By the Chairperson: Budget & Treasury Standing Committee

BUDGETBUDGET SPEECHSPEECH 2010/112010/11

BY THE CHAIRPERSON: BUDGET & TREASURY STANDING COMMITTEE, CLLR A SCHOLTZ INTRODUCTION

The Honorable Speaker The Executive Mayor The Chief Whip Members of the Mayoral Committee Councillors of the NMBMM The Municipal Manager Officials of the NMBMM Distinguished Guests and Citizens of the Metro

The national wealth of our country, the heritage of South Africans, shall be restored to the people ; The mineral wealth beneath the soil , the Banks and monopoly industry shall be transferred to the ownership of the people as a whole; All other industry and trade shall be controlled to assist the wellbeing of the people ; All people shall have equal rights to trade where they choose , to manufacture and to enter all trades, crafts and professions, Freedom Charter, 1955.

It is indeed an honour and a privilege for me to join our Executive Mayor, Councillor Zanoxolo Wayile, in tabling before you, and all the citizens of our Metro, the budget programme for the 2010/11 financial year. It should be noted that after the initial tabling of the Budget in accordance with the legislative requirements, the Budget was subjected to a public participation process. The key service delivery priorities emanating from this process forms the basis of the Budget tabled before you here today.

Why this clause is significant as we table this budget to this Council. ?

This clause contains six (6) key strategic messages such as;

 National wealth- A heritage of all South Africans , not a selected few  Owners of South African wealth and all South Africans and must be restored to the people  Mineral resources beneath the soil and productive assets of the economy such as industries, banks, land , monopoly industry must be transferred to the ownership of the people as a whole - 2 -  All other industries must be controlled to assist the wellbeing of the people  All people must be have equal rights to trade where they choose  Skills development and empowerment in areas such as crafts and professions must be promoted amongst the people. The Freedom Charter specifically refers to South Africans as owners of South African wealth, in this regard; it calls for a human solidarity to share this wealth, our heritage with the people as a whole.

Madam Speaker, it is now 55 years since this clarion call was made and recorded in 1955. Both as a country in general and as a nation in particular, we are far from achieving this reality, but there is a tremendous progress we making in various areas such as electrification of township, transfer of resources to improve the living standards of our people.

Madam Speaker, in tabling this Budget, we must recognize serious constraints facing us and conditions imposed on us by the system of capitalism. These are constraints that make us not achieve fully the ideals of the freedom charter. In this regard, we need to acknowledge that a “state” by its nature, it is a product of class contradictions, and as such, an organ of class power and class rule.

Taking this point further, Karl Marx, (Capital, vol.1) correctly states that, “The accumulation of wealth at one pole of society involves a simultaneous accumulation of poverty, labour torment, slavery, ignorance, brutalization, and moral degradation, at the opposite pole.”

This Budget is being tabled for adoption against the backdrop of a number of challenges which face South Africa, the world in general and our region in particular, Nelson Mandela Bay Metropolitan Municipality. Among these are the global economic recession which has affected all of us and exacerbated poverty and unemployment.

This global economic crisis exposes serious failures of a capitalist system and its inability to solve the problems facing the global human family of nations in the global, particularly the poorest of the poor.

- 3 - There is also acknowledgment even by anti-Marxist and anti-democratic forces and various elements constituting enemies of democracy and development , but posing as public opinion makers, independent reactionary analysts, bourgeoisie apologists , that the system of capitalism is losing its grip and is in a deep crisis.

However, this budget is presented today under condition of not of our own choosing , therefore , we should recognize that we are living under a capitalist system whose mode of production and accumulation continue to produce mass poverty, mass hunger , shedding jobs in a massive way as opposed to our agenda of building a strong , active developmental state, ultimately , with our goal of building a non racial , non sexist , democratic , a prosperous, united , cohesive and a caring society.

As a country and as Nelson Mandela Bay Metropolitan Municipality, we recognize we fully all the social ills, service delivery backlog and centuries of colonial legacy and since 1994, the ANC together with its Alliance components, we have made progress to address the apartheid legacy under very difficult conditions with reactionary and right wing forces undermining our efforts, instead, embarking in a cheap political publicity campaign aimed at projecting the ANC’s failure to deliver. But our people remain revolutionary vigilant and will not be misled by anti-democratic and anti-development and reactionary forces. It within our understanding of the plight of our people that led the ANC government to declare this year as the year of service delivery with clear priorities such as education, health, crime, housing , rural development particularly in the peri- urban/rural communities.

Ladies and gentlemen, the impact of the global economic recession has indeed hit Nelson Mandela Bay and has started to affect our revenue base. Also the growing unemployment has meant that more of our people have become indigent and now depend on government for greater assistance. The consequences of the economic recession have put increased pressure on this budget.

However, the biggest challenge that remain with us is the lack of a reliable data on massive job losses , a lack of a credible instrument to quantify this impact in monetary terms , but , clearly , scourges of poverty , unemployment rate and the decline of income is observable in our peoples inability to pay for municipal basic services. This budget makes a provision for the poorest of the poor who qualifies for indigent subsidy and this

- 4 - constitute but one element of our commitment as a caring municipality committed to serve the people.

Despite these challenges, we have made significant progress as confirmed and acknowledged by various institutions. Among these are:

(a) For the second consecutive year, the Municipality achieved an unqualified audit opinion.

(b) By December 2008, the Municipality had met the national target for the provision of water within a 200m radius of households within the urban edge.

(c) The receipt of the National Vuna Award for first runner-up as best Metropolitan Municipality in South Africa.

(d) The Nelson Mandela Bay Municipality’s efforts to keep the City clean were rewarded when it was announced as the winner in the Metropolitan Category of the Cleanest Town Competition in 2008/09 by the Department of Environmental Affairs. It is acknowledged that there is still a problem with the illegal dumping of builders’ rubble and household refuse throughout the Nelson Mandela Bay.

(e) The magnificent Nelson Mandela Bay Stadium, which is a world-class facility, was completed in December 2008. The construction period of 22 months represents a world record for the building of a stadium of this size.

(f) In 2008, for the third year running, the Red Location Museum of Struggle bagged another prestigious award – the Diamond Arrow award from the Professional Management Review (PMR) as an Eastern Cape Leadership Achiever.

This confirms our commitment and striving for excellence in governance and service delivery.

- 5 - The 2008/09 unqualified audit report issued by the Auditor General’s office represents the second year in a row that the Municipality has achieved this status.

Ladies and Gentlemen, the financial status of the Municipality is sound and stable as confirmed by a Moody’s Credit Rating of Aa3.za which translates into our Municipality having a strong financial performance, good liquidity and cash management.

STRATEGIC POLITICAL LEADERSHIP COLLECTIVE

Madam Speaker , allow me to congratulate our Executive Mayor , for being a visionary , dynamic , hard working and selfless revolutionary who , within a very short period of six month undertaken very successful programmes involving our people on the ground. Some of the excellent programmes include but not limited to the following;

 100 days strategic institutional turn around programme  Mayoral Outreach Programme  Mayoral Strategic Retreat  Stakeholder Engagement and Sector Consultation Programme  IDP/ Budget Public Consultation Programme  The Mayoral Cup Challenge Programme  An institutional Turn Around Working Document  Performance Management Seminar  Economic Summit

This budget takes into account all the lessons learnt from these programme, the message we received from stakeholders, civil society, labour private sector and communities.

- 6 - INTEGRATED DEVELOPMENT PLAN

Madam Speaker, we also table before this house today, the Integrated Development Plan (IDP). The IDP has been developed following extensive and intensive consultations and engagements with all stakeholders and most especially the poorest residents of Nelson Mandela Bay. We can therefore proudly proclaim that this IDP is indeed a reflection of the aspirations, needs and priorities of the people of Nelson Mandela Bay. Although the 2010/11 Budget gives effect to the implementation of the IDP, it is important to note that, we have inherited from apartheid system and minority white rule , of which DA was part of the apartheid regime and its machinery which created all human miseries , suffering , poverty , hunger and starvation of our people. Some of the realities that this Budget had to take into account are;

 Racial segregation of residential areas, amenities and great disparities in the levels of services provided to different communities.  Disparities between areas in terms of their economic activities and tax base  The growth of informal settlement and housing backlogs, mainly affecting poor working class families  Long traveling distances between work places and residential areas, especially the working class using public transport system  Development of urban sprawl and decline in central business activities  Land use and ownership as well as land audit; both land use and land tenure were crucial in shaping and determining the future of South Africa.  Inadequate infrastructure characterized by leaks, breakages and poor condition, particularly in the working class communities.  High levels of unemployment.

These are some of the challenges that this Budget takes into consideration and is aligned with the municipal IDP. This Budget is informed by five key strategic principles of IDP Process, namely

(i) Participation and Community involvement (ii) Strategic Focus (iii) Integration (iv) Prioritization (v) Delivery Orientation - 7 - BUDGET 2010/11

Madam Speaker, the budget before this house today proposes combined Capital and Operating expenditure of R7.823 billion for the 2010/11 financial year.

Budget Allocation According To IDP Priorities

The following table and graph shows the apportionment of combined Opex and Capex in terms of IDP priorities. d d e n d n c c a n i a

t t t e

n a n r y

n n n m a l n c r l o u i y e e e i o a n o l t y e a t t i i i r t l n p c t b v l m m m i a i i c i e l a o a l u i u p p p t c p v n b r i i c e b o o o P t o m a a o l l l c n E a r D s i T

i n n e e e

d t G u l i i a o

r v v v e V f n r a a F M d f a e e e c t s a c i o n s P D n D D o I v o u r a L r e S G T S R '000 R '000 R '000 R '000 R '000 R '000

2010/11 Budget Capital Expenditure 172,628 1,535,768 366,834 43,158 64,735 2,183,123 Operating Expenditure 564,896 2.593,916 581,849 1,082,274 817,365 5,640,300 Total 737,524 4,129,684 948,683 1,125,432 882,100 7,823,423

2011/12 Budget Capital Expenditure 80,579 2,148,792 349,178 48,349 59,092 2,685,990 Operating Expenditure 567,815 2,999,423 591,558 1,179,914 827,525 6,166,235 Total 648,394 5,148,215 940,736 1,228,263 886,617 8,852,225

2012/13 Budget Capital Expenditure 76,982 2,077,051 328,648 49,955 96,544 2,629,180 Operating Expenditure 635,202 3,337,175 661,762 1,319,749 947,640 6,901,528 Total 712,184 5,414,226 990,410 1,369,704 1,044,184 9,530,708

- 8 - 2010/11 E xpenditure by IDP Priorities F inancial G ood G overnance S us tainability and and P ublic V iability P articipation 14.4% 11.3%

L ocal E conomic Municipal D evelopment Trans formation 12.1% and D evelopment 9.4%

S ervice D elivery and Infrastructure D evelopment 52.8%

It is evident from the above that approximately 53% of total budget of R7,823 billion for the 2010/11 year is spent on Service Delivery and Infrastructural Development. With respect to the Capex of R2.183 billion, just over 74% is spent on this IDP priority. Further analysis of the proposed Capital Budget reveals some 80% is to be spent on Wards in the disadvantaged areas. With respect to those elements of the combined Capex and Opex which can be assigned to specific wards, approximately 87% is to be spent in disadvantaged wards.

- 9 - Capital expenditure per Directorate 2010/11:

Executive and Council Safety and Security 0.6% 1.7% Electricity and Energy 2010 World Cup Office 12.0% 5.5%

Sanitation Service Strategic Programmes 12.6% Directorate 2.8% Water Service Budget and Treasury 7.4% 5.6% Housing and Land Economic Development 0.1% and Recreational Services 4.3% Public Health 2.8% Corporate Services 1.8%

Infrastructure and Engineering 42.8%

2010/11 – 2012/13 Capital Budget by Directorate The table below reflects the Capital Expenditure per Directorate as well as the sources of funding that supports this expenditure.

Budget Budget Budget R’ Thousand 2010/11 2011/12 2012/13

Budget and Treasury 122,700 25,400 17,900 Public Health 59,682 85,398 121,310 Housing and Land 3,000 3,000 3,000 Economic Development and Recreational Services 92,950 87,000 48,900 Corporate Services 38,800 45,652 34,500 Infrastructure and Engineering 933,850 1,422,190 1,536,143 Water Service 161,044 350,538 224,636 Sanitation Service 275,665 384,924 359,250 Electricity and Energy 265,396 232,287 253,891 Executive and Council 13,860 13,000 11,100 Safety and Security 36,070 30,300 18,550 2010 World Cup Office 120,000 0 0 Strategic Programmes Directorate 60,107 6,300 0 Total Capital Expenditure 2,183,123 2,685,990 2,629,180

Funded by: - 10 - National Government 1,119,477 1,506,773 1,375,506 Provincial Government 2,250 2,700 0 Other transfers and grants 40,000 90,000 100,000 Transfers recognised – capital 1,161,727 1,599,473 1,475,506 Public contributions & donations 38,186 39,268 39,268 Borrowing 470,000 705,686 818,887 Internally generated funds 513,210 341,563 295,519 Total Capital Funding 2,183,123 2,685,990 2,629,180

Growth of Capital Expenditure 2003/04 to 2010/11

Madam Speaker, our Capex (excluding World Cup 2010) has grown from R452 million in 2003/04 to R1.57 billion in the coming year, which is a clear indication of our commitment to deal with the infrastructural needs of our Metro. However, as stated elsewhere in this report, we have to ensure that this increased expenditure results in greater job creation through the use of labour intensive methods wherever possible. In this respect we call upon the Municipal Manager, Chief Operating Officer, Chief Financial Officer and all Executive Directors to prioritise the implementation of the Expanded Public Works Programme so that infrastructure development is coupled with sustainable job creation.

CAPITAL BUDGET GROWTH SINCE 2003/04

RAND (in millions) 1,500 Including World Cup Excluding World Cup 1,000

0 2004 2005 2006 2007 2008 2009 2010 2011 YEAR

- 11 - Major Capital Projects – 2010/11 – 2012/13

The table below provides details of the major capital expenditure over the MTEF period.

Project Budget Budget Budget 2010/2011 2011/ 2012 2012 /2013

Tarring of Gravel Roads 150,000,000 117,000,000 220,000,000 Tarring of Gravel Roads: Major/Collectors 0 20,000,000 20,000,000 2010 Work Package: Public Transport Planning 107,433,900 161,434,470 335,210,480 HV Network Reinforcement 97,606,100 68,770,860 91,285,000 2010 Work Package: Modal Interchanges 94,108,650 154,365,520 58,719,780 2010 Work Package: Bus Rapid Transit 89,618,770 166,136,240 203,082,650 2010 Work Package: Public Transport Facilities 85,204,000 92,046,000 110,285,400 Rudimentary Services: Sanitation 75,000,000 15,000,000 15,000,000 2010 Work Package: Road Works 44,130,670 96,944,500 110,285,400 Informal Housing Electrification 32,056,540 37,665,510 37,775,860 H45 Redhouse - Chelsea Arterial: Walker Drive 26,000,000 30,000,000 30,000,000 to N2 Motherwell Thusong Service Centre 20,000,000 Provision of Sidewalks and Cycle Tracks 20,000,000 30,000,000 30,000,000 Resurfacing Tar roads (non-subsidy) 20,000,000 35,000,000 36,000,000 Access Road to Chatty Developments 17,000,000 0 0 2010 Work Package: TDM and ITS 16,709,900 15,862,100 15,000,000 Paapenkuils Main Sewers Augmentation 15,890,000 8,000,000 0 Elandsjagt - Upgrade to Restore Capacity 14,800,000 15,000,000 16,286,000 New Swimming Pool – Zwide 14,000,000 0 Private Township Development 12,000,000 12,000,000 12,000,000 Nooitgedagt/Coega Low Level System 8,000,000 53,000,000 15,000,000 Multi-Purpose Recreational Facilities 8,000,000 5,000,000 Swimming Pool Kwanobuhle - Uitenhage 6,000,000 0 Njoli Square Redevelopment 5,000,000 70,000,000 40,000,000 Churchill Pipeline Upgrade 5,000,000 30,000,000 0 Motherwell NU29 & 30 : Roads & S/w Bulk 5,000,000 20,000,000 500,000 Infrastructure Van der Kemp's Reservoir and Approach Main 5,000,000 10,000,000 100,000 Replacement of KwaNobuhle Reservoir 4,000,000 0 Motherwell North Bulk Sewerage 0 15,000,000 15,000,000

- 12 - Major Capital Projects – 2010/11 – 2012/13 (continued)

Project Budget Budget Budget 2010/ 2011 2011 /2012 2012/2013

Coega Reinforcement 12,000,000 12,000,000 12,000,000 Zwide Bulk Stormwater 5,000,000 13,000,000 13,000,000 Wells Estate: Stormwater Improvements 0 17,000,000 18,000,000 Loerie Treatment Works: Rehabilitation 8,000,000 2,000,000 0 Remedial works: Pell Street Interchange 5,591,600 13,365,450 0 Lower valley Road Bridge 3,376,180 1,000,000 0 Resurfacing of Subsidised Roads 6,000,000 6,000,000 6,000,000 Miscellaneous Mains and Substations 10,000,000 11,000,000 11,000,000 Rehabilitation of William Moffett Expressway 10,000,000 30,000,000 30,000,000 Lorraine - Bulk Sewerage Augmentation 18,050,000 11,500,000 11,500,000 Construction of Amanzi Reservoir and Pipeline 5,000,000 25,000,000 100,000 Motherwell/Coega WWTW and outfall sewer 32,000,000 40,000,000 50,000,000 Upgrading Helenvale Resource Centre – 14,200,000 1,300,000 0 Multipurpose Centre Glen Hurd drive Upgrading 6,000,000 3,000,000 20,000,000 Upgrade of Zwide Stadium 6,000,000 Construction of Community Health Centre in 540000 10,780,000 Kwazakhele Area Construction of Clinic in St Albans Area 230,000 2,300,000 Construction of Clinic in Amanzi Estate Area 230,000 2,300,000 Construction of Clinic in Peri-urban Area - 350,000 2,063,050 Colchester Construction of KwaNobuhle Clinic 540,000 5,491,700 Construction of Clinic in Zanemvula Area 4,900,000 4,900,000 Construction of Clinic in Motherwell -Ext 29 Area 3,626,100 Construction of Clinic in KwaNoxolo / Kleinskool 3,626,100 Area Total 1,151,278,510 1,472,893,700 1,604,002,270

- 13 - OPERATING EXPENDITURE – 2010/11

Revenue and Expenditure components of the 2010/11 Operating Budget:

2010/11 S tatement of Financial Performance - B udget R evenue

F ines Licences and 1.0% P ermits Interes t - O uts tanding 0.1% Debtors Income for Agency Interes t - E xternal 1.9% S ervices Inves tments 0.0% 2.4% R ental of F acilities Government Grants and E quipment and S ubs idies 0.3% 22.2%

O ther Income 4.3%

S ervice C harges 52.6% P roperty R ates 15.1%

2010/11 S tatement of F inancial Performance - B udget E xpenditure

E mployee R elated C osts 30.4% R emuneration to C ouncillors 0.9% B ad D ebts G eneral E xpenses 0.9% 11.3% D epreciation 5.1%

R epairs and G rants and Maintenance S ubsidies P aid 8.7% 10.3% C ontracted F inance C harges S ervices 3.2% 2.1% B ulk P urchases 27.2%

- 14 - POVERTY ALLEVIATION

Assistance to the Poor (ATTP)

Fellow Councillors, our Municipality continues to roll out our ATTP programme to qualifying households in Nelson Mandela Bay, which includes:

– Free 8kl of water – Free basic sanitation – Free 75 kwh electricity – Free basic refuse removal – Property rates subsidy – Free Environmental charges

Out of approximately 275 000 households in the Nelson Mandela Bay, some 111 950, effectively 40.71%, are part of the ATTP. The total cost of free basic services currently amounts to R378 million and is anticipated to increase to R582 million in 2012/13, with about 132 950 households benefiting out of approximately 296 000 households.

FINANCIAL TARGETS

The multi-year budget tabled today is premised on the following targets:

2010/11 2011/12 2012/13 Income % % % Water Tariff Increase 12.0 12.0 12.0 Sanitation Tariff Increase 11.0 11.0 11.0 Refuse Tariff Increase 11.0 11.0 11.0 Property Rates Increase 11.0 11.0 11.0 Electricity Tariff Increase 22.0 22.0 22.0 Revenue collection rates 98 98 98 Total Expenditure Increase allowed (excluding repairs 9.0 9.0 9.0 and maintenance) Salary increase 10.0 10.5 11.0

- 15 - 2010/11 2011/12 2012/13 Expenditure

Increase in repairs and maintenance 12.0 12.0 12.0 Increase in bulk purchase of power costs 28.9 25.8 25.9

DIVISION OF REVENUE ACT ALLOCATION 2010/11 – 2012/13

The following allocations have been gazetted for the Metro in terms of the Division of Revenue Act.

2009/10 2010/11 2011/12 2012/13

(R'000) (R'000) (R'000) (R'000) Specific Purpose Recurrent grant 58 21 1,25 1, Allocations ,350 ,500 0 250 75 1,2 1, Financial Management Grant 0 1,000 50 250 5 20 2010 World Cup Host City Operating grant 7,600 ,500 - -

423,7 771,0 934,5 1,15 Infrastructure Grant 76 66 32 5,993 Public transport Infrastructure & Systems 147,07 408,3 600,0 800, grant 9 33 00 000 Neighbourhood Development Partnership 9,00 75,2 65,0 69, grant 0 01 00 062 162,64 182,5 219,5 266, Municipal Infrastructure Grant (MIG) 5 32 32 931 30,00 25,0 30,0 Electricity Demand Side Management grant 0 00 00 - 20,0 20,0 20, Integrated National Electrification Programme - 00 00 000 17,50 17,5 2010 Interest subsidy 0 00 - - 2010 FIFA World Cup Stadium Development 57,55 42,5 grant 2 00 - -

Allocations-in-kind to Municipalities 2,60 3,4 0 10 120 16 Neighbourhood Development Partnership 3,4 grant 2,600 10 120 16 8 Expanded Public Works Programme 37 12,404 - -

Equitable Share and Total allocation to 816,66 994,5 1,098,5 1,184, Municipality 7 51 40 728 - 16 - 2009/10 2010/11 2011/12 2012/13

(R'000) (R'000) (R'000) (R'000) 456,62 602,8 686,6 759, Equity Share 5 83 23 738 360,04 391,6 411,9 Fuel Levy 2 68 17 424,990 1,302,23 1,802, 2,034,4 2,341, Total Allocations 0 931 42 987

BORROWINGS AND CAPITAL REPLACEMENT RESERVE (CRR)

In order to fund the higher levels of Capital expenditure, the Municipality has borrowed R1,465 billion over the last three years, with borrowing of R470 million being planned for the 2010/11 financial year.

Borrowing per year

800 700 600

n 500 o i l l

i 400 m 300 R 200 100 0 2007/08 2008/09 2009/10 2010/11 Finyear

CRR Balance per year

800 700 600 n

o 500 i l l i 400 m

R 300 200 100 0 2008/09 2009/10 2010/11 Finyear

- 17 - CHALLENGES AND FOCUS AREAS AHEAD

Madam Speaker and fellow Councillors, there are a number of areas which our Municipality needs to focus on in the ensuing financial year, including:

 Full accreditation of the Nelson Mandela Bay Municipality as a housing developer.  Enhancing capacity to implement the Budget.  Service delivery backlogs in disadvantaged areas.  Maintenance backlogs in respect of Council’s existing assets.  Confirmation of Provincial grants and subsidies.  Acceptance and implementation of unfunded mandates; e.g. provision of Health, Roads and Library Services.  Establishment of REDS.  Maintenance of current collection rates.  Replenishing the Capital Replacement Reserve.  Management of personnel costs.  Careful and judicious management of the Municipality’s borrowing exposure and the associated financial implications.  Improving operational efficiencies.

- 18 - CONCLUSION

Madam Speaker, fellow Councillors, in conclusion, I do believe that in adopting this budget, we can truly claim that we are indeed making a positive impact on the lives of our communities.

This budget outlines several aspects and areas of great improvement due to collective political leadership. Although it shows growth, we need to ask ourselves the following questions;

Growth for whom, for what and by whom?

Let me conclude by saying, brotherhood and sisterhood between rich and poor communities, is possible only if 80% to 20% principles is implemented. Meaning, this Budget must remain pro-poor and seek to address the backlog in service delivery and respond to many challenges facing the municipality. However , it will be very difficult to secure the future of our children and of our beautiful city if 80% of our brothers and sisters lives in mass grinding poverty , hunger , social misery and despair , while on the other hand , 20% (privileged ) are living a luxurious life style at the expense of the 80% poor working class communities.

But WORKING TOGERTHER WE CAN DO MORE!

Thank you!!

CLLR ARNOLD SCHOLTZ CHAIRPERSON: BUDGET & TREASURY

- 19 -