjustment of R585 000.

Capital Funding

Council

Council funding shows a R40,6m increase in the Adjustments Budget. 

Grant Funding

• The Civil Business unit has made provisions for the R129k MIG rollover.

• The Housing Accreditation which was originally R142.5k, has been adjusted downwards to cover employee-related operational expenses.

• The MIG allocation was reduced by R4,1m, and the entire NDPG allocation of R13,2m was also withdrawn.

• In addition to this correspondence, the Municipality has received a withholding of NDPG funds amounting to R5.3m out of the total R13,267m due to non-compliance or non-performance. The matter has been brought to the attention of Provincial Treasury.

Ladies and gentlemen, on behalf of the Council, I would like to express my gratitude for the valuable contributions of different Business Units led by the accounting officer in preparing this adjusted budget which will be submitted to the National Treasury, the Provincial Treasury, and Department of Co-operate Governance and Traditional Affairs.

In his State of the Nation Address, President Ramaphosa pointed out that too many municipalities are failing on governance, financial and service delivery measures and his office has started the implementation of a number of measures to address this problem “by providing support to local government, including professionalising the civil service and ensuring that people with the right skills are appointed to key positions”, We are proud that KwaDukuza cannot be named amongst the poorly managed municipalities. This is a result of the strong oversight from council structures coupled with an empowered workforce and systems.

Ladies and gentlemen, in compliance with sub-regulation 26 of the Municipal Budget and Reporting Regulations, the accounting officer is required to make the revised budget available to the public in accordance with section 21(A) of the Municipal Systems Act.

It is important for the Council to take note that the Provincial Treasury S72 Mid-Year Budget & Performance Assessment Report has been included as supporting documentation.

Speaker, in the item served before Council, the recommendations are set out in the Adjustments Budget Item for further indulgence. 

I herewith formally submit recommendations of the adjustment budget on page 5-7 of the Council Agenda for consideration and approval of the 2023/2024 second Adjustment Budget.

Thank you.