STATEMENT BY THE MAYOR OF KWADUKUZA MUNICIPALITY, CLLR. LINDILE NHACA AT THE OCCASION OF THE OCCASION OF TABLING DRAFT MEDIUM TERM REVENUE AND EXPENDITURE FRAMEWORK (MTREF) FOR THE 2024/2025 FINANCIAL YEAR FOR PUBLIC CONSULTATION
This is a watershed moment as the Medium Term Revenue and Expenditure Framework informs how council will be apportioning its budget over the medium term which considers the two outer years.
This happens at a time where Islam communities throughout the world are observing the holy month of Ramadan which begun at the first sighting of the crescent moon on the evening of Sunday, March 10. For the Muslim community, this is a month of prayer, community, and reflection.
Ramadan encompasses more than mere acts of fasting and prayer; it serves as a reminder of the depth of the Islamic religious convictions and a joyous commemoration of the indomitable spirit of the Islam community.
We are worried about the constant bombardment playing out in Palestine which has brough about acute devastation of unparallel proportions to its inhabitants. The Palestinian people have been tested and it is even more difficult to comprehend what Ramadan looks like in Palestine where over 1.7 million people have been displaced in severely overcrowded shelters without food and clean water during this fasting period.
We therefore join millions in condemning the atrocities against the people of Palestine who are consistently targeted by Israel forces that are aided unabated by their allies.
On that note, we welcome yesterdays, United Nations Security Council resolution which demands an immediate ceasefire in the Gaza Strip for the Holy Month of Ramadan. We trust that this resolution will broker lasting peace in that part of the world. May the people of Palestine come out stronger during this period of fasting in the knowledge that we as a nation lived through similar atrocities prior to the attainment of democracy.
Fellow members, the draft budget before you took into account, a number of priorities that serve a blueprint for improving the well-being of our people, encompassing social, cultural, and economic aspects which includes:
· The protection of the poor
· Sustainable development
· Forging long-term growth
· Addressing sector barriers to growth and investment amongst other factors.
True to this fact, the Premier of KwaZulu-Natal, in her State of the Province Address also pointed out that as the government of the ANC, we are committed to tackling the increasing cost of living, promoting freedom for all, revitalizing our economy, and generating employment opportunities. We also share the goal of reshaping our economy through the promotion of inclusive industries.
Therefore, in compiling the Medium Term Revenue and Expenditure Framework, the following significant assumptions were highlighted.
Our municipality is facing inflationary increases and economic pressures due to several factors. These include the impact of setting cost-related tariffs, the influence of Consumer Price Index inflations on general tariff increases, a higher unemployment rate leading to indigent households, the global economic status hindering consumers' ability to settle debt on time, interest rates for borrowings and investment of funds, as well as the lower investment grade status of credit ratings outlook.
The rise in fuel costs for the forthcoming fiscal year will also have a notable effect on how we do business. Additionally, the number of individuals qualifying for municipal indigent assistance may increase due to the current economic conditions, necessitating a greater allocation of resources towards supporting the indigent population.
Consolidated Overview of the 2024/2025 MTREF
The overall expenditure for the draft Medium Term Revenue and Expenditure Framework has been appropriated as follows:
The total operating expenditure for 2024/2025 is set to be R 2,7 billion. For the outer years; 2025/2026 and 2026/2027, it will be R 2,8 billion and R 3 billion respectively.
The total capital expenditure for 2024/2025 is proposed to be R 286 million. For the outer years; 2025-26 and 2026-27, it is to be R 211 million and R 152 million respectively.
The detailed Draft capital budget amounts to R 286,2 million for the 2024/2025 financial year and it is broken down as follows:
· R8.4 million for Community and social service
· 125,5 million for Energy sources
· 12.1 million for Executive and council
· R19.6 million for Finance and administration
· 8.8 million for Housing
· R8.4 million for Planning and development
· R14,4 million for Public safety
· R71,8 ,million for Road Transport
· R14,2 million for Sports and recreation:
· R2.6 million for Waste Management:
The proposed overall of the next financial year will therefore be R 3,002 billion and the indicative years will rise to R 3,063 billion and R 3,184 billion as captured on the item.
Total operating revenue is expected to grow by 4% for the 2024/2025 financial year when compared to the 2023/2024 Adjusted Budget. For the two outer years, operational revenue will increase by R136 million and R180 million respectively.
FUNDING SOURCES
The funding model of the Draft MTREF 2024/2025 is dependent on the following:
· The anticipated amount of revenue from Property Rates in the budget year is R 732 million, which includes budget allocation of R15m for Special Rating Areas. The anticipated amount of revenue from Service Charges in the budget year is R 1 502 bn.Service Charges consists of revenue streams from Electricity and Refuse Removal.
· Draft Property Rates are to increase by 5% in 2024/2025 financial year and 25% rebate where applicable.
· Council also proposes maximum increase of 10,5% in Electricity tariffs subject to the consultation and approval from NERSA.
· The plans and processes to reduce energy losses in the upcoming year will be robustly be reviewed during the public participation process and should these not be deemed to result in sufficient reduction of energy losses the bulk purchases budget will be adjusted by a commensurate value.
Employee related costs and council remuneration account for 24% of the total operational budget are as follows:
· R 602 million for Employee Costs
· R 37 million for Councillor Remuneration
· Other expenditure amounts to R146 million
FREE BASIC SERVICES
Through the Indigent Policy framework, the municipality will be making provision for 100 kwh of electricity each month, at no charge to indigent consumers. Thanks to the “Equitable Share” grant which enables municipalities to provide basic services to indigent households in an affordable manner. However, the beneficiation threshold for indigent households is proposed for R5000.00 for the upcoming financial year, contrary to the current amount of R4500.00.
Various indigent services, both direct and indirect, are offered to households residing in designated areas. These households receive specific benefits simply by living in these areas. Refuse removal tariffs have been increased on average by 8%. This increase will assist in allowing basic refuse removal services to be delivered to the community with maintained assets to meet the increasing demands of refuse removal. Properties with a value below a certain threshold are also eligible for a 100% rebate on rates.
Madam Speaker, we present a budget that prioritizes service delivery and which places a strong emphasis on infrastructure maintenance. Some may perceive the proposed tariff hikes as excessive, surpassing the inflation forecast. Critics may argue that we are disregarding the challenges faced by our community. However, it is important to note that the budget Steering Committee conducted a thorough investigation and formulated several preliminary assumptions. The budgeting process inherently looks towards the future, necessitating the forecasting of principles and assumptions months in advance. These assumptions are generally in line with the local conditions and the overall economic outlook of the nation.
In the past couple of years, our tariff increases have been tied to inflation. Actually, some of our tariff hikes have not only been lower than the inflation rate but also lower than the cost increases associated with those services.
To ensure that we can maintain our service standards and recover our costs, it is crucial for us to implement tariffs that accurately reflect the costs involved.
President Ramaphosa in his State of the Nation Address also pointed out that for services to be delivered, local government has to work. This is how we are making it work. The draft budget has set out pro-poor interventions for our communities especially during a time of global economic austerity and downturns. We continue to deliver the following:
1. Delivering low-cost housing,
2. Helping local children with full school uniform every year,
3. Providing tertiary institutions with financial assistance,
4. Rates exemption to qualifying properties,
5. Providing rates rebates for child headed families and senior citizens.
6. Providing free basic refuse removal to indigent communities,
7. As well as free basic electricity for qualifying households
Ladies and gentlemen, I must also indicate that in terms of our cash flow, we are in a financially stable position.
In order to mitigate the potential long-term effects on KwaDukuza's financial stability, the Council has taken proactive measures by implementing a funding and reserves policy. This policy establishes the minimum funding goals that the Council should aim to attain in the medium and long term. A phased approach will be employed to achieve a harmonious balance between service delivery and financial sustainability.
Service Charges for Electricity and Refuse
Revenue generated from Electricity and Refuse service charges for 2024/2025 financial year amounts to R 1 502 billion which indicates 55% of revenue generated as follows:
· R 1,39 billion on Electricity
· R 103 million on Refuse
The council has initiated several measures to improve the collection of service charges revenue. These measures include:
1. Revenue Enhancement Projects
2. Development of an Energy Losses Task Team which will assist in the reduction of energy losses.
3. A contractor has been appointed for the disconnection/reconnection of electricity as well as meter inspections.
4. Implementation of the Meter Replacement Programme
5. Implementation of the Municipal Data Cleansing Project.
CAPITAL EXPENDITURE OF THE MTREF
The Capital Budget focuses on the IDP objectives and will be on delivering on the following priorities:
· i. Increased focus on Civil and Electrical Infrastructure.
· ii. Increased focus on catalytic projects to stimulate econonic growth.
In order to adhere to best practices, the Council is required to allocate 40% of the capital budget for the purpose of renewing existing assets. In past fiscal years, only 27% of the budget was allocated for this purpose, as most of the rural wards in the Municipality still needed new infrastructure such as roads, sports fields, community halls, and daycare centers. However, for the 2024/25 Draft Capital Budget, the Municipality has allocated 45% towards the renewal of existing assets, while 55% is designated for new assets. This change is a direct response to the impact that recent weather patterns have had on the municipal infrastructure. From heavy rainfall and storms to extreme heatwaves, the infrastructure systems including roads, bridges, sports fields, buildings, and electrical networks have been significantly affected.
Madam Speaker, for the upcoming fiscal year, our main priority will be to invest in and maintain infrastructure. This will provide a strong foundation for our local economy, while also working towards achieving a clean audit. Additionally, our focus will be on creating opportunities for economic recovery and attracting investment to KwaDukuza.
We have also made significant investments in capital infrastructure in recent years, which is why we need to allocate more funds to repairs and maintenance.
Ladies and gentlemen, we look forward into receiving meaningfully inputs and comments from our communities and political parties represented in this august house, through the planned public participation and stakeholder engagements which will be held in the coming month of April. The Schedule of Key Deadlines is enclosed on the item before you.
In order to support our residents and businesses who have been impacted by the economic challenges, we have proposed implementing tariffs at the lowest possible rates. This is an important measure we have taken in this process.
Fellow councillors, I want to assure you that the BSC has diligently formulated this budget in line with the circular guidelines from the National Treasury and the Municipal Budget and Reporting Regulations. We have taken into consideration the limited resources at our disposal. According to Section 152(2) of The Constitution of the Republic of South Africa, 1996, it is our responsibility as a municipality to strive towards fulfilling the goals of local government, within our financial and administrative capabilities. Rest assured, we are fully committed to fulfilling this duty.
This draft budget is testament of a caring government and this Council hereby makes a commitment that it is determined to look after all residents and do more especially during these challenging times. It also demonstrates our commitment to alleviating poverty, fostering economic growth, and enhancing infrastructure development and service delivery.
Speaker, I present to the house, the 2024/2025 financial year and the two outer years’ budget patterns for engagement and for the purposes of public consultation upon consideration.
I thank you!
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