Tabling of the 2023/2024 Third Quarter MFMA (Section 52(d) budget and performance assessment report by the mayor of KwaDukuza, Cllr. O.L. Nhaca at the KwaDukuza Town Hall

Madam Speaker, I rise once again to present the third Quarter Budget and Performance Assessment Report of the municipality in terms of Section 52d of the MFMA which requires the mayor to submit a report to Council on the implementation of the Budget to outline the financial state of the Municipality in terms of revenue and expenditure for the last quarter.

 

This report will therefore focus on the third quarter which commenced from January ending 31 March 2024 on the Municipal Financial System.

I firstly wish to extend my heartfelt condolences to the family, friends and collogues of Sithembiso Nkomanisi (19) who worked for Ijubane Investments and contracted as a technician to KwaDukuza Municipality. He lost his live following an incidental electrocution in the line of duty yesterday - allegedly in an attempt to save his colleague, Kwanele Ngema (19) who was experiencing electrical shocks at the Nkobongo Sub-station yesterday. Death has indeed robbed us of a dedicated servant of the people. We mourn his death together with his family, and with company that he worked for, the electricity department and those who knew him. On the same breath, we pray for Ngema’s full recovery whilst he remains in hospital due to injuries.

Economic outlook

Ladies and gentlemen, the impact of adverse global events continues to pose a major challenges and this impedes governments role in fulfilling their obligations and diminishes the country's growth prospects.

The municipality is indeed operating under a tough economic pressure with the enduring impact of a sluggish economic recovery post-Covid-19, coupled with rising costs of basic services and living expenses, increased unemployment rates, rising fuel, energy, and food prices, and recent natural calamities. These factors have played a significant role in impeding the prompt settlement of old debts. With such economic conditions, it is unlikely for consumer debt to see the significant decrease in the upcoming fiscal year. 

Revenue collection

As of March 31, 2024, the total amount owed by consumer debtors is R335 million. This figure represents a decrease of R6,7 million compared to June 30 of 2023. The majority of the debt in this category is overdue by more than 150 days.

During the 2023/24 financial year, various measures have been implemented to enhance revenue. These include:

·      Inspecting faulty meters,

·      conducting back-billings for rates and electricity,

·      reviewing refuse and consumer deposits,

·      and implementing rate coding.

These initiatives have led to an increase in overall revenue, which is reflected in the overall debt accumulated during the year.

The total amount owed by debtors, which includes both consumer and miscellaneous debtors, is R 375m. The outstanding balance owed by miscellaneous debtors has been steadily rising, mainly due to the poor collection of rental income from municipal properties.

Overall, the current collection rate as of March 31, 2024, stands at 100.40%. In comparison, the collection rate for the previous financial year (2022/23) was 95.95%.

On Cash reserves and Financial Ratings

As of the end of March 2024, the reserves of KwaDukuza Municipality have increased, resulting in approximately 2.6 months' worth of available cash. This represents a remarkable improvement compared to the previous closing coverage of 2 months cash availability in June. It is vital to closely monitor collections throughout the financial year to maintain our financial stability.

True to form, KwaDukuza has achieved the highest rating for financial stability among municipalities in the province and ranked sixth in the country on the Municipal Financial Stability Index that is published by Ratings Afrika annually. This rating is based on our performance, management of liabilities, budget practices, and liquidity position.

Our strong financial position is testament of prudent financial management which enables the municipality led by the African National Congress (ANC), to effectively deliver and improve its infrastructure, as well as maintain reserves to withstand any potential financial challenges. These outcomes validate our commitment to maintaining sound budgeting practices, generating revenue effectively, and effective oversight.

Municipal Excellence Awards

In addition, KwaDukuza in the last quarter received three converted awards from the KwaZulu-Natal Department of Cooperative Governance and Traditional Affairs for Best Sustained Financial Management, the Cleanest Townships and Best Waste Management Outreach Programme at the occasion of the 2024 Municipal Excellence Awards.

 

Our municipality continues to heightened confidence in the province by clearly reflecting our commitment at enforcing strict controls, maintaining a strong liquidity position, practicing effective budgeting, achieving operational excellence, managing liabilities, and combating maladministration. We attribute these successes to our hard-working finance team and foresight of management and wisdom of council.

I am therefore thrilled about the progress we are making. Such accolades are not only attractive but true to our long-term goal of repositioning KwaDukuza to become the face of the province and as a preferred tourism destination in the country.

 

Energy Action Plan

 

Ladies and gentlemen, as we commemorate Freedom Month, we also anticipate activities that will be taking place in the month of May as we observe Energy Month. It is this month where we are said to host our long awaited Energy Indaba. I say this on the context that by the end of the quarter, cumulative energy loss amounted to R237 million, with a consumption of 132,195,955 kwh and total losses of 25.24% of electricity purchases.

The municipal energy losses have surpassed the norm of 6% to 12%, being more than double the acceptable range. Such significant losses pose a serious threat to the council's financial sustainability.

In terms of the Third Quarter assessment, the actual revenue billed or collected to date is R1,8 billion. The negative variance of approximately R 75,5 million or -4% is recognised at the end of the quarter under review. The actual expenditure to date is R 1,7 billion. A negative variance of R 240 million or - 12% has resulted at the end of the quarter under review.

On Revenue

By the end of March, there was a positive variance of R24,6 million in revenue compared to the budget. This can be primarily attributed to the reduced capital expenditure on the projects related to the Disaster Response Grant, which resulted in a higher balance of cash and investments. Consequently, interest was generated during the Third Quarter under review. Furthermore, the expected decrease in interest rates did not materialize, resulting in increased interest income from the capital balances.

The EDTEA funded Vuthela Project with a budget allocation of R6,625m remains unspent at the end of the quarter under review. The budget has been requested for roll-over into the 2024/25 financial year.

The contributing factors for the under collection or billing includes Service Charges on Electricity Revenue which reflects a negative variance of R100,7m.

 

On expenditure

The budgeted operating expenditure for the third quarter of the 2023/24 financial year was R1,9billion. However, as of March 31, 2024, the actual expenditure recorded was R1,7billion. This indicates that the municipality has experienced a negative variance of approximately R240m in terms of expenditure.

On employee related costs

 

The employee related costs show a negative variance of R27 million, which is 6% as at end of March 2024. The variance is as a result of the timing of the filling of vacant positions, resignations, and untimely loss of municipal officials. Recruitment processes have been finalised for many of the vacant posts and expenditure has commenced from October 2023. However, the filling of various prioritised posts highlighted by business units is dependent on the approval of the organogram.

Fellow members, expenditure of overtime also remains a serious concern as we proceed towards the end of the financial year.

On Capital budget

 

Council approved R 950 million as a capital budget in the current financial year with the majority of the funding being allocated towards electrical upgrades, road infrastructure projects and community recreational facilities.

 

The capital grant and public contribution allocation for the financial year is R 897,236m, and consists of:

·      Municipal Infrastructure Grant (MIG) – capital allocation of R 47 million with 56% expenditure being reflected. 

·      Energy Efficiency and Demand Side Management Grant (EEDSM) – capital allocation of R 4,3 million which is fully spent at the end of March with a further R2 million in terms of the previous item.

·      Municipal Disaster Response Grant – A total of 37% expenditure is being reflected at the end of March and this is concerning.

·      Municipal Disaster Recovery Grant – the Municipality has been allocated a further capital allocation of R19 million (excl. vat) for the Reconstruction and Rehabilitation of Infrastructure that was damaged due to the impact of storms that occurred in 2019. R 8,6 million expenditure is reflected on the grant as approval of the disaster related capital projects.

·      Internally Funded Civil Engineering Projects – R11,4 million is spent of the R18,3 millionbudget allocation.

Fellow members, with these remarks, I hereby present 2023/2024 Section 52(D) Third Quarter Budget and Performance Assessment Report for consideration and approval as is set out in the item before you.

Thank you