Pixley ka Seme DiStrict munciPality

AnnuAl RepoRt 2018/19 , Tel: 053, Tel: 839 2900, Kimberley RED APPLE MEDIA Printed APPLE by RED Pixley Ka Seme District Municipality Annual Report 2018/19

Table of Contents

CHAPTER 1: MAYOR’S FOREWORD AND EXECUTIVE COMPONENT C: PLANNING AND DEVELOPMENT ...... 50 SUMMARY ...... 2 3.7 PLANNING ...... 50 COMPONENT A: MAYOR’S FOREWORD ...... 2 COMPONENT B: EXECUTIVE SUMMARY ...... 4 3.8 LOCAL ECONOMIC DEVELOPMENT ...... 52 COMPONENT D: MUNICIPAL HEALTH ...... 56 MUNICIPAL MANAGER’S OVERVIEW ...... 4 3.9 ENVIRONMENTAL HEALTH...... 56 1.2 MUNICIPAL OVERVIEW ...... 5 COMPONENT E: PUBLIC SAFETY ...... 60 1.3 MUNICIPAL HIGHLIGHTS AND CHALLENGES ...... 11 3.10 DISASTER MANAGEMENT ...... 60 1.4 FINANCIAL HEALTH OVERVIEW ...... 11 COMPONENT F: CORPORATE POLICY OFFICES AND 1.5 ORGANISATIONAL DEVELOPMENT OVERVIEW ...... 13 OTHER SERVICES ...... 61 1.6 AUDITOR-GENERAL REPORT ...... 13 3.11 OFFICE OF THE MAYOR ...... 61 CHAPTER 2: GOVERNANCE ...... 15 3.12 OFFICE OF THE MUNICIPAL MANAGER ...... 62 A) NATIONAL KEY PERFORMANCE INDICATORS - GOOD GOVERNANCE 3.13 FINANCIAL SERVICES ...... 63 AND PUBLIC PARTICIPATION ...... 15 3.14 SUPPORT SERVICES ...... 64 B) GOOD GOVERNANCE AND PUBLIC PARTICIPATION HIGHLIGHTS 15 3.15 HUMAN RESOURCES ...... 65 C) GOOD GOVERNANCE AND PUBLIC PARTICIPATION CHALLENGES 15 3.16 LEGAL SERVICES & LABOUR DIVISION ...... 66 COMPONENT A: POLITICAL AND ADMINISTRATIVE GOVERNANCE ...... 15 3.17 INTERNAL AUDIT ...... 67 2.1 POLITICAL GOVERNANCE STRUCTURE ...... 15 COMPONENT G: ORGANISATIONAL PERFOMANCE SCORECARD AND INDIVIDUAL PERFORMANCE ...... 69 2.2 ADMINISTRATIVE GOVERNANCE STRUCTURE ...... 19 3.18 DEVELOPMENT AND SERVICE DELIVERY PRIORITIES FOR COMPONENT B: INTERGOVERNMENTAL RELATIONS 19 2019/20 ...... 69 2.3 INTERGOVERNMENTAL STRUCTURES ...... 19 3.19 MUNICIPAL MANAGER AND MANAGERS DIRECTLY ACCOUNTABLE 2.4 JOINT PROJECTS WITH SECTOR DEPARTMENTS ...... 20 TO THE MUNICIPAL MANAGER ...... 73 COMPONENT C: PUBLIC ACCOUNTABILITY AND CHAPTER 4: ORGANISATIONAL DEVELOPMENT PARTICIPATION ...... 23 PERFORMANCE ...... 74 2.5 PUBLIC MEETINGS...... 23 PERFORMANCE REPORT PART II ...... 74 2.6 REPRESENTATIVE FORUMS ...... 23 4.1 NATIONAL KEY PERFORMANCE INDICATORS – MUNICIPAL 2.7 SHARED SERVICES ...... 25 TRANSFORMATION AND ORGANISATIONAL DEVELOPMENT ...... 74 COMPONENT D: CORPORATE GOVERNANCE ...... 27 4.2 INTRODUCTION TO THE MUNICIPAL WORKFORCE ...... 74 2.8 RISK MANAGEMENT ...... 27 4.3 EMPLOYMENT EQUITY ...... 74 2.9 ANTI-CORRUPTION AND ANTI-FRAUD ...... 28 4.4 VACANCY RATE ...... 75 2.10 AUDIT COMMITTEE ...... 28 4.5 TURNOVER RATE ...... 76 2.11 INTERNAL AUDITING ...... 29 4.6 MANAGING THE MUNICIPAL WORKFORCE ...... 76 2.12 AUDITOR-GENERAL ...... 30 4.7 CAPACITATING THE MUNICIPAL WORKFORCE ...... 77 2.13 BY-LAWS AND POLICIES ...... 30 4.8 MANAGING THE MUNICIPAL WORKFORCE EXPENDITURE ...... 79 2.14 COMMUNICATION ...... 30 CHAPTER 5: FINANCIAL PERFORMANCE ...... 81 CHAPTER 3: SERVICE DELIVERY PERFORMANCE ...... 33 COMPONENT A: STATEMENTS OF FINANCIAL OVERVIEW OF PERFORMANCE WITHIN THE PERFORMANCE ...... 81 ORGANISATION ...... 33 5.1 FINANCIAL SUMMARY ...... 81 LEGISLATIVE REQUIREMENTS ...... 33 5.2 FINANCIAL PERFORMANCE PER MUNICIPAL FUNCTION...... 85 ORGANISATIONAL PERFORMANCE ...... 34 5.3 GRANTS ...... 88 PERFORMANCE MANAGEMENT SYSTEM USED IN THE 5.4 FINANCIAL RATIOS ...... 89 FINANCIAL YEAR 2018/19 ...... 34 COMPONENT B: BORROWING & INVESTMENTS ...... 91 THE IDP AND THE BUDGET ...... 34 5.5 BORROWING ...... 91 ACTUAL PERFORMANCE ...... 34 5.6 INVESTMENTS ...... 91 MONITORING OF THE SERVICE DELIVERY BUDGET IMPLEMENTATION CHAPTER 6: AUDITOR-GENERAL AUDIT FINDINGS ...... 92 PLAN ...... 35 COMPONENT A: AUDITOR-GENERAL REPORT 2017/18 ...... 92 PERFORMANCE REPORT PART I ...... 35 6.1 AUDITOR-GENERAL REPORT 2017/18 ...... 92 3.1 INTRODUCTION ...... 35 COMPONENT B: AUDITOR-GENERAL REPORT 2018/19 ...... 93 3.2 STRATEGIC SERVICE DELIVERY BUDGET IMPLEMENTATION PLAN 35 6.2 AUDITOR-GENERAL REPORT 2018/19 ...... 93 3.3 SERVICE PROVIDERS PERFORMANCE...... 45 LIST OF ABBREVIATIONS ...... 95 LIST OF TABLES ...... 96 3.4 MUNICIPAL FUNCTIONS ...... 46 LIST OF FIGURES ...... 97 COMPONENT A: BASIC SERVICES ...... 47 LIST OF GRAPHS ...... 97 3.5 HOUSING ...... 47 ANNEXURE A: FINANCIAL STATEMENTS ...... 98 COMPONENT B: ROAD TRANSPORT ...... 49 ANNEXURE B: REPORT OF THE AUDITOR-GENERAL ..... 186 3.6 ROADS ...... 49

1 Pixley Ka Seme District Municipality Annual Report 2018/19

Chapter 1: Mayor’s Foreword and Executive Summary Component A: Mayor’s Foreword

It is with great pleasure and humility that I would like to present the annual report for the 2018-2019 financial year to the community and stakeholders of Pixley ka Seme District, in my first term as the Executive Mayor.

This has proven to be one of the most challenging periods in the country, especially at the level of local government. The country continued to suffer under the triple challenges of inequality, poverty and unemployment. These challenged continued to have a gender and racial bias, despite the many work done by the government at all levels, since 1994.

The people of the country also exercised their constitutionally enshrined rights to elect their provincial and national public representatives, during this financial year. The May 2019 elections were conducted in an atmosphere of peace and political tolerance, which has become the hallmark of all elections in the country, since the historic breakthrough on 27 April 1994. The people of the country once again demonstrated, that despite the political differences in the country, each one is entitled to his\her view. These elections also further demonstrated that despite the mentioned challenges in the country, the vast majority of our people still had their hope in the democratic electoral system. We need to ensure that more rigorous measures are put in place for public representatives to be kept more accountable to the people.

The Premier of the , Dr Zamani Saul, introduced a new vision for the province, eg ‘A Modern, Growing and Successful Province.’ This call by the Premier and the Provincial Executive Council instructed all of us to ensure that we look at administratively innovative ways to improve the lives of the people of the Northern Cape. Local government in the Northern Cape had to assess itself, so as to ensure that it aligned its operations with the new provincial vision.

The Executive Mayor, Speaker and Members of the Mayoral Committee once again visited a number of towns in the district, in an attempt to resolve the challenges faced by the people, and to improve accountability at local government level. The visits to the different towns did not just bring the Executive Mayor closer to the people, but it also highlighted the strides achieved by the government in improving the lives of the poor in the district. These visits also served as an opportunity to meet the different stakeholders in the district, and to ensure that we are all committed to improve the lives of our people.

We were also pleased to witness the mining development in Copperton, in the Siyathemba Local Municipality. This development will serve to reduce the high levels of unemployment and poverty in the district, especially amongst the youth.

The President of the country, Mr Cyril Ramaphosa, announced the establishment of the District Development Model, which model will seek to improve service delivery in all municipal districts in the country. We are firmly of the view

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2 Pixley Ka Seme District Municipality Annual Report 2018/19 that this development will be a step in the right direction, in government’s attempts to reduce the unnecessary administrative bottlenecks in the provision of public services.

We were also humbled by the performance of the Pixley ka Seme District Municipality, in as far as the Auditor General is concerned. The municipality reduced the number of issues raised in previous AG reports, and retained its Unqualified with Matters of Emphasis status.

Z Monakalia EXECUTIVE MAYOR

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Component B: Executive Summary

Municipal Manager’s Overview

Chapter 7, Section 152 (a) of the Constitution of the Republic of mandates municipalities to provide democratic and accountable government for local communities. It is therefore in the spirit of this Constitutional mandate that Pixley ka Seme District Municipality prepared this annual report, which will serve to shed light on the administrative, financial and political decisions taken during the 2018-2019 financial year.

This annual report will be a reflection on all the operations of the Pixley ka Seme District Municipality, focusing on all the business units of the institution. The municipal council, senior management and staff is of the view that an honest reflection on the operations of the municipality, will serve to deepen the relationship that Pixley ka Seme District Municipality enjoyed with all its stakeholders during the 2018-2019 financial year.

The municipality continued to raise the inefficiency of the current equitable share formula, as it failed to acknowledge the rural nature of the district, as well as the vast distances to travel to deliver services. We utilized all platforms, provincially and nationally, to advise against using population numbers to determine the share of nationally raised revenue, for distribution to all municipalities in the country.

The municipality continued to enjoy an administratively productive relationship with all the local municipalities in the district, as it shared its human resource capacity with all local municipalities. This happened through the Shared Services SLA signed with all local municipalities. The district also experienced a positive trend in the annual Auditor- General outcomes amongst all municipalities, hugely as a result of the impact of the shared services.

The Annual Report for 2018-2019 has been segmented as follows:

 Chapter 1: Mayor’s Foreword and Executive Summary  Chapter 2: Governance  Chapter 3: Service Delivery Performance  Chapter 4: Organisational Development  Chapter 5: Financial Performance  Chapter 6: Auditor-General Audit Findings

We would like to encourage all stakeholders in the district and beyond, to familiarize themselves with the content of the 2018-2019 Annual Report, and provide feedback to the municipality.

Mr RE Pieterse MUNICIPAL MANAGER

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1.2 Municipal Overview

This report addresses the performance of the Pixley Ka Seme District Municipality in the Northern Cape in respect of its core legislative obligations. Local government must create the participatory framework that defines and enhances the relationship between elected leaders and their communities. This requires that the council of the municipality provides regular and predictable reporting on programme performance and the general state of affairs in their locality.

The 2018/19 Annual Report reflects on the performance of the Municipality for the period 1 July 2018 to 30 June 2019. The Annual Report is prepared in terms of Section 121(1) of the Municipal Finance Management Act (MFMA), in terms of which the Municipality must prepare an Annual Report for each financial year.

1.2.1 Vision and Mission

The Municipality committed itself to the vision and mission of:

Vision: “Developed and Sustainable District for Future Generations” Mission:

Supporting our local municipalities to create a home for all in our towns, settlements and rural areas to render dedicated services;

Providing political and administrative leadership and direction in the development planning process;

Promoting economic growth that is shared across and within communities;

Promoting and enhancing integrated development planning in the operations of our municipalities; and

Aligning development initiatives in the district to the National Development Plan.

Strategic Objectives:

Administer finances in a sustainable manner and strive to comply with legislative requirements to achieve a favorable audit outcome;

Compliance with the tenets of good governance as prescribed by legislation and best practice;

Guide local municipalities in the development of their IDP’s and in spatial development;

Monitor and support local municipalities to enhance service delivery;

Promote economic growth in the district;

To provide a professional, people-centered human resources and administrative service to citizens, staff and Council;

To provide an independent and objective internal audit assurance and consulting service to add value and to improve the administrative operations of all the municipalities in the district through an approach that is systematic and disciplined;

To provide disaster management services to the citizens; and

To provide municipal health services to improve the quality of life of the citizens.

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1.2.2 Municipal Area at a Glance

Demographics (Stats SA Estimates 2019) Total municipal area 103 410 km² Population 203 788 Households 58 975 Selected statistics Total population intercensal Population 1.05% 1,9 growth rate (2011-2016) density(persons/km²)

73.3% (Northern Cape) Proportion of households Matric pass rate 2018 earning less than R4500 per 11% 70.2% (District) annum in 2016 Access to basic services– minimum service level* Water 99% Sanitation 89% Electricity 89.8% Refuse removal 74.2% Education Persons aged 20 years+ who have completed grade 12 34 929 Higher education 5.4% (2016) Economy Labour Market in 2011 GDPR Northern Cape in 2011 2.2% Unemployment rate 28.3% Youth unemployment rate GDPR South Africa in 2011 3.5% 35.4% (ages 15 to 34) Largest sectors (using the relative size of the provincial economy by industry) Wholesale, retail and motor Finance and business Mining Government services trade; catering and services accommodation 11.6% 26.7% 12.8% 9.9% Health in Pixley Ka Seme District Health care facilities Teenage pregnancies – delivery Immunisation rate% HIV prevalence rate (hospitals/clinics /hospice) rate to women U/18% 44 73,4% 2.9% 19.9% Top Crimes in the District Assault (GBH and Burglaries (Residential Drug-related crimes Theft (General) Stock theft Common) and business) Sources: Census 2011 & Community Survey 2016 – Statistical Release & Municipal Own Data*

Table 1: Municipal Area at a Glance

1.2.3 Geographical Context

Spatial Location

The jurisdiction of the Pixley ka Seme District Municipality (as a category C Municipality) covers an area of 103 410km², which is also 27,7% of the total area that constitutes the Northern Cape province.

This district municipal area is the eastern-most district Municipality within the Northern Cape, and borders on the Western Cape, Eastern Cape and Free State provinces.

6 Pixley Ka Seme District Municipality Annual Report 2018/19

The map below indicates the location of the Municipality in the province:

Figure 1 Locality map

There are 8 category B municipalities within the municipal are, viz. Emthanjeni, Kareeberg, Renosterberg, Siyancuma, Siyathemba, Thembelihle, Ubuntu and Umsobomvu. The following main towns in these category B municipalities represent an even spread throughout the district as central places and agricultural service centers: Douglas, , Carnarvon, , , and . De Aar is the ‘largest’ of these towns. The closest major city to these towns is Bloemfontein in the Free State province.

Emthanjeni Municipality: comprising of the three towns De Aar, and Hanover. De Aar is the second most important railway junction in the country. When the railway line was built from Cape Town to Kimberley, the administration bought a large portion of the farm, De Aar, meaning coincidentally “artery‟, after underground water supply, envisaged as large life-giving veins of water.

Kareeberg Municipality: This Municipality comprises of three towns, that is, Carnarvon, Van Wyksvlei and . The municipal area is the heart of the Karoo and the predominant economic activity is livestock farming. The possibilities of having Kilometre Array Telescope befit the landscape of the Municipality that is characterised by clear skies and less pollution. This Municipality is an entry point to the Western Cape Province from the Northern parts of the country.

Renosterberg Municipality: The Municipality is located on the banks of the . The Municipality was formed through the amalgamation of three towns, that is, , and Phillipstown.

The Municipality covers approximately 553 000 ha of land and forms about 5% of the total area of the district.

Siyancuma Municipality: This Municipality hosts the confluence of the Vaal and the Orange River. It comprises in the main of three towns, that is, Campbell, Douglas and and has densely populated rural settlement called Smitchdrift. The municipal area is richly endowed with precious and semi-precious stones, that is, diamonds and tiger’s eye. Beneficiation of tiger’s eye is on the high impact project identified in the District Growth and Development Strategy. The Municipality has a great tourism potential.

7 Pixley Ka Seme District Municipality Annual Report 2018/19

Siyathemba Municipality: This Municipality is located on the banks of the Orange River and boosts with massive and high scale irrigation farming, the river not only adds agricultural value to the Municipality but also boosts massive tourism and economic potential. The Municipality comprises of three towns, that is, , Prieska and . The Municipality has massive potential for mining activities of both precious and semi-precious stones. The Municipality also has the Alkantpan testing area where international and national ammunition testing is done.

Thembelihle Municipality: This Municipality is also located on the banks of the Orange River. The Municipality was formed through the amalgamation of three towns, that is, Hopetown, and Orania. The outcome of the dispute regarding Orania has not yet been decided upon and the uncertainty still exists as to where Orania is demarcated. cuts through this municipal area and is a major boost to the economies of Hopetown and Strydenburg.

Ubuntu Municipality: The Municipality comprises of three towns that is Victoria West, Loxton and Richmond. The N12 and N1 pass through this Municipality and have a great tourism potential. The preliminary study in the district’s Mining Strategy highlights that the Municipality is endowed with uranium deposits.

Umsobomvu Municipality: This Municipality comprises of three towns, that is, Colesberg, Norvalspond and . N1 and N9 traverse trough the Municipality. It shares borders with other municipalities in the Eastern Cape and Free State Provinces. In the district this Municipality is among the municipalities that hold massive tourism potential.

Two of the abovementioned towns, viz. Prieska and Carnarvon have in recent years changed character from small rural towns to potentially regional hubs as a result of investments in renewable energy generation and the Square Kilometre Array radio telescope project, respectively.

The map below indicates the municipal area divided into local municipalities with their main towns:

Figure 2 District Municipal Area Divided into Local Municipalities

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1.2.4 Demographic Profile

Population

The table below indicates both an increase in the population size and the number of households between 2011 and 2019:

Indicator 2011 2016 2019 Population 186 351 195 595 203 788 Households 49 193 56 309 58 795 People per household 3,8 3,5 3,5

Gender Males 92 068 (49,4%) 97 594 (49.9%) breakdown Females 92 284 (50,6%) 98 001 (50.1%) 0 - 14 31,6% 25.8% Age 15 - 64 62,4% 68.2% breakdown 65+ 6,1% 6.0% Data not currently available Black-African 31,5% 30.0%

Race Coloured 59,2% 63.3% Composition White 8,1% 6.3% Asian 0,6% 0.4% Source: Statistics Census 2011, Community Survey 2016 – Statistical Release & Stats SA Estimates 2019

Table 2: Demographic Profile

As mentioned above, the Pixley ka Seme District Municipality area consists of 8 local municipalities, where Ubuntu Municipality being the largest area and Emthanjeni Municipality having the highest population. The table below provides the km² area and total population per local Municipality:

Local Municipality Area (km²) Population Households Emthanjeni 13 472 45 404 12 668 Kareeberg 17 702 12 772 3 868 Renosterberg 5 527 11 818 3 563 Siyancuma 16 753 35 941 11 150 Siyathemba 14 725 23 075 6 620 Thembelihle 8 023 16 230 4 736 Ubuntu 20 389 19 471 6 615 Umsobomvu 6 819 30 883 9 575 Total 103 410 195 595 58 795* Source: Community Survey 2016 & Municipal Own Data 2019*. Data not currently available for population per town for 2019.

Table 3: Total Area and Population per Local Municipality

1.2.5 Economic Profile

The economy in the Pixley ka Seme municipal area is characterised by the following:

High levels of poverty and low levels of education;

It is a small to medium-town sub-region with a low level of development despite the strategic location in terms of the national transport corridors;

Sparsely populated towns with a number of larger towns serving as “agricultural service centres”; spread evenly throughout the district as central places;

9 Pixley Ka Seme District Municipality Annual Report 2018/19

High rate of unemployment, poverty and social grant dependence;

Prone to significant environmental changes owing to long-term structural changes (such as climate change, energy crises and other shifts);

Geographic similarity in economic sectors, growth factors and settlement patterns;

Economies of scale not easily achieved owing to the relatively small size of towns;

A diverse road network with national, trunk, main and divisional roads of varying quality;

Potential and impact of renewable energy resource generation; and

Potential and impact of radio telescope initiatives, e.g. Square Kilometre Array radio telescope project.

Employment Status

The employment status of the available workforce/economically active group in the Pixley ka Seme municipal area is listed in the table below. It indicates that the overall results with regard to the employment status of the workforce/potential economically active group in the municipal area have improved from the 2001 figure of 63,1% employed and 36,9% unemployed. In 2011, the number of unemployed individuals was almost 8% below what it was in 2001. However, any unemployment rate, irrespective of how large, has serious repercussions for the ability of the residents to pay for their daily needs and for municipal services. Owing to the high numbers of unemployed persons, other main sources of income are pension/welfare payments:

Employment status 2001 % 2001 2011 % 2011 Employed 36 921 63,1% 43 664 71,7% Unemployed 21 632 36,9% 17 203 28,3% Not economically 101 886 42,5% 116 201 47,6% active Source: Statistics SA 2001 and 2011 Census

Table 4: Employment Status

Economic Sector Contributor

The economic activities in the Northern Cape Province are dominated by mining, agriculture, manufacturing and construction, contributing to the provincial GDP, i.e. 22%, 7%, 3% and 2% respectively. Note that the Northern Cape only contributed about a share of 2% to the national GDP in 2014 and which contribution fluctuated around that mark since 2004. Between 2011 and 2014, the annual growth in the agriculture and mining sectors was about 4,2% and 5,2%, respectively.

The economic activities in the Pixley ka Seme municipal area are dominated by agriculture, social and personal services, financial services, tourism and transport and lately, retail and construction activities emanating from the establishment of the Square Kilometre Array project.

Household Income

According to Census 2011, almost 11 % of all households within the municipal area have no income, whilst another 3,4% of households earn between R0 and R4800 per annum. In the context of housing delivery, these people as well as another 50% of all households will be beneficiaries of housing programmes, i.e. the RDP and BNG programmes with ownership as the tenure type, and the CRU programme with rental as tenure type. In total, almost 61% of all households in the municipal area will qualify for these housing options owing to a monthly household income of less than R3500. Another segment of the population, viz. 24,8% earns below ‘R15 000’ per month, and for this group it

10 Pixley Ka Seme District Municipality Annual Report 2018/19 would not possible to qualify for a (commercial) home loan. These people would then rely of housing subsidies (to gain ownership of a house) or social housing (to rent a dwelling).

It is accepted that‚ on average‚ South African households have an annual income of R138 168, viz. a monthly income of R11 514. Hence, more than 90% of the households living in the Pixley ka Seme municipal area have a monthly income below the average for a South African household

1.3 Municipal Highlights and Challenges

1.3.1 Service Delivery Highlights

Highlight Description Auditor General Opinion Decrease in number of matters of emphasis Provision of Shared Services Improved Auditor-General opinions at local municipalities

Table 5: Services Delivery Highlights

1.3.2 Service Delivery Challenges

Service Area Challenge Actions to address Failure by some local municipalities to To Approach Provincial Treasury for Local Municipalities ( Shared Services ) settle SLA commitments future funding

Table 6: Services Delivery Challenges

1.4 Financial Health Overview

1.4.1 Financial Viability Highlights

Highlight Description 100% Grant spending All Grant allocations spend No overdraft facility Remained within available cost No 3rd party defaults All staff deductions paid over Adhering to agreements Agreements with creditors e.g. Auditor General and SALGA honoured to the latter Unqualified Audit opinion with matters Decrease in matters of emphasis All data strings submitted obtained a green status, all transactions captured are MSCOA transacting without errors

Table 7: Financial Viability Highlights

1.4.2 Financial Viability Challenges

Challenge Description Equitable share allocation Equitable share formula still not assisting District Municipality Grants from Provincial Departments allocation negative towards District Conditions of Grants Municipality Debtor non-payment Non-payment of Shared services by Local Municipalities IT Out-dated server

Table 8: Financial Viability Challenges

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1.4.3 National Key Performance Indicators – Municipal Financial Viability and Management (Ratios)

The following table indicates the municipality’s performance in terms of the National Key Performance Indicators required in terms of the Local Government: Municipal Planning and the Performance Management Regulations of 2001 and section 43 of the MSA. These key performance indicators are linked to the National Key Performance Area namely Municipal Financial Viability and Management.

Unit of KPA & Indicator 2017/18 2018/19 Measurement Financial viability measured in terms of the available cash to Number of cover fixed operating expenditure by 30 June 2017 ((Cash and months it takes Cash Equivalents - Unspent Conditional Grants - Overdraft) + to cover fix 0.19 1 Short Term Investment) / Monthly Fixed Operational Expenditure operating excluding (Depreciation, Amortisation, and Provision for Bad expenditure with Debts, Impairment and Loss on Disposal of Assets)) available cash Financial viability measured in terms of the municipality's ability to meet it's service debt obligations by 30 June 2017 ((Short Term % of debt Borrowing + Bank Overdraft + Short Term Lease + Long Term 7.81 45% coverage Borrowing + Long Term Lease) / Total Operating Revenue - Operating Conditional Grant)

Table 9: National KPI’s for financial viability and management

1.4.4 Financial Overview

2018/19 2016/17 Details Original budget Adjustment Budget Actual R Income Grants (Operating + Capital) 49 929 942 53 538 000 69 845 632 62 799 181 Taxes, Levies and tariffs 0 0 0 0 Other 6 489 876 3 653 085 5 012 012 5 674 018 Sub Total 56 419 818 57 191 085 74 857 644 68 473 199 Less Expenditure 57 474 637 55 722 687 74 021 326 64 595 049 Net surplus/(deficit) (1 054 819) 1 418 398 836 318 3 878 150

Table 10: Financial Overview

1.4.5 Operating Ratios

Actual % % Variance Actual % % Variance Detail Expected norm 2017/18 2018/19 Employee Cost 30% 59.31 59.31 55.25% 25.25 Repairs & Maintenance 9% 1.74 1.74 2.21% (6.79) Finance Charges & Depreciation 18% 2.92 2.92 2.12% (15.88) Note: Repairs and Maintenance on basic services are not applicable as the municipality as a District Municipality is not responsible for the delivery of basic services

Table 11: Operating ratios

Employee cost is 25.25% higher than the norm of 30% as the municipality is a district municipality which mainly provide services and support to local municipalities that involve mostly human resources. The Municipality do not deliver and/or maintain any basic infrastructure services. This is also the reason for the variance on repairs and maintenance.

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Finance charges and depreciation are 15.88% lower than the norm of 18% which is a positive and can mainly be attributed to the low level of borrowings outstanding at this point in time.

1.5 Organisational Development Overview

1.5.1 Municipal Transformation and Organisational Development Highlights

Highlight Description The municipality was able to assist its employees with Bursaries in the following fields of study: B Com Supply Chain Bursaries to officials Management, B Tech Project Management, B com Hons Public Management, B Com Internal Audit Through the LGSETA Grant Funding the municipality was able Training for the unemployed to train 10 unemployed learners in Local Economic Development at NQF L 6 The municipality received a grant to train all LED officers of Assisting local municipalities on Local Economic Development Local Municipalities on a Certificate : NQF L 6 Local Economic Development with the Thubelihle Graduate Institute On behalf of the local Municipalities, Pixley ka Seme District Municipality was able to secure a grant with LGSETA to train 30 officials. The following municipalities are beneficiaries of Municipal Finance Management Programme this programme: Rhenosterberg Municipality, Emthanjeni Municipality, Pixley ka Seme DM and Thembelihle Municipality. In the period under review the municipality was able to Absorption of the unemployed learners absorb 2 Financial Interns to the position Junior Accountant and Payroll Clerk. 10 officials from the municipality are enrolled for a learnership in Project Management: NQF L 6 with Sizani Project Management Training Consulting, the officials are left with 2 modules to complete the training.

Table 12: Municipal Transformation and Organisational Development Highlights

1.5.2 Municipal Transformation and Organisational Development Challenges

Challenge Actions to address Not enough funding for Study Assistance (Bursaries). The The municipality to consider increasing the budget for number of officials enrolling for tertiary educations is trainings increasing every year including the costs of study. LGSETA Turnaround time for payment of Discretionary Grants Continuous engagements with LGSETA at a provincial level

Table 13: Municipal Transformation and Organisational Development Challenges

1.6 Auditor-General Report

The Municipality received an unqualified report with findings by the Auditor-General for 2018/2019.

This audit opinion means that the financial statements present fairly, in all material respects, the financial position and its financial performance and cash flows in accordance with applicable laws, regulations and standards. Matters of emphasis were highlighted by the Auditor-General and are listed in Chapter 6 of this report.

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The audit outcomes received for the past four years are indicated in the table below:

Year 2015/16 2016/17 2017/18 2018/19 Unqualified with Unqualified with Unqualified with Unqualified with Status findings findings findings findings

Table 14: Audit Outcomes

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CHAPTER 2: Governance

Good governance has 8 major characteristics. It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. It assures that corruption is minimized, the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society. a) National Key Performance Indicators - Good Governance and Public Participation

The following table indicates the municipality’s performance in terms of the National Key Performance Indicators required in terms of the Local Government: Municipal Planning and the Performance Management Regulations 796 of 2001 and section 43 of the MSA. This key performance indicator is linked to the National Key Performance Area - Good Governance and Public Participation.

KPA & Indicators 2017/18 2018/19 The percentage of a municipality’s capital budget actually spent on capital projects identified for a particular financial No major capital projects No major capital projects year in terms of the municipality’s integrated development plan

Table 15: National KPIs - Good Governance and Public Participation Performance b) Good Governance and Public Participation Highlights

Highlight Description Successful hosting of Career Exhibitions Hosted two youth career exhibitions at the adopted schools The municipality also received a grant funding to train about 200 ward committee members and unemployed youth on Ward Committee Training ward committee governance, a training provided by KG Business Solutions

Table 16: Good Governance and Public Participation Performance Highlights c) Good Governance and Public Participation Challenges

Description Description Not all Sector departments attends community meetings None attendance of Sector Departments although they are invited

Table 17: Good Governance and Public Participation Challenges

Component A: Political and Administrative Governance

2.1 Political Governance Structure

The council performs both legislative and executive functions. They focus on legislative, oversight and participatory roles. Their primary role is to debate issues publicly and to facilitate political debate and discussion. Apart from their functions as decision makers, councillors are also actively involved in community work and the various social programmes in the municipal area. 2.1.1 Council The Council performs both legislative and executive functions. They focus on legislative, oversight and participatory roles, and have delegated its executive function to the Executive Mayor and the Mayoral Committee. Their primary

15 Pixley Ka Seme District Municipality Annual Report 2018/19 role is to debate issues publicly and to facilitate political debate and discussion. Apart from their functions as decision makers, councillors are also actively involved in community work and the various social programmes in the municipal area. The tables below categorise the councillors within their specific political parties for the 2018/19 financial year:

Representative or Council Members Capacity Political Party Proportional

MT Kibi (Until 23/05/2019) Executive Mayor ANC Proportional Z Monakali (From 14/06/2019) Executive Mayor (Elected 28/06/2019) ANC Proportional NL Hermans (Until 11/06/2019) Speaker ANC Proportional CC Jantjies (From 19/06/2019) Speaker (Elected 28/06/2019) ANC Proportional UR Itumeleng Member Mayoral Committee ANC Proportional AT Sintu Member Mayoral Committee ANC Proportional GL Nkumbi Member Mayoral Committee ANC Proportional J Grobbelaar Chairperson MPAC DA Proportional H Marais Councillor DA Proportional MA Matebus Councillor EFF Proportional L Billie (Until 28/02/2019) Councillor ANC Representative PP Mhlauli (From 28/02/2019) Councillor ANC Representative J Hoffman Councillor DA Representative JEJ Hoorn Councillor ANC Representative ME Bitterbos Councillor ANC Representative P McKlein (Until 06/06/2019) Councillor ANC Representative A Oliphant (From 06/06/2019) Councillor ANC Representative LC van Niekerk (Until 19/09/2018) Councillor DA Representative D Smous (From 19/09/2018) Councillor DA Representative JT Yawa Councillor ANC Representative S Swartling Councillor ANC Representative CC Jantjies (Until 19/06/2019) Councillor ANC Representative E Humphries Councillor ANC Representative NJ Batties Councillor DA Representative

Table 18: Council

Below is a table which indicates the Council meetings and attendance for the 2018/19 financial year:

Percentage Number of items Percentage Meeting dates Apologies for submitted Attendance non-attendance 28 August 2018 11 73.68% 21.05% 19 November 2018 (Special meeting) 1 68.42% 10.53%2 14 December 2018 16 84.21% 0% 30 January 2019 (Special meeting) 5 73.68% 15.79% 26 March 2019 12 57.89% 31.58% 28 May 2019 22 68.42% 15.79% 28 June 2019 (Special meeting) 4 84.21% 5.26%

Table 19: Council meetings

16 Pixley Ka Seme District Municipality Annual Report 2018/19

2.1.2 Executive Mayoral Committee

The Executive Mayor of the Municipality, assisted by the Mayoral Committee, heads the executive arm of the Municipality. The Executive Mayor is at the centre of the system of governance, since executive powers are vested in him to manage the day-to-day affairs. This means that he has an overarching strategic and political responsibility. The key element of the executive model is that executive power is vested in the Executive Mayor, delegated by the Council, and as well as the powers assigned by legislation. Although accountable for the strategic direction and performance of the Municipality, the Executive Mayor operates in concert with the Mayoral Committee.

The name and portfolio of each Member of the Mayoral Committee is listed in the table below:

Name of member Meeting Dates

Cllr GL Nkumbi – Finance Committee 17 August 2018 6 November 018 30 November 2018 Cllr UR Itumeleng – Corporate Services and Council Support 22 February 2019 18 March 2019 15 May 2019 Cllr AT Sintu – Infrastructure Development, Housing and Planning

Table 20: Executive Mayoral Committee

2.1.3 Portfolio Committees

In terms of section 80 of the Municipal Structures Act, 1998, if a council has an executive committee; it may appoint in terms of section 79 committees of councillors to assist the executive committee or executive mayor. Section 80 committees are permanent committees that specialise in a specific functional area of the municipality and may in some instances make decisions on specific functional issues. They advise the executive committee on policy matters and make recommendations to Council.

The composition of the portfolio committees are stipulated in the tables below:

Finance

Name of Member Meeting Dates Clr GL Nkumbi Clr L Billie (Until 28/02/2019) Clr PP Mhlauli (From 28/02/2019) 28 August 2018 30 January 2019 Clr H Marais 28 May 2019 Clr CC Jantjies (Until 19/06/2019) Mr BF James

Table 21: Finance Portfolio Committee

17 Pixley Ka Seme District Municipality Annual Report 2018/19

Infrastructure Development, Housing & Planning

Name of Member Meeting Dates Clr AT Sintu Clr JEJ Hoorn Clr D Smous

Clr JT Yawa 28 August 2018 30 January 2019 Mr HP Greeff 26 March 2019 Ms H Maganya 28 May 2019 Mr E McKenzie Mr A Sibeko Mr Z Dingile

Table 22: Infrastructure Development, Housing & Development Portfolio Committee

Corporate Services and Council Support

Name of Member Meeting Dates Cllr UR Itumeleng Cllr ME Bitterbos Cllr J Hoffman Mr TA Loko Mr S Foster 30 January 2019 Mr C Menziwa 28 May 2019 Mr MK Mfazwe Mr S Nkondeshe Ms M Zwiegers Ms M Mukoma Ms BT Bosch

Table 23: Corporate Services and Council Support Portfolio Committee

Rules Committee

Name of Member Meeting Dates Clr NL Hermans Clr UR Itumeleng 26 March 2019 Clr J Grobbelaar 28 May 2019 Clr MA Matebus Mr TA Loko

Table 24: Rules Committee

Municipal Public Accounts Committee

Name of Member Meeting Dates

Clr J Grobbelaar 27 August 2018 22 November 2018 Clr P McKlein (Until 06/06/2019) 5 March 2019 Clr A Oliphant (From 06/06/2019) 5 June 2019

18 Pixley Ka Seme District Municipality Annual Report 2018/19

Name of Member Meeting Dates Clr E Humphries Clr S Swartling Clr LC van Niekerk (Until 19/09/2018) Clr N Batties Clr MA Matebus Mr D Fourie

Table 25: Municipal Public Accounts Committee

2.2 Administrative Governance Structure

The Municipal Manager is the Accounting Officer of the Municipality. He is the head of the administration, and primarily has to serve as chief custodian of service delivery and implementation of political priorities. He is assisted by his direct reportees, which constitutes the Senior Management Team, whose structure is outlined in the table below:

Performance Agreement Signed Name of Official Department (Yes/No) RE Pieterse Municipal Manager Yes BF James Financial Services Yes TA Loko Corporate Services Yes H Greeff Infrastructure, Planning, Development & Housing Yes R Sors Internal Audit Yes

Table 26: Administrative Governance Structure

Component B: Intergovernmental Relations

2.3 Intergovernmental Structures

In terms of the Constitution of South Africa, all spheres of government and all organs of state within each sphere must co-operate with one another in mutual trust and good faith fostering friendly relations. They must assist and support one another; inform and consult one another on matters of common interest; coordinate their actions, adhering to agreed procedures and avoid legal proceedings against one another.

To adhere to the principles of the Constitution as mentioned above the municipality actively participates in the following intergovernmental structures:

Name of Structure Members Outcomes of Engagements/Topics Discussed General service delivery challenges affecting local communities, sharing of best-practice, District IGR Forum All Mayors etc. Seeks to improve on local service delivery. Provides report to PIGRF District health report, e.g. NHI, HIV\AIDS, status of health-facilities, etc. Seeks to All Mayors, sector departments led by enhance the delivery of health services in the District Aids and Health Department of Health, Civil Society, Office of district, comprehensive approach in dealing Forum the Premier with HIV\AIDS, impact of poor health of communities on municipal service delivery. Provides report to Provincial Council on Aids

19 Pixley Ka Seme District Municipality Annual Report 2018/19

Name of Structure Members Outcomes of Engagements/Topics Discussed Improvement and coordination of government District Communication Pixley ka Seme DM, GCIS, sector departments, communication and messaging, alignment of Forum state-owned enterprises etc. government programmes in the district Government service delivery challenges, All MM’s, CFO’s, Pixley Ka Seme DM senior including local government challenges, sharing managers, regional heads of sector Technical IGR Forum best practice, presentations by private sector departments, private sector service providers, service providers, etc. Provides technical SOE’s, SALGA advice and report to DIGRF Technical financial matters and related MM\CFO Forum All MM’s and CFO’s challenges, e.g. mSCOA, budgeting, ESKOM, shared services, audit outcomes by AG

Table 27: Intergovernmental Structures

2.4 Joint Projects with Sector Departments

All the functions of government are divided between the different spheres namely National, Provincial and Local. The municipality therefore share their area and community with other spheres of government and their various sector departments and has to work closely with national and provincial departments to ensure the effective implementation of various projects and functions.

The table below provides detail of such projects:

Name of Project/ Expected Outcome/s of the Contribution of Sector Sector Department/s involved Function Project Department A more informed youth, Siyathemba LM, Dept of Basic Mobilization, catering, Career exhibition reduction of general Education, Dept of Labour, Dept presentations, human resources. unemployment Home Affairs, mining companies Adoption of Functional schools, improved Department of Basic Education, Identification of needy schools schools levels of education and teaching School Governing Bodies

Table 28: Joint Projects with Sector Departments

Ubuntu MIG Project

Background

Ubuntu LM has been identified by MIG since 2016/17 financial year as unstable municipality as administration utilized grant funding for operational purposes. Subsequently the MIG administration both Provincial and National together with Ubuntu municipality resolved that the MIG funds will be administered by the District Municipality until the municipality’s administration and management has improved. Thus, Pixley ka Seme DM became involved administering Ubuntu Municipality MIG funds for the 2018/19 cycle.

On the 1st of February 2018, PKS DM received Ubuntu Municipality council resolution that Pixley ka Seme will administer the MIG for the 2018/19 year, followed by the MOU which was only signed in July 2018. Pixley ka Seme District Municipality appointed a Professional Service Provider, IX Engineers to assist with the implementation of the project and the first meeting was held in August 2018 where the scope of works was identified by officials of Ubuntu Municipality.

Project Registration

The scope of the existing registered project did not cover all aspects and was the service provider requested to amend the business plan. The revised project was registered on the MIG system early in 2019 for an amount of R 30 million.

20 Pixley Ka Seme District Municipality Annual Report 2018/19

MIG 2018/19 Allocation

The MIG allocation for the 2018/19 financial year amounts to R 9 862 000.00 and was transferred to the district municipality towards the end of March 2019.

Scope of Work

Water related priorities identified are:

Enhancement of water quality by further treatment methods which may include primary aeration process or water purification plant. The challenge is that the municipal aquifer fields are contaminated with Hydrogen Sulphate (water have rotten egg smell) and needs to be treated. Further the supply pipelines from these boreholes are not interconnected and water is stored in separate reservoirs and distributed separately to the neighbourhoods. The objective is to enhance the water quality with cost effective treatment option which will reduce the reliance of external water sources.

A Telemetric system is needed as a municipality is utilizing different boreholes which supply water to different reservoirs. The system should be set up in such a manner optimizing the safe yield of the different boreholes.

Augmentation of the bulk water supply is needed therefore MISA has embark on a process to drill a new borehole for Victoria West. Three new boreholes were also planned to be drilled under the MIG project and for this a geo- hydrological assessment was done determining possible water sources, the drilling of the boreholes and the analysis of the water quality and quantity.

Commissioning of new borehole(s) is a priority as it will reduce the reliance on external water sources. This includes the provisioning of electricity, borehole pumps and pressure pipelines to Martin se Gat.

Water free flow to the Mandela Square Pump Station. Upgrading of the Mandela Square booster pumps are necessary in order to utilize the storage in the reservoir for emergencies. A balancing reservoir at the pump station may be needed but the technical investigation will highlight the need.

The municipality plan to replace the connection balancing water main between Hostel Reservoir and Moonlight Hill with the Water Services Improvement Grant. Upgrading of the Gravity feeder line from Moonlight Hill reservoir to the community is needed as the current water pipe line capacity is insufficient.

Implementation Progress and Way Forward

Augmentation of the bulk water supply, geo-hydrological assessment of new and existing boreholes;

Ubuntu Municipality is relying from external water sources supplied by Mr. Conroy in the Hutchinson area. In order for the municipality to be independent additional water sources need to be found. IX Engineers appointed Kimopax as the geo-hydrologist to identify new aquifers and to drill the boreholes. They also have to sample all the water sources and determine the safe yield of the production boreholes. This all was completed and was a report ready to be discussed with the municipality by mid July 2019.

Commissioning of the new boreholes and telemetric system; Commissioning of the new boreholes will be done after the EIA has been approved;

Commissioning of the new boreholes can only be done after the Environmental Impact Assessment study has been done. The EIA process can only commence after the production boreholes has been identified. It is anticipated that the EIA process will commence in September 2019 and the timeframe is either 230 or 360 days depending on the type of application e.g. Basic Assessment of full EIA.

21 Pixley Ka Seme District Municipality Annual Report 2018/19

Assessment of the existing telemetric system was completed and a report with recommendations is ready to be discussed with the municipality.

Enhancement of the water quality by appropriate treatment methods of the borehole water;

This phase depends on the water analysis Phase 1 and IX Engineers was requested to find the most economical and sustainable solution for the municipality and present it before continuing with the design. Process designs for the treatment works can start as soon as the municipality has given the go-ahead. Treatment options will also be presented during the meeting planned for 19 July 2019. This phase with the telemetry will go out on tender in August 2019 and is estimated to be completed by June 2020.

Upgrading of the Mandela Square booster pump station, sealing of the reservoir, and

Upgrading of the gravity feeder line from Moonlight hill.

Balintulo Construction was appointed for an amount of R3,2 million on the 25 March 2019 for these two phases and the site handover meeting was held 9 May 2019. The contractor is on site and has employed 8 workers and a CLO but will be increased to 30 workers as the project progresses. Construction period ends end of November 2019. The work entails exposure of existing bulk water pipelines, installation of a new bulk water pipeline adjacent to it and erf connections. Further the contractor has to seal the Mandela Square Reservoir and refurbish the booster pump station. The first activities commenced but progress is slow and was the contractor requested to increase production.

Pipes clogged with residue in untreated Water Augmentation in progress – water sourcing additional water sources

Installing new water pipe lines

22 Pixley Ka Seme District Municipality Annual Report 2018/19

Component C: Public Accountability and Participation

Section 16 of the MSA refers specifically to the development of a culture of community participation within municipalities. It states that a municipality must develop a culture of municipal governance that complements formal representative government with a system of participatory governance. For this purpose it must encourage and create conditions for the local community to participate in the affairs of the community. Such participation is required in terms of:

the preparation, implementation and review of the IDP establishment, implementation and review of the performance management system monitoring and review of the performance, including the outcomes and impact of such performance preparation of the municipal budget

2.5 Public Meetings

Number of Community members Nature and purpose of meeting Date of events attending

18 July 2018 (Victoria-West) 126 Community Members attended Council Meeting the People 24 October 2018 (Loxton) 80 Community members attended 23 April 2019 (Van Wyksvlei) 42 Community Members attended. Budget and IDP 14 February 2019 (Niekerkshoop) 80 Community Members attended. 22 February 2019 (Noupoort) 79 Community Members attended. AG Outcomes (2017-2018) 27 February 2019 (Philipstown) 74 Community Members attended.

Table 29: Public Meetings

2.6 Representative Forums

Local Labour Forum

The table below specifies the members of the Local Labour forum for the period under review:

Name of Representative Capacity Meeting Dates Clr. N Nkumbi Council Representative Clr. Itumeleng Council Representative Clr. Sintu Council Representative

Mr TA Loko Employer Representative 25 July 2018, Miss S Antonnnie Imatu Representative 25 October 2018, 7 February 2019, Mr. E Mackenzie Imatu Representative 15 April 2019, 30 May 2019 and 30 May 2019 Mr. P Demas SAMWU Representative (two LLF meetings , one for the Mr. C Valla SAMWU Representative approval of WSP) Miss Y Mabedla SAMWU Representative Mr. S Ntamehlo LLF Secretary Mr C Valla LLF Chairperson ( SAMWU)

Table 30: Local Labour Forum

23 Pixley Ka Seme District Municipality Annual Report 2018/19

IDP Forum

Name of Representative/ Organisation Capacity Meeting Dates Presenting Mr. Greeff and Me. Maganya - Planning Pixley ka Seme District Municipal 15 October 2018 Unit Steering Committee

Mr. Greeff and Me. Maganya - Planning Pixley ka Seme District Municipal IDP 29 November 2018 Unit Representative Forum Meeting 26-27 February 2019 Mayor and Councilors, - Mayor’s office Pixley ka Seme District Municipal IDP Mr. Greeff and Me. Maganya - Planning Public Engagement Session in 14 February 2019 Unit Niekerkshoop

Table 31: IDP Forum

District and Local AIDS Committee Meetings

Name of Municipality and Town Type of Committee Meeting Meeting Dates 19 September 2018 Sector Departments, Civil Society, local Managers, Chairpersons and Secretaries, 29 November 2018 Municipalities, Non-Governmental Local Mayors and District Coordinators 20 March 2019 Organizations and Office of the Premier 26 June 2019

Table 32: District and Local AIDS Council

District Communication Forum

Name of Municipality and Town Type of Committee Meeting Meeting Dates Department Transport Safety and Ms Rusthof & Mr Moloto Liaison Mr Moeti GCIS Mr Steyn Department Home Affairs Mr Nel Department Stats Ms Thala Services Seta Kampher Angels Resource Centre Ms Mvenya Department of Education Ms Ceza & Ngweya Brand South Africa 20 September 2018 Mr Loko IEC 28 November 2018 28 March 2019 Mr Nagel GCIS 12 June 2019 Ms Jobe SASSA Ms Lightfoot Sita Coghsta Mr Mashula GCIS Mr Moeti Mr Nkondeshe Department Environmental Affairs Ms Msengana IEC Ms Khonono GCIS Ms Chistians Service SETA

Table 33: District Communication Forum

24 Pixley Ka Seme District Municipality Annual Report 2018/19

2.7 Shared Services

2.7.1 Planning

The Planning Section falls under the Infrastructure Development and Housing Department and is charged with the responsibility of planning for the district. This planning function is multidimensional focusing on spatial planning and integrated development planning for the district as a whole.

Part B of Schedules 4 and 5 of the Constitution of the Republic of South Africa, Act 108 of 1996, places the function of town planning on local municipalities. However, taking the abilities of the local municipalities in consideration, Council has decided that Pixley ka Seme District Municipality should provide hands on support to all its local municipalities, in adherence to the prescripts of the Local Government: Municipal Structures Act, 117 of 1998.

Support was rendered in the following activities:

Processing of building plan applications in order for applicants to get building permits in time. Assist local municipality with land development applications e.g. zoning, residential layout and removal of restrictions

During the year the following achievements were made in this field:

71 building applications were received of which 32 were approved and 39 were not approved due to incompliance issues in terms of the Municipal Scheme Regulations and National Building Regulation and Building Standards Act. The quality of the building plans remains a challenge for the section and is a major contributor to the non- approval of building plans.

Spatial Plan Land Use Management Act

SPLUMA came into effect from 1 July 2015 and since council has decided to establish a District Municipal Planning Tribunal (DMPT), the planning unit drove the process in order to establish the DMPT.

The DMPT met 5 times during the 2018/19 financial year to consider 46 applications of which 34 were approved and 11 were referred back to the applicant for review due to non-compliance with the Municipal By-Law on Spatial Planning and Land Use Management. One application was not approved or rejected.

Integrated Development Planning

The Municipal Systems Act requires municipalities to review and adopt their IDPs annually to guide development within their areas of jurisdiction to ensure sustainable development, poverty eradication and a better life for all. The Municipality adopted its reviewed IDP for the 2019/20 in May 2019. The District must assist our nine local municipalities on proper municipal planning to ensure alignment and objective driven IDP’s.

The achievement for 2018/19 was that all final IDP's were adopted by the respective councils and submitted to the MEC for further assessment.

The IDP is a strategic planning tool for addressing developmental challenges, the plan sets out some strategic agendas and focus for development and service delivery in years to come. The strategic development agendas are premised on five key performance areas as set out by the Department of Cooperative Governance, Human Settlements and Traditional Affairs. The said five key performance areas are basic service delivery, good governance and public participation, municipal transformation and institutional development, municipal financial viability and management and local economic development.

25 Pixley Ka Seme District Municipality Annual Report 2018/19

2.7.2 Internal Audit

During the 2018/2019 financial year, internal audit services were rendered to all eight (8) local municipalities within the Pixley ka Seme District in terms of the Service Level Agreement, however Ubuntu LM and Renosterberg LM only signed the Service Level Agreements during the second quarter of the 2018/2019 financial year. The service was rendered to the following municipalities:

Emthanjeni Municipality

Umsobomvu Municipality

Siyathemba Municipality

Siyancuma Municipality

Kareeberg Municipality

Thembelihle Municipality

Ubuntu Local Municipality

Renosterberg Municipality

The table below indicates the audit activities per local municipality for the year under review:

Activity Name of Local Municipality Date/Number Emthanjeni 4 Umsobomvu 4 Siyathemba 4 Siyancuma 4 Quarterly Audits Kareeberg 4 Thembelihle 4 Ubuntu 4 Renosterberg 4 Emthanjeni 4 Umsobomvu 4 Siyathemba 2 Siyancuma 4 Audit committee meetings Kareeberg 4 Thembelihle 2 Ubuntu 1 Renosterberg 0 Quality Assurance Programme 1 Emthanjeni 1 Umsobomvu 1 Siyathemba 1 Siyancuma 1 Adopted Audit committee Charters Kareeberg 1 Thembelihle 1 Ubuntu 0 Renosterberg 0 Emthanjeni 1 Developed and approved Risk Based Audit Plan and three year strategic Umsobomvu 1 plans Siyathemba 1

26 Pixley Ka Seme District Municipality Annual Report 2018/19

Activity Name of Local Municipality Date/Number Siyancuma 1 Kareeberg 1 Thembelihle 1 Ubuntu 0 Renosterberg 0

Table 34: Internal Audit Activities

Component D: Corporate Governance

Corporate governance is the set of processes, practices, policies, laws and stakeholders affecting the way an institution is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the institution is governed.

2.8 Risk Management

In the absence of a dedicated Risk Management Unit, the Internal Audit Services Department assumed a coordinating role regarding the updating of the risk profile for the Municipality. The risk profile was also submitted to the Audit Committee.

The role of the service departments is to assist management in identification and review of risks in order to properly manage them. Risk management is an integral or natural part of the organisational processes and procedures. Risk management should be embedded in the organisation. It becomes an intrinsic part of business planning and decision making as there is no direction taken without looking at potential risks.

As from 01 April 2018 Pixley ka Seme District responded to the need to establish a Risk management unit and appointed a Risk Officer within the institution.

The table below include the top risks of the Municipality:

Risk Root Cause Risk Exposure Going Concern Municipality totally grant dependent High Failure by locals to honoured payment Material Impairments High ito Service Level Agreement Weaknesses in IT controls and processes Lack of capacity within IT section High

Steering Committee meetings not Non-functional mSCOA governance taking place as required due to lack Moderate structures of understanding of mSCOA. Lack of capacity

Table 35: Top Risks

2.8.1 Risk Committee

The role of the Risk Committee is to provide timely and useful enterprise risk management reports to the Audit Committee of the municipality. The members and meeting dates of the Committee are indicated in the table below:

Name of Committee Member Capacity Meeting dates Ms. J Mafilika Chairperson Mr. RE Pieterse Municipal Manager 15 November 2018 Mr. BF James CFO

27 Pixley Ka Seme District Municipality Annual Report 2018/19

Name of Committee Member Capacity Meeting dates Ms. R.A Sors Permanent invitee Mr H Greeff IDH&P Mr. T Loko Senior Manager Corporate Services Ms. C Oliphant Representative from Provincial Treasury Mr. A Vena Risk Officer

Table 36: Risk Committee

2.9 Anti-Corruption and Anti-Fraud

Section 83(c) of the MSA refers to the implementation of effective bidding structures to minimize the possibility of fraud and corruption and the Municipal Finance Management Act (MFMA), section 112(1) (m)(i) identify supply chain measures to be enforced to combat fraud and corruption, favouritism and unfair and irregular practices. Section 115(1) of the MFMA states that the accounting officer must take steps to ensure mechanisms and separation of duties in a supply chain management system to minimize the likelihood of corruption and fraud.

Developed Strategies

Developed Name of Strategy Date Adopted/Reviewed Yes/No Fraud Prevention Plan Yes March 2009 / May 2017

Table 37: Strategies: Anti-corruption and Anti-fraud

2.10 Audit Committee Section 166(2) of the MFMA states that an audit committee is an independent advisory body which must –

(a) advise the municipal council, the political office-bearers, the accounting officer and the management staff of the municipality, on matters relating to –

internal financial control and internal audit; risk management; accounting policies; the adequacy, reliability and accuracy of financial reporting information; performance management; effective governance; compliance with this Act, the annual Division of Revenue Act and any other applicable legislation; performance evaluation; and any other issues referred to it by the municipality

2.10.1 Functions of the Audit Committee The Audit Committee have the following main functions as prescribed in section 166 (2) (a-e) of the Municipal Finance Management Act, 2003 which is further supplemented by the Local Government Municipal and Performance Management Regulation as well as the approved Audit Committee charter:

To advise the Council on all matters related to compliance and effective governance.

28 Pixley Ka Seme District Municipality Annual Report 2018/19

To review the annual financial statements to provide Council with an authoritative and credible view of the financial position of the municipality, its efficiency and its overall level of compliance with the MFMA, the annual Division of Revenue Act (DoRA) and other applicable legislation.

Respond to the council on any issues raised by the Auditor-General in the audit report. To carry out such investigations into the financial affairs of the municipality as the council may request. Perform such other functions as may be prescribed. To review the quarterly reports submitted to it by the internal audit. To evaluate audit reports pertaining to financial, administrative and technical systems. To review the performance management system and make recommendations in this regard to Council. To identify major risks to which Council is exposed and determine the extent to which risks have been minimised. Review the plans of the Internal Audit function and in so doing; ensure that the plan addresses the high-risk areas and ensure that adequate resources are available.

Provide support to the Internal Audit function. Ensure that no restrictions or limitations are placed on the Internal Audit section. Evaluate the activities of the Internal Audit function in terms of their role as prescribed by legislation.

2.10.2 Members of the Audit Committee

Meeting Dates Member: J Blair Member: J Mafilika Member: DPS van Wyk 21 August 2018 Attended Not Attended Not Attended 3 December 2018 Attended Attended Attended 28 March 2019 Attended Not Attended Attended 18 June 2019 Attended Not Attended Attended

Table 38: Members of the Audit Committee

2.11 Internal Auditing

Section 165(2)(a), (b)(iv) of the MFMA requires that the internal audit unit of a municipality must –

(a) prepare a risk based audit plan and an internal audit program for each financial year; and

(b) advise the accounting officer and report to the audit committee on the implementation on the internal audit plan and matters relating to risk and risk management.

(c) The municipality has an in-house Internal Audit function consisting of four auditors, four internal audit clerks, one Senior Internal Auditor and one Chief Audit Executive. (d) The table below indicates the detail of internal audit activities for the year under review for Pixley ka Seme itself:

Activity 2017/18 2018/19 Quarterly Audits 4 4 Adhoc assignments 0 0 Quality Assurance Programme 1 1 Reviewed and approved Internal Audit Charter 1 1 Reviewed and adopted Audit Committee Charter 1 1 Developed and approved Risk Based Audit Plan 1 1

Table 39: Internal Audit Activities

29 Pixley Ka Seme District Municipality Annual Report 2018/19

2.12 Auditor-General

The Municipality is audited by the Auditor-General of South Africa in terms of Section 188 of the Constitution and Section 4 of the Public Audit Act and Section 126 of the MFMA. The audit report for the financial year under review is in Annexure B of this report.

2.13 By-Laws and Policies

Section 11 of the MSA gives Council the executive and legislative authority to implement By-Laws and policies. The Municipal Health Services By-Law were revised during the year.

Below is a list of all the policies developed and/or reviewed during the financial year:

Policies Developed/ Revised Date Adopted Risk Management Committee Charter 14 December 2018 Subsistence and Traveling Policy 01 March 2019 Asset Management Policy 26 March 2019 Borrowing Policy 26 March 2019 Cash and Investment Policy 26 March 2019 Commitments Policy 26 March 2019 Contingent Liability Policy 26 March 2019 Credit Control Policy 26 March 2019 Fraud Prevention Plan 26 March 2019 Related Party Policy 26 March 2019 Revenue Management Policy 26 March 2019 Risk Management Policy 26 March 2019 Supply Chain Management Policy 26 March 2019 Tariff Policy 28 May 2019 Unauthorized, irregular, fruitless and wasteful expenditure policy 26 March 2019 Electronic Funds Transfer (EFT) Policy 26 March 2019 SCM Infrastructure Policy 26 March 2019 MHS Standard Operating Procedures 28 May 2019 Disaster Management and Contingency Plan 28 May 2019 Information Technology Strategic Plan 28 May 2019 Organizational Structure 28 May 2019 Terms of Reference IT Steering Committee Reviewed 28 May 2019 Terms of Reference: Standing & other Committees of PKSDM 28 May 2019

Table 40: Policies Developed/ Revised

2.14 Communication

Local government has a legal obligation and a political responsibility to ensure regular and effective communication with the community. The Constitution of the Republic of South Africa, 1996 and other statutory enactments all impose an obligation on local government and require high levels of transparency, accountability, openness, participatory democracy and direct communication with the communities to improve the lives of all.

Good customer care is clearly of fundamental importance to any organisation. A successful communication strategy therefore links the people to the municipality’s programme for the year.

30 Pixley Ka Seme District Municipality Annual Report 2018/19

Below is a communication checklist of the compliance to the communication requirements:

2.14.1 Communication Activities

Description Yes/No Communication strategy Yes Customer satisfaction surveys Yes Newsletters distributed at least quarterly Yes, 3 were distributed in 2018/19 Crisis Communication Procedure Yes Language Policy and Procedure No Media Protocol Procedure No Social Media Yes 4 Meetings were held 20 September 2018 District Communication Forum 28 November 2018 28 March 2019 12 June 2019 8 Meetings were held Kareeberg: 10 September 2018 Emthanjeni: 11 September 2018 Siyathemba: 14 September 2018 Local Communication Forums Siyancuma: 31 October 2018 Ubuntu: 1 November 2018 Umsobomvu: 8 February 2019 Thembelihle: 7 March 2019 Renosterberg: 30 May 2019

Table 41: Communication Activities

2.14.2 Communication Unit:

Number of People in the Unit Job Titles Communications Specialist 4 positions, but only 1 filled. Researchers (2), Field Worker (1)

Table 42: Communication Unit

2.14.3 Website

Municipalities are required to develop and maintain a functional website that displays relevant information as per the requirements of S75 of the MFMA and S21A and B of the Municipal Systems Act (“MSA”) as amended.

The website should serve as a mechanism to promote accountability and transparency to communities and therefore information posted should be accurate and timeously updated.

The municipal website is a key communication mechanism in terms of service offering, information sharing and public participation. It is a communication tool that should allow easy and convenient access to relevant information. The municipal website should serve as an integral part of the municipality’s communication strategy.

The table below gives an indication of the information and documents that are published on the municipal website.

Description of information and/or document Yes/No Municipal contact details (Section 14 of the Promotion of Access to Information Act) Full Council details Yes

31 Pixley Ka Seme District Municipality Annual Report 2018/19

Description of information and/or document Yes/No Contact details of the Municipal Manager Yes Contact details of the CFO Yes Physical address of the Municipality Yes Postal address of the Municipality Yes Financial Information (Sections 53, 75, 79 and 81(1) of the Municipal Finance Management Act) Draft Budget 2017/18 No Adjusted Budget 2017/18 No Asset Management Policy Yes Credit control & Debt collection Policy Yes Investment & Cash Management Policy Yes Supply Chain Management Policy Yes Tariff Policy Yes Travel and Subsistence Policy Yes Borrowing Policy Yes Top Layer SDBIP 2017/18 Yes Budget and Treasury Office Structure No Budget and Treasury Office delegations No Delegations Yes Integrated Development Plan and Public Participation (Section 25(4)(b) of the Municipal Systems Act and Section 21(1)(b) of the Municipal Finance Management Act) Reviewed IDP for 2017/18 Yes IDP Process Plan for 2017/18 No Supply Chain Management (Sections 14(2), 33, 37 &75(1)(e) & (f) and 120(6)(b)of the Municipal Finance Management Act and Section 18(a) of the National SCM Regulation) List of capital assets that have been disposed No Long Term borrowing contracts Yes SCM contracts above R30 000 Yes Contracts which impose a financial obligation on the municipality beyond 3 years Yes Service delivery agreements Yes Public invitations for formal price quotations Yes

Annual Report of 2016/17 Yes Oversight report of 2016/17s No Mid-year budget and performance assessment of 2017/18 (Sec 72 MFMA) Yes Quarterly Reports (sec 52 MFMA) Yes Monthly Budget Statement (Sec 71 MFMA) Yes Performance Management (Section 75(1)(d) of the Municipal Finance Management Act) Performance Agreements for employees appointed as per S57 of Municipal Systems Act for 2017/18 Yes Assurance Functions (Sections 62(1), 165 & 166 of the Municipal Finance Management Act) Internal Audit charter Yes Audit Committee charter Yes Risk Management Policy Yes

Table 43: Information on Website

32 Pixley Ka Seme District Municipality Annual Report 2018/19

CHAPTER 3: SERVICE DELIVERY PERFORMANCE OVERVIEW OF PERFORMANCE WITHIN THE ORGANISATION

Performance management is a process which measures the implementation of the organisation’s strategy. It is also a management tool to plan, monitor, measure and review performance indicators to ensure efficiency, effectiveness and the impact of service delivery by the municipality.

At local government level performance management is institutionalized through the legislative requirements on the performance management process for Local Government. Performance management provides the mechanism to measure whether targets to meet its strategic goals, set by the organisation and its employees, are met.

Legislative requirements

The Constitution of the RSA, 1996, section 152, dealing with the objectives of local government paves the way for performance management with the requirements for an “accountable government”. The democratic values and principles in terms of section 195 (1) are also linked with the concept of performance management, with reference to the principles of inter alia:

the promotion of efficient, economic and effective use of resources, accountable public administration to be transparent by providing information, to be responsive to the needs of the community, and to facilitate a culture of public service and accountability amongst staff.

The Municipal Systems Act (MSA), 2000 requires municipalities to establish a performance management system. Further, the MSA and the Municipal Finance Management Act (MFMA) requires the Integrated Development Plan (IDP) to be aligned to the municipal budget and to be monitored for the performance of the budget against the IDP via the Service Delivery and the Budget Implementation Plan (SDBIP).

In addition, Regulation 7 (1) of the Local Government: Municipal Planning and Performance Management Regulations, 2001 states that “A Municipality’s Performance Management System entails a framework that describes and represents how the municipality’s cycle and processes of performance planning, monitoring, measurement, review, reporting and improvement will be conducted, organised and managed, including determining the roles of the different role players.” Performance management is not only relevant to the organisation as a whole, but also to the individuals employed in the organization as well as the external service providers and the Municipal Entities. This framework, inter alia, reflects the linkage between the IDP, Budget, SDBIP and individual and service provider performance.

In terms of section 46(1)(a) of the systems Act (Act 32 of 2000) a municipality must prepare for each financial year a performance report reflecting the municipality’s and any service provider’s performance during the financial year, including comparison with targets of and with the performance of the previous financial year. The report must, furthermore, indicate the development and service delivery priorities and the performance targets set by the municipality for the following financial year and measures that were or are to be taken to improve performance.

33 Pixley Ka Seme District Municipality Annual Report 2018/19

Organisational performance

Strategic performance indicates how well the municipality is meeting its objectives and whether policies and processes are working effectively. All government institutions must measure and report on their strategic performance to ensure that service delivery is done in an efficient, effective and economical manner. Municipalities must therefore develop strategic plans and allocate resources for the implementation. The implementation of the plans must be monitored on an on-going basis and the results must be reported on during the financial year to various role-players to enable them to timeously implement corrective measures where required.

This report highlight the strategic performance in terms of the municipality’s Top Layer Service Delivery Budget Implementation Plan (SDBIP), high level performance in terms of the Strategic Objectives and performance on the National Key Performance Indicators as prescribed in terms of section 43 of the Municipal Systems Act, 2000.

Performance Management System used in the financial year 2018/19

The IDP and the Budget

The IDP and the main budget for 2018/19 was approved by Council on 27 May 2018. As he IDP process and the performance management process are integrated, the IDP fulfils the planning stage of performance management whilst performance management in turn, fulfils the implementation management, monitoring and evaluation of the IDP.

The Mayor approved the Top Layer Service Delivery Budget Implementation Plan (SDBIP) for 2018/19 on 21 June 2018. The Top layer SDBIP indicators are aligned with the budget which was prepared in terms of the reviewed IDP. The indicators in the Top layer SDBIP include indicators required by legislation, indicators that will assist to achieve the objectives adopted in the IDP and indicators that measure service delivery responsibilities.

The actual performance achieved in terms of the KPI’s was reported on quarterly. The indicators and targets were adjusted after the finalisation of the previous year budget and mid-year budget assessment. The Top Layer SDBIP was revised with the Adjustments Budget in terms of section 26 (2)(c) of the Municipal Budget and Reporting Regulations and an amended Top Layer SDBIP was approved by the Council on 30 January 2019 through resolution R2019-01- 30(9.3).

The performance agreements of the senior managers was compiled and revised in terms of the SDBIP indicators.

Actual Performance

The municipality utilizes an electronic web based system on which KPI owners update actual performance on a monthly basis. KPI owners report on the results of the KPI by documenting the following information on the performance system:

The actual result in terms of the target set. A performance comment. Actions to improve the performance against the target set, if the target was not achieved.

It is the responsibility of every KPI owner to maintain a portfolio of evidence to support actual performance results updated.

34 Pixley Ka Seme District Municipality Annual Report 2018/19

Monitoring of the Service Delivery Budget Implementation Plan

Municipal performance is measured as follows:

Quarterly reports was submitted to council on the actual performance in terms of the Top Layer SDBIP. Mid-year assessment and submission of the mid-year report to the Mayor in terms of section of Section 72(1) (a) and 52(d) of the Local Government Municipal Finance Management Act to assess the performance of the municipality during the first half of the financial year.

PERFORMANCE REPORT PART I

3.1 Introduction

This section provides an overview of the key service achievements of the municipality that came to fruition during 2015/16 in terms of the deliverables achieved against the strategic objectives of the IDP.

3.2 Strategic Service Delivery Budget Implementation Plan

This section provides an overview on the achievement of the municipality in terms of the strategic intent and deliverables achieved as stated in the IDP. The Top Layer SDBIP assists with documenting and monitoring of the municipality’s strategic plan and shows the strategic alignment between the IDP, Budget and Performance plans.

In the paragraphs below the performance achieved is illustrated against the Top Layer SDBIP KPI’s applicable to 2018/19 in terms of the IDP strategic objectives.

The following table explains the method by which the overall assessment of the actual performance against the targets set for the key performance indicators (KPI’s) of the SDBIP are measured:

Category Colour Explanation KPI Not Yet Measured n/a KPI’s with no targets or actuals in the selected period KPI Not Met R 0% > = Actual/Target< 75% KPI Almost Met O 75% > = Actual/Target < 100% KPI Met G Actual/Target = 100% KPI Well Met G2 100% > Actual/Target < 150% KPI Extremely Well Met B Actual/Target > = 150%

Figure 3 SDBIP measurement criteria

35 Pixley Ka Seme District Municipality Annual Report 2018/19

3.2.1 Overall Performance as per Top Layer SDBIP

The overall performance results achieved by the Municipality in terms of the Top Layer SDBIP are indicated in the tables and graphs below:

To provide an independent and objective internal audit Administer assurance and To provide a finances in a consulting professional, sustainable Compliance Guide local service to add To provide Monitor and people- manner and with the municipalities value and to To provide municipal support local Promote centered strive to tenets of good in the improve the disaster health Measurement municipalities economic human comply with governance as development administrative management services to to enhance growth in the resources and Criteria legislative prescribed by of their IDP’s operations of services to improve the service district administrative requirements legislation and and in spatial all the the citizens quality of life delivery service to to achieve a best practice development municipalities of the citizens citizens, staff favorable audit in the district and Council outcome through an approach that is systematic and disciplined KPI Not 0 0 0 2 2 1 0 1 1 Met

KPI Almost 0 0 0 3 0 0 0 0 0 Met

KPI Met 9 7 2 3 1 4 4 4 1

KPI Well 0 2 0 1 0 0 0 0 1 Met KPI Extremely 0 1 0 0 0 2 3 0 0 Well Met Total 9 10 2 9 3 7 7 5 3

Graph 1: Top Layer SDBIP Performance per objective

36 Pixley Ka Seme District Municipality Annual Report 2018/19

Actual performance as per Top Layer SDBIP according to objectives

Administer finances in a sustainable manner and strive to comply with legislative requirements to achieve a favorable audit outcome

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Compile and submit an Audit Audit Recovery Action Plan to Plan compiled and TL18 Council by 31 1 0 0 1 0 1 1 G approved by 31 January 2019 to January 2019 address the issues raised by the AG Report quarterly to Council on meetings with and Number of reports correspondence to TL19 submitted to 4 1 1 1 1 4 4 G defaulting Council municipalities on debt relating to services rendered Prepare and Draft budget submit the draft TL20 submitted by 31 1 0 0 1 0 1 1 G budget to Council March 2019 by 31 March 2019 Prepare and Final budget submit the final TL21 submitted by 31 1 0 0 0 1 1 1 G budget to Council May 2019 by 31 May 2019 Prepare and submit the Adjustments adjustments budget submitted TL22 1 0 0 1 0 1 1 G budget to Council by 28 February by the 28 February 2019 2019 Submit the annual Statements financial submitted to the TL23 statements to the 1 1 0 0 0 1 1 G Auditor-General Auditor-General by by 31 August 2018 31 August 2018 Co-ordinate the Number of District MM/CFO TL24 meetings co- 2 0 1 0 1 2 2 G forums on a bi- ordinated annual basis Financial viability measured in terms of the Municipality's ability to meet it's service debt obligations by 30 June 2019 ((Short Term Borrowing + TL25 % debt coverage 7.81% 0% 0% 0% 45% 45% 45% G Bank Overdraft + Short Term Lease + Long Term Borrowing + Long Term Lease) / Total Operating Revenue - Operating Conditional Grant)

37 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Financial viability measured in terms of the available cash to cover fixed operating expenditure by 30 June 2019 ((Cash and Cash Equivalents - Unspent Conditional Grants Number of months - Overdraft) + it takes to cover TL26 Short Term fix operating 0.19 0 0 0 1 1 1 G Investment) / expenditure with Monthly Fixed available cash Operational Expenditure excluding (Depreciation, Amortisation, and Provision for Bad Debts, Impairment and Loss on Disposal of Assets))

Table 44: Administer finances in a sustainable manner and strive to comply with legislative requirements to achieve a favorable audit outcome

Compliance with the tenets of good governance as prescribed by legislation and best practice

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Facilitate the quarterly meetings Number of of the Technical TL1 meetings 4 1 1 1 1 4 4 G District facilitated Intergovernmental Forum Sign Section 57 Number of performance performance TL2 agreements with 4 4 0 0 0 4 4 G agreements all directors by 31 signed July 2018 Facilitate the quarterly meetings Number of of the Political TL4 meetings 3 1 1 1 1 4 4 G District facilitated Intergovernmental Forum Submit a report to Council on the monitoring and Report submitted TL12 evaluation of to council by 30 1 0 0 0 1 1 1 G community June 2019 participation by 30 June 2019

Facilitate the Number of TL13 quarterly meetings meetings 3 1 1 1 1 4 4 G of the District facilitated

38 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Communication Forum Host commemorative days as per the Number of TL14 approved list by commemorative 5 0 2 0 3 5 7 G2 the Municipal days hosted Manager and Mayor Facilitate the Number of quarterly meetings TL15 meetings 4 1 1 1 1 4 5 G2 of the District facilitated HIV/AIDS Council Facilitate the bi- Number of annual meetings TL16 meetings 2 0 1 0 1 2 3 B of the Youth facilitated Council Submit the Top Top Layer SDBIP layer SDBIP for submitted approval by the annually to Mayor TL27 Mayor within 14 within 14 days 1 0 0 0 1 1 1 G days after the after the budget budget has been has been approved approved Submit the draft Draft Annual Annual Report to Report submitted TL28 1 0 0 1 0 1 1 G Council by 31 to Council by 31 January 2019 January 2019

Table 45: Compliance with the tenets of good governance as prescribed by legislation and best practice

Guide local municipalities in the development of their IDP’s and in spatial development

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Review the IDP Draft reviewed and submit draft IDP submitted to TL57 1 0 0 1 0 1 1 G to Council by 31 Council by 31 March 2019 March 2019 Compile an IDP framework by 31 IDP framework TL58 August 2018 to completed by 31 1 1 0 0 0 1 1 G guide local August 2018 municipalities

Table 46: Guide local municipalities in the development of their IDP’s and in spatial development

Monitor and support local municipalities to enhance service delivery

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Report quarterly Number of reports to Council on submitted to 3 1 1 1 1 4 3 O TL3 Shared Services Council Corrective Report for the second quarter was not submitted. Will ensure in future that all reports are Measures submitted.

39 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Arrange and convene quarterly Number of 4 1 1 1 1 4 2 R Infrastructure meetings arranged TL51 Forum meetings Four quarterly infrastructure forum meeting notices went out but only 2 realize due to Corrective stakeholders nonattendance. The Senior Management should revise target after 1 or 2 fail Measures attempts. Submit quarterly progress reports that include expenditure on all Number of reports 4 1 1 1 1 4 3 O MIG projects in submitted TL52 the district to the Portfolio Committee 4 reports was submitted but only 3 Portfolio committee meetings took place. Senior Manager Corrective should request condonation in terms of KPI’s that could not be met as a result of external Measures factors. Submit quarterly progress reports on the Implementation of infrastructure Number of reports grants/allocations 4 1 1 1 1 4 3 O submitted according to set TL53 conditions and submit to the Portfolio Committee 4 reports was submitted but only 3 Portfolio committee meetings took place. Senior Manager Corrective should request condonation in terms of KPI’s that could not be met as a result of external Measures factors. Review the Human Reviewed Human Settlements Settlements Sector Plan and Sector Plan 1 0 0 0 1 1 0 R submit to Council submitted to TL54 for approval by 30 council annually June 2019 by 30 June 2019 Reviewed report was submitted but Municipal Manager was not happy with end result. Senior Corrective Manager should request condonation in the respect of meeting the desired target from Municipal Measures Manager. Conduct housing consumer New Key Number education in towns Performance TL55 households 150 150 150 150 600 803 G2 of non-accredited Indicator for educated municipalities in 2018/19 the district Report quarterly New Key to the Portfolio Number of reports Performance TL56 1 1 1 1 4 4 G Committee on all submitted Indicator for housing functions 2018/19 Apply for funding to review the Funding Spatial New Key application Development Performance TL61 submitted to 0 1 0 0 1 1 G Framework that Indicator for possible funder by include Land Use 2018/19 Management 31 December 2018 Schemes and submit to possible

40 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual funder by 31 December 2018 Apply for funding to review the District Growth and Development Funding Strategy to New Key application include an Performance TL62 submitted to 0 1 0 0 1 1 G implementation Indicator for possible funder by plan with actions 2018/19 31 December 2018 and timeframes and submit to possible funder by 31 December 2018

Table 47: Monitor and support local municipalities to enhance service delivery

Promote economic growth in the district

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Facilitate 2 career New Key exhibitions in the Number of career Performance TL17 Pixley Ka Seme exhibitions 0 1 0 1 2 2 G Indicator for District area by 30 facilitated 2018/19 June 2019 Review the LED Draft reviewed New Key strategy and LED strategy Performance submit draft to submitted to 0 0 0 1 1 0 R Indicator for Council by 30 June Council by 30 TL59 2018/19 2019 June 2019 Corrective When drafting the KPI’s Senior Managers should take cognisance of external factors and set Measures realistic target dates. Create job opportunities Number of through the opportunities Expanded Public 633 0 0 0 55 55 34 R created by 30 Works Programme TL60 June 2019 (EPWP) by 30 June 2019 Corrective Senior Manager must populate actual performance in accordance with evidence captured in the Measures POE.

Table 48: Promote economic growth in the district

To provide a professional, people-centered human resources and administrative service to citizens, staff and Council

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Spent 1% of personnel budget % of the personnel TL29 on training by 30 budget spent by 1% 0% 0% 0% 1% 1% 1% G June 2019 (Actual 30 June 2019 total training expenditure

41 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual divided by total personnel budget) Submit a business proposal to LGSETA for Proposal discretionary grant TL30 submitted by 31 1 0 0 1 0 1 1 G to avail funds to March 2019 train employees and unemployed by 31 March 2019 Implement the WPSP measured by the % of identified employees that completed training as identified in WPSP by 30 June % of identified 2019 (Total employees that number of officials completed TL31 90% 0% 0% 0% 90% 90% 90% G that received training as training as was identified in WPSP identified in the by 30 June 2019 WPSP/total number of officials that were identified for training in the WPSP) Limit the vacancy % vacancy rate of rate to less that budgeted posts by 10% of budgeted 30 June 2019 posts by 30 June (Number of posts TL32 2019 ((Number of 5.26% 0% 10% 0% 10% 10% 9.52% B filled/Total posts filled/Total number of number of budgeted budgeted posts)x100 posts)x100) Review the Workplace Skills Plan submitted to TL33 Plan and submit to the LGSETA by 30 1 0 0 0 1 1 1 G the LGSETA by 30 April 2019 April 2019 The number of people from employment equity target groups employed (newly appointed) in the three Number of people TL34 highest levels of employed (newly 1 0 0 0 1 1 3 B management in appointed) compliance with the municipality's approved Employment Equity Plan by 30 June 2019 Develop a policy to implement a New Key System developed Performance TL47 system of 0 0 1 0 1 0 R understudy within by 31 March 2019 Indicator for the Municipality 2018/19 and submit to

42 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Council by 31 March 2019 Corrective Senior Manager Corporate Service must report on KPI's not met and indicate to the Municipal Measures Manager challenges experience.

Table 49: To provide a professional, people-centered human resources and administrative service to citizens, staff and Council

To provide an independent and objective internal audit assurance and consulting service to add value and to improve the administrative operations of all the municipalities in the district through an approach that is systematic and disciplined

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Submit a Quality Assurance Plan for Quality Assurance Pixley Ka Seme Plan submitted TL5 District 1 0 0 0 1 1 1 G annually by 30 Municipality to the June 2019 Audit Committee by 30 June 2019 Submit quarterly internal audit reports to the local Number of reports TL6 20 3 3 3 3 12 23 B municipalities in submitted terms of the Service Level Agreements Compile the Risk Based Audit Plan (RBAP) for Pixley Ka Seme District RBAP submitted Municipality and TL7 by 30 November 1 0 1 0 0 1 1 G submit to the 2018 Audit Committee for consideration by 30 November 2018 Compile the Risk Based Audit Plans (RBAP) for the local municipalities in Number of plans TL8 terms of the 4 0 0 0 3 3 6 B submitted Service Level Agreements and submit to the local municipalities by 30 June 2019 Review the 3 year Strategic Audit Plan for Pixley Ka Revised 3 year Seme District Strategic Audit TL9 Municipality and plan submitted to 1 0 1 0 0 1 1 G submit to the the AC by 30 Audit Committee November 2018 by 30 November 2018

43 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Review the 3 year Strategic Audit Plan for the Local Municipalities in Revised 3 year terms of the Strategic Audit TL10 Service Level plan submitted to 4 0 0 0 3 3 6 B Agreements and the AC by 30 June submit to the to 2019 the Audit Committee by 30 June 2019 Facilitate the quarterly Audit Committee Number of Audit meetings during Committee TL11 the 2018/19 4 1 1 1 1 4 4 G meetings financial year for facilitated Pixley Ka Seme District Municipality

Table 50: To provide an independent and objective internal audit assurance and consulting service to add value and to improve the administrative operations of all the municipalities in the district through an approach that is systematic and disciplined

To provide disaster management services to the citizens

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Submit a funding application for Application disaster TL35 submitted by 31 1 0 0 1 0 1 1 G management to March 2019 COGHSTA by 31 March 2019 Host a training session by 30 June Training session 2019 to train TL36 hosted by 30 June 1 0 0 0 1 1 1 G volunteers ito 2019 Disaster Management Review the Disaster Reviewed plan Management Plan submitted to TL37 1 0 0 0 1 1 1 G and submit to Council by 30 Council by 30 June June 2019 2019 Complete institutional assessment to determine extend Assessment New Key of underfunding submitted to Performance for Disaster 0 1 0 0 1 0 R Council by 31 Indicator for Management December 2018 2018/19 TL48 function and submit report to council by 30 December 2018 Institutional assessment was submitted to 26 March Council meeting. Senior manager should Corrective request revised target date in instances where the deadline could not be met for valid reasons Measures or all deadlines except where legislation requite otherwise, should be at the end of the financial year.

44 Pixley Ka Seme District Municipality Annual Report 2018/19

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Conduct a risk analysis on New Key disaster threats in Report submitted Performance TL49 the district and to Council by 30 0 0 0 1 1 1 G Indicator for submit report on June 2019 2018/19 analysis to Council by 30 June 2019

Table 51: To provide disaster management services to the citizens

To provide municipal health services to improve the quality of life of the citizen

Performance of 2018/19 Actual Unit of Ref KPI performance Targets Measurement 2017/18 Actual Q1 Q2 Q3 Q4 Annual Compile monthly water quality analysis reports to local Number of reports TL39 municipalities in 111 24 24 24 24 96 105 G2 compiled terms of the Water Quality Monitoring Programme Submit quarterly reports to Council Number of reports on municipal 4 1 1 1 1 4 1 R submitted TL40 health services rendered Corrective Reports for quarters 1,2 and 3 were submitted to Council in one report in May 2019. Measures Develop Municipal New Key Health Services Bylaw submitted Performance TL50 Bylaw and submit to Council by 30 0 0 0 1 1 1 G Indicator for to Council by 30 June 2019 2018/19 June 2019

Table 52: To provide municipal health services to improve the quality of life of the citizen 3.3 Service Providers Performance

Section 76(b) of the MSA states that KPIs should inform the indicators set for every municipal entity and service provider with whom the municipality has entered into a service delivery agreement: a) Service provider means a person or institution or any combination of persons and institutions which provide a municipal service b) External service provider means an external mechanism referred to in section 76(b) which provides a municipal service for a municipality c) Service delivery agreement means an agreement between a municipality and an institution or person mentioned in section 76(b) in terms of which a municipal service is provided by that institution or person, either for its own account or on behalf of the municipality

During the year under review the municipality did not appoint any service providers who provided a municipal service to or for the benefit of the local community on behalf of the municipality and therefore this report contains no such

45 Pixley Ka Seme District Municipality Annual Report 2018/19 details. All other contract appointments are regularly monitored and ensured, that the requirements of the contract is complied with.

3.4 Municipal Functions

The table below indicates the functional areas that the municipality are responsible for in terms of the Constitution:

Municipal Function Municipal Function Yes / No Constitution Schedule 4, Part B functions: Air pollution Yes Building regulations Yes Firefighting services Yes Local tourism Yes Municipal health services Yes Trading regulations Yes Constitution Schedule 5, Part B functions: Control of public nuisances Yes Licensing and control of undertakings that sell food to the public Yes

Table 53: Functional areas

46 Pixley Ka Seme District Municipality Annual Report 2018/19

COMPONENT A: BASIC SERVICES

3.5 Housing

Pixley ka Seme DM, a level 2 accredited housing service delivery agent is delivering the housing service as a shared service to seven of the seven local municipalities in the district. The strategic objectives in terms of housing delivery for the institution are:

Promote integrated sustainable human settlements; Align housing projects to existing IDP development priorities; Develop and implement a programmed approach to land development for housing; Develop and implement efficient land identification and land release strategies; Ensure effective planning and servicing of identified land; Improve skills and capacity building within the municipalities; and Implement IGR goals and objectives related to housing.

Highlights: Housing

Highlight Description For the 2018/19 financial year the Housing section was able to: Housing Level 2 accreditation – Provide timeously monthly HSS reports and capturing thereof on the system administration and Human Attend various HSS related training sessions and operate the HSS successfully. Settlement System Review the Municipal Human Settlements Plan and submit it to council for adoption. Submit monthly progress reports on time. The annual target set for consumer education by the Department for Pixley ka Seme District Municipality is 720 beneficiaries. The Housing unit was able to provide housing Consumer Education consumer education to 735 beneficiaries for the year under review in the following municipalities: Umsobomvu 71, Ubuntu 107, Renosterberg 34, Kareeberg 447, Siyathemba 76

Table 54: Housing Highlights

Challenges: Housing

Challenge Action to Address Coghsta is implementing housing projects, while the district is monitoring progress and is responsible for beneficiary administration. This creates tension between Coghsta and the District as the housing allocation does not cover all costs related to the services rendered. Requests has been submitted to Coghsta to resolve on the matter, Human Settlement or Housing without any success. delivery function National Department of Human Settlement is currently in a process of engaging the affected Municipalities and Coghsta (Province) on the matter. There is a process of reviewing the Accreditation Framework to remedy the current situation

Accreditation Framework Review Pixley Ka Seme was accredited when the income pattern were stable. and Human settlement Budget Currently the Housing Unit allocation is 60% less than the expenditure of the unit.

Table 55: Housing Challenges

47 Pixley Ka Seme District Municipality Annual Report 2018/19

Service Statistics: Housing A summary of houses built, includes:

Financial year Number of houses built Number of sites serviced 150 (Victoria West) 20 (Richmond) 63 (Strydenburg) 2017/18 55 (Marydale) 201 (Hopetown) 47 (Niekerkshoop) 15 (Prieska Fairview) 364 (Prieska Fairview) 2018/19 14 (Noupoort)

30 (Hanover) 475 (Hanover)

Table 56: Houses built and Sites Serviced

Prieska

Completed houses Handing over of houses completed during 2018/19 financial year

Hanover

Completed houses Handing over of houses completed during 2018/19 financial year

Employees: Housing

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 4 4 0 0 7 - 9 0 0 0 0 10 - 12 2 1 1 50.0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 7 6 1 14.3 As at 30 June 2019

Table 57: Employees Housing

48 Pixley Ka Seme District Municipality Annual Report 2018/19

Capital Expenditure: Housing

No capital funding is allocated to the District. The provincial department assigns implementation of housing projects to their appointed Project Management Unit (PMU).

COMPONENT B: ROAD TRANSPORT

3.6 Roads

The District Municipality does not have any road assets to maintain, however the municipality is involved with the Rural Road Asset Management which entails the condition assessment of municipal streets, traffic analysis and condition assessment of bridges within the district which is funded by the National Department of Transport.

36 Traffic numerators, 4 civil engineering graduates and 2 data capturers were employed in order to implement the programme with the available funding. A new service provider, Lidwala Consulting (Pty) Ltd was appointed during the year for the next 3 years to provide technical assistance as and when needed with the implementation of the project.

The diagram below illustrates the network per road typed assessed and the overall condition of the network assessed during the period.

Highlights: Roads

Highlight Description The RAMP document compiled during 2017/18 was revised and updated with the latest data set and distributed to each local municipality within the Pixley ka Seme District. RRAMS Condition Assessment With the RAMP document/report, municipalities can budget and prioritize which roads Report - Roads Asset Management should be upgraded and be maintained. The report also provides an overview of the Planning RAMP document municipal roads in relation with other municipalities. Traffic information was also provided as part of the RAMP document, identifying the highest trafficked roads in each town.

Table 58: Roads Highlights

Challenges: Roads

Description Actions to address The district municipality has appointed the civil engineering graduates on a three-year contract. The objective is to provide employment opportunities to civil engineering graduates in order to expose them to the civil engineering labour market. During the High technical staff turnover past financial year, the RRAMS unit has lost two graduates which were absorbed in other public offices in the district. Challenges are also experienced in retaining traffic numerators as they tend to find alternative work easily.

Table 59: Roads Challenges

49 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: Roads

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 0 0 0 0 7 - 9 0 0 0 0 10 - 12 2 2 0 0 13 - 15 0 0 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 2 2 0 0 As at 30 June 2019

Table 60: Employees – Roads

Capital Expenditure: Roads

There was no capital expenditure for the 2018/19 financial year.

COMPONENT C: PLANNING AND DEVELOPMENT

3.7 Planning

Sustainable economic development in a region is firstly only possible if there is a balance between the urban-rural and larger-smaller town developments (thus, if there is spatial development balance). Secondly, it requires sufficient protection of all dimensions of the natural environment and, thirdly, the different elements of the physical infrastructure have to develop at a sufficient pace.

These three areas are easily taken for granted in the daily efforts of private enterprises to make a profit, break even or fulfil their short-term goals vs the objectives of public policy to protect and allocate resources to ensure long term sustainability.

The functions of the planning unit consist of:

The processing of building plan applications on behalf of local municipalities in the district Assisting local municipalities with zoning and residential layout plans Assist local municipalities with land rezoning and removal of restrictions Establishment of all structures to give effect for the implementation of the Spatial Planning Land Use Management Act (SPLUMA).

Highlights: Planning

Highlight Description During the year the planning unit assessed 71 building plan applications from Processing of building plan Kareeberg - 13, Siyathemba - 18, Ubuntu - 13, Siyancuma - 18, Thembelihle - 6 and applications Renosterberg -3. 32 building plans were approved while 39 were not approved, due to various reasons which may include incomplete submissions, applications not aligned with the municipal scheme regulations, or title deed. 79% of the building plans were

50 Pixley Ka Seme District Municipality Annual Report 2018/19

Highlight Description addressed within the 30 day period. Incomplete submissions delay the speedy process of the remaining 21%.

The DMPT met five times during the financial year, considering 46 applications in total.

Date of Quarter Number of applications meeting Emthanjeni – 1 referred back Thembelihle – 1 approved 1 18 July 2018 Siyathemba – 2 referred back Siyancuma – 1 approved, 1 referred back District Municipal Planning Tribunal Emthanjeni – 1 rejected, 1 approved (DMPT) was established in terms of 16 October 2 Ubuntu – 1 approved, 1 referred back Spatial Planning and Land Use 2018 Management Act (SPLUMA) to Siyancuma – 3 approved decide on Land Development 30 November Thembelihle – 1 referred back 2 Applications. 2018 Siyathemba – 2 approved and 2 referred back Emthanjeni – 3 approved 3 12 February Siyancuma – 2 approved and 4 referred back Emthanjeni – 7 approved and 1 referred back Siyancuma – 5 approved and 1 referred back 4 25 April 2019 Kareeberg – 1 approved Siyathemba – 6 approved

Five meetings were conducted during the financial year in reviewing the IDP. These Improved IDP Stakeholder and includes IDP Steering committee meetings 15 October 2018, IDP Representative Forums community engagements – 29 November 2018 and 26-27 February 2019, and community meeting 14 February 2019 in Niekerkshoop. IDP Review support to Support was rendered to Emthanjeni, Umsobomvu, Siyancuma, Siyathemba, Kareeberg, Municipalities through IDP working Renosterberg, Ubuntu and Thembelihle Municipalities during their IDP review process, group sessions by attending IDP Representative Forum Meetings Adoption of the process plans and Pixley ka Seme DM (28/05/2019), Emthanjeni, Umsobomvu, Siyancuma, Siyathemba, IDP framework, draft and final IDP’s Kareeberg, Renosterberg, Ubuntu & Thembelihle

Table 61: Planning Highlights

Challenges: Planning

Description Actions to address Inadequate capacity at local municipal level to enforce and Spatial Planning and Land Use Management related training and skills development is assess land development necessary at local municipal level in order to improve on the quality of applications applications - training and skills submitted to DMPT and district municipality. development Implementation of the 2017 – 2022 Appropriate skills to formulate projects that will respond to poverty eradication and IDP better life for all, and budget accordingly. Inadequate capacity at local municipal level to enforce building Support to local municipalities control in order to combat Illegal erection of buildings Lack of Spatial Development Three of the eight local municipalities in the district does not have SDF’s to guide land Frameworks at Local Municipal development applications which should be approved in alignment with the SDF of the level municipality.

Table 62: Planning Challenges

51 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: Planning

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 0 0 0 0 7 - 9 0 0 0 0 10 - 12 1 1 0 0 13 - 15 0 0 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 1 1 0 0 As at 30 June 2019

Table 63: Employees – Planning

Capital Expenditure: Planning

There was no capital expenditure for the 2018/19 financial year.

3.8 Local Economic Development

The purpose of Local Economic Development is to build up the sustainable development capacity of a local area to improve its economic future and the quality of life for all. It is a process by which government, the private sector, labour and civil society work collectively to create better conditions for economic growth, investment and employment generation.

The National LED policy framework 2018-2028 therefore focuses on the following LED Policy Pillars/Thrusts:

Building a Diverse and innovation driven local economies.

Developing Learning and Skillful Local Economies.

Developing Inclusive Economies.

Enterprise development and Support.

Economic governance and infrastructure.

Strengthening local innovation system.

As the Pixley ka Seme district, our economy is predominantly primary sector focused with manufacturing and tourism also contributing to the district economy. In the coming years, the sector contributions will fluctuate with the contributions by the social and personal services sector (including tourism) and the agriculture sector expected to increase and decrease respectively. This is owing to a very low growth rate in certain sectors but a sharp increase in the others, mainly as a result of, as mentioned, the investment in renewable energy generation and the SKA project. We are furthermore excited about the mining prospects coming to the district with the copper mine set to open in Copperton.

The economy in the Pixley ka Seme municipal area is characterised by the following:

High levels of poverty and low levels of education.

52 Pixley Ka Seme District Municipality Annual Report 2018/19

It is a small-town sub-region with a low level of development despite the strategic location in terms of the national transport corridors

Sparsely populated towns with a number of larger towns serving as “agricultural service centres”; spread evenly throughout the district as central places

High rate of unemployment, poverty and social grant dependence Prone to significant environmental changes owing to long-term structural changes (such as climate change, energy crises and other shifts)

Geographic similarity in economic sectors, growth factors and settlement patterns Economies of scale not easily achieved owing to the relatively small size of towns A diverse road network with national, trunk, main and divisional roads of varying quality, and Potential and impact of in renewable energy resource generation. Various mining opportunities that are currently being explored in the district i.e. Copper & Tiger’s eye.

Highlights: LED

Highlight Description Appointment of new staff. The LED Unit is resourced with a LED Manager and a LED Learner The LED Strategy done in conjunction with DEDAT has been finalized with the last step Delivery of LED Strategy being the adoption of the strategy by council. Implementation will see the municipality contribute great gains to the economic growth of the district. There is a functional LED Forum which meets quarterly. We invite the stakeholders and Quarterly District LED Forum our target is always 70 attendances, thus far we have reached our target. We believe the establishment of sector specific chambers will assist to address Establishment of community ICT injustices of the past and ensure information on sector specific opportunities reach the Chamber correct role players. Submitted a business plan to the Department of Economic Development and Tourism Submitted funding request to and the European Bank to assist with the review of the District Growth and review District Growth and Development Strategy. We will enter into a MOU with DEDAT again to see this through Development Strategy once funding is approved.

Table 64: LED Highlights

Challenges: LED

Description Actions to address Majority of the local municipalities within the district do not have dedicated LED Challenges of Local municipality officials and others that have officials are not completely capacitated. We are LED Units in the district currently addressing this through capacitation sessions. Vacancy of the LED supporter from The position of District Support Manager: LED from DEDAT is currently vacant but DEDAT DEDAT has committed to filling the position as soon as possible. With a limited budget we are limited to advisory services and only the forum for now Departmental budget but we continue to advocate for an increase in budget to deliver more development projects in the district.

Table 65: LED Challenges

53 Pixley Ka Seme District Municipality Annual Report 2018/19

LED Objectives

LED includes all activities associated with economic development initiatives. The municipality has a mandate to provide strategic guidance to the municipality’s integrated development planning and economic development matters and working in partnership with the relevant stakeholders on strategic economic issues. The LED strategy identifies various issues and strategic areas for intervention such as:

Objectives Strategies Support local municipal, national & provincial government Enabling Infrastructure initiatives Impacts on regional planning Make inputs in regional forums and conferences Land use management practices Participates in IDP and SDF review processes Attracts investors Highlights the competitive and comparative advantages

Table 66: LED Objectives and Strategies

Acting Mayor doing opening and LED Strategy review community welcoming during District LED Forum consultation in Colesberg

LED Forum stakeholders engaging on Delegates during the Tourism Information Sharing development challenges in the district Session held in conjunction with National Tourism

54 Pixley Ka Seme District Municipality Annual Report 2018/19

Extended Public Works Programme (EPWP)

The table below indicates the number of projects and jobs created with the EPWP:

Job creation through Extended Public Works Programme (EPWP) projects Year Number of Projects Number of Job Opportunities Created 2017/18 3 112 2018/19 3 62

Table 67: Job creation through EPWP projects

EPWP Projects

The Council approved the implementation of the following projects in the 2018/19 financial year.

Implementation of Rural Road Asset Management System Grant

The strategic goal of the RRAMS Grant is to ensure efficient and effective investment in rural roads through the development of Road Asset Management Systems (RAMS) and the collection of associated road and bridge inventory data, condition assessments and traffic information. Traffic numerators that were appointed for the programme was they trained in conduction traffic counts at strategic intersections of roads in towns. (36 Beneficiaries)

Renovation of offices and security fencing at Pixley ka Seme DM

The district municipality has embarked on a programme to renovate the offices in phases since 2014/15. This phase entails the installation of a security fence in front of the building and some minor repairs to the building like sealing of the roof, utilizing EPWP workers. Four EPWP support officers were also appointed in the district municipality under the EPWP programme and are they rendering services in the Infrastructure EPWP data capture officer, Registry officer, Communications field officer and LED field officer. (14 beneficiaries).

Upgrading of gravel streets in to paved streets

The allocation for 2018/19 was a continuation of the first phase which commence in March 2018 which entails the construction of storm water control measures in order to prevent and to drain flooding in the low laying areas. Storm water pipes were purchased during 2018/19 and will be installed during the 2019/20 financial year with the necessary storm water catch pits. A building was refurbished to be used as a store the kerb manufacturing process. The Clinic parameter fence was relocated as was not erected according to the cadastral boundary of the erf. Construction work commences in August 2018 and was completed in April 2019. The project will continue in the new financial year. (12 Beneficiaries)

Renovation of offices and security Upgrading of gravel streets in fencing at Pixley ka Seme DM Schmidtsdrift to paved streets

55 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: LED

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 0 0 0 0 7 - 9 0 0 0 0 10 - 12 0 0 0 0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 1 1 0 0 As at 30 June 2019

Table 68: Employees – LED

Capital Expenditure: LED

There was no capital expenditure for the 2018/19 financial year.

COMPONENT D: MUNICIPAL HEALTH

3.9 Environmental Health

According to the Constitution of the Republic of South Africa 1996, the Local Government, Municipal Structures Act No.117 of 1998 and the National Health Act, No 61 of 2003, it is the statutory responsibility of a District Municipality and Metropolitan Municipality to render Municipal Health Services.

Section 24 of the Constitution entrenches the right of all citizens to live in an environment that is not harmful to their health or well-being. Section 1 of the National Health Act, 2003 (Act 61 of 2003), defines municipal health services and clearly stipulates the responsibilities of municipalities in the performance of such services.

Environmental Health

Environmental health transects several areas of human interaction and existence and is defined by the World Health Organization (WHO) as addressing the physical, chemical and biological factors external to a person and all the related factors impacting behaviours. It encompasses the assessment and control of those environmental factors that can potentially affect public health.

Environmental Health Services

In Pixley Ka Seme DM it is still an unfortunate reality that a large proportion of diseases can be attributed to preventable environmental health conditions and it is often the marginalized communities who tend to be worse affected. Protecting the public’s health through the protection of the environment is one of Pixley Ka Seme DM’s core legislative mandates by the rendering of municipal health services.

56 Pixley Ka Seme District Municipality Annual Report 2018/19

The Role and Function of the Municipal Health Services Unit

Municipal health services are rendered to ensure protection of public health in the district, it is essential that effective municipal health services are implemented. Pixley Ka Seme DM have nine (10) Environmental Health Practitioners (EHP’s) to ensure effective rendering of municipal health services, such officials ensure that the services are rendered in accordance with the National Health Act (Act 61 of 2003).

Key Performance Areas of Municipal Health are:

Water quality monitoring Waste management Food control Health surveillance of premises Disposal of the dead Chemical safety Environmental pollution control Vector control Surveillance and prevention of communicable diseases excluding immunization

EHP’s work together to provide situation analysis and need based risks affecting public health. Routine inspections reveal that new and evolving risks and exposures continuously place demands on our municipal health services and to respond to these risks, continuous appointment of EHP’s are done to respond/address such risks through awareness campaigns, clean-up programs and indoor air quality.

The District identified five Key Areas which poses serious threat to Public Health:

Water Quality Monitoring Food Safety Control Surveillance of premises Early Childhood Development (ECD) Centre’s, clinics, hospitals and schools etc. Waste management monitoring

Surveillance of communicable diseases

Food safety training

57 Pixley Ka Seme District Municipality Annual Report 2018/19

Highlights: Municipal Health

Highlight Description Municipal Health Services By-laws were Gazetted on the 15th of May 2019 which will MHS By-law strengthen law enforcement measures within the district and reduce levels of non- compliances and environmental health related health risks. From the13th– 15th November 2019 Northern Cape MHS Summit was held by Pixley Ka NC MHS summit Seme DM at De Aar country club in collaboration with SALGA. Ms Fundiswa Qumba, one of the current PKSDM MHS officials was appointed as an air Appointment of air quality officer quality officer effective from 25 September 2018. Her role will be to deal with air quality related matters in the district. 1 EHP Appointment On 1st of November 2018 Official was placed at Siyancuma Local Municipality. An enforcement program was conducted throughout PKSDM with an objective to MHS law enforcement program improve levels of compliance at food premises and eliminate health risks posed by non- complying premises. 228 Food safety trainings were conducted at food premises, over 200 food handlers Food safety training were trained. TB Awareness programs were conducted throughout the district; over 500 patients were reached with an aim to raise awareness among TB patients about the importance TB Awareness program of completing TB treatment and how to behave in order to avoid further spreading the disease. Ms Sindiswa Tyolashe completed her studies in Btech Environmental Health and Academic achievements graduated on the 11th of April 2019. Health hygiene and back to school This is an initiative aimed at educating students about health hygiene and donating program school uniform and sanitary pads to underprivileged girls.

Table 69: Municipal Health Highlights

NC MHS summit 13th -15th November 2018

Ms Sindiswa Tyolashe’s Graduation at Central University of Technology

Health Hygiene awareness and back to school program at Petrusville High School

58 Pixley Ka Seme District Municipality Annual Report 2018/19

Challenges: Municipal Health

Description Actions to address Council vehicle conditions Purchase new vehicles Air quality management plan Appointed air quality officer to develop in collaboration with Provincial DEA

Table 70: Municipal Health Challenges

Service Statistics: Municipal Health

Type of service 2017/18 2018/19 Water quality monitoring by conducting monthly sampling to 1 357 1241 determine compliance to SANS 241-2011 Inspections of food premises 850 1430 Inspection to landfill sites 37 20 Inspection of funeral undertakers (disposal of the dead) 60 71 Inspection of non-food premises e.g. schools, crèches, 330 448 hospitals and clinics (i.e. Surveillance premises) Health and Hygiene Promotion Campaigns 99 233 Training on funeral Undertaker 17 21 Illegal Dumping Campaign 8 191 Chemical safety Campaigns 30 205 Training on food safety for food handlers 59 228

Table 71: Service Statistics: Municipal Health

Employees: Municipal Health

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 0 0 0 0 7 - 9 0 0 0 0 10 - 12 19 8 11 57.9 13 - 15 2 2 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 21 10 11 52.4 As at 30 June 2019

Table 72: Employees – Municipal Health

Capital Expenditure: Municipal Health

There was no capital expenditure for the 2018/19 financial year.

59 Pixley Ka Seme District Municipality Annual Report 2018/19

Law enforcement program at all 8 local municipalities

COMPONENT E: PUBLIC SAFETY

3.10 Disaster Management

The Disaster Management Act provides for:

An integrated and coordinated Disaster Management Policy that focuses on preventing or reducing the risk of disasters, mitigating the severity of disasters, emergency preparedness, rapid and effective response to disasters, and post-disaster recovery.

The establishment of a District Municipal Disaster Management Centre. Disaster management volunteers. Awareness programs. Matters relating to these issues.

Highlights: Disaster Management

Highlights Description Training of Volunteers Basic Fire Fighting (Coleberg/Carnarvon) was provided Awareness Campaign Domestic Fire Awareness campaign ( De Aar) was conducted Disaster Management Forums Meetings took place

Table 73: Disaster Management Highlights

Challenges: Disaster Management

Description Actions to address Lack of funding Engagement with national department to secure more funding Poor attendance of advisory forums Engagement with role players Shortage of equipment to fight Secure funding incidence

Table 74: Disaster Management Challenges

60 Pixley Ka Seme District Municipality Annual Report 2018/19

Activities – Disaster Management

The table below reflects some of the matters addressed by Disaster Management within the Pixley Ka Seme District Municipal Area:

Items 2017/18 2018/19 Campaigns 1 1 Firefighting training sessions 0 2 Number of volunteers trained 20 40

Table 75: Activities: Disaster Management

Employees: Disaster Management

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 14 11 3 21.4 7 - 9 0 0 0 0 10 - 12 1 1 0 0 13 - 15 0 0 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 15 12 3 20.0 As at 30 June 2019

Table 76: Employees – Disaster Management

Capital Expenditure: Disaster Management

There was no capital expenditure for the 2018/19 financial year.

COMPONENT F: CORPORATE POLICY OFFICES AND OTHER SERVICES

3.11 Office of the Mayor

This division include Communication, Community Liaison and Special Programmes

Highlights: Office of the Mayor

Highlights Description Hosting of 2 Career Guidance Exhibitions to our Adopted High Schools by including institutions of higher learning e.g. Sol To inform learners about available opportunities and how to Plaatjie University and TVET colleges, Service Providers e.g. access bursaries and scholar ships SANRAL, IPP’s Hosting of national historic days for both staff and the To inform both our staff and communities about the community, e.g. Nelson Mandela international day, Women’s importance of honouring the national days and the past Day, Heritage day and Youth day

Table 77: Office of the Mayor Highlights

61 Pixley Ka Seme District Municipality Annual Report 2018/19

Challenges: Office of the Mayor

Challenge Actions to address Request will be submitted for the unit to have and allocated Lack of white fleet for our officials to execute the duties vehicle

Table 78: Office of the Mayor Challenges

Employees: Office of the Mayor

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 2 2 0 0 7 - 9 3 2 1 33.3 10 - 12 0 0 0 0 13 - 15 2 2 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 7 6 1 14.3 As at 30 June 2019

Table 79: Employees – Office of the Mayor

Capital Expenditure: Office of the Mayor

There was no capital expenditure for the 2018/19 financial year.

3.12 Office of the Municipal Manager

Highlights: Office of Municipal Manager

Highlights Description Successful implementation of the Municipal Health Services By- Municipal Health Services By-Law Law. The only district municipality in Northern Cape with such a by-law.

Table 80: Office of the Municipal Manager Highlights

Challenges: Office of the Municipal Manager

Challenge Actions to address Municipal financial sustainability The grant dependency of the district municipality

Table 81: Office of the Municipal Manager Challenges

62 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: Office of the Municipal Manager

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 1 1 0 0 7 - 9 0 0 0 0 10 - 12 1 1 0 0 13 - 15 0 0 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 2 2 0 0 As at 30 June 2019

Table 82: Employees – Office of the Municipal Manager

Capital Expenditure: Office of the Municipal Manager

There was no capital expenditure for the 2018/19 financial year.

3.13 Financial Services

Financial Services is responsible for budgeting, revenue, expenditure and supply chain management.

Service Statistics: Supply Chain Management (SCM)

The table below indicates the service statics for the division:

2017/18 2018/19 Description Total No Total No Total No Monthly Average Orders processed 658 55 855 71 Extensions 0 0 0 0 Bids received (number 87 7 59 5 of documents) Bids awarded 1 1 15 1 Bids awarded ≤ R200 20 10 20 10 000 Appeals registered 0 0 0 0 Successful Appeals 0 0 0 0

Table 83: Statistics SCM

63 Pixley Ka Seme District Municipality Annual Report 2018/19

Total Employees – Financial Services

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 5 5 0 0 7 - 9 1 1 0 0 10 - 12 3 3 0 0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 10 10 0 0 As at 30 June 2019

Table 84: Total employees – Financial Services

Capital Expenditure: Financial Services

There was no capital expenditure for the 2018/19 financial year.

3.14 Support Services

Highlights: Support Services

Highlights Description Mr Eugene Stamboel, learner in the registry office, attended registry training Capacitation of the Registry learner presented by the Northern Cape Provincial Archives in Kimberley from 18 to 21 September 2018 The IMIS system in registry ensures that information is available to all personnel Introduction of the IMIS system electronically Seven new vehicles were bought to enlarge the white fleet of the municipality and to Purchase of new vehicles enhance services delivery

Table 85: Support Services Highlights

Challenges: Support Services

Challenge Description Slow internet connection at registry causing huge backlog of outstanding responses Internet connection from officials The strong room is too small to store all the closed files and is also not complying Strong room capacity with the specifications of the National Archives Act Training of the IT Support Officer Training for the IT Support Officer, this is especially on the Venus Financial System It is concerned with monitoring the network of the municipality in terms of security Cyberoam Firewall and usage

Table 86: Support Services Challenges

64 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: Support Services

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 6 6 0 0 4 - 6 4 3 1 25.0 7 - 9 0 0 0 0 10 - 12 3 3 0 0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 14 13 1 7.1 As at 30 June 2019

Table 87: Employees – Support Services

Capital Expenditure: Support Services

There was no capital expenditure for the 2018/19 financial year.

3.15 Human Resources

Highlights: Human Resources

Highlights Description Filling of vacancies The HR could ensure that all vacancies that are budgeted for are filled The municipality was funded for many projects including playing the role of Lead employer for the province in the following programmes: Coaching and mentoring (200 Discretionary Grant (LGSETA) employed officials), Occupation Directed Training and Development Practices for NQF L 5 and 6 for 25 employed learners.

Absorbing unemployed learners/ Junior Accountant Interns Payroll Clerk

Table 88: Human Resources Highlights

Challenges: Human Resources

Challenge Actions to address Budget for Employee Wellness The municipality must budget more for the EAP

Table 89: Human Resources Challenges

65 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: Human Resources

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 1 1 0 0 7 - 9 0 0 0 0 10 - 12 1 1 0 0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 3 3 0 0 As at 30 June 2019

Table 90: Employees – Human Resources

Capital Expenditure: Human Resources

There was no capital expenditure for the 2018/19 financial year.

3.16 Legal Services & Labour Division

Highlights: Legal Services & Labour Division

Highlights Description Various matters were taken to the South African Local Government Bargaining Council by employees from various municipalities who felt aggrieved by the conduct of the Labour Relations employers. Issues were addressed and resolved at this level without any matters being referred to the Labour Courts. Emthanjeni LM matter where an official from the traffic department referred a dispute regarding his alleged Unfair Dismissal to the bargaining council were Successfully defended dispute successfully defended at the South African Local Government Bargaining Council regarding dismissal where the Commissioner upheld his dismissal as procedurally and substantively in compliance with the provisions of the law. Two sexual harassment matters were dealt by the Legal Unit one of which is finalised Sexual harassment matters successfully, with a positive outcome and the other one still pending.

Table 91: Legal Services & Labour Division Highlights

Challenges: Legal Services & Labour Division

Challenge Actions to address Municipalities will have to train managers and or Human Recourse personnel to The availability of presiding officers initiate and preside over matters that is not complicated in nature as not all in disciplinary matters remains a disciplinary hearings needs to be addressed by legal unite. There are matters that can challenge that impacts on the be dealt with in house by municipalities. finalisation of disciplinary cases. SALGA provided a list of qualified labour practitioners that alleviated much of the pressure in this regard. The Legal Unit in collaboration with Umsobomvu intends to conduct a workshop for Local Municipalities have challenges HR personnel to train them specifically on how to initiate disciplinary enquiries. The with employees that is not up to workshop will not concentrate on the letter of the Disciplinary Procedure Collective date with disciplinary procedures. Agreement, its aim would centre more with the physical steps that needs to be followed to institute disciplinary procedures. It will deal with the initiation of Disciplinary hearing, the appointment of employer representatives, presiding officers,

66 Pixley Ka Seme District Municipality Annual Report 2018/19

Challenge Actions to address compiling of charge sheets and the basics in conduction a disciplinary hearing that complies with the provisions of the Disciplinary Procedure Collective Agreement. The Legal Unit is currently The position of Labour Relations Officer were advertised and it is expected that the functioning with only one employee, new incumbent with commence with her duties as from the 1st of September 2019. who serves the local municipalities which makes it extremely difficult and challenging to attend to all matters that is referred to the Unit timeously.

Table 92: Legal Services & Labour Division Challenges

Employees: Legal Services & Labour Division

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 0 0 0 0 7 - 9 0 0 0 0 10 - 12 1 0 1 0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 2 1 1 0 As at 30 June 2019

Table 93: Employees – Legal Services & Labour Division

Capital Expenditure: Legal Services & Labour Division

There was no capital expenditure for the 2018/19 financial year.

3.17 Internal Audit

Highlights: Internal Audit

Highlights Description Professional Internal Auditor(PIA) Five (5) officials completed the PIA programme Programme EU funded Audit Committee Training Audit committee members from the district were successfully trained

Table 94: Internal Audit Highlights

Challenges: Internal Audit

Challenge Actions to address Recommendations not implemented Audit Action Plan for IA issues Lack of IT and Forensic Auditing Training officials within the IA unit capacity External Assessment Perform a readiness assessment

Table 95: Internal Audit Challenges

67 Pixley Ka Seme District Municipality Annual Report 2018/19

Employees: Internal Audit

The following table indicates the staff composition for this division:

Vacancies (fulltime Vacancies (as a % of Posts Employees Job Level equivalents) total posts) Number % 0 - 3 0 0 0 0 4 - 6 4 4 0 0 7 - 9 0 0 0 0 10 - 12 4 4 0 0 13 - 15 1 1 0 0 16 - 18 0 0 0 0 19 - 20 0 0 0 0 Total 9 9 0 0 As at 30 June 2019

Table 96: Employees – Internal Audit

Capital Expenditure: Internal Audit

There was no capital expenditure for the 2018/19 financial year.

68 Pixley Ka Seme District Municipality Annual Report 2018/19

COMPONENT G: ORGANISATIONAL PERFOMANCE SCORECARD AND INDIVIDUAL PERFORMANCE

This component includes the Annual Performance Scorecard Report for the current year.

3.18 Development and Service Delivery Priorities for 2019/20

The main development and service delivery priorities for 2019/20 are included in the Municipality’s Top Layer SDBIP for 2019/20 and the Key Performance Indicators to achieve the service delivery priorities:

Administer Finances in a Sustainable Manner and Strive to Comply with Legislative Requirements to Achieve a Favourable Audit Outcome

Ref KPI Unit of Measurement Target Compile and submit an Audit Action Plan Audit Recovery Plan compiled and approved TL21 to Council by 31 January 2020 to address 1 by 31 January 2020 the issues raised by the AG Report quarterly to Council on meetings with and correspondence to defaulting TL22 Number of reports submitted to Council 4 municipalities on debt relating to services rendered Prepare and submit the draft budget to TL23 Draft budget submitted by 31 March 2020 1 Council by 31 March 2020 Prepare and submit the final budget to TL24 Final budget submitted by 31 May 2020 1 Council by 31 May 2020 Prepare and submit the adjustments Adjustments budget submitted by 28 February TL25 1 budget to Council by the 28 February 2020 2020 Submit the annual financial statements to Statements submitted to the Auditor-General TL26 1 the Auditor-General by 31 August 2019 by 31 August 2019 Co-ordinate the District MM/CFO forums on TL27 Number of meetings coordinated 2 a bi-annual basis Financial viability measured in terms of the Municipality's ability to meet it's service debt obligations by 30 June 2020 TL28 ((Short Term Borrowing + Bank Overdraft + % debt coverage 45% Short Term Lease + Long Term Borrowing + Long Term Lease) / Total Operating Revenue - Operating Conditional Grant) Financial viability measured in terms of the available cash to cover fixed operating expenditure by 30 June 2020 ((Cash and Cash Equivalents - Unspent Conditional Grants - Overdraft) + Short Term Number of months it takes to cover fix TL29 1 Investment) / Monthly Fixed Operational operating expenditure with available cash Expenditure excluding (Depreciation, Amortisation, and Provision for Bad Debts, Impairment and Loss on Disposal of Assets))

Table 97: Service Delivery Priorities for 2019/20– Administer Finances in a Sustainable Manner and Strive to Comply with Legislative Requirements to Achieve a Favourable Audit Outcome

69 Pixley Ka Seme District Municipality Annual Report 2018/19

Compliance with the Tenets of Good Governance as Prescribed by Legislation and Best Practice

Ref KPI Unit of Measurement Target Submit a report to Council on the TL1 monitoring and evaluation of community Report submitted to council by 30 June 2020 1 participation by 30 June 2020 Facilitate the quarterly meetings of the TL2 Number of meetings facilitated 4 District Communication Forum Facilitate the quarterly meetings of the TL4 Number of meetings facilitated 4 District HIV/AIDS Council Facilitate the bi-annual meetings of the TL5 Number of meetings facilitated 2 Youth Council Facilitate the meeting with relevant stakeholders on the Street Children and TL7 Meeting facilitated by 30 June 2020 1 Fetal Alcohol Syndrome Special Programme by 30 June 2020 Compile and distribute the District Number of newsletters compiled and TL8 Municipality's external newsletter on a 4 distributed quarterly basis Facilitate the quarterly meetings of the TL9 Technical District Intergovernmental Number of meetings facilitated 4 Forum Sign Section 57 performance agreements TL10 Number of performance agreements signed 4 with all directors by 31 July 2019 Facilitate the quarterly meetings of the TL12 Number of meetings facilitated 4 Political District Intergovernmental Forum Complete the Risk Assessment and submit Risk Analysis completed and updated risk TL13 the updated risk register to the Risk register submitted to the Risk Management 1 Management Committee by 31 March 2020 Committee by 31 March 2020 Submit the Top layer SDBIP for approval by Top Layer SDBIP submitted annually to Mayor TL30 the Mayor within 14 days after the budget within 14 days after the budget has been 1 has been approved approved Submit the draft Annual Report to Council Draft Annual Report submitted to Council by TL31 1 by 31 January 2020 31 January 2020

Table 98: Services Delivery Priorities for 2019/20- Compliance with the Tenets of Good Governance as Prescribed by Legislation and Best Practice

Guide Local Municipalities in the Development of their IDP’s and in Spatial Development

Ref KPI Unit of Measurement Target Review the IDP and submit draft to Council Draft reviewed IDP submitted to Council by TL46 1 by 31 March 2020 31 March 2020 Compile an IDP framework by 31 August TL47 IDP framework completed by 31 August 2019 1 2019 to guide local municipalities

Table 99: Services Delivery Priorities for 2019/20- Guide Local Municipalities in the Development of their IDP’s and in Spatial Development

Monitor and Support Local Municipalities to Enhance Service Delivery

Ref KPI Unit of Measurement Target Report quarterly to Council on Shared TL11 Number of reports submitted to Council 4 Services Arrange and convene quarterly TL42 Number of meetings arranged 4 Infrastructure Forum meetings

70 Pixley Ka Seme District Municipality Annual Report 2018/19

Ref KPI Unit of Measurement Target Submit quarterly progress reports on TL43 Infrastructure, Housing, Planning and Number of reports submitted 4 Development to the Portfolio Committee Review the Human Settlements Sector Plan Reviewed Human Settlements Sector Plan TL44 and submit to Council for approval by 30 submitted to council annually by 30 June 1 June 2020 2020 Conduct housing consumer education in TL45 towns of non-accredited municipalities in Number households educated 720 the district

Table 100: Services Delivery Priorities for 2019/20- Monitor and Support Local Municipalities to Enhance Service Delivery

Promote Economic Growth in the District

Ref KPI Unit of Measurement Target Facilitate 2 career exhibitions in the Pixley TL6 Number of career exhibitions facilitated 2 Ka Seme District area by 30 June 2020 Create job opportunities - full time equivalents (FTE's) through the Expanded Number of opportunities created by 30 June TL48 14 Public Works Programme (EPWP) by 30 2020 June 2020 [Person days / FTE (230 days)]

Table 101: Service Delivery Priorities for 2019/20- Promote Economic Growth in the District

To Provide a Professional, People-Centred Human Resources and Administrative Service to Citizens, Staff and Council

Ref KPI Unit of Measurement Target Spent 1% of personnel budget on training by 30 June 2020 (Actual total training % of the personnel budget spent by 30 June TL32 1% expenditure divided by total personnel 2020 budget) Submit a business proposal to LGSETA for discretionary grant to avail funds to train TL33 Proposal submitted by 31 March 2020 1 employees and unemployed by 31 March 2020 Implement the WPSP measured by the % of identified employees that completed training as identified in WPSP by 30 June % of identified employees that completed TL34 2020 (Total number of officials that 90% training as identified in WPSP by 30 June 2020 received training as was identified in the WPSP/total number of officials that were identified for training in the WPSP) Limit the vacancy rate to less that 10% of % vacancy rate of budgeted posts by 30 June budgeted posts by 30 June 2020 ((Number TL35 2020 (Number of posts filled/Total number of 10% of posts filled/Total number of budgeted budgeted posts)x100 posts)x100) Review the Workplace Skills Plan and Plan submitted to the LGSETA by 30 April TL36 1 submit to the LGSETA by 30 April 2020 2020 The number of people from employment equity target groups employed (newly appointed) in the three highest levels of Number of people employed (newly TL37 1 management in compliance with the appointed) municipality's approved Employment Equity Plan by 30 June 2020

Table 102: Service Delivery Priorities for 2019/20- To Provide a Professional, People-Centred Human Resources and Administrative Service to Citizens, Staff and Council

71 Pixley Ka Seme District Municipality Annual Report 2018/19

To Provide an Independent and Objective Internal Audit Assurance and Consulting Service to Add Value and to Improve the Administrative Operations of all the Municipalities in the District through an Approach that is Systematic and Disciplined

Ref KPI Unit of Measurement Target Submit a Quality Assurance Plan for Pixley Quality Assurance Plan submitted annually by TL14 Ka Seme District Municipality to the Audit 1 30 June 2020 Committee by 30 June 2020 Submit quarterly internal audit reports to TL15 the local municipalities in terms of the Number of reports submitted 20 Service Level Agreements Compile the Risk Based Audit Plan (RBAP) for Pixley Ka Seme District Municipality TL16 RBAP submitted by 30 November 2019 1 and submit to the Audit Committee for consideration by 30 November 2019 Compile the Risk Based Audit Plans (RBAP) for the local municipalities in terms of the TL17 Number of plans submitted 5 Service Level Agreements and submit to the local municipalities by 30 June 2020 Review the 3 year Strategic Audit Plan for Pixley Ka Seme District Municipality and Revised 3 year Strategic Audit plan submitted TL18 1 submit to the Audit Committee by 30 to the AC by 30 November 2019 November 2019 Review the 3 year Strategic Audit Plan for the Local Municipalities in terms of the Revised 3 year Strategic Audit plan submitted TL19 Service Level Agreements and submit to 5 to the AC by 30 June 2020 the to the Audit Committee by 30 June 2020 Facilitate the quarterly Audit Committee Number of Audit Committee meetings TL20 meetings during the 2019/20 financial year 4 facilitated for Pixley Ka Seme District Municipality

Table 103: Service Delivery Priorities for 2019/20- To Provide an Independent and Objective Internal Audit Assurance and Consulting Service to Add Value and to Improve the Administrative Operations of all the Municipalities in the District through an Approach that is Systematic and Disciplined

To Provide Disaster Management Services to the Citizens

Ref KPI Unit of Measurement Target Host a training session by 30 June 2020 to TL38 Training session hosted by 30 June 2020 1 train volunteers ito Disaster Management Review the Disaster Management Plan and Reviewed plan submitted to Council by 30 TL39 1 submit to Council by 30 June 2020 June 2020

Table 104: Service Delivery Priorities for 2019/20- To Provide Disaster Management Services to the Citizens

To Provide Municipal Health Services to Improve the Quality of Life of the Citizens

Ref KPI Unit of Measurement Target Host commemorative days as per the TL3 approved list by the Municipal Manager Number of commemorative days hosted 5 and Mayor Compile monthly water quality analysis TL40 reports to local municipalities in terms of Number of reports compiled 96 the Water Quality Monitoring Programme Submit quarterly reports to Council on TL41 Number of reports submitted 4 municipal health services rendered

Table 105: Service Delivery Priorities for 2019/20- To Provide Municipal Health Services to Improve the Quality of Life of the Citizens

72 Pixley Ka Seme District Municipality Annual Report 2018/19

3.19 Municipal Manager and Managers directly accountable to the Municipal Manager

The Municipal Systems Act, 2000 (Act 32 of 2000) prescribes that the municipality must enter into performance based agreements with the all s57-employees and that performance agreements must be reviewed annually. This process and the format are further regulated by Regulation 805 (August 2006). The performance agreements of the senior managers for the 2018/19 financial year were signed as prescribed. The appraisal of the actual performance in terms of the signed agreements takes place twice per annum as regulated. The final evaluation of the 2017/18 financial year (1 January 2018 to 30 June 2018) took place on 10 October 2018 and the mid-year performance of 2018/19 (1 July 2018 to 31 December 2018) took place on 11 March 2019.

73 Pixley Ka Seme District Municipality Annual Report 2018/19

Chapter 4: Organisational Development Performance Performance Report Part II

4.1 National Key Performance Indicators – Municipal Transformation and Organisational Development

The following table indicates the municipality’s performance in terms of the National Key Performance Indicators required in terms of the Local Government: Municipal Planning and the Performance Management Regulations of 2001 and section 43 of the MSA. These key performance indicators are linked to the National Key Performance Area – Municipal Transformation and Organisational Development.

KPA& Indicators 2017/18 2018/19 The number of people from employment equity target groups employed in the three highest levels of management in compliance with a municipality’s approved employment 1 3 equity plan The percentage of a municipality’s budget actually spent on implementing its workplace 1% 1% skills plan

Table 106: National KPIs– Municipal Transformation and Organisational Development

4.2 Introduction to the Municipal Workforce

The Pixley Ka Seme District Municipality currently employs 80 permanent officials as at 30 June 2019, who individually and collectively contribute to the achievement of Municipality’s objectives. The primary objective of Human Resource Management is to render an innovative HR service that addresses both skills development and an administrative function.

4.3 Employment Equity

The Employment Equity Act (1998) Chapter 3, Section 15 (1) states that affirmative action measures are measures designed to ensure that suitable qualified people from designated groups have equal employment opportunities and are equitably represented in all occupational categories and levels in the workforce of a designated employer. The national performance indicator also refers to: “Number of people from employment equity target groups employed in the three highest levels of management in compliance with a municipality’s approved employment equity plan”

Employment Equity Targets/Actual within the 3 highest levels

African Coloured Indian White Target June Actual June Target June Actual June Target June Actual June Target June Actual June 3 3 1 0 0 0 0 0

Table 107: 2018/19 EE targets/Actual by racial classification

Male Female Disability Target Actual Target Target Actual Target Target Actual Target June June reach June June reach June June reach 3 3 Yes 1 0 No 0 0 n/a

Table 108: 2018/19 EE targets/actual by gender classification

74 Pixley Ka Seme District Municipality Annual Report 2018/19

Occupational Levels - Race

Male Female Department Total A C I W A C I W MM & MSA section 57 & 56 2 1 0 1 0 1 0 0 5 Managers (Unit heads) 4 1 0 2 1 0 0 1 9 Professionals and Middle management 1 2 0 0 7 2 0 0 12 Skilled technical and academically qualified workers, junior management, supervisors, 7 2 0 0 4 2 0 0 15 foremen and superintendents Semi – skilled 7 6 0 1 11 7 0 0 32 Unskilled and defined decision making 2 1 0 0 2 2 0 0 7 Total permanent 23 13 0 4 25 14 0 1 80 Non- permanent employees 6 1 0 0 4 5 0 0 16 Grand total 29 14 0 4 29 19 0 1 96

Table 109: Occupational Levels - Race

Departments - Race

The following table categories the number of employees by race within the different departments:

Male Female Department Total A C I W A C I W Office of the Municipal Manager 1 0 0 0 1 0 0 0 2 Office of the Executive Mayor 3 0 0 0 2 1 0 0 6 Finance 1 3 0 1 3 3 0 0 11 Corporate Services 11 7 0 1 14 6 0 1 40 Infrastructure, Housing, Planning & 6 1 0 1 3 0 0 0 11 Development Internal Audit 1 3 0 1 2 3 0 0 10 Total permanent 23 14 0 4 25 13 0 1 80 Non- permanent employees 6 1 0 0 4 5 0 0 16 Grand total 29 15 0 4 29 18 0 1 96

Table 110: Departments – Race

4.4 Vacancy Rate

The approved organogram for the municipality has 100 post. The actual positions filled are indicated in the tables below by post level and by functional level. 20 posts were vacant at the end of 2018/19, resulting in a vacancy rate of 20%.

Below is a table that indicates the vacancies within the municipality:

Department Filled Vacant Office of the Municipal Manager 2 1 Office of the Executive Mayor 6 1 Finance 11 0 Corporate Services 40 16

75 Pixley Ka Seme District Municipality Annual Report 2018/19

Department Filled Vacant Infrastructure, Housing, Planning & Development 11 2 Internal Audit 10 0 Total 80 20

Table 111: Vacancy rate per post and functional level

4.5 Turnover rate A high turnover may be costly to a municipality and might negatively affect productivity, service delivery and institutional memory/organizational knowledge. Below is a table that shows the turnover rate within the municipality. The turnover rate for 2017/18 was 8.9% and decreased to 7.5% in 2018/19.

The table below indicates the turn-over rate over the last two years:

Total no appointments No Terminations during Financial year at the end of each New appointments Turn-over Rate the year Financial Year 2017/18 79 17 7 8.9% 2018/19 80 17 6 7.5%

Table 112: Turnover rate

4.6 Managing the Municipal Workforce

Managing the municipal workforce refers to analysing and coordinating employee behaviour.

Injuries

An occupational injury is a personal injury, disease or death resulting from an occupational accident. Compensation claims for such occupational injuries are calculated according to the seriousness of the injury/disease and can be costly to a municipality. Occupational injury will influence the loss of man hours and therefore financial and productivity performance.

The table below indicates the total number of injuries within the different departments:

Department 2017/18 2018/19 Office of the Municipal Manager 0 0 Office of the Executive Mayor 0 0 Finance 0 0 Corporate Services 0 1 Infrastructure, Housing, Planning & Development 0 0 Internal Audit 0 0 Total 0 1

Table 113: Injuries

Sick Leave

The number of day’s sick leave taken by employees has service delivery and cost implications. The monitoring of sick leave identifies certain patterns or trends. Once these patterns are identified, corrective action can be taken.

The total number of employees that have taken sick leave during the 2018/19 financial year shows an increase when comparing it with the 2017/18 financial year.

76 Pixley Ka Seme District Municipality Annual Report 2018/19

The table below indicates the total number sick leave days taken within the year:

Year Total number of sick leave days taken within the year 2017/18 817 2018/19 835

Table 114: Sick Leave

HR Policies and Plans

Policies and plans provide guidance for fair and consistent staff treatment and a consistent approach to the managing of staff.

The table below shows the HR policies and plans that are approved:

Approved policies Name of policy Date approved/revised Recruitment and Selection Policy 30 May 2017 Skills Development Policy 30 May 2017 Career Pathing Policy 30 May 2017 Study Assistance Policy 30 May 2017 Staff Induction Policy 30 May 2017 Bereavement Policy 30 May 2017 Code of Conduct for Municipal Officials Local Government: Municipal Systems Act Dress Code Policy 30 May 2017 Employee Health and Wellness Policy 30 May 2017 Employment Equity Plan 27 May 2016 HIV/Aids Policy 30 May 2017 Human Resources Strategy 30 May 2017 Placement Policy 31 March 2017 Performance Management Framework 30 May 2017 Promotion and Succession Planning Policy 30 May 2017 Remuneration Policy 30 May 2017 Rental Allowance Scheme Policy 30 May 2017 Substance Abuse Policy 30 May 2017 Organisational Structure 28 May 2019

Table 115: HR policies and plans

4.7 Capacitating the Municipal Workforce

The Skills Development Act (1998) and the Municipal Systems Act, (2000), require employers to supply employees with the necessary training in order to develop its human resource capacity. Section 55(1)(f) states that as head of administration the Municipal Manager is responsible for the management, utilization and training of staff.

77 Pixley Ka Seme District Municipality Annual Report 2018/19

Skills Matrix

The table below indicates the number of employees that received training in the year under review:

Number of employees identified Number of Employees that Management level Gender for training at start of the year received training Female 0 0 MM and S57 Male 1 1

Legislators, senior officials and Female 1 1 managers Male 2 2

Associate professionals and Female 0 0 Technicians Male 2 2 Female 6 6 Professionals Male 2 2 Female 8 8 Clerks Male 6 6 Female 0 0 Elementary occupations Male 2 2 Female 15 15 Sub total Male 15 15 Total 30 30

Table 116: Skills Development: Training provided

MFMA Competencies

In terms of Section 83 (1) of the MFMA, the accounting officer, senior managers, the chief financial officer, non- financial managers and other financial officials of a municipality must meet the prescribed financial management competency levels that are key to the successful implementation of the Municipal Finance Management Act. National Treasury has prescribed such financial management competencies in Government Notice 493 dated 15 June 2007.

To assist the above-mentioned officials to acquire the prescribed financial competencies, National Treasury, with the collaboration of various stakeholders and role players in the local government sphere, developed an outcomes- based NQF Level 6 qualification in municipal finance management. In terms of the Government Notice 493 of 15 June 2007, “(1) No municipality or municipal entity may, with effect 1 January 2013 (exempted until 30 September 2015 as per Government Notice 179 of 14 March 2014), employ a person as a financial official if that person does not meet the competency levels prescribed for the relevant position in terms of these Regulations.”

The table below provides details of the financial competency development progress as required by the regulation:

Total number of Total number of Total number of Competency officials whose officials that meet officials employed assessments performance prescribed Description by municipality completed agreements comply competency levels (Regulation 14(4)(a) (Regulation with Regulation 16 (Regulation and (c)) 14(4)(b) and (d)) (Regulation 14(4)(e)) 14(4)(f)) Financial Officials Accounting officer 1 Yes 1 1 Chief financial officer 1 No 1 1 Senior managers 2 Yes 2 2 Any other financial officials 7 No n/a 7

78 Pixley Ka Seme District Municipality Annual Report 2018/19

Total number of Total number of Total number of Competency officials whose officials that meet officials employed assessments performance prescribed Description by municipality completed agreements comply competency levels (Regulation 14(4)(a) (Regulation with Regulation 16 (Regulation and (c)) 14(4)(b) and (d)) (Regulation 14(4)(e)) 14(4)(f)) Supply Chain Management Officials Heads of supply chain 1 No n/a 1 management units Supply chain management 0 No n/a 0 senior managers TOTAL 12 n/a 4 12

Table 117: Financial competency development: Progress report

Skills Development - Budget allocation

The table below indicates that a total amount of R500 000 was allocated to the workplace skills plan and that 73.3% of the total amount was spent in the 2018/19 financial year:

Total personnel Total Allocated Total Spend Year expenditure budget % Spent R

2017/18 30 601 564 450 000 292 967 65.1

2018/19 34 412 267 500 000 366 531 73.3

Table 118: Budget allocated and spent for skills development

4.8 Managing the Municipal Workforce Expenditure

Section 66 of the MSA states that the accounting officer of a municipality must report to the Council on all expenditure incurred by the municipality on staff salaries, wages, allowances and benefits. This is in line with the requirements of the Public Service Regulations, (2002), as well as National Treasury Budget and Reporting Regulations SA22 and SA23.

Personnel Expenditure

The percentage personnel expenditure is essential in the budgeting process as it reflects on current and future efficiency. The table below indicates the percentage of the municipal budget that was spent on salaries and allowance for the past two financial years and that the municipality is over the national norm of between 35 to 40%:

Total Expenditure Salary Total Operating Percentage Financial year and Allowances Expenditure R % 2017/18 34 091 063 57 474 637 59.3 2018/19 35 690 063 64 595 049 55.2

Table 119: Personnel Expenditure

79 Pixley Ka Seme District Municipality Annual Report 2018/19

Below is a summary of Councillor and staff benefits for the year under review:

Financial year 2017/18 2018/19 Original Adjusted Actual Actual Description Budget Budget R Councillors (Political Office Bearers plus Other) Executive Mayor 807 913 855 668 839 749 751 711 Deputy Executive Mayor 0 0 0 0 Mayoral Committee Members 1 819 608 1 927 057 1 891 239 1 891 239 Speaker 647 531 685 735 673 000 637 721 Councillors 931 268 987 890 1 043 467 1 042 969 Sub Total - Councillors 4 206 300 4 456 350 4 447 455 4 323 640 % increase/ (decrease) - 5.9 -0.2 -2.8 Senior Managers of the Municipality Annual Remuneration 4 285 047 4 196 400 4 323 620 4 285 757 Acting Allowance 0 0 0 0 Car Allowance 478 982 429 445 420 450 861 741 Settlement Payment 0 0 0 0 Bonus & Long Service Bonus 379 863 285 950 287 870 274 850 Performance Bonus 746 312 0 747 320 779 464 Contribution to UIF, Medical & Pension 524 599 448 485 205 685 209 907 Housing Subsidy 0 0 0 0 Telephone Allowance 0 0 0 0 Leave Pay-Out 0 0 0 0 Other 0 396 996 383 340 0 Sub Total - Senior Managers of Municipality 6 414 803 5 757 276 6 368 285 6 411 719 % increase/ (decrease) - -10.3 10.6 0.7 Other Municipal Staff Basic Salaries and Wages 19 592 078 19 660 752 21 416 752 24 908 137 Pension Contributions 3 160 425 3 496 512 3 541 030 3 542 090 Medical Aid Contributions 728 796 725 377 841 150 868 784 Motor vehicle allowance 1 403 052 1 092 000 1 121 140 2 185 344 Cell phone allowance 194 647 160 000 197 000 195 647 Housing allowance 266 481 255 620 247 740 234 569 Overtime 550 013 500 000 500 000 630 812 Other benefits or allowances 1 780 768 1 923 751 529 170 3 124 680 Sub Total - Other Municipal Staff 27 676 260 27 814 012 28 393 982 35 690 063 % increase/ (decrease) - 0.5 2.1 25.7 Table 120: Personnel Expenditure

80 Pixley Ka Seme District Municipality Annual Report 2018/19

Chapter 5: Financial Performance Component A: Statements of Financial Performance

The Statement of financial performance provides an overview of the financial performance of the municipality and focuses on the financial health of the municipality.

5.1 Financial Summary

The table below indicates the summary of the financial performance for the 2018/19 financial year:

2017/18 2018/19 2018/19 Variance Adjust- Original Adjusted Original Description Actual Actual ments Budget Budget Budget Budget R’000 % Financial Performance Government Grants and Subsidies Received 49,930 53,538 69,846 62,799 14.75 -11.22 Public Contributions and Donations 0 0 0 0 0.00 0.00 Service In-kind Contributions 1,952 0 0 0 0.00 0.00 Rental of Facilities and Equipment 101 71 80 101 29.50 20.57 Interest Earned- External Investments 716 510 600 1,066 52.18 43.74 Other Revenue 3,178 3,072 4,332 4,507 31.83 3.88 Other Gains and Losses 0 0 0 0 0.00 0.00 Profit on Disposal of PPE 543 0 0 0 0.00 0.00 Total Revenue (excluding capital transfers 56,420 57,191 74,858 68,473 16.48 -9.32 and contributions) Employee costs 34,091 33,571 36,466 35,690 5.94 -2.17 Remuneration of councillors 4,206 4,456 4,447 4,324 -3.07 -2.86 Depreciation & asset impairment 1,832 2,000 2,000 2,080 3.86 3.86 Impairment losses 1,916 0 0 (28) 100.00 100.00 Repairs and Maintenance 1,000 895 2,135 1,429 37.39 -49.36 Finance charges 1,678 60 0 1,371 95.62 100.00 Contracted Services 506 1,852 12,866 200 -827.06 -6,340.32 Transfers and grants 3,850 0 500 8,923 100.00 94.40 Other expenditure 8,395 12,938 15,607 10,380 -24.64 -50.35 Loss on Disposal of Investment Property 0 0 0 225 -24.64 -50.35 Total Expenditure 57,475 55,773 74,021 64,595 13.66 -14.59 Surplus/(Deficit) (1,055) 1,418 836 3,878 63.43 78.44 Transfers recognised - capital 0 0 0 0 0.00 0.00 Contributed assets 0 0 0 0 0.00 0.00 Loss on foreign exchange 0 0 0 0 0.00 0.00 Fair value adjustment 0 0 0 0 0.00 0.00 Actuarial gains / (losses) 0 0 0 0 0.00 0.00 Surplus/(Deficit) (1,055) 1,418 836 3,878 63.43 78.44 Capital expenditure & funds sources Capital expenditure

81 Pixley Ka Seme District Municipality Annual Report 2018/19

2017/18 2018/19 2018/19 Variance Adjust- Original Adjusted Original Description Actual Actual ments Budget Budget Budget Budget R’000 % Transfers recognised - capital (incl Housing 0 1,650 3,892 3,888 57.56 -0.10 Development Fund) Public contributions & donations 0 0 0 0 0.00 0.00 Borrowing 3,136 0 0 0 0.00 0.00 Internally generated funds 256 0 0 0 0.00 0.00 Total sources of capital funds 3,392 1,650 3,892 3,888 57.56 -0.10 Financial position Total current assets 4,107 50,785 50,785 4,107 -1,136.66 -1,136.66 Total non-current assets 13,367 2,443 2,443 13,367 81.72 81.72 Total current liabilities 13,041 2,215 2,215 12,625 82.45 82.45 Total non-current liabilities 15,829 568 568 15,829 96.41 96.41 Community wealth/Equity (11,396) 50,445 50,445 (10,785) 567.75 567.75 Cash flows Cash/cash equivalents at the year begin 3,186 0 0 3,254 100.00 100.00 Net cash from (used) operating 1,631 0 0 11,066 100.00 100.00 Net cash from (used) investing (256) 0 0 (415) 100.00 100.00 Net cash from (used) financing (1,306) 0 0 (1,856) 100.00 100.00 Cash/cash equivalents at the year end 3,254 0 0 12,048 100.00 100.00 Cash backing/surplus reconciliation Cash and investments available 3,186 0 0 3,254 100.00 100.00 Application of cash and investments 0 0 0 0 0.00 0.00 Balance - surplus (shortfall) 3,186 0 0 3,254 100.00 100.00 Asset management Asset register summary (WDV) 13,367 0 0 14,875 100.00 100.00 Depreciation & asset impairment 1,832 2,000 2,000 2,080 3.86 3.86 Renewal of Existing Assets 3,392 1,650 3,892 3,888 57.56 -0.10 Repairs and Maintenance 1,000 895 2,135 1,429 37.39 -49.36

Table 121: Financial Performance

82 Pixley Ka Seme District Municipality Annual Report 2018/19

The following graph indicates the various types of revenue received in 2018/19:

Graph 2: Revenue

The following graph indicates the various types of expenditure items in 2018/19:

Graph 3: Operating Expenditure

The table below shows a summary of performance against budgets

Revenue Operating expenditure Financial Budget Actual Diff. Budget Actual Diff. Year % % (R’000) (R’000) 2017/18 51,871 56,420 4,549 0.09 53,819 57,475 3,656 0.07

2018/19 74,858 68,473 (6,384) -0.09 74,021 64,595 (9,426) -0.13

Table 122: Performance against budgets

83 Pixley Ka Seme District Municipality Annual Report 2018/19

5.1.1 Revenue Collection by Vote

The table below indicates the Revenue collection performance by vote

2017/18 2018/19 2018/19 Variance Adjust- Original Adjusted Original Vote Description Actual Actual ments Budget Budget Budget Budget R’000 % Mayor & Council 3,261 3,350 3,350 3,349 -0.03 -0.03 Municipal Manager 0 0 0 0 0.00 0.00 Budget and Treasury Office 46,199 49,372 52,135 52,311 5.62 0.34 Corporate Service 0 71 80 101 29.50 20.57 Internal Audit 0 0 0 0 0.00 0.00 Development & Infrastructure 0 0 0 0 0.00 0.00 IDP 4,327 4,009 18,183 11,667 65.64 -55.86 Health 0 0 0 0 0.00 0.00 Housing 2,283 0 720 1,046 100.00 31.16 Public Safety 350 389 389 0 0.00 0.00 Total Revenue by Vote (Including capital transfers 56,420 57,191 74,858 68,473 16.48 -9.32 and contributions)

Table 123: Revenue collection by vote 5.1.2 Revenue Collection by Source

The table below indicates the Revenue collection performance by source for the financial year:

2017/18 2018/19 2018/19 Variance Original Adjusted Original Adjusted Description Actual Actual Budget Budget Budget Budget R’000 % Government Grants and Subsidies received 49,930 53,538 69,846 62,799 14.75 -11.22 Public Contributions and donations 0 0 0 0 0.00 0.00 Service In-kind Contributions 1,952 0 0 0 0.00 0.00 Rentals of facilities and equipment 101 71 80 101 29.50 20.57 Interest earned - external investments 716 510 600 1,066 52.18 43.74 Other revenue 3,178 3,072 4,332 4,507 31.83 3.88 Other Gains and Losses 0 0 0 0 0.00 0.00 Profit on disposal of Property Plant and Equipment 543 0 0 0 0.00 0.00 Total Revenue (excluding capital transfers and 56,420 57,191 74,858 68,473 16.48 -9.32 contributions)

Table 124: Revenue collection by source

84 Pixley Ka Seme District Municipality Annual Report 2018/19

5.2 Financial Performance per Municipal Function

5.2.1 Housing

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 2,283 0 720 1,046 100.00 Expenditure: Employees 1,843 1,849 2,031 1,407 -31.39 Repairs and Maintenance 0 0 0 0 0.00 Other 200 665 582 712 6.63 Total Operational Expenditure 2,043 2,514 2,613 2,119 -18.61 Net Operational (Service) 239 (2,514) (1,893) (1,074) -134.17

Table 125: Financial Performance: Housing

5.2.2 Planning

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 4,327 4,009 18,183 11,667 65.64 Expenditure: Employees 3,676 3,402 3,836 3,979 14.49 Repairs and Maintenance 8,272 4,259 13,591 3,532 -20.58 Other 11,949 7,661 17,428 7,510 -2.00 Total Operational Expenditure (7,622) (3,652) 756 4,156 187.86 Net Operational (Service) 3,676 3,402 3,836 3,979 14.49

Table 126: Financial Performance: Planning

5.2.3 Disaster Management

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 350 389 389 0 0.00 Expenditure: Employees 2,597 2,526 2,632 2,780 9.13 Repairs and Maintenance 0 0 0 0 0.00 Other 219 312 266 334 6.63 Total Operational Expenditure 2,815 2,838 2,898 3,114 8.86 Net Operational (Service) (2,465) (2,449) (2,509) (3,114) 21.36

Table 127: Financial Performance: Disaster Management

85 Pixley Ka Seme District Municipality Annual Report 2018/19

5.2.4 Environmental Health

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 0 0 0 0 0.00 Expenditure: Employees 3,515 3,957 4,351 4,821 17.92 Repairs and Maintenance 0 0 0 0 0.00 Other 502 870 913 589 -47.70 Total Operational Expenditure 4,017 4,827 5,264 5,410 10.77 Net Operational (Service) (4,017) (4,827) (5,264) (5,410) 10.77

Table 128: Environmental Health

5.2.5 Council

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 3,261 3,350 3,350 3,349 -0.03 Expenditure: Employees 2,216 2,615 2,538 2,632 0.65 Repairs and Maintenance 4,206 4,456 4,447 4,324 -3.07 Remuneration of Councillors 0 0 0 0 0.00 Other 1,777 2,225 2,455 2,077 -7.10 Total Operational Expenditure 8,200 9,297 9,441 9,034 -2.91 Net Operational (Service) (4,939) (5,947) (6,091) (5,685) -4.61

Table 129: Financial Performance: Council

5.2.6 Office of the Municipal Manager

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 0 0 0 0 0.00 Expenditure: Employees 1,733 1,797 1,830 1,692 -6.21 Repairs and Maintenance 0 0 0 0 0.00 Other 100 160 207 171 6.63 Total Operational Expenditure 1,833 1,957 2,037 1,863 -5.03 Net Operational (Service) (1,833) (1,957) (2,037) (1,863) -5.03

Table 130: Financial Performance: Office of the Municipal Manager

86 Pixley Ka Seme District Municipality Annual Report 2018/19

5.2.7 Financial Services

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 46,199 49,372 52,135 52,086 5.21 Expenditure: Employees 5,460 5,564 5,544 6,706 17.03 Repairs and Maintenance 1,000 1,240 2,135 1,429 13.25 Grants and subsidies paid 3,850 – 500 8,923 100.00 Depreciation/Amortarisation 1,832 2,000 2,000 2,080 3.86 Impairment Losses 1,916 – – (28) 100.00 Finance Cost 1,678 60 – 1,371 95.62 Contracted Services 506 1,852 12,866 200 -827.06 Other 0 0 0 139 0.00 Loss on disposal of PPE 0 0 0 225 100.00 Total Operational Expenditure 16,242 10,716 23,045 21,046 49.08 Net Operational (Service) 29,958 38,656 29,090 31,040 -24.54

Table 131: Financial Performance: Financial Services

5.2.8 Human Resources

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 101 71 80 101 29.50 Expenditure: Employees 6,942 7,180 7,263 7,532 4.68 Repairs and Maintenance 0 0 0 0 0.00 Other 1,127 1,107 1,365 1,894 41.56 Total Operational Expenditure 8,069 8,286 8,628 9,426 12.09 Net Operational (Service) (7,968) (8,215) (8,548) (9,325) 11.90

Table 132: Financial Performance: Human resources

87 Pixley Ka Seme District Municipality Annual Report 2018/19

5.2.9 Internal Audit

2017/18 2018/19 Original Adjustment Variance to Description Actual Actual Budget Budget Budget R’000 % Total Operational Revenue 0 0 0 0 0.00 Expenditure: Employees 3,711 4,331 4,386 4,140 -4.60 Repairs and Maintenance 0 0 0 0 0.00 Other 760 870 913 932 6.63 Total Operational Expenditure 4,471 5,201 5,299 5,072 -2.54 Net Operational (Service) (4,471) (5,201) (5,299) (5,072) -2.54

Table 133: Financial Performance: Internal Audit

5.3 Grants

5.3.1 Grant Performance The Municipality had a total amount of R62,799 million for operational expenditure available that was received in the form of grants from the National and Provincial Governments during the 2018/19 financial year. The performance in the spending of these grants is indicated in the table below:

2017/18 2018/19 2018/19 Variance Adjust- Adjust- Original Description Actual Budget ments Actual ments Budget Budget Budget R’000 % Operating Transfers and Grants National Government: 41,909 50,140 50,140 52,503 4.50 4.50 Equitable share 39,861 47,820 47,820 47,820 0.00 0.00 Expanded Public Works Programme 798 1,000 1,000 1,171 14.61 14.61 MIG - Project Management Unit 0 0 0 2,192 100.00 100.00 Finance Management Grant 1,250 1,320 1,320 1,320 0.00 0.00 Provincial Government: 3,976 0 720 6,115 100.00 88.23 Project Hope Town 465 0 0 0 0.00 0.00 COGHTA Grant 2,283 0 720 1,046 100.00 31.16 EPWP Renosterberg 380 0 0 122 100.00 100.00 Provincial Roads 848 0 0 946 100.00 100.00 Pula Nula 0 0 0 4,000 100.00 100.00 Other grant providers: 4,045 389 389 4,181 90.70 90.70 Health Subsidy 166 0 0 333 100.00 100.00 NEAR 350 389 389 0 0.00 0.00 RAMS 3,003 0 0 2,978 100.00 100.00 DPSA 526 0 0 871 100.00 100.00 Total Operating Transfers and Grants 49,930 50,529 51,249 62,799 19.54 18.39 Actual amount represent the total revenue recognised excluding VAT on grants and subsidies

Table 134: Grant Performance

88 Pixley Ka Seme District Municipality Annual Report 2018/19

5.3.2 Level of Reliance on Grants & Subsidies

Total grants Total Percentage Financial year and subsidies received Operating Revenue R’000 % 2017/18 49,930 56,420 88.50 2018/19 62,799 68,473 91.71

Table 135: Level of reliance on grants

Graph 4: Reliance on grants as %

5.4 Financial Ratios

5.4.1 Current Ratio

Description Basis of calculation 2017/18 2018/19 Current Ratio Current assets/current liabilities 0.34 0.72

Table 136: Liquidity Ratio

5.4.2 Performance Management Regulation Financial Viability Indicators

Description Basis of calculation Unit of Measurement 2017/18 2018/19 Financial viability measured in terms of the available cash to cover fixed operating expenditure by 30 June 2017 ((Cash and Cash Equivalents - Unspent Number of months it takes to cover fix Conditional Grants - Overdraft) + Short Cost Coverage operating expenditure with available 0.19 1 Term Investment) / Monthly Fixed cash Operational Expenditure excluding (Depreciation, Amortisation, and Provision for Bad Debts, Impairment and Loss on Disposal of Assets)) Financial viability measured in terms of the municipality's ability to meet it's service debt obligations by 30 June Debt 2017 ((Short Term Borrowing + Bank % of debt coverage 7.81% 45% coverage Overdraft + Short Term Lease + Long Term Borrowing + Long Term Lease) / Total Operating Revenue - Operating Conditional Grant)

89 Pixley Ka Seme District Municipality Annual Report 2018/19

5.4.3 Borrowing Management

Description Basis of calculation 2017/18 2018/19 Interest & Principal Paid /Operating Capital Charges to Operating Expenditure 2.92% 2.12 Expenditure

Table 137: Borrowing Management

Graph 5: Capital Charges to Operating Expenditure Ratio

5.4.4 Employee costs

Description Basis of calculation 2017/18 2018/19 Employee costs/(Total Revenue - capital Employee costs 68.28% 56.83% revenue)

Table 138: Employee Costs

Graph 6: Employee Costs Ratio

90 Pixley Ka Seme District Municipality Annual Report 2018/19

5.4.5 Repairs & Maintenance

Description Basis of calculation 2017/18 2018/19 R&M/(Total Revenue excluding capital Repairs & Maintenance 1.77% 2.28% revenue)

Table 139: Repairs and Maintenance

Graph 7: Repairs and Maintenance Ratio

COMPONENT B: BORROWING & INVESTMENTS

5.5 Borrowing

5.5.1 Actual Borrowings

2017/18 2018/19 Instrument (R’000) Bank Overdrafts 3 8 Financial Leases 1,554 1,252 Current Borrowings 120 112 Total 1,678 1,371

Table 140: Actual Borrowings

5.6 Investments

5.6.1 Actual Investments

2017/18 2018/19 Investment type R’000 Deposits - Bank 3,254 12,048

Table 141: Municipal Investments

91 Pixley Ka Seme District Municipality Annual Report 2018/19

CHAPTER 6: AUDITOR-GENERAL AUDIT FINDINGS Component A: Auditor-General Report 2017/18

6.1 Auditor-General Report 2017/18

Main issues raised Corrective steps implemented/ to be implemented

Material Uncertainty Relating to Going Concern This matter is out of the Municipalities hands, as we are 90% Material Uncertainty relating to going concern grant dependent, and the grant allocations are being determined by National Treasury. Emphasis of Matter Material Impairment Losses- Receivables from exchange This matter has already been dealt with by Council, as transactions: disclosed by the AG. As disclosed in note 24 to the financial statements, material The municipality will in future exercise stronger controls over impairment losses of R1 916 038 was incurred as a result of a this issue. write-off of irrecoverable trade debtors Irregular expenditure identified by the AG during 2016/2017 to be disclosed accordingly. SCM unit to intensify monitoring of expenditure before being Irregular Expenditure executed. As disclosed in note 38.3 to the financial statements, irregular Issue of CSD and MBD4 form to be a priority during 2018/2019. expenditure of R1 715 306 that was incurred in the previous Committee responsible for investigating irregular expenditure years was still under investigation to be utilized more effectively. A meeting between the Audit Committee, MPAC and Management to be held in order to deal with issues raised by the AG during the 2017/2018 Audit Unauthorized Expenditure This issue was already approved by Council and will also be As disclosed in note 38.1 to the financial statements dealt with in the meeting with the Audit Committee, MPAC and unauthorised expenditure of R 2 220 039 was incurred in the Management regarding the way forward. previous years was still under investigation. Other Matters Achievement of Planned Targets Top layer SDBIP will be revised after midyear assessment. Expenditure Management Reasonable steps were not taken to prevent irregular expenditure, as required by section 62(1) (d) of the MFMA. The value of R 4 529 392, as disclosed in note 38.3 is not complete as management was still in the process of quantifying the full The already written-off by Council Irregular Expenditure extent of the irregular expenditure. The majority of the incurred during 2016/2017 and 2017/2018 Financial years will disclosed irregular expenditure was caused by SCM process not be relooked at during the meeting the Audit Committee, MPAC followed. Irregular expenditure amounting to R 2 814 085 was and Management. incurred on printing and water sampling. The municipality will also look into the issues of MBD4 Reasonable steps were not taken to prevent unauthorised declarations, CSD and section 36 SCM regulations and expenditure amounting to R4 377 863, as disclosed in note 38.1 strengthen the Management of the latter. to the annual financial statements, in contravention of section 62(1) (d) of the MFM. The majority of the unauthorized d expenditure was caused by the overspending of the budget on and vote 3: Budget and Treasury and vote 8: Economic development planning. Consequence Management The issues in question here relates to interest raised by the AG All of the fruitless and wasteful expenditure incurred by the in terms of their arrear accounts municipality was not investigated to determine if any person The reason for the non-payment to the AG was because of the is liable for the expenditure, as required by section 32(2)(b) of Municipality’s Financial position – hence no official could be the MFMA. held liable for this expenditure. Procurement and Contract Management Some of the goods and services with a transaction value of The issue of MBD4 declarations, CSD registrations and Section below R200 000 were procured without obtaining the required 36 SCM regulations to be stricter implemented. price quotations, in contravention of SCM regulation 17(a) and

92 Pixley Ka Seme District Municipality Annual Report 2018/19

Main issues raised Corrective steps implemented/ to be implemented (c). Similar non-compliance was also reported in the prior year. Some of the quotations were accepted from bidders who did not submit a declaration on whether they are employed by the state or connected to any person employed by the state as required by SCM regulation 13(c). Similar non-compliance was also reported in prior years. Some of the quotations were not awarded to bidders based on preference points that were not calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and its regulations. Similar non-compliance was also reported in the prior year. Human Resource Management The Municipal Manager was appointed without submitting We totally disagreed with the AG in this regard but future original/certified copies of academic and professional appointments will be dealt with in the proper manner. qualifications, as required by municipal performance regulation 4(4) (b). Individual performance will be implemented with the assistance of a service provider as soon as the municipality is Appropriate systems and procedures to monitor, measure and ready. evaluate performance of staff were not developed and adopted, as required by section 67(1)(d) of the MSA Strategic Planning and Performance The SDBIP for the year under review did not include monthly The incorrect version of the approved top Layer SDBIP was revenue projections by source of collection, and the monthly provided to the AG. operational and capital expenditure by vote, as required by section 1 of the MFMA

Table 142: AG Report 2017/18

Component B: Auditor-General Report 2018/19

6.2 Auditor-General Report 2018/19

Main issues raised Corrective steps implemented/ to be implemented

Material Uncertainty Relating to Going Concern As disclosed in note 50 to the financial statements, which More functions to be vested in the DM in order for the DM indicates as at year ended 30 June 2019 the Municipality's total to generate more funds and thus increase it's assets and liabilities exceeded its total assets by R 5 139 719. As stated lower it's liabilities and to become less grant dependent. in note 50 these events or conditions, along with other matters The reintroduction of MSIG grant to the DM to enable DM as set forth in note 49, indicate that a material uncertainty to render Shared Services to its 8 local municipalities free exists that may cast significant doubt on the municipality's of charge. abilities to continue as a going concern Emphasis of Matter

All the restatements occurred due to a difference of opinion with the AG and also as a result that issues are treated for the first time in a certain way by the AG whilst As disclosed in note 32 to the financial statements, the it was treated differently in previously e.g UIF vs VAT corresponding figures for 30 June 2018 were restated as a disclosure, disclosure of expenditure, different result of an error in the financial statements of the interpretation of contracts between AG and PIXLEY. municipality at, and for the year ended, 30 June 2019. It is proposed that future AFS's be subjected to pre-quality assurances to an external service provider before submittance to the AG.

The MIG allocation for Ubuntu Local Municipality was only transferred to Pixley towards the end of the municipal As disclosed in the statement of comparison of budget and financial year-hence the underspending of the budget. actual amounts for the year ended 30 June 2019, the In future-if the DM is requested to administer projects on municipality materially underspent the budget by R 9 571 295. behalf of Cat B's should the transfer of funding be done in line with all involved sphere's respective financial years. Other Matters Management subsequently corrected the misstatements hence The supplementary information set out on pages X to X does no material findings on usefulness and reliability of the not form part of the financial statements and is presented as reported performance information.

93 Pixley Ka Seme District Municipality Annual Report 2018/19

Main issues raised Corrective steps implemented/ to be implemented additional information. We have not audited these schedules and accordingly, we do not express an opinion thereon. Material misstatements of general expenditure, payables and Different approaches by different auditors in treating issues at commitments identified by the auditors in the submitted different municipalities needs to be addressed as a solution in documents were subsequently corrected and supporting solving this issue. A workshop by external stakeholders-in documents were provided subsequently resulting in the AFS conjunction with treasury is planned for Feb/March 2020 in an receiving an unqualified audit opinion. effort to resolve this matter.

The irregular expenditure was already investigated and condoned by Council. Additional irregular expenditure identified by the AG to be investigated and written-off Reasonable steps not taken to prevent irregular expenditure during 2019/2020. R2 781 291(2.2M incurred on printing and water The Fruitless and wasteful expenditure relates to interest sampling).Reasonable steps not taken to prevent F & W on the AG account. We have a ring-fenced agreement in expenditure R71 149.Reasonable steps not taken to prevent place with the AG which covers the issue of the interest. unauthorised expenditure R251 246 (PUBLIC SAFETY). The unauthorised expenditure relates to overtime payments over which the DM has very little control over-- better budgetary provisions have to be made in future. The SCM unit needs to get access to the CATS system that is Persons in service of Municipality failed to disclose business being used by the AG to enable us to do verification-we interest. Some goods and services with a transaction value currently have to rely on disclosures done by officials. below R200 000.00 were procured without obtaining three The R200 000.00 issue is still under investigation in as far as quotations. the AG do not currently "belief" our reasons giving for deviating I t o Section 36 of the SCM regulations e.g. sole providers etc. As indicated to the AG the expenditure was as incurred related to the interest raised by the AG on our arrear account. We All of the fruitless and wasteful expenditure incurred by the concluded an agreement with the AG which covered the municipality was not investigated to determine if any person interest aspect-hence was no official liable for the is liable for the expenditure. expenditure in question. The Ring-fenced agreement with the AG to be used as guideline in this regard.

Table 143: AG Report 2018/19

94 Pixley Ka Seme District Municipality Annual Report 2018/19

LIST OF ABBREVIATIONS

AG Auditor-General CAPEX Capital Expenditure CFO Chief Financial Officer DPLG Department of Provincial and Local Government DWAF Department of Water Affairs and Forestry EE Employment Equity G R A P Generally Recognised Accounting Practice HR Human Resources IDP Integrated Development Plan IFRS International Financial Reporting Standards IMFO Institute for Municipal Finance Officers KPA Key Performance Area KPI Key Performance Indicator LED Local Economic Development MAYCO Executive Mayoral Committee MFMA Municipal Finance Management Act (Act No. 56 of 2003) MIG Municipal Infrastructure Grant MM Municipal Manager MSA Municipal Systems Act No. 32 of 2000 NGO Non-governmental organisation NT National Treasury OPEX Operating expenditure PMS Performance Management System PT Provincial Treasury SALGA South African Local Government Organisation SAMDI South African Management Development Institute SCM Supply Chain Management SDBIP Service Delivery and Budget Implementation Plan SDF Spatial Development Framework

95 Pixley Ka Seme District Municipality Annual Report 2018/19

List of Tables

TABLE 1: MUNICIPAL AREA AT A GLANCE ...... 6 TABLE 56: HOUSES BUILT AND SITES SERVICED ...... 48 TABLE 2: DEMOGRAPHIC PROFILE ...... 9 TABLE 57: EMPLOYEES HOUSING ...... 48 TABLE 3: TOTAL AREA AND POPULATION PER LOCAL MUNICIPALITY ..... 9 TABLE 58: ROADS HIGHLIGHTS ...... 49 TABLE 4: EMPLOYMENT STATUS ...... 10 TABLE 59: ROADS CHALLENGES ...... 49 TABLE 5: SERVICES DELIVERY HIGHLIGHTS ...... 11 TABLE 60: EMPLOYEES – ROADS ...... 50 TABLE 6: SERVICES DELIVERY CHALLENGES ...... 11 TABLE 61: PLANNING HIGHLIGHTS ...... 51 TABLE 7: FINANCIAL VIABILITY HIGHLIGHTS ...... 11 TABLE 62: PLANNING CHALLENGES ...... 51 TABLE 8: FINANCIAL VIABILITY CHALLENGES ...... 11 TABLE 63: EMPLOYEES – PLANNING ...... 52 TABLE 9: NATIONAL KPI’S FOR FINANCIAL VIABILITY AND MANAGEMENT 12 TABLE 64: LED HIGHLIGHTS ...... 53 TABLE 10: FINANCIAL OVERVIEW ...... 12 TABLE 65: LED CHALLENGES ...... 53 TABLE 11: OPERATING RATIOS...... 12 TABLE 66: LED OBJECTIVES AND STRATEGIES ...... 54 TABLE 12: MUNICIPAL TRANSFORMATION AND ORGANISATIONAL TABLE 67: JOB CREATION THROUGH EPWP PROJECTS ...... 55 DEVELOPMENT HIGHLIGHTS ...... 13 TABLE 68: EMPLOYEES – LED ...... 56 TABLE 13: MUNICIPAL TRANSFORMATION AND ORGANISATIONAL TABLE 69: MUNICIPAL HEALTH HIGHLIGHTS ...... 58 DEVELOPMENT CHALLENGES ...... 13 TABLE 70: MUNICIPAL HEALTH CHALLENGES ...... 59 TABLE 14: AUDIT OUTCOMES ...... 14 TABLE 71: SERVICE STATISTICS: MUNICIPAL HEALTH ...... 59 TABLE 15: NATIONAL KPIS - GOOD GOVERNANCE AND PUBLIC TABLE 72: EMPLOYEES – MUNICIPAL HEALTH...... 59 PARTICIPATION PERFORMANCE ...... 15 TABLE 73: DISASTER MANAGEMENT HIGHLIGHTS ...... 60 TABLE 16: GOOD GOVERNANCE AND PUBLIC PARTICIPATION PERFORMANCE TABLE 74: DISASTER MANAGEMENT CHALLENGES ...... 60 HIGHLIGHTS ...... 15 TABLE 75: ACTIVITIES: DISASTER MANAGEMENT ...... 61 TABLE 17: GOOD GOVERNANCE AND PUBLIC PARTICIPATION CHALLENGES TABLE 76: EMPLOYEES – DISASTER MANAGEMENT ...... 61 ...... 15 TABLE 77: OFFICE OF THE MAYOR HIGHLIGHTS ...... 61 TABLE 18: COUNCIL ...... 16 TABLE 78: OFFICE OF THE MAYOR CHALLENGES ...... 62 TABLE 19: COUNCIL MEETINGS ...... 16 TABLE 79: EMPLOYEES – OFFICE OF THE MAYOR ...... 62 TABLE 20: EXECUTIVE MAYORAL COMMITTEE ...... 17 TABLE 80: OFFICE OF THE MUNICIPAL MANAGER HIGHLIGHTS ...... 62 TABLE 21: FINANCE PORTFOLIO COMMITTEE ...... 17 TABLE 81: OFFICE OF THE MUNICIPAL MANAGER CHALLENGES ...... 62 TABLE 22: INFRASTRUCTURE DEVELOPMENT, HOUSING & DEVELOPMENT TABLE 82: EMPLOYEES – OFFICE OF THE MUNICIPAL MANAGER ...... 63 PORTFOLIO COMMITTEE ...... 18 TABLE 83: STATISTICS SCM ...... 63 ABLE CORPORATE SERVICES AND COUNCIL SUPPORT PORTFOLIO T 23: TABLE 84: TOTAL EMPLOYEES – FINANCIAL SERVICES ...... 64 COMMITTEE ...... 18 TABLE 85: SUPPORT SERVICES HIGHLIGHTS ...... 64 TABLE 24: RULES COMMITTEE ...... 18 TABLE 86: SUPPORT SERVICES CHALLENGES ...... 64 TABLE 25: MUNICIPAL PUBLIC ACCOUNTS COMMITTEE ...... 19 TABLE 87: EMPLOYEES – SUPPORT SERVICES ...... 65 TABLE 26: ADMINISTRATIVE GOVERNANCE STRUCTURE ...... 19 TABLE 88: HUMAN RESOURCES HIGHLIGHTS ...... 65 TABLE 27: INTERGOVERNMENTAL STRUCTURES ...... 20 TABLE 89: HUMAN RESOURCES CHALLENGES ...... 65 TABLE 28: JOINT PROJECTS WITH SECTOR DEPARTMENTS ...... 20 TABLE 90: EMPLOYEES – HUMAN RESOURCES ...... 66 TABLE 29: PUBLIC MEETINGS ...... 23 TABLE 91: LEGAL SERVICES & LABOUR DIVISION HIGHLIGHTS ...... 66 TABLE 30: LOCAL LABOUR FORUM ...... 23 TABLE 92: LEGAL SERVICES & LABOUR DIVISION CHALLENGES ...... 67 TABLE 31: IDP FORUM ...... 24 TABLE 93: EMPLOYEES – LEGAL SERVICES & LABOUR DIVISION ...... 67 TABLE 32: DISTRICT AND LOCAL AIDS COUNCIL ...... 24 TABLE 94: INTERNAL AUDIT HIGHLIGHTS ...... 67 TABLE 33: DISTRICT COMMUNICATION FORUM ...... 24 TABLE 95: INTERNAL AUDIT CHALLENGES ...... 67 TABLE 34: INTERNAL AUDIT ACTIVITIES ...... 27 TABLE 96: EMPLOYEES – INTERNAL AUDIT ...... 68 TABLE 35: TOP RISKS ...... 27 TABLE 97: SERVICE DELIVERY PRIORITIES FOR 2019/20– ADMINISTER TABLE 36: RISK COMMITTEE ...... 28 FINANCES IN A SUSTAINABLE MANNER AND STRIVE TO COMPLY TABLE 37: STRATEGIES: ANTI-CORRUPTION AND ANTI-FRAUD ...... 28 WITH LEGISLATIVE REQUIREMENTS TO ACHIEVE A FAVOURABLE TABLE 38: MEMBERS OF THE AUDIT COMMITTEE...... 29 AUDIT OUTCOME ...... 69 TABLE 39: INTERNAL AUDIT ACTIVITIES ...... 29 TABLE 98: SERVICES DELIVERY PRIORITIES FOR 2019/20- COMPLIANCE TABLE 40: POLICIES DEVELOPED/ REVISED ...... 30 WITH THE TENETS OF GOOD GOVERNANCE AS PRESCRIBED BY TABLE 41: COMMUNICATION ACTIVITIES ...... 31 LEGISLATION AND BEST PRACTICE ...... 70 TABLE 42: COMMUNICATION UNIT ...... 31 TABLE 99: SERVICES DELIVERY PRIORITIES FOR 2019/20- GUIDE LOCAL TABLE 43: INFORMATION ON WEBSITE ...... 32 MUNICIPALITIES IN THE DEVELOPMENT OF THEIR IDP’S AND IN TABLE 44: ADMINISTER FINANCES IN A SUSTAINABLE MANNER AND STRIVE TO SPATIAL DEVELOPMENT ...... 70 COMPLY WITH LEGISLATIVE REQUIREMENTS TO ACHIEVE A TABLE 100: SERVICES DELIVERY PRIORITIES FOR 2019/20- MONITOR AND FAVORABLE AUDIT OUTCOME ...... 38 SUPPORT LOCAL MUNICIPALITIES TO ENHANCE SERVICE TABLE 45: COMPLIANCE WITH THE TENETS OF GOOD GOVERNANCE AS DELIVERY ...... 71 PRESCRIBED BY LEGISLATION AND BEST PRACTICE ...... 39 TABLE 101: SERVICE DELIVERY PRIORITIES FOR 2019/20- PROMOTE TABLE 46: GUIDE LOCAL MUNICIPALITIES IN THE DEVELOPMENT OF THEIR ECONOMIC GROWTH IN THE DISTRICT ...... 71 IDP’S AND IN SPATIAL DEVELOPMENT ...... 39 TABLE 102: SERVICE DELIVERY PRIORITIES FOR 2019/20- TO PROVIDE A TABLE 47: MONITOR AND SUPPORT LOCAL MUNICIPALITIES TO ENHANCE PROFESSIONAL, PEOPLE-CENTRED HUMAN RESOURCES AND SERVICE DELIVERY ...... 41 ADMINISTRATIVE SERVICE TO CITIZENS, STAFF AND COUNCIL TABLE 48: PROMOTE ECONOMIC GROWTH IN THE DISTRICT ...... 41 ...... 71 TABLE 49: TO PROVIDE A PROFESSIONAL, PEOPLE-CENTERED HUMAN TABLE 103: SERVICE DELIVERY PRIORITIES FOR 2019/20- TO PROVIDE AN RESOURCES AND ADMINISTRATIVE SERVICE TO CITIZENS, STAFF INDEPENDENT AND OBJECTIVE INTERNAL AUDIT ASSURANCE AND COUNCIL ...... 43 AND CONSULTING SERVICE TO ADD VALUE AND TO IMPROVE THE TABLE 50: TO PROVIDE AN INDEPENDENT AND OBJECTIVE INTERNAL AUDIT ADMINISTRATIVE OPERATIONS OF ALL THE MUNICIPALITIES IN ASSURANCE AND CONSULTING SERVICE TO ADD VALUE AND TO THE DISTRICT THROUGH AN APPROACH THAT IS SYSTEMATIC IMPROVE THE ADMINISTRATIVE OPERATIONS OF ALL THE AND DISCIPLINED ...... 72 MUNICIPALITIES IN THE DISTRICT THROUGH AN APPROACH THAT IS TABLE 104: SERVICE DELIVERY PRIORITIES FOR 2019/20- TO PROVIDE SYSTEMATIC AND DISCIPLINED ...... 44 DISASTER MANAGEMENT SERVICES TO THE CITIZENS ...... 72 TABLE 51: TO PROVIDE DISASTER MANAGEMENT SERVICES TO THE CITIZENS TABLE 105: SERVICE DELIVERY PRIORITIES FOR 2019/20- TO PROVIDE ...... 45 MUNICIPAL HEALTH SERVICES TO IMPROVE THE QUALITY OF TABLE 52: TO PROVIDE MUNICIPAL HEALTH SERVICES TO IMPROVE THE LIFE OF THE CITIZENS ...... 72 QUALITY OF LIFE OF THE CITIZEN ...... 45 TABLE 106: NATIONAL KPIS– MUNICIPAL TRANSFORMATION AND TABLE 53: FUNCTIONAL AREAS ...... 46 ORGANISATIONAL DEVELOPMENT ...... 74 TABLE 54: HOUSING HIGHLIGHTS ...... 47 TABLE 107: 2018/19 EE TARGETS/ACTUAL BY RACIAL CLASSIFICATION ... 74 TABLE 55: HOUSING CHALLENGES ...... 47 TABLE 108: 2018/19 EE TARGETS/ACTUAL BY GENDER CLASSIFICATION 74

96 96 Pixley Ka Seme District Municipality Annual Report 2018/19

TABLE 109: OCCUPATIONAL LEVELS - RACE ...... 75 TABLE 137: BORROWING MANAGEMENT ...... 90 TABLE 110: DEPARTMENTS – RACE ...... 75 TABLE 138: EMPLOYEE COSTS ...... 90 TABLE 111: VACANCY RATE PER POST AND FUNCTIONAL LEVEL ...... 76 TABLE 139: REPAIRS AND MAINTENANCE ...... 91 TABLE 112: TURNOVER RATE ...... 76 TABLE 140: ACTUAL BORROWINGS ...... 91 TABLE 113: INJURIES ...... 76 TABLE 141: MUNICIPAL INVESTMENTS ...... 91 TABLE 114: SICK LEAVE ...... 77 TABLE 142: AG REPORT 2017/18 ...... 93 TABLE 115: HR POLICIES AND PLANS ...... 77 TABLE 143: AG REPORT 2018/19 ...... 94 TABLE 116: SKILLS DEVELOPMENT: TRAINING PROVIDED ...... 78 TABLE 117: FINANCIAL COMPETENCY DEVELOPMENT: PROGRESS REPORT ...... 79 TABLE 118: BUDGET ALLOCATED AND SPENT FOR SKILLS DEVELOPMENT . 79 List of Figures TABLE 119: PERSONNEL EXPENDITURE ...... 79 TABLE 120: PERSONNEL EXPENDITURE ...... 80 TABLE 121: FINANCIAL PERFORMANCE ...... 82 FIGURE 1 LOCALITY MAP ...... 7 FIGURE 2 DISTRICT MUNICIPAL AREA DIVIDED INTO LOCAL MUNICIPALITIES TABLE 122: PERFORMANCE AGAINST BUDGETS ...... 83 ...... 8 TABLE 123: REVENUE COLLECTION BY VOTE ...... 84 FIGURE 3 SDBIP MEASUREMENT CRITERIA ...... 35 TABLE 124: REVENUE COLLECTION BY SOURCE ...... 84 TABLE 125: FINANCIAL PERFORMANCE: HOUSING ...... 85 TABLE 126: FINANCIAL PERFORMANCE: PLANNING ...... 85 TABLE 127: FINANCIAL PERFORMANCE: DISASTER MANAGEMENT ...... 85 TABLE 128: ENVIRONMENTAL HEALTH ...... 86 List of Graphs TABLE 129: FINANCIAL PERFORMANCE: COUNCIL ...... 86 TABLE 130: FINANCIAL PERFORMANCE: OFFICE OF THE MUNICIPAL GRAPH 1: TOP LAYER SDBIP PERFORMANCE PER OBJECTIVE ...... 36 MANAGER ...... 86 GRAPH 2: REVENUE ...... 83 TABLE 131: FINANCIAL PERFORMANCE: FINANCIAL SERVICES ...... 87 GRAPH 3: OPERATING EXPENDITURE...... 83 TABLE 132: FINANCIAL PERFORMANCE: HUMAN RESOURCES ...... 87 GRAPH 4: RELIANCE ON GRANTS AS % ...... 89 TABLE 133: FINANCIAL PERFORMANCE: INTERNAL AUDIT ...... 88 GRAPH 5: CAPITAL CHARGES TO OPERATING EXPENDITURE RATIO ...... 90 TABLE 134: GRANT PERFORMANCE ...... 88 GRAPH 6: EMPLOYEE COSTS RATIO ...... 90 TABLE 135: LEVEL OF RELIANCE ON GRANTS ...... 89 GRAPH 7: REPAIRS AND MAINTENANCE RATIO ...... 91 TABLE 136: LIQUIDITY RATIO ...... 89

97 97 Pixley Ka Seme District Municipality Annual Report 2018/19

Annexure A: Financial Statements

98 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

99 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

INDEX

DescriptionDescription PagePage No. No.

GeneralGeneral Information Information 101 3

ApprovalApproval 102 4 Accounting Officer's Report 103 Accounting Officer's Report 5 Statement of Financial Position 111 Statement of Financial Position 13 Statement of Financial Performance 112 Statement of Financial Performance 14 Statement of Changes in Net Assets 113 Statement of Changes in Net Assets 15 Cash Flow Statement 114 Cash Flow Statement 16 Statement of Comparison of Budget and Actual Amounts 115 Statement of Comparison of Budget and Actual Amounts 17 Accounting Policies 122 Accounting Policies 24 Notes to the Financial Statements 138 Notes to the Financial Statements 40 The following appendices do not form part of the Annual Financial Statements and are Theunaudited:following appendices do not form part of the Annual Financial Statements and are unaudited: Appendix A 170 Appendix A 72 Appendix B 171 Appendix B 73 Appendix C 173 Appendix C 75 Appendix D 174

AppendixAppendix D E 175 76

AppendixAppendix E F 180 77

AppendixAppendix F G 181 82

AppendixAppendix G H 183 83

100 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

GENERAL INFORMATION

Members of the Council:

MT Kibi Mayor (resigned) NL Hermans Speaker UR Itumeleng Mayorial Committee GL Nkumbi Mayorial Committee TA Sintu Mayorial Committee NJ Batties Member ME Bitterbos Member SL Billie Member (resigned) J Hoffman Member JEJ Hoorne Member SE Humphries Member CC Jantjies Member H Marais Member AM Matebus Member PJ McKlein Member (resigned) PP Mhlawuli Member A Oliphant Member DV Smous Member SS Swartling Member LC van Niekerk Member (resigned) VT Yawa Member

Municipal Manager: RE Pieterse

Chief Financial Officer: BF James

Grading of Local Authority: Grade 3

Auditors: Auditor-General of South Africa

Bankers: Standard Bank of South Africa Limited

Registered Office: Culvert Road De Aar 7000

Physical Address: Culvert Road De Aar 7000

Postal Address: Private Bag X1012 De Aar 7000

Telephone Number: (053) 632 0891

Fax Number: (053) 631 2529

3 101 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS

I am responsible for the preparation of these annual financial statements, which are set out on pages 13 to 71, in terms of Section 126(1) of the Municipal Finance Management Act and which I have signed on behalf of the Municipality.

I certify that the salaries, allowances and benefits of Councillors, loans made to Councillors, if any, and payments made to Councillors for loss of office, if any, as disclosed in note 22 of these annual financial statements are within the upper limits of the framework envisaged in Section 219 of the Constitution, read with the Remuneration of Public Officer Bearers Act and the Minister of Provincial and Local Government’s determination in accordance with this Act.

Municipal Manager: RE Pieterse

30 August 2019

102 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

1. INTRODUCTION

It gives me great pleasure to present the Annual Financial Statements of Pixley-ka-Seme District Municipality at 30 June 2019.

These Annual Financial Statements have been prepared in accordance with Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board (ASB) in accordance with Section 122(3) of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003). The standards and pronouncements that form the GRAP Reporting Framework for the 2018/19 financial period is set out in Directive 5 issued by the ASB on 11 March 2009.

The Statement of Financial Position at 30 June 2019 indicates a increase in Net Assets, an increase in Non-current Liabilities and a increase in Current Liabilities.

The increase in Net Assets is ascribed primarily to the increase in Accumulated Surplus as a result of the surplus generated on the operating account. The increase in Non-current Liabilities is primarily as a result of the increases in Long-term Liabilities. The increase in Current Liabilities is primarily as a result of the increase in Unspent Conditional Grants.

2. KEY FINANCIAL INDICATORS

The following indicators are self-explanatory. The percentages of expenditure categories are well within acceptable norms and indicate good governance of the funds of the Municipality.

2.1 Financial Statement Ratios:

INDICATOR 2019 2018

Surplus / (Deficit) before Appropriations (3,985,897) (9,142,734) Surplus / (Deficit) at the end of the Year 5,156,838 (604,866)

Expenditure Categories as a percentage of Total Expenses: Employee Related Costs 56.66% 60.24% Remuneration of Councillors 6.85% 7.32% Depreciation and Amortisation 3.30% 3.19% Impairment Losses -0.04% 3.33% Repairs and Maintenance 2.27% 1.74% Interest Paid 2.17% 2.92% Contracted Services 2.85% 4.94% Grants and Subsidies Paid 6.34% 0.00% General Expenses 19.30% 16.33% Loss on Disposal of Property, Plant and Equipment 0.00% 0.00%

Current Ratio: Trade Creditors Days (excluding arrangements) 7.83 28.25 Trade Creditors Days (arrangements) 354.35 146.86 Debtors from Exchange Transactions Days 355 132

The ratio for Debtors Days, calculated on net Debtors, weakened significantly due the fact that the majority outstanding debtors represent Shared Service debtors, which was billed at yearend.

2.2 Performance Indicators:

INDICATOR 2019 2018

Financial Position Debtors Management: Outstanding Debtors to Revenue 22.77% 39.79% Outstanding Service Debtors to Revenue 22.77% 39.79%

5 103 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

2. KEY FINANCIAL INDICATORS (continued)

INDICATOR 2019 2018

Liquidity Management: Liquidity Ratio 0.77 0.39

Liability Management: Capital Cost as percentage of Own Revenue (5.66)% (5.67)% Borrowed Funding as percentage of Own Capital Expenditure 10.42% 92.45% Borrowing as percentage of Total Capital Assets (112.88)% (151.87)%

Safety of Capital: Gearing (112.88)% (151.87)%

Financial Viability: Debt Coverage 58.94% 59.74% Cost Coverage 0.39 0.11

Financial Performance Expenditure Management: Creditors to Cash and Investments 100.00% 100.00%

A detailed ratio analysis, together with explanations, is included in Appendix H.

3. OPERATING RESULTS

Details of the operating results per segmental classification of expenditure are included in Appendix D, whilst operational results are included in Appendices E(1), E(2) and E(3).

The services offered by Pixley-ka-Seme District Municipality can generally be classified as General, Economic and Trading Services and are discussed in more detail below.

The overall operating results for the year ended 30 June 2019 are as follows:

Actual Actual Percentage Budgeted Variance Actual/ DETAILS 2019 2018 Variance 2019 Budgeted R R % R % Income: Opening surplus / (deficit) (9,142,734) (10,341,657) (11.59)% 2,019,100 (552.81)% Operating income for the year 68,238,199 56,892,918 19.94% 74,857,644 (8.84)% Appropriation for the year - 1,803,789 59,095,465 48,355,049 76,876,744

Expenditure: Operating expenditure for the year 63,081,361 57,497,784 9.71% 74,021,326 (14.78)% Closing surplus / (deficit) (3,985,897) (9,142,734) (56.40)% 2,855,418 (239.59)% 59,095,465 48,355,049 76,876,744 - - -

6 104 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

3. OPERATING RESULTS (continued)

3.1 General Services:

Rates and General Services are all types of services rendered by the Municipality, excluding those listed below. The main income sources are Sundry Fees levied.

Actual Actual Percentage Budgeted Variance Actual/ DETAILS 2019 2018 Variance 2019 Budgeted R R % R %

Income 67,004,676 54,610,073 22.70% 74,137,644 (9.62)% Expenditure (60,774,303) (55,454,331) 9.59% (71,408,616) (14.89)% Surplus / (Deficit) 6,230,373 (844,258) 2,729,028 Surplus / (Deficit) as % of total income 9.30% (1.55)% 3.68%

Variance from 2018 actual: The significant increase is due to the increase in qualifying expenditure incurred, result in the Government Grants and Subsidies increasing significantly.

Variance from 2019 budget: No material fluctutaion exists.

3.2 Housing Services:

Housing Services are services rendered by the Municipality to supply housing to the community and includes the rental of units owned by the Municipality to public and staff. The main income source is the levying of Housing Rentals.

Actual Actual Percentage Budgeted Variance Actual/ DETAILS 2019 2018 Variance 2019 Budgeted R R % R %

Income 1,045,889 2,282,845 (54.18)% 720,000 45.26% Expenditure (2,119,423) (2,043,453) 3.72% (2,612,710) (18.88)% Surplus / (Deficit) (1,073,534) 239,392 (1,892,710) Surplus / (Deficit) as % of total income (102.64)% 10.49% (262.88)%

Variance from 2018 actual: In the previous financial year, the Municipality received significantly higher Housing Accreditation Grants than in the current year.

Variance from 2019 budget: The Municipality received from Housing Accreditation Grant funds that budgeted for.

7 105 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

3. OPERATING RESULTS (continued)

3.3 Shared Services:

Shared Services are services rendered by the Municipality to other municipalities in the form of Internal Audit Services. Income is mainly generated from the levying of fees and tariffs determined by the council.

Actual Actual Percentage Budgeted Variance Actual/ DETAILS 2019 2018 Variance 2019 Budgeted R R % R %

Income - - - - - Expenditure - - - - - Surplus / (Deficit) - - - Surplus / (Deficit) as % of total income - - -

Variance from 2018 actual: This department was incorporated into the Budget and Treasury Department during the year.

Variance from 2019 budget: This department was incorporated into the Budget and Treasury Department during the year.

4. FINANCING OF CAPITAL EXPENDITURE

The expenditure on Assets during the year amounted to R3 888 238 (2018: R3 392 383). Full details of Assets are disclosed in Notes 6, 7, 8 and Appendices B, C and E(4) to the Annual Financial Statements.

The capital expenditure of R3 888 238 was financed as follows:

Actual Actual Percentage Budgeted Variance Actual/ DETAILS 2019 2018 Variance 2019 Budgeted R R % R %

External Loans 3,398,177 3,136,350 8.35% 2,500,000 35.93% Grants and Subsidies - - - - - Own Funds (Accumulated Surplus) 490,061 256,033 91.41% 1,382,000 (64.54)%

3,888,238 3,392,383 3,882,000

Source of funding as a percentage of Total Capital Expenditure:

DETAILS 2019 2018

Capital Replacement Reserve - - External Loans 87.40% 92.45% Grants and Subsidies - - Own Funds (Accumulated Surplus) 12.60% 7.55%

100.00% 100.00%

Capital Assets are funded to a great extent from External Loans as the Municipality does not have the financial resources to finance certain required capital expenditure from its own funds.

8 106 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

5. RECONCILIATION OF BUDGET TO ACTUAL

5.1 Operating Budget:

DETAILS 2019 2018

Variance per Category:

Budgeted surplus before appropriations 836,318 (1,948,286)

Revenue variances (6,619,445) 5,021,586

Expenditure variances: Employee Related Costs 721,765 (4,807,230) Remuneration of Councillors 123,815 1,704 Depreciation and Amortisation (79,378) (3,831,414) Impairment Losses 27,911 (1,916,038) Repairs and Maintenance 705,570 1,221,313 Finance Costs (1,371,371) (1,557,535) Contracted Services 11,068,056 (1,043,767) Grants and Subsidies Paid (3,500,000) - General Expenses 3,431,230 8,254,802 Loss on Disposal of Property, Plant and Equipment (187,634) -

Actual surplus before appropriations 5,156,838 (604,866) - 0

DETAILS 2019 2018

Variance per Service Segment:

Budgeted surplus before appropriations 836,318 (1,948,286)

Administration 25,007 3,138 Finance 564,444 3,450,359 Development and Infrastructure 6,828 (3,983,505) Environmental Health (197,164) 33,583 Housing 819,176 1,911,946 Internal Audit 227,244 277,965 Council Expenses 374,806 61,594 Municipal Manager 174,062 (8,659) I D P 2,769,199 (119,072) Protection Services (443,083) (283,928) Shared Services - -

Actual surplus before appropriations 5,156,839 (604,866)

Details of the operating results per segmental classification of expenditure are included in Appendix D, whilst operational results are included in Appendices E(1), E(2) and E(3).

9 107 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

5. RECONCILIATION OF BUDGET TO ACTUAL (continued)

5.2 Capital Budget:

Actual Actual Percentage Budgeted Variance Actual/ DETAILS 2019 2018 Variance 2019 Budgeted R R % R %

Finance and Administration 3,888,238 3,392,383 14.62% - 100.00%

3,888,238 3,392,383 -

Details of the results per segmental classification of capital expenditure are included in Appendix C and in Appendix E(4).

6. ACCUMULATED SURPLUS

The balance of the Accumulated Surplus as at 30 June 2019 amounted to R(5 139 719) (2018: R(9 142 734)) and is made up as follows: Accumulated Surplus (3,985,897) (3,985,897)

The Capital Replacement Reserve replaces the previous statutory funds, like the Capital Development Fund, and is a cash-backed reserve established to enable the Municipality to finance future capital expenditure. Cash contributions, depending on the availability of cash, is made annually to the reserve.

The Municipality, in conjunction with its own capital requirements and external funds (external loans and grants) is able to finance its annual infrastructure capital programme.

Refer to Note 23 and the Statement of Change in Net Assets for more detail.

7. LONG-TERM LIABILITIES

The outstanding amount of Long-term Liabilities as at 30 June 2019 was R4 553 906 (2018: R3 525 539).

Loans amounting to R3 398 177 (2018: R3 136 350) were taken up during the financial year to enable the Municipality to finance part of its capital requirements for the year.

Refer to Note 12 and Appendix A for more detail.

8. EMPLOYEE BENEFIT LIABILITIES

Emplyee Benefit Liabilities amounted R11 569 903 as at 30 June 2019 (2018: R12 303 733) and is made up as follows:

Ex-Gratia Benefit Liability 63,186 Post-retirement Health Care Benefits Liability 11,506,717 11,569,903

The Post-retirement Health Care Benefits Liability is in respect of continued Health Care Benefits for employees of the Municipality after retirement being members of schemes providing for such benefits. This liability is unfunded.

Refer to Note 13 for more detail.

10 108 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

9. CURRENT LIABILITIES

Current Liabilities amounted R18 507 521 as at 30 June 2019 (2018: R10 940 242) and is made up as follows:

Provisions Note 9 1,214,908 Payables from Exchange Transactions Note 10 6,143,827 Unspent Conditional Grants and Receipts Note 11 10,000,969 Current Portion of Long-term Liabilities Note 12 1,147,816 18,507,521

Current Liabilities are those liabilities of the Municipality due and payable in the short-term (less than 12 months). There is no known reason as to why the Municipality will not be able to meet its obligations.

Refer to the indicated Notes for more detail.

10. PROPERTY, PLANT AND EQUIPMENT

The net value of Property, Plant and Equipment was R15 214 093 as at 30 June 2019 (2018: R12 110 085).

Refer to Note 6 and Appendices "B, C and E (4)" for more detail.

11. INTANGIBLE ASSETS

The net value of Intangible Assets were R2 660 as at 30 June 2019 (2018: R4 137).

Intangible Assets are assets which cannot physically be identified and verified and are in respect of computer software obtained by the Municipality in order to be able to fulfill its duties as far as service delivery is concerned.

Refer to Note 7 and Appendix B for more detail.

12. INVESTMENT PROPERTY

The net value of Investment Properties were R1 210 000 as at 30 June 2019 (2018: R1 210 000).

Investment Property is property held to earn rentals or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes; or sale in the ordinary course of operations.

Refer to Note 8 and Appendix "B" for more detail.

13. CURRENT ASSETS

Current Assets amounted R14 529 225 as at 30 June 2019 (2018: R4 302 556) and is made up as follows:

Receivables from Exchange Transactions Note 2 2,480,783 Cash and Cash Equivalents Note 4 12,048,442 Operating Lease Assets Note 5 - 14,529,225

Refer to the indicated Notes for more detail.

14. INTER-GOVERNMENTAL GRANTS

The Municipality is dependent on financial aid from other government spheres to finance its annual capital programmed. Operating grants are utilized to finance the operations of the Municipality.

Refer to Notes 11 and 15, and Appendix F for more detail.

11 109 PIXLEY-KA-SEME DISTRICT MUNICIPALITY ANNUAL FINANCIAL STATEMENTS for the year ended 30 June 2019

REPORT OF THE CHIEF FINANCIAL OFFICER

15. EVENTS AFTER THE REPORTING DATE

Full details of all known events, if any, after the reporting date are disclosed in Note 48.

16. EXPRESSION OF APPRECIATION

We are grateful to the Mayor, members of the Executive Committee, Councillors, the Municipal Manager and Heads of Departments for the support extended during the financial year. A special word of thanks to all staff in the Finance Department, for without their assistance these Annual Financial Statements would not have been possible.

CHIEF FINANCIAL OFFICER 30 August 2019

12 110 PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2019

2019 2018 Note R R ASSETS

Current Assets 14,529,225 4,302,556 Receivables from Exchange Transactions 2 2,480,783 840,813 VAT Receivable 3 - 195,920 Cash and Cash Equivalents 4 12,048,442 3,254,059 Current Portion of Operating Lease Receivables 5 - 11,764

Non-Current Assets 16,426,753 13,324,222 Property, Plant and Equipment 6 15,214,093 12,110,085 Intangible Assets 7 2,660 4,137 Investment Property 8 1,210,000 1,210,000 Operating Lease Receivables 5 - -

Total Assets 30,955,978 17,626,779

LIABILITIES

Current Liabilities 18,818,069 10,940,242 Current Portion of Employee Benefit Liabilities 9 1,214,908 1,135,868 Payables from Exchange Transactions 10 6,143,827 6,420,744 Unspent Conditional Grants and Receipts 11 10,000,969 2,749,406 VAT Payable 3 310,548 - Current Portion of Long-term Liabilities 12 1,147,816 634,224

Non-Current Liabilities 16,123,808 15,829,271 Long-term Liabilities 12 4,553,906 3,525,539 Employee Benefit Liabilities 13 11,569,903 12,303,733

Total Liabilities 34,941,877 26,769,513

Total Assets and Liabilities (3,985,899) (9,142,735)

NET ASSETS (3,985,897) (9,142,734) Accumulated Surplus / (Deficit) 14 (3,985,897) (9,142,734)

Total Net Assets (3,985,897) (9,142,734)

13 111 PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 Note R R REVENUE Revenue from Non-exchange Transactions Government Grants and Subsidies Received 15 62,564,181 49,929,941 Public Contributions and Donations 16 - 473,100 Service In-kind Contributions 17 - 1,951,874 Revenue from Exchange Transactions Rental of Facilities and Equipment 18 100,714 100,714 Interest Earned - External Investments 19 1,066,477 716,468 Other Revenue 20 4,506,827 3,177,656 Profit on Disposal of Property, Plant and Equipment 30 - 543,164

Total Revenue 68,238,199 56,892,918

EXPENDITURE Employee Related Costs 21 35,744,302 34,634,712 Remuneration of Councillors 22 4,323,640 4,206,320 Depreciation and Amortisation 23 2,079,378 1,831,414 Impairment Losses 24 (27,911) 1,916,038 Repairs and Maintenance 25 1,429,430 1,000,187 Finance Costs 26 1,371,371 1,677,535 Materials 27 1,797,844 2,841,557 Grants and Subsidies Paid 28 4,000,000 - General Expenses 29 12,175,674 9,390,020 Loss on Disposal of Property, Plant and Equipment 30 187,634 -

Total Expenditure 63,081,361 57,497,784

SURPLUS / (DEFICIT) FOR THE YEAR 5,156,838 (604,866)

Refer to Budget Statement for explanation of budget variances 0.00 0.00

14 112 PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30 JUNE 2019 Total for Accumulated Description Total Surplus/(Deficit) Account R R 2018 Balance at 1 July 2017 (10,341,657) (10,341,657) Correction of Error (Note 32) 1,803,789 1,803,789 Balance at 1 July 2017 (8,537,868) (8,537,868) Surplus / (Deficit) for the year (604,866) (604,866) Balance at 30 June 2018 (9,142,734) (9,142,734)

2019 Restated Balance at 1 July 2018 (9,142,734) (9,142,734) Surplus / (Deficit) for the year 5,156,838 5,156,838 Balance at 30 June 2019 (3,985,897) (3,985,897)

Details on the movement of the Funds and Reserves are set out in Note 14.

15 113 Remuneration ofCouncillors Employee RelatedCosts Payments Other Receipts Interest Received Government GrantandSubsidies Receipts CASH FLOWSFROMOPERATING ACTIVITIES NET CASHFLOWSFROMFINANCING ACTIVITIES Repayment ofBorrowings Proceeds fromBorrowings CASH FLOWSFROMFINANCING ACTIVITIES NET CASHFLOWSFROMINVESTING ACTIVITIES Proceeds onDisposalofProperty, PlantandEquipment Purchase ofProperty, PlantandEquipment CASH FLOWSFROMINVESTING ACTIVITIES Suppliers Paid NET CASHFLOWSFROMOPERATING ACTIVITIES NET INCREASE/(DECREASE)INCASH AND CASHEQUIVALENTS Cash andEquivalentsatEndofPeriod Cash andEquivalentsatBeginningofPeriod CASH FLOWSTATEMENT FORTHE YEAR ENDED30JUNE2019 PIXLEY-KA-SEME DISTRICTMUNICIPALITY 114 16 Note 12 12 30 35 6 4 4

(36,169,020) (20,762,443)

2019

69,815,744

12,621,967

12,048,442

(5,254,395) (2,046,366) (4,323,640) (1,856,218) (1,971,366)

2,994,849 1,066,477 3,398,177 8,794,383 3,254,059

R 75,000

Actual

(36,808,346)

(11,126,585)

2018 50,298,247

(4,939,150) (4,206,320) (1,306,370) 2,757,042 3,632,780 1,630,506 3,185,954 3,254,059

R

(256,033) (256,033)

716,468

68,105

-

114 114

PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

2019

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R FINANCIAL POSITION Current Assets Receivables from Exchange Transactions 2,734,860 3,272,531 6,007,391 - - 6,007,391 2,480,783 - (3,526,608) (58.70)% (9.29)% VAT Receivable ------Cash and Cash Equivalents 48,050,000 (44,035,287) 4,014,713 - - 4,014,713 12,048,442 - 8,033,729 200.11% (74.93)% Current Portion of Operating Lease Receivables ------

Non-Current Assets Property, Plant and Equipment 1,440,000 (12,242,000) (10,802,000) - - (10,802,000) 15,214,093 - 26,016,093 (240.85)% 956.53% Intangible Assets 100,000 - 100,000 - - 100,000 2,660 - (97,340) (97.34)% (97.34)% Investment Property 903,000 - 903,000 - - 903,000 1,210,000 - 307,000 34.00% 34.00% Operating Lease Receivables ------

Total Assets 53,227,860 (53,004,756) 223,104 - - 223,104 30,955,978 - 30,732,874

Current Liabilities Current Portion of Employee Benefit Liabilities ------1,214,908 - 1,214,908 100.00% 100.00% Payables from Exchange Transactions 1,750,000 (8,370,220) (6,620,220) - - (6,620,220) 6,143,827 - 12,764,047 (192.80)% 251.08% Unspent Conditional Grants and Receipts ------10,000,969 - 10,000,969 100.00% 100.00% VAT Payable ------310,548 - 310,548 100.00% 100.00% Current Portion of Long-term Liabilities 465,219 - 465,219 - - 465,219 1,147,816 - 682,597 146.73% 146.73%

Non-Current Liabilities Long-term Liabilities 567,873 - 567,873 - - 567,873 4,553,906 - 3,986,033 701.92% 701.92% Retirement Benefit Liabilities ------11,569,903 - 11,569,903 100.00% 100.00%

Total Liabilities 2,783,092 (8,370,220) (5,587,128) - - (5,587,128) 34,941,877 - 40,529,005

Total Assets and Liabilities 50,444,768 (44,634,536) 5,810,232 - - 5,810,232 (3,985,899) - (9,796,131)

Net Assets (Equity) Accumulated Surplus / (Deficit) 50,444,918 (47,589,500) 2,855,418 - - 2,855,418 (3,985,897) - (6,841,315) (239.59)% (107.90)%

Total Net Assets 50,444,918 (47,589,500) 2,855,418 - - 2,855,418 (3,985,897) - (6,841,315) - - - Financial Position: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items disclosed in the Statement of Financial Position are explained below:

Receivables from Exchange Transactions: Due to the increase in the debt recovery, with specific reference to the Shared Service debtors. Cash and Cash Equivalents: Due to the increase in the Unspent Conditional Grant funds, which was received late and not spent in full at yearend. Operating Lease Assets: No fluctuation. Property, Plant and Equipment: The Municipality incorrectly budgeted for the line item, resulting in the material fluctuation. Only the depreciation expense was included and the fluctuation was explained in the Statement of Financial Performance. Intangible Assets: The Municipality budgeted for capital expenditure in respect to Intangible Assets which did not occur. Investment Property: The flutcutaion is due to the prior financial year increase in the Fair Value Adjustment. Payables from Exchange Transactions: The Municipality budgeted for a significant decrease in Payables as it planned to pay all its creditors within the legislative 30 days. Unspent Conditional Grants and Receipts: Due to significant grants received close to yearend, which was not spent in full. VAT Receivable (Payable): Management settled its full 2018 VAT debt and this resulted in a VAT debtor being realised. Long-term Liabilities: Due to the purchase of new vehicles (annuity loans) and computer equipment (finance leases). Retirement Benefit Liabilities: The Municipality did not budget for the Retirement Benefit Liability.

11517 PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

2019

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R FINANCIAL PERFORMANCE Revenue from Non-exchange Transactions Government Grants and Subsidies Received 53,538,000 16,307,632 69,845,632 - - 69,845,632 62,564,181 - (7,281,451) (10.43)% 16.86% Revenue from Exchange Transactions Rental of Facilities and Equipment 71,000 9,000 80,000 - - 80,000 100,714 - 20,714 25.89% 41.85% Interest Earned - External Investments 510,000 90,000 600,000 - - 600,000 1,066,477 - 466,477 77.75% 109.11% Other Income 3,072,085 1,259,927 4,332,012 - - 4,332,012 4,506,827 - 174,815 4.04% 46.70% Other Gains and Losses from Operations ------0.00% Profit on Disposal of Property, Plant and Equipment ------0.00%

Total Revenue 57,191,085 17,666,559 74,857,644 - - 74,857,644 68,238,199 - (6,619,445)

Expenditure Employee Related Costs 33,571,287 2,894,780 36,466,067 - - 36,466,067 35,744,302 - (721,765) (1.98)% 6.47% Remuneration of Councillors 4,456,400 (8,945) 4,447,455 - - 4,447,455 4,323,640 - (123,815) (2.78)% -2.98% Depreciation and Amortisation 2,000,000 - 2,000,000 - - 2,000,000 2,079,378 - 79,378 3.97% 3.97% Impairment Losses ------(27,911) - (27,911) (100.00)% (100.00)% Repairs and Maintenance 895,000 1,240,000 2,135,000 - - 2,135,000 1,429,430 - (705,570) (33.05)% 59.71% Finance Costs 60,000 (60,000) - - - - 1,371,371 - 1,371,371 100.00% 2185.62% Contracted Services 1,852,000 11,013,900 12,865,900 - - 12,865,900 1,797,844 - (11,068,056) (86.03)% -2.92% Grants and Subsidies Paid - 500,000 500,000 - - 500,000 4,000,000 - 3,500,000 700.00% 100.00% General Expenses 12,938,000 2,668,904 15,606,904 - - 15,606,904 12,175,674 - (3,431,230) (21.99)% -5.89% Loss on Disposal of Property, Plant and Equipment ------187,634 - 187,634 100.00% 100.00%

Total Expenditure 55,772,687 18,248,639 74,021,326 - - 74,021,326 63,081,361 - (10,939,965)

Surplus/(Deficit) 1,418,398 (582,080) 836,318 - - 836,318 5,156,838 - 4,320,520 100.00% 100.00%

Surplus/(Deficit for the Year 1,418,398 (582,080) 836,318 - - 836,318 5,156,838 - 4,320,520 - Financial Performance: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items disclosed in the Statement of Financial Performance are explained below:

Rental of Facilities and Equipment: The Municipality received more revenue than what was budgeted for, mainly due to the straightling of the rental contract. Interest Earned - External Investments: Due to the increase in the Cash and Cash Equivalents, the interest earned on these balances exceeded management's expectations. Impairment Losses: Due to the reversal of previous debtors provided for, which was not budgeted for. Repairs and Maintenance: Due to cost saving exercises, the Municipality was able to save on the amount of funds spent on Repairs and Maintenance. Finance Costs: Due to the purchase of new vehicles (annuity loans) and computer equipment (finance leases). Contracted Services: Due to cost saving exercises, the Municipality was able to save on the amount of funds spent on Contracted Services. Grants and Subsidies Paid: Significant more grants were allocated to the Municipality than was expected - this resulted in more funds being spent on projects. General Expenses: No material fluctuations. Profit on Disposal of Property, Plant and Equipment Management did not budget for the sale of vehicles and other equipment, which occurred during the year.

11618 116

PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

2019

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R CAPITAL EXPENDITURE PER FUNCTION Finance and Administration 1,650,000 2,242,000 3,892,000 - - 3,892,000 5,444,542 - 1,552,542 39.89% 229.97%

Total Capital Expenditure 1,650,000 2,242,000 3,892,000 - - 3,892,000 5,444,542 - 1,552,542

Capital Expendirure per Function: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items for Capital Expenditure per Function are explained below:

Finance and Administration: Due to the additional computer equipment (printers) purchased under finance leases during the year. No material fluctuation noted.

2019

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R CASH FLOW Cash Flows from/(used in) Operating Activities Grants 47,800,000 17,733,272 65,533,272 - - 65,533,272 69,815,744 - 4,282,472 6.53% 46.06% Interest Received ------1,066,477 - 1,066,477 100.00% 100.00% Other Receipts 2,985,010 540,958 3,525,968 - - 3,525,968 2,994,849 - (531,119) (15.06)% 0.33% Employee Related Costs - (36,466,067) (36,466,067) - - (36,466,067) (36,169,020) - 297,047 (0.81)% (100.00)% Remuneration of Councillors - (4,447,455) (4,447,455) - - (4,447,455) (4,323,640) - 123,815 (2.78)% (100.00)% Interest Paid ------Suppliers Paid - (23,749,358) (23,749,358) - - (23,749,358) (20,762,443) - 2,986,915 (12.58)% (100.00)%

Cash Flows from/(used in) Investing Activities Purchase of Property, Plant and Equipment ------(2,046,366) - (2,046,366) (100.00)% (100.00)% Proceeds on Disposal of Investment Property ------75,000 - 75,000 100.00% 100.00%

Cash Flows from/(used in) Financing Activities New Loans raised ------3,398,177 - 3,398,177 100.00% 100.00% Loans repaid ------(5,254,395) - (5,254,395) (100.00)% (100.00)%

Cash and Cash Equivalents at End of the Year 50,785,010 (46,388,650) 4,396,360 - - 4,396,360 8,794,383 - 4,398,023 #REF! Cash Flow: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items disclosed in the Cash Flow Statement are explained below:

Cash Flow Statement: Management did not budget sufficiently for the movement in the cashflow statement, due to items not budgeted for in the other statements.

11719 PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

2018

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R FINANCIAL POSITION Current Assets Receivables from Exchange Transactions 2,734,860 - 2,734,860 - - 2,734,860 840,813 - (1,894,047) (69.26)% 100.00% Cash and Cash Equivalents 48,050,150 - 48,050,150 - - 48,050,150 3,254,059 - (44,796,091) (93.23)% (93.23)% Current Portion of Operating Lease Receivables ------11,764 - 11,764 100.00% 100.00%

Non-Current Assets Property, Plant and Equipment 1,440,000 - 1,440,000 - - 1,440,000 12,110,085 - 10,670,085 740.98% 740.98% Intangible Assets 100,000 - 100,000 - - 100,000 4,137 - (95,863) (95.86)% (95.86)% Investment Property 903,000 - 903,000 - - 903,000 1,210,000 - 307,000 100.00% 100.00% Operating Lease Receivables ------100.00% 100.00%

Total Assets 53,228,010 - 53,228,010 - - 53,228,010 17,430,859 - (35,797,151)

Current Liabilities Current Portion of Employee Benefit Liabilities ------1,135,868 - 1,135,868 100.00% 100.00% Payables from Exchange Transactions 1,750,000 - 1,750,000 - - 1,750,000 6,420,744 - 4,670,744 266.90% 266.90% Unspent Conditional Grants and Receipts ------2,749,406 - 2,749,406 100.00% 100.00% VAT Payable ------100.00% 100.00% Current Portion of Long-term Liabilities 465,219 - 465,219 - - 465,219 634,224 - 169,005 100.00% 100.00%

Non-Current Liabilities Long-term Liabilities 567,873 - 567,873 - - 567,873 3,525,539 - 2,957,666 520.83% 520.83% Retirement Benefit Liabilities ------12,303,733 - 12,303,733 100.00% 100.00%

Total Liabilities 2,783,092 - 2,783,092 - - 2,783,092 26,769,513 - 23,986,421

Total Assets and Liabilities 50,444,918 - 50,444,918 - - 50,444,918 (9,338,655) - (59,783,573)

Net Assets (Equity) Accumulated Surplus / (Deficit) 50,444,918 - 50,444,918 - - 50,444,918 (9,142,734) - (59,587,652) (118.12)% (118.12)%

Total Net Assets 50,444,918 - 50,444,918 - - 50,444,918 (9,142,734) - (59,587,652) - - - - Financial Position: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items disclosed in the Statement of Financial Position are explained below:

Receivables from Exchange Transactions: During the current year, management provided for doubtful debt. This provision consisted of Shared Services debtors which has been outstanding for a significant period and althougn management is still attempting to recover the debt, a change exists that all or a significant portion may not be recovered. Cash and Cash Equivalents: Management did not take into account the significant amount of funds to be spent on projects and the operational expenditure, therefore the significant difference. Operating Lease Assets: Due to immaterial balance applicable and as this is a non-cash flow item, it has not been budgeted for. Property, Plant and Equipment: The amount budgeted for was insufficient for the applicable balance. Intangible Assets: Management budgeted for expenditure to be incurred on the Intangible Assets (due to MSCOA implementation), which did not realise. Investment Property: In the previous financial year a fair value adjustment was made (R350 000), which was not taken into consideration during the budget preparation. Payables from Exchange Transactions: Management is attempting to settle all debt, but unfortunately, the settling of some debt is outside the control of the Municipality, for example the Provision for Bonusses and Leave, etc. Unspent Conditional Grants and Receipts: Management budgeted for all grants funds to be spent at yearend, but due to circumstances outside the control of the Municipality (i.e. timing of funds allocated to the Municipality) not all funds were spent at year end. VAT Receivable (Payable): Management is attempting to settle all debt, but unfortunately, the settling of some debt is outside the control of the Municipality. In the 2017 financial year, the municipality made material adjustments to oustatnding debtors and had to account for the VAT portion thereof. As these funds have not been recovered, the output VAT portion has not been declared and paid to SARS. Long-term Liabilities: New copiers were acquired by the Municipality, which were financed through finance leases. Retirement Benefit Liabilities: The Municipality did not budget for the Retirement Benefit Liability.

11820 118

PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

2018

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R FINANCIAL PERFORMANCE Revenue from Non-exchange Transactions Government Grants and Subsidies Received 47,800,000 (95,000) 47,705,000 - - 47,705,000 49,929,941 - 2,224,941 4.66% 4.46% Public Contributions and Donations ------473,100 473,100 100.00% 100.00% Service In-kind Contributions ------1,951,874 - 1,951,874 100.00% 100.00% Revenue from Exchange Transactions Rental of Facilities and Equipment 70,000 - 70,000 - - 70,000 100,714 - 30,714 43.88% 100.00% Interest Earned - External Investments 250,000 250,000 500,000 - - 500,000 716,468 - 216,468 43.29% 186.59% Other Income 2,985,010 610,722 3,595,732 - - 3,595,732 3,177,656 - (418,076) (11.63)% 6.45% Other Gains and Losses from Operations ------100.00% 100.00% Profit on Disposal of Property, Plant and Equipment ------543,164 - 543,164 100.00% 100.00%

Total Revenue 51,105,010 765,722 51,870,732 - - 51,870,732 56,892,918 - 5,022,186

Expenditure Employee Related Costs 29,827,482 - 29,827,482 - - 29,827,482 34,634,712 - 4,807,230 16.12% 16.12% Remuneration of Councillors 4,237,727 (29,703) 4,208,024 - - 4,208,024 4,206,320 - (1,704) (0.04)% (0.74)% Depreciation and Amortisation (2,000,000) - (2,000,000) - - (2,000,000) 1,831,414 - 3,831,414 (191.57)% (191.57)% Impairment Losses ------1,916,038 - 1,916,038 100.00% 100.00% Repairs and Maintenance 1,853,000 368,500 2,221,500 - - 2,221,500 1,000,187 - (1,221,313) (54.98)% (46.02)% Finance Costs 120,000 - 120,000 - - 120,000 1,677,535 - 1,557,535 1297.95% 1297.95% Contracted Services 2,462,000 (664,210) 1,797,790 - - 1,797,790 2,841,557 - 1,043,767 58.06% 15.42% Grants and Subsidies Paid ------#DIV/0! 100.00% General Expenses 15,558,502 2,085,720 17,644,222 - - 17,644,222 9,390,020 - (8,254,202) (46.78)% (39.65)% Loss on Disposal of Property, Plant and Equipment ------100.00% 100.00%

Total Expenditure 52,058,711 1,760,307 53,819,018 - - 53,819,018 57,497,784 - 3,678,766

Surplus/(Deficit) (953,701) (994,585) (1,948,286) - - (1,948,286) (604,866) - 1,343,420 (68.95)% (36.58)%

Surplus/(Deficit for the Year (953,701) (994,585) (1,948,286) - - (1,948,286) (604,866) - 1,343,420 - Financial Performance: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items disclosed in the Statement of Financial Performance are explained below:

Service In-kind Contributions During the current year, National Treasury and the Auditor-General came to an agreement whereby the a significant portion of the outstanding fees were settled / written-off. This was not budgeted for during the year. Rental of Facilities and Equipment: The Municipality is busy disposing of its Investment Property, and therefore no balance was budgeted for at yearend. As all property was not sold, the Municipality generated Rental Income during the year. Interest Earned - External Investments: Due to cost-cutting measures and the increase in funding through grants, the Municipality was able to increase its Cash and Investment balance during the year. New investment accounts were opened during the year. Employee Related Costs: Due to the provision for Perfomance Bonusses, which were not included in the budget for the 2017/2018 financial year. Depreciation and Amortisation Due to the insufficient amount provided for Property, Plant and Equipment, the related depreciation and amortisation expense was insufficient. Impairment Losses: During the current year, management provided for doubtful debt. This provision consisted of Shared Services debtors which has been outstanding for a significant period and althougn management is still attempting to recover the debt, a change exists that all or a significant portion may not be recovered. Repairs and Maintenance: As unforesenn Repairs and Maintenance expenses incurred in the previous year, management overbudgeted in the current year. Finance Costs: Due to the Standard Bank loan and the Nashua Finance Leases entered into during the year, which was not budgeted for. Contracted Services: Due to cost saving exercises, the Municipality was able to save on the amount of funds spent on Contracted Services. Grants and Subsidies Paid: The Municipality received a number of Grants, which were not received in previous financial years and the funds were spent accordingly. The projects were not budgeted for and therefore Cash and Cash Equivalents were also over-budgeted for. General Expenses: Due to cost saving exercises, the Municipality was able to save on the amount of funds spent on General Expenses. Profit on Disposal of Property, Plant and Equipment Due to the disposal of the previous finance leases (and acquiring of new equipment), which were not anticipated during the year.

11921 PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

2018

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R CAPITAL EXPENDITURE PER FUNCTION Finance and Administration ------3,392,383 - 3,392,383 100.00% 100.00%

Total Capital Expenditure ------3,392,383 - 3,392,383

Capital Expendirure per Function: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items for Capital Expenditure per Function are explained below:

Finance and Administration: Management did not budget for any capital expenditure, as the significant portion was obtained through a finance lease.

2018

Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Description Total Adjustments of Virement Variance as % of as % of Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget R R R R R R R R R R R CASH FLOW Cash Flows from/(used in) Operating Activities Grants 47,800,000 4,520,000 52,320,000 - - 52,320,000 50,298,247 - (2,021,753) (3.86)% 5.23% Interest Received 250,000 200,000 450,000 - - 450,000 716,468 - 266,468 59.22% 186.59% Other Receipts 2,985,010 1,292,125 4,277,135 - - 4,277,135 2,757,042 - (1,520,093) (35.54)% (7.64)% Employee Related Costs ------(36,808,346) - (36,808,346) (100.00)% (100.00)% Remuneration of Councillors ------(4,206,320) - (4,206,320) (100.00)% (100.00)% Interest Paid ------Suppliers Paid ------(11,126,585) - (11,126,585) (100.00)% (100.00)%

Cash Flows from/(used in) Investing Activities Purchase of Property, Plant and Equipment ------(256,033) - (256,033) (100.00)% (100.00)% Proceeds on Disposal of Investment Property ------

Cash Flows from/(used in) Financing Activities New Loans raised ------3,632,780 - 3,632,780 100.00% 100.00% Loans repaid ------(4,939,150) - (4,939,150) (100.00)% (100.00)%

Cash and Cash Equivalents at End of the Year 51,035,010 6,012,125 57,047,135 - - 57,047,135 68,103 - (56,979,032) #REF! Cash Flow: Explanation of Variances between Approved Budget and Actual Reasons for Variances greater than 10% between Approved Budget and Actual Amount on the various items disclosed in the Cash Flow Statement are explained below:

Cash Flow Statement: Management did not budget sufficiently for the movement in the cashflow statement, due to items not budgeted for in the other statements.

12022 120

PIXLEY-KA-SEME DISTRICT MUNICIPALITY STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30 JUNE 2019

RECONCILIATION OF BUDGET SURPLUS / (DEFICIT) WITH THE SURPLUS / (DEFICIT) IN THE STATEMENT OF FINANCIAL PERFORMANCE:

Description 2019 2018

R R

Net Surplus/(Deficit) per the Statement of Financial Performance 5,156,838 (604,866)

Revenue from Non-exchange Transactions Government Grants and Subsidies Received 7,281,451 (2,224,941) Public Contributions and Donations - (473,100) Service In-kind Contributions - (1,951,874) Revenue from Exchange Transactions Rental of Facilities and Equipment (20,714) (30,714) Interest Earned - External Investments (466,477) (216,468) Other Revenue (174,815) 418,076 Other Gains and Losses - - Profit on Disposal of Property, Plant and Equipment - (543,164)

Expenditure Employee Related Costs (721,765) 4,807,230 Remuneration of Councillors (123,815) (1,704) Depreciation and Amortisation 79,378 3,831,414 Impairment Losses (27,911) 1,916,038 Repairs and Maintenance (705,570) (1,221,313) Finance Costs 1,371,371 1,557,535 Contracted Services (11,068,056) 1,043,767 Grants and Subsidies Paid 3,500,000 - General Expenses (3,431,230) (8,254,202) Loss on Disposal of Property, Plant and Equipment 187,634 -

Net Surplus/Deficit per Approved Budget 836,318 (1,948,286)

12123 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

1. BASIS OF PRESENTATION

The Annual Financial Statements have been prepared on an accrual basis of accounting and are in accordance with the historical cost convention, except where indicated otherwise.

The financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP), as approved by the Minister of Finance, including any interpretations, guidelines and directives issued by the Accounting Standards Board and the Municipal Finance Management Act, 2003 (Act No. 56 of 2003).

1.1 Changes In Accounting Policy And Comparability

Accounting Policies have been consistently applied, except where otherwise indicated below:

For the years ended 30 June 2019 and 30 June 2018, the Municipality has adopted the accounting framework as set out in point 1 above. The details of any resulting changes in accounting policy and comparative restatements are set out below.

The Municipality changes an Accounting Policy only in the following instances: (a) if it is required by a Standard of GRAP; or (b) when it results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flow.

1.2 Critical Judgements, Estimations And Assumptions

In the application of the Municipality's accounting policies, which are described below, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and estimations that management have made in the process of applying the Municipality’s Accounting Policies and that have the most significant effect on the amounts recognised in Annual Financial Statements:

1.2.1 Revenue Recognition

Accounting Policy 8.2 on Revenue from Exchange Transactions and Accounting Policy 8.3 on Revenue from Non-exchange Transactions describes the conditions under which revenue will be recorded by the management of the Municipality.

In making their judgement, management considered the detailed criteria for the recognition of revenue as set out in GRAP 9: Revenue from Exchange Transactions and GRAP 23: Revenue from non-exchange transactions. In particular, whether the Municipality, when goods are sold, had transferred to the buyer the significant risks and rewards of ownership of the goods and when services is rendered, whether the service has been rendered. Also of importance is the estimation process involved in initially measuring revenue at the fair value thereof. Management of the Municipality is satisfied that recognition of the revenue in the current year is appropriate.

1.2.2 Financial assets and liabilities

The classification of financial assets and liabilities, into categories, is based on judgement by management. Accounting Policy 7.1 on Financial Assets Classification and Accounting Policy 7.2 on Financial Liabilities Classification describe the factors and criteria considered by the management of the Municipality in the classification of financial assets and liabilities.

In making the above-mentioned judgement, management considered the definition and recognition criteria for the classification of financial instruments as set out in GRAP 104: Financial Instruments.

1.2.3 Impairment of Financial Assets

Accounting Policy 7.4 on Impairment of Financial Assets describes the process followed to determine the value at which financial assets should be impaired. In making the estimation of the impairment, the management of the Municipality considered the detailed criteria of impairment of financial assets as set out in GRAP 104: Financial Instruments and used its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of the reporting period. The management of the Municipality is satisfied that the impairment of financial assets recorded during the year is appropriate.

The calculation in respect of the impairment of debtors is based on an assessment of the extent to which debtors have defaulted on payments already due, and an assessment of their ability to make payments based on their creditworthiness. This was performed per service-identifiable categories across all classes of debtors. The total increase in estimation of the impairment of trade and other receivables from exchange transactions is disclosed in note 2 to the AFS.

24 122 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

1. BASIS OF PRESENTATION (continued)

1.2.4 Useful lives of Property, Plant and Equipment, Intangible Assets and Investment Property

As described in Accounting Policies 3.3, 4.2 and 5.2 the Municipality depreciates its property, plant and equipment and investment property, and amortises it's intangible assets over the estimated useful lives of the assets, taking into account the residual values of the assets at the end of their useful lives, which is determined when the assets are available for use. The useful lives of assets are based on management’s estimation. Management considered the impact of technology, availability of capital funding, service requirements and required return on assets in order to determine the optimum useful life expectation, where appropriate.

The estimation of residual values of assets is based on management’s judgement as to whether the assets will be sold or used to the end of their useful lives, and in what condition they will be at that time.

1.2.5 Impairment: Write down of Property, Plant and Equipment, Investment Property and Intangible Assets

Accounting Policy 6 on Impairment of assets describes the conditions under which non-financial assets are tested for potential impairment losses by the management of the Municipality. Significant estimates and judgements are made relating to property, plant and equipment impairment testing and Intangible assets impairment testing.

In making the above-mentioned estimates and judgement, management considered the subsequent measurement criteria and indicators of potential impairment losses as set out in GRAP 21: Impairment of non-Cash generating Assets and GRAP 26: Impairment of Cash generating Assets. In particular, the calculation of the recoverable service amount for PPE and intangible assets involves significant judgment by management. During the year the estimated impairments to property, plant and equipment made are disclosed in note 6 to the AFS, whilst no impairments were made to intangible assets.

1.2.6 Defined Benefit Plan Liabilities

As described in Accounting Policy 10, the Municipality obtains actuarial valuations of its defined benefit plan liabilities. The defined benefit obligations of the Municipality that were identified are Post-retirement Health Benefit Obligations. The estimated liabilities are recorded in accordance with the requirements of GRAP 25. Details of the liabilities and the key assumptions made by the actuaries in estimating the liabilities are provided in Note 13 to the Annual Financial Statements.

1.2.8 Budget information

Deviations between budget and actual amounts are regarded as material differences when a 10% deviation exists. All material differences are explained in the notes to the annual financial statements.

1.3 Presentation Currency

The Annual Financial Statements are presented in South African Rand, rounded off to the nearest Rand, which is the Municipality's functional currency.

1.4 Going Concern Assumption

The Annual Financial Statements have been prepared on a going concern basis.

1.5 Offsetting

Assets, liabilities, revenues and expenses have not been offset except when offsetting is required or permitted by a Standard of GRAP.

1.6 Standards, Amendments to Standards and Interpretations issued but not yet Effective

The following GRAP standards have been issued but are not yet effective and have not been early adopted by the Municipality:

GRAP 20 Related Party Disclosures (Revised) GRAP 32 Service Concession Arrangement Grantor GRAP 108 Statutory Receivables GRAP 109 Accounting by Principles and Agents IGRAP 17 Service Concession Arrangements Where a Grantor Controls a Significant Residual Interest in an Asset IGRAP 18 Recognition and Derecognition of Land IGRAP 19 Laibilities to Pay Levies Guideline Accounting for Arrangements Undertaken in terms of the National Housing Programme

The Minister of Finance announced that the application of GRAP 25 for period starting after 1 April 2013. All other standards as listed above will only be effective when a date is announced by the Minister of Finance.

25 123 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

1. BASIS OF PRESENTATION (continued)

The ASB Directive 5 paragraph 29 sets out the principles for the application of the GRAP 3 guidelines in the determination of the GRAP Reporting Framework hierarchy, as set out in the standard of GRAP 3 on Accounting Policies, Changes in Accounting Estimates and Errors.

Where a standard of GRAP is approved as effective, it replaces the equivalent statement of International Public Sector Accounting Standards Board, International Financial Reporting Standards or Generally Accepted Accounting Principles. Where a standard of GRAP has been issued, but is not yet in effect, an entity may select to apply the principles established in that standard in developing an appropriate accounting policy dealing with a particular section or event before applying paragraph .12 of the Standard of GRAP on Accounting Policies, Changes in Accounting Estimates and Errors.

The Municipality applied the principles established in the following Standards of GRAP that have been issued, but is not yet in effect, in developing an appropriate accounting policies dealing with the following transactions, but have not early adopted these Standards: Related Parties - GRAP 20

Management has considered all of the above-mentioned GRAP standards issued but not yet effective and anticipates that the adoption of these standards will not have a significant impact on the financial position, financial performance or cash flows of the Municipality.

2. NETT ASSETS

Included in the nett assets of the Municipality, are the following reserves that are maintained in terms of specific requirements:

2.1 Accumulated Surplus Oth The Municipality creates and maintains reserves which form part of the Accumulated Surplus in terms of specific requirements.

3. PROPERTY, PLANT AND EQUIPMENT

3.1 Initial Recognition

Property, plant and equipment are tangible non-current assets that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one year.

The cost of an item of property, plant and equipment is recognised as an asset if, and only if it is probable that future economic benefits or service potential associated with the item will flow to the Municipality, and if the cost or fair value of the item can be measured reliably.

Property, plant and equipment are initially recognised at cost on its acquisition date or in the case of assets acquired by grant or donation, deemed cost, being the fair value of the asset on initial recognition. The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by the Municipality. Trade discounts and rebates are deducted in arriving at the cost. The cost also includes the necessary costs of dismantling and removing the asset and restoring the site on which it is located.

When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Where an asset is acquired by the Municipality for no or nominal consideration (i.e. a non-exchange transaction), the cost is deemed to be equal to the fair value of that asset on the date acquired.

The cost of an item of property, plant and equipment acquired in exchange for a non-monetary assets or monetary assets, or a combination of monetary and non-monetary assets is measured at the fair value of the asset given up, unless the fair value of the asset received is more clearly evident. If the acquired item could not be measured at its fair value, its cost is measured at the carrying amount of the asset given up.

Major spare parts and servicing equipment qualify as property, plant and equipment when the Municipality expects to use them during more than one period. Similarly, if the major spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are accounted for as property, plant and equipment.

3.2 Subsequent Measurement

Subsequent expenditure relating to property, plant and equipment is capitalised if it is probable that future economic benefits or potential service delivery associated with the subsequent expenditure will flow to the entity and the cost or fair value of the subsequent expenditure can be reliably measured. Subsequent expenditure incurred on an asset is only capitalised when it increases the capacity or future economic benefits associated with the asset. Where the Municipality replaces parts of an asset, it derecognises the part of the asset being replaced and capitalises the new component.

Subsequently all property plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses.

Compensation from third parties for items of property, plant and equipment that were impaired, lost or given up is included in the Statement of Financial Performance when the compensation becomes receivable.

26 124 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

3. PROPERTY, PLANT AND EQUIPMENT (continued)

3.3 Depreciation

Land is not depreciated as it is regarded as having an unlimited life. Depreciation on assets other than land is calculated on cost, using the straight line method, to allocate their cost or revalued amounts to their residual values over the estimated useful lives of the assets. The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potential are expected to be consumed by the Municipality. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately. The depreciation rates are based on the following estimated useful lives.

Depreciation only commences when the asset is available for use, unless stated otherwise.

Years Buildings 30 - 100

Other Specialist Vehicles 5 - 20 Other Vehicles 5 - 10 Office Equipment 3 - 7 Furniture and Fittings 7 - 10

The assets’ residual values, estimated useful lives and depreciation method are reviewed annually, and adjusted prospectively if appropriate, at each reporting date.

Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unless expectations differ from the previous estimate.

3.4 Incomplete Construction Work

Incomplete construction work is stated at historical cost. Depreciation only commences when the asset is available for use.

3.5 Finance Leases

Assets capitalised under finance leases are depreciated over their expected useful lives on the same basis as PPE controlled by the entity or where shorter, the term of the relevant lease if there is no reasonable certainty that the Municipality will obtain ownership by the end of the lease term.

3.6 Land

Land is not depreciated as it is deemed to have an indefinite useful life.

3.7 Derecognition of property, plant and equipment

The carrying amount of an item of property, plant and equipment is derecognised on disposal, or when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in the Statement of Financial Performance when the item is derecognised.

Gains or losses are calculated as the difference between the carrying value of assets (cost less accumulated depreciation and accumulated impairment losses) and the disposal proceeds is included in the Statement of Financial Performance as a gain or loss on disposal of property, plant and equipment.

4. INTANGIBLE ASSETS

4.1 Initial Recognition

Identifiable non–monetary assets without physical substance are classified and recognised as intangible assets. The Municipality recognises an intangible asset in its Statement of Financial Position only when it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the Municipality and the cost or fair value of the asset can be measured reliably.

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4. INTANGIBLE ASSETS (continued)

Internally generated intangible assets are subject to strict recognition criteria before they are capitalised. Research expenditure is recognised as an expense as it is incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled:

▪ it is technically feasible to complete the intangible asset so that it will be available for use; ▪ management intends to complete the intangible asset and use or sell it; ▪ there is an ability to use or sell the intangible asset; ▪ it can be demonstrated how the intangible asset will generate probable future economic benefits; ▪ adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and ▪ the expenditure attributable to the intangible asset during its development can be reliably measured.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is available for use. Development assets are tested for impairment annually, in accordance with GRAP 21 or GRAP 26.

Intangible assets are initially recognised at cost. The cost of an intangible asset is the purchase price and other costs attributable to bring the intangible asset to the location and condition necessary for it to be capable of operating in the manner intended by the Municipality, or where an intangible asset is acquired at no cost, or for a nominal cost, the cost shall be its fair value as at the date of acquisition. Trade discounts and rebates are deducted in arriving at the cost. The cost of an intangible asset acquired in exchange for a non-monetary assets or monetary assets, or a combination of monetary and non-monetary assets is measured at the fair value of the asset given up, unless the fair value of the asset received is more clearly evident. If the acquired item could not be measured at its fair value, its cost is measured at the carrying amount of the asset given up. If the acquired item's fair value was not determinable, it's deemed cost is the carrying amount of the asset(s) given up.

4.2 Subsequent Measurement, Amortisation and Impairment

After initial recognition, intangible assets are carried at its cost less any accumulated amortisation and any accumulated impairment losses.

After initial recognition, intangible assets are carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses. If the intangible asset’s carrying amount is increased as a result of a revaluation, the increase is credited directly to the revaluation surplus. However, the increase is recognised in the Statement of Financial Performance to the extent that it reverses a revaluation decrease of the same intangible asset previously recognised in the Statement of Financial Performance.

Expenditure on an intangible item that was initially recognised as an expense shall not be recognised as part of the cost of an intangible asset at a later date.

In terms of GRAP 31, intangible assets are distinguished between internally generated intangible assets and other intangible assets. It is further distinguished between indefinite or finite useful lives. Amortisation is charged on a straight-line basis over the intangible assets' useful lives (when the intangible asset is available for use), the residual value of assets with finite useful lives is zero, unless an active market exists. Where intangible assets are deemed to have an indefinite useful life, such intangible assets are not amortised, however such intangible assets are subject to an annual impairment test. The useful lives per category of intangible assets are detailed below:

Intangible asset Years Software 3

Intangible assets are annually tested for impairment, including intangible assets not yet available for use, as per Accounting Policy 8: Impairment of assets. Where items of intangible assets have been impaired, the carrying value is adjusted by the impairment loss, which is recognised as an expense in the period that the impairment is identified except where the impairment reverses a previous revaluation. The impairment loss is the difference between the carrying amount and the recoverable amount.

The estimated useful life, residual values and amortisation method are reviewed annually at the end of the financial year. Any adjustments arising from the annual review are applied prospectively as a change in accounting estimate in the Statement of Financial Performance.

4.3 Derecognition

Intangible assets are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. The gain or loss arising on the disposal or retirement of an intangible asset is determined as the difference between the net disposals proceeds and the carrying value and is recognised in the Statement of Financial Performance.

The Municipality changed its accounting policy from GRAP 102 to GRAP 31 with no effect on the financial information disclosed previously.

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5. INVESTMENT PROPERTY

5.1 Initial Recognition

Investment property includes property (land or a building, or part of a building, or both land and buildings held under a finance lease) held to earn rentals and/or for capital appreciation, rather than held to meet service delivery objectives, the production or supply of goods or services, or the sale of an asset in the ordinary course of operations.

At initial recognition, the Municipality measures investment property at cost including transaction costs once it meets the definition of investment property. However, where an investment property was acquired through a non-exchange transaction (i.e. where it acquired the investment property for no or a nominal value), its cost is its fair value as at the date of acquisition.

The cost of self-constructed investment property is the cost at date of completion.

Based on management's judgement, the following criteria have been applied to distinguish investment properties from owner occupied property or property held for resale: ▪ All properties held to earn market-related rentals or for capital appreciation or both and that are not used for administrative purposes and that will not be sold within the next 12 months are classified as Investment Properties; ▪ Land held for a currently undetermined future use. (If the Municipality has not determined that it will use the land as owner-occupied property or for short-term sale in the ordinary course of business, the land is regarded as held for capital appreciation); ▪ A building owned by the entity (or held by the entity under a finance lease) and leased out under one or more operating leases (this will include the property portfolio rented out by the Housing Board on a commercial basis on behalf of the Municipality); ▪ A building that is vacant but is held to be leased out under one or more operating leases on a commercial basis to external parties; and ▪ Property that is being constructed or developed for future use as investment property;

5.2 Subsequent Measurement - Fair Value Model

Investment property is measured using the fair value model. Investment property is carried at fair value, representing open market value determined by external valuers at the date of the last general valuation. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. A gain or loss arising from a change in the fair value of investment property is included in the Statement of Financial Performance for the period in which it arises.

5.3 Derecognition

An investment property shall be derecognised (eliminated from the Statement of Financial Position) on disposal or when the investment property is permanently withdrawn from use and no future economic benefits or service potential are expected from its disposal.

6. IMPAIRMENT OF ASSETS

The entity classifies all assets held with the primary objective of generating a commercial return as cash-generating assets. All other assets are classified as non-cash-generating assets.

6.1 Impairment of Cash generating assets

The Municipality assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Municipality estimates the recoverable amount of the individual asset.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

The best evidence of fair value less cost to sell is the price in a binding sale agreement in an arm's length transaction, adjusted for the incremental cost that would be directly attributable to the disposal of the asset.

Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to be derived from the continuing use of an asset and from its disposal at the end of its useful life.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in the Statement of Financial Performance.

An impairment of assets carried at revalued amount in reduces the revaluation surplus for that asset. The decrease shall be debited directly to a revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of that asset.

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6. IMPAIRMENT OF ASSETS (continued)

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

A Municipality assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in the Statement of Financial Performance.

6.2 Impairment of Non-Cash generating assets

The Municipality assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the Municipality estimates the recoverable service amount of the asset.

If there is any indication that an asset may be impaired, the recoverable service amount is estimated for the individual asset. If it is not possible to estimate the recoverable service amount of the individual asset, the recoverable service amount of the cash-generating unit to which the asset belongs is determined.

The recoverable service amount is the higher of a non-cash generating asset's fair value less costs to sell and its value in use.

The value in use for a non-cash generating asset is the present value of the asset’s remaining service potential.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

If the recoverable service amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable service amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in the Statement of Financial Performance. Any impairment loss of a revalued asset is treated as a revaluation decrease.

An impairment loss is recognised for non-cash generating units if the recoverable service amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit as follows: (i) to the assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

A Municipality assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets may no longer exist or may have decreased. If any such indication exists, the recoverable service amounts of those assets are estimated.

The increased carrying amount of an asset attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation is recognised immediately in the Statement of Financial Performance. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase.

7. FINANCIAL INSTRUMENTS

The Municipality has various types of financial instruments and these can be broadly categorised as either financial assets, financial liabilities or residual interests in accordance with the substance of the contractual agreement. The Municipality only recognises a financial instrument when it becomes a party to the contractual provisions of the instrument.

Initial recognition

Financial assets and financial liabilities are recognised on the entity's Statement of Financial Position when the entity becomes party to the contractual provisions of the instrument

The Entity does not offset a financial asset and a financial liability unless a legally enforceable right to set off the recognised amounts currently exist; and the entity intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

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7. FINANCIAL INSTRUMENTS (continued)

7.1 Financial Assets - Classification

A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another entity.

In accordance with GRAP 104 the Financial Assets of the Municipality are classified as follows into the three categories allowed by this standard: - Financial Asset at fair value - Financial Asset at fair amortised cost - Financial Asset at cost

Financial asset at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months, which are classified as non-current assets. Financial asset at amortised cost are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. After initial recognition Financial Assets are measured at amortised cost, using the effective interest rate method less a provision for impairment.

Financial assets measured at fair value are financial assets that meet either of the following conditions: (a) derivatives; (b) combined instruments that are designated at fair value (c) instruments held for trading. (d) non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair value at initial recognition; or (e) financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments at cost.

Financial assets measured at cost are investments in residual interests that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured.

The Municipality has the following types of financial assets as reflected on the face of the Statement of Financial Position or in the notes thereto:

Type of Financial Asset Classification in terms of GRAP 104 Bank Balances and Cash Financial asset at amortised cost Other Debtors Financial asset at amortised cost Investments in Fixed Deposits Financial asset at amortised cost

Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash that are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call with banks, net of bank overdrafts. The Municipality categorises cash and cash equivalents as financial assets: Financial asset at amortised cost.

7.2 Financial Liabilities - Classification

A financial liability is a contractual obligation to deliver cash or another financial asset to another entity.

There are three main categories of Financial Liabilities, the classification determining how they are measured. Financial liabilities may be measured at: (i) Financial liabilities measured at fair value or (ii) Financial liabilities measured at amortised cost (iii) Financial liabilities measured at cost

The Municipality has the following types of financial liabilities as reflected on the face of the Statement of Financial Position or in the notes thereto:

Type of Financial Liabilities Classification in terms of GRAP 104 Long term Liabilities Financial liability at amortised cost Other Creditors Financial liability at amortised cost Current portion of Long-Term Liabilities Financial liability at amortised cost

Financial liabilities that are measured at fair value financial liabilities that are essentially held for trading (i.e. purchased with the intention to sell or repurchase in the short term; derivatives other than hedging instruments or are part of a portfolio of financial instruments where there is recent actual evidence of short-term profiteering or are derivatives).

Bank overdrafts are recorded based on the facility utilised. Finance charges on bank overdrafts are expensed as incurred.

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7. FINANCIAL INSTRUMENTS (continued)

7.3 Initial and Subsequent Measurement

7.3.1 Financial Assets:

Financial asset at amortised cost are initially measured at fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequently, these assets are measured at amortised cost using the Effective Interest Method less any impairment, with interest recognised on an effective yield basis.

Trade and other receivables (excluding Value Added Taxation, prepayments and operating lease receivables), loans to Municipality entities and loans that have fixed and determinable payments that are not quoted in an active market are classified as Financial asset at amortised cost.

Financial Assets measured at fair value are initially measured at fair value excluding directly attributable transaction costs. They are subsequently measured at fair value with unrealised gains or losses recognised directly in the Statement of Financial Performance.

Fair value methods and assumptions

The fair values of financial instruments are determined as follows:

The fair values of quoted investments are based on current bid prices.

7.3.2 Financial Liabilities:

Financial liabilities measured at fair value

Financial liabilities measured at fair value are stated at fair value, with any resulted gain or loss recognised in the Statement of Financial Performance.

Financial Liabilities measured at amortised cost

Any other financial liabilities are classified as "Other financial liabilities" (All payables, loans and borrowings are classified as other liabilities) and are initially measured at fair value, net of transaction costs. Trade and other payables, interest bearing debt including finance lease liabilities, non-interest bearing debt and bank borrowings are subsequently measured at amortised cost using the effective interest rate method. Interest expense is recognised in the Statement of Financial Performance by applying the effective interest rate.

Bank borrowings, consisting of interest-bearing short-term bank loans, repayable on demand and overdrafts are recorded at the proceeds received. Finance costs are accounted for using the accrual basis and are added to the carrying amount of the bank borrowing to the extent that they are not settled in the period that they arise.

Prepayments are carried at cost less any accumulated impairment losses.

7.4 Impairment of Financial Assets

Financial assets, other than those measured at fair value, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence of impairment of Financial Assets (such as the probability of insolvency or significant financial difficulties of the debtor). If there is such evidence the recoverable amount is estimated and an impairment loss is recognised in accordance with GRAP 104.

Financial assets carried at amortised cost

Accounts receivable encompasses long term debtors, consumer debtors and other debtors.

Initially Accounts Receivable are valued at fair value plus transaction costs and subsequently carried at amortised cost using the effective interest rate method. An estimate is made for doubtful debt based on past default experience of all outstanding amounts at year-end. Bad debts are written off the year in which they are identified as irrecoverable. Amounts receivable within 12 months from the date of reporting are classified as current.

A provision for impairment of accounts receivables is established when there is objective evidence that the Municipality will not be able to collect all amounts due according to the original terms of receivables. The provision is made in accordance with GRAP 104 whereby the recoverability of accounts receivable is assessed individually and then collectively after grouping the assets in financial assets with similar credit risk characteristics. The amount of the provision is the difference between the financial asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Cash flows relating to short-term receivables are not discounted where the effect of discounting is immaterial.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets carried at amortised cost with the exception of consumer debtors, where the carrying amount is reduced through the use of an allowance account. When a consumer debtor is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against revenue. Changes in the carrying amount of the allowance account are recognised in the Statement of Financial Performance.

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7. FINANCIAL INSTRUMENTS (continued)

Impairment of Financial Assets measured at cost

If there is objective evidence that an impairment loss has been incurred on an investment in a residual interest that is not measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses shall not be reversed.

7.5 Derecognition of Financial Assets

The Municipality derecognises Financial Assets only when the contractual rights to the cash flows from the asset expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity, except when Council approves the write-off of Financial Assets due to non-recoverability.

If the Municipality neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Municipality recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Municipality retains substantially all the risks and rewards of ownership of a transferred financial asset, the Municipality continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

7.6 Derecognition of Financial Liabilities

The Municipality derecognises Financial Liabilities when, and only when, the Municipality's obligations are discharged, cancelled or they expire.

The Municipality recognises the difference between the carrying amount of the financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, in the Statement of Financial Performance.

8. GRANTS AND RECEIPTS

Grants, transfers and donations received or receivable are recognised as assets when the resources that have been transferred to the Municipality, meet the definition and criteria for recognition of an asset.

A corresponding liability is recognised to the extent that the grant, transfer or donation recognised as an asset, is subject to conditions which require that the entity either consumes the future economic benefits or service potential of the asset as specified or that in the event that the conditions are breached the entity returns such future economic benefits or service potential to the transferor. The liability is transferred to revenue when the conditions attached to the grants, transfers or donations, are met. Grants, transfers or donations that are not subject to any conditions are recognised as revenue when the assets are initially recognised.

9. REVENUE RECOGNITION

9.1 General

Revenue, excluding value-added taxation where applicable, is derived from a variety of sources which include grants from other tiers of government and revenue from trading activities and other services provided. Revenue is recognised when it is probable that future economic benefits or service potential will flow to the Municipality and these benefits can be measured reliably, except when specifically stated otherwise.

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Municipality’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts.

The Municipality recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Municipality and when specific criteria have been met for each of the municipalities’ activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Municipality bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Furthermore services rendered are recognised by reference to the stage of completion of the transaction at the reporting date.

Revenue from exchange transactions refers to revenue that accrued to the Municipality directly in return for services rendered / goods sold, the value of which approximates the consideration received or receivable.

Revenue from non-exchange transactions refers to transactions where the Municipality received revenue from another entity without directly giving approximately equal value in exchange. Revenue from non-exchange transactions is generally recognised to the extent that the related receipt or receivable qualifies for recognition as an asset and there is no liability to repay the amount.

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9. REVENUE RECOGNITION (continued)

9.2 Revenue from Exchange Transactions

9.2.1 Finance income

Interest earned on investments is recognised in the Statement of Financial Performance on the time proportionate basis that takes into account the effective yield on the investment.

Interest earned on the following investments is not recognised in the Statement of Financial Performance: ▪ Interest earned on trust funds is allocated directly to the fund. ▪ Interest earned on unutilised conditional grants is allocated directly to the creditor: unutilised conditional grants, if the grant conditions indicate that interest is payable to the funder.

9.2.2 Tariff Charges

Revenue arising from the application of the approved tariff of charges is recognised when the relevant service is rendered by applying the relevant authorised tariff. This includes the issuing of licenses and permits.

9.2.3 Rentals

Revenue from the rental of facilities and equipment is recognised on a straight-line basis over the term of the lease agreement.

9.3 Revenue from Non-exchange Transactions

An inflow of resources from a non-exchange transaction, that meets the definition of an asset shall be recognised as an asset when it is probable that the future economic benefits or service potential associated with the asset will flow to the Municipality and the fair value of the asset can be measured reliably. The asset shall be recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

A present obligation arising from a non-exchange transaction that meets the definition of a liability will be recognised as a liability when it is probable that an outflow of economic benefit will be required to settle the obligation and a reliable estimate of the amount can be made.

9.3.1 Government Grants And Receipts

Equitable share allocations are recognised in revenue at the start of the financial year if no time-based restrictions exist.

Conditional Grants and receipts

Conditional grants, donations and funding are recognised as revenue to the extent that the Municipality has complied with any of the criteria, conditions or obligations embodied in the agreement. Where the agreement contains a stipulation to return the asset, other future economic benefits or service potential, in the event of non-compliance to these stipulations and would be enforced by the transferor, a liability is recognised to the extent that the criteria, conditions or obligations have not been met. Where such requirements are not enforceable, or where past experience has indicated that the transferor has never enforced the requirement to return the transferred asset, other future economic benefits or service potential when breaches have occurred, the stipulation will be considered a restriction and is recognised as revenue.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Municipality with no future related costs are recognised in the Statement of Financial Performance in the period in which they become receivable.

Revenue is recognised when all conditions associated with the contribution have been met or where the contribution is to finance property, plant and equipment, when such items of property, plant and equipment are brought into use.

9.3.2 Revenue From Recovery Of Unauthorised, Irregular, Fruitless And Wasteful Expenditure

Revenue from the recovery of unauthorised, irregular, fruitless and wasteful expenditure is based on legislated procedures, including those set out in the Municipal Finance Management Act (Act No.56 of 2003) and is recognised when the recovery thereof from the responsible councillors or officials is virtually certain.

10. PROVISIONS

Provisions for legal claims are recognised when the Municipality has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the obligation.

The best estimate of the expenditure required to settle the present obligation is the amount that an entity would rationally pay to settle the obligation at the reporting date or to transfer it to a third party at that time and are determined by the judgment of the management of the entity, supplemented by experience of similar transactions and, in some cases, reports from independent experts. The evidence considered includes any additional evidence provided by events after the reporting date. Uncertainties surrounding the amount to be recognised as a provision are dealt with by various means according to the circumstances, Where the provision being measured involves a large population of items, the obligation is estimated by weighting all possible outcomes by their associated probabilities.

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10. PROVISIONS (continued)

Future events that may affect the amount required to settle an obligation are reflected in the amount of a provision where there is sufficient objective evidence that they will occur. Gains from the expected disposal of assets are not taken into account in measuring a provision. Provisions are not recognised for future operating losses. The present obligation under an onerous contract is recognised and measured as a provision. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it - this unavoidable cost resulting from the contract is the amount of the provision to be recognised.

Provisions are reviewed at reporting date and the amount of a provision is the present value of the expenditure expected to be required to settle the obligation. When the effect of discounting is material, provisions are determined by discounting the expected future cash flows that reflect current market assessments of the time value of money. The impact of the periodic unwinding of the discount is recognised in the Statement of Financial Performance as a finance cost as it occurs.

11. EMPLOYEE BENEFITS

11.1 Short-Term Employee Benefits

Remuneration to employees is recognised in the Statement of Financial Performance as the services are rendered, except for non- accumulating benefits, which are only recognised when the specific event occurs.

The Municipality treats its provision for leave pay as an accrual.

The costs of all short-term employee benefits such as leave pay, are recognised during the period in which the employee renders the related service. The liability for leave pay is based on the total accrued leave days at year end and is shown as a creditor in the Statement of Financial Position. The Municipality recognises the expected cost of performance bonuses only when the Municipality has a present legal or constructive obligation to make such payment and a reliable estimate can be made.

11.2 Post-Employment Benefits

The Municipality provides retirement benefits for its employees and councillors, and has both defined benefit and defined contribution post- employment plans.

11.2.1 Defined Contribution Plans

A defined contribution plan is a plan under which the Municipality pays fixed contributions into a separate entity. The Municipality has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to service in the current or prior periods.

The Municipality’s contributions to the defined contribution funds are established in terms of the rules governing those plans. Contributions are recognised in the Statement of Financial Performance in the period in which the service is rendered by the relevant employees. The Municipality has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

11.2.2 Defined Benefit Plans

A defined benefit plan is a post- employment benefit plan other than a defined contribution plan.

11.3 Post-Retirement Health Care Benefits:

The Municipality has an obligation to provide Post-retirement Health Care Benefits to certain of its retirees. According to the rules of the Medical Aid Funds, with which the Municipality is associated, a member (who is on the current Conditions of Service), on retirement, is entitled to remain a continued member of the Medical Aid Fund, in which case the Municipality is liable for a certain portion of the medical aid membership fee.

The defined benefit liability is the aggregate of the present value of the defined benefit obligation and unrecognised actuarial gains and losses, reduced by unrecognised past service costs. The plan is unfunded. The present value of the defined benefit obligation is calculated using the projected unit credit method, incorporating actuarial assumptions and a discount rate based on the government bond rate. Valuations of these obligations are carried out annually by independent qualified actuaries.

Actuarial gains or losses recognised immediately in the Statement of Financial Performance.

Past-service costs are recognised immediately in the Statement of Financial Performance.

11.4 Defined Benefit Pension Plans

The Municipality has an obligation to provide Post-retirement pension Benefits to certain of its retirees. Pension contributions in respect of employees who were not members of a pension fund are recognised as an expense when incurred. Staff provident funds are maintained to accommodate personnel who, due to age, cannot join or be part of the various pension funds. The Municipality contributes monthly to the funds.

35 133 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

11. EMPLOYEE BENEFITS (continued)

The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains or losses recognised immediately in the Statement of Financial Performance.

Past-service costs are recognised immediately in the Statement of Financial Performance.

12. LEASES

Lease Classification Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred to the Municipality.

Leases of property, plant and equipment, in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.

12.1 The Municipality As Lessee

Finance leases

Where the Municipality enters into a finance lease, property, plant and equipment or intangible assets subject to finance lease agreements are capitalised at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. Corresponding liabilities are included in the Statement of Financial Position as Finance Lease Liabilities. The corresponding liabilities are initially recognised at the inception of the lease and are measured as the sum of the minimum lease payments due in terms of the lease agreement, discounted for the effect of interest. In discounting the lease payments, the Municipality uses the interest rate that exactly discounts the lease payments and unguaranteed residual value to the fair value of the asset plus any direct costs incurred. Lease payments are allocated between the lease finance cost and the capital repayment using the effective interest rate method. Lease finance costs are expensed when incurred.

Subsequent to initial recognition, the leased assets are accounted for in accordance with the stated accounting policies applicable to property, plant, equipment or intangibles. The lease liability is reduced by the lease payments, which are allocated between the lease finance cost and the capital repayment using the effective interest rate method. Lease finance costs are expensed when incurred. The accounting policies relating to derecognition of financial instruments are applied to lease payables. The lease asset is depreciated over the shorter of the asset's useful life or the lease term.

Operating leases

The Municipality recognises operating lease rentals as an expense in the Statement of Financial Performance on a straight-line basis over the term of the relevant lease. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

12.2 The Municipality As Lessor

Amounts due from lessees under finance leases or installment sale agreements are recorded as receivables at the amount of the Municipality’s net investment in the leases. Finance lease or installment sale income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Municipality’s net investment outstanding in respect of the leases or installment sale agreements.

Operating lease rental income is recognised on a straight-line basis over the term of the relevant lease.

12.3 Determining Whether An Arrangement Contains A Lease

At inception of an arrangement, the Municipality determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Municipality the right to control the use of the underlying asset. At inception or upon reassessment of the arrangement, the Municipality separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Municipality concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Municipality’s incremental borrowing rate.

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ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

13. BORROWING COSTS

The Municipality capitalises borrowing costs incurred that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset only when the commencement date for capitalisation is on or after 1 July 2008, while all other borrowing costs incurred (including borrowing cost incurred on qualifying assets where the commencement date for capitalisation is prior to 1 July 2008) are recognised as an expense in the Statement of Financial Performance in accordance with the requirements of GRAP 5. To the extent that an entity borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditure on that asset. The capitalisation rate shall be the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that an entity capitalises during a period shall not exceed the amount of borrowing costs it incurred during that period.

The Municipality ceases to capitalise borrowing costs when substantially all the activities necessary to prepare the qualifying assets for its intended use has been completed. Where the construction of the qualifying asset is completed in parts and each part is capable of being used while construction continues on other parts, the entity shall cease capitalising borrowing costs when it completes substantially all the activities necessary to prepare that part.

14. GRANTS-IN-AID

The Municipality transfers money to individuals, organisations and other sectors of government from time to time. When making these transfers, the Municipality does not: ▪ receive any goods or services directly in return, as would be expected in a purchase or sale transaction; ▪ expect to be repaid in future; or ▪ expect a financial return, as would be expected from an investment.

These transfers are recognised in the Statement of Financial Performance as expenses in the period that the events giving rise to the transfer occurred.

15. VALUE ADDED TAX

The Municipality is registered with SARS for VAT on the payments basis, in accordance with Section 15(2)(a) of the Value-Added Tax Act No 89 of 1991.

16. UNAUTHORISED EXPENDITURE

Unauthorised expenditure is expenditure that has not been budgeted, expenditure that is not in terms of the conditions of an allocation received from another sphere of government, Municipality or organ of state and expenditure in the form of a grant that is not permitted in terms of the Municipal Finance Management Act (Act No 56 of 2003). All expenditure relating to unauthorised expenditure is recognised as an expense in the Statement of Financial Performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

17. IRREGULAR EXPENDITURE

Irregular expenditure is expenditure that is contrary to the Municipal Finance Management Act (Act No 56 of 2003), the Municipal Systems Act (Act No 32 of 2000) and the Public Office Bearers Act (Act No 20 of 1998) or is in contravention of the Municipality’s or Municipal Entities’ supply chain management policies. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure is accounted for as an expense in the Statement of Financial Performance in the period it occurred and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

18. FRUITLESS AND WASTEFUL EXPENDITURE

Fruitless and wasteful expenditure is expenditure that was made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the Statement of Financial Performance in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

19. CHANGES IN ACCOUNTING POLICIES, ESTIMATES AND ERRORS

Changes in accounting policies that are effected by management have been applied retrospectively in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the change in policy. In such cases the Municipality shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable. Refer to Note 31 for details of changes in accounting policies.

Changes in accounting estimates are applied prospectively in accordance with GRAP 3 requirements. Details of changes in estimates are disclosed in the notes to the annual financial statements where applicable.

Correction of errors is applied retrospectively in the period in which the error has occurred in accordance with GRAP 3 requirements, except to the extent that it is impracticable to determine the period-specific effects or the cumulative effect of the error. In such cases the Municipality shall restate the opening balances of assets, liabilities and net assets for the earliest period for which retrospective restatement is practicable. Refer to Note 32 to the Annual Financial Statements for details of corrections of errors recorded during the period under review.

37 135 PIXLEY-KA-SEME DISTRICT MUNICIPALITY

ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

20. RELATED PARTIES

Individuals as well as their close family members, and/or entities are related parties if one party has the ability, directly or indirectly, to control or jointly control the other party or exercise significant influence over the other party in making financial and/or operating decisions. Management is regarded as a related party and comprises the councillors, Executive Mayor, Mayoral Committee members, Municipal Manager, executive directors and all other managers reporting directly to the Municipal Manager or as designated by the Municipal Manager.

21. EVENTS AFTER THE REPORTING DATE

Events after the reporting date that are classified as adjusting events have been accounted for in the Annual Financial Statements. The events after the reporting date that are classified as non-adjusting events after the reporting date have been disclosed in the notes to the Annual Financial Statements.

22. FOREIGN CURRENCIES

Transactions in foreign currencies are translated to the functional currency of the entity at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost and fair value in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the reporting period.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in the Statement of Financial Performance.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Cash flows arising from transactions in a foreign currency are recorded in Rand's by applying, to the foreign currency amount, the exchange rate between the Rand and the foreign currency at the date of the cash flow.

23. COMPARATIVE INFORMATION

23.1 Prior Year Comparatives

When the presentation or classification of items in the Annual Financial Statements is amended, prior period comparative amounts are reclassified. The nature and reasons for the reclassification are disclosed.

23.2 Budget Information

The annual budget figures have been prepared in accordance with the GRAP standard and are consistent with the accounting policies adopted by the Council for the preparation of these financial statements. The amounts are scheduled as a separate additional financial statement, called the Statement of Comparison of Budget and Actual amounts. Explanatory comment is provided in the notes to the annual financial statements giving firstly reasons for overall growth or decline in the budget and secondly motivations for over- or under spending on line items. The annual budget figures included in the financial statements are for the Municipality and do not include budget information relating to subsidiaries or associates. These figures are those approved by the Council at the beginning and during the year following a period of consultation with the public as part of the Integrated development plan. The budget is approved on an accrual basis by nature classification. The approved budget covers the period from 1 July 2018 to 30 June 2019.

24. CONTINGENT ASSETS AND CONTINGENT LIABILITIES

Contingent liabilities represent a possible obligation that arises from past events and whose existence will be confirmed only by an occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. A contingent liability can also arise as a result of a present obligation that arises from past events but which is not recognised as a liability either because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

Contingent assets represent possible assets that arise from past events and whose existence will be confirmed only by an occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in the notes to the annual financial statements.

25. TREATMENT OF ADMINISTRATION AND OTHER OVERHEAD EXPENSES

The costs of internal support services are transferred to the various services and departments to whom resources are made available.

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ACCOUNTING POLICIES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

26. CAPITAL COMMITMENTS

Items are classified as commitments where the Municipality commits itself to future transactions that will normally result in the outflow of resources.

Capital commitments are not recognised in the Statement of Financial Position as a liability but are included in the disclosure notes in the following cases: ▪ Approved and contracted commitments, where the expenditure has been approved and the contract has been awarded at the reporting date, where disclosure is required by a specific standard of GRAP. ▪ Approved but not yet contracted commitments, where the expenditure has been approved and the contract has yet to be awarded or is awaiting finalisation at the reporting date. ▪ Items are classified as commitments where the Municipality commits itself to future transactions that will normally result in the outflow of resources. ▪ Contracts that are entered into before the reporting date, but goods and services have not yet been received are disclosed in the disclosure notes to the financial statements. ▪ Other commitments for contracts are non-cancellable or only cancellable at significant cost contracts should relate to something other than the business of the Municipality.

27. IN-KIND DONATIONS AND CONTRIBUTIONS

In-kind Donations and Contributions are recognised when it is probable that future economic benefits or service potential will flow to the Municipality and these benefits can be measured reliably, except when specifically stated otherwise. In-kind Donations and Contributions are recognised at the fair value of the consideration received or receivable.

In the case of Donated Assets, the Donation is recognised at the fair value of the asset received.

28. PUBLIC PRIVATE PARTNERSHIPS

A PPP can generally be described as an agreement between a public sector entity (entity) and a private sector institution (private party). In terms of this the private party assumes some substantial financial, construction, technical and operational risks in the design, financing, building and operation of a project. It typically involves a private party that supplies an asset and/or services that previously were developed or provided by an entity. The private party provides a service to the public on behalf of the entity through the use of assets and/or the management of such an asset. In return, the private party is rewarded through payments from the entity. Such payments are based on service outputs delivered to specification, charges to users of such services, or a combination of these.

The definition of a PPP agreement in the MFMA identifies two broad categories of PPP agreements - one where the private party performs an institutional function on behalf of the entity, and the other where the private party acquires the use of state property for its own commercial purposes. The PPP agreement can also be a combination of these.

The Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers) (GRAP 23) states that control of an asset arises when the entity can use or otherwise benefit from the asset in pursuit of its objectives, and can exclude or otherwise regulate the access of others to that benefit. GRAP 23 requires that the ability to exclude or regulate the access of others to the benefits of an asset is an essential element of control that distinguishes an entity’s assets from those public goods that all entities have access to and from which they benefit.

Under the control approach, the Municipality uses the following criteria to determine whether it controls the use of the underlying asset in the PPP agreement: ▪ The Municipality controls or regulates what services the private party must provide with the associated asset, to whom it must provide them and at what price. ▪ The Municipality controls - through ownership, beneficial entitlement or otherwise - any significant residual interest in the asset at the end of the agreement.

The control approach to assets that are developed, constructed, acquired or used in terms of PPP agreements. These assets are used by the private party to perform part of an entity’s service delivery or administrative functions (institutional function).

The control approach is also applied to PPP agreements where the Municipality provides the private party with an existing asset, and the private party upgrades, operates and maintains the asset for a specified period of time. If the PPP agreement requires the private party to use its own asset, the Municipality only recognises the asset in its financial statements if both the control approach criteria are met.

39 137 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

1. GENERAL INFORMATION

Pixley-ka-Seme District Municipality (the Municipality) is a local government institution in De Aar, Northern Cape Province. The addresses of its registered office and principal place of business are disclosed under General Information included in the Annual Financial Statements and in the introduction of the Annual Report. The principal activities of the Municipality are disclosed in the Annual Report and are prescribed by the Municipal Finance Management Act (MFMA).

2. RECEIVABLES FROM EXCHANGE TRANSACTIONS

Gross Provision for Net Balances Impairment Balances R R R As at 30 June 2019

Other Receivables 4,633,249 (2,152,465) 2,480,783 Property Rental Debtors 4,182 - 4,182 Shared Services 3,949,585 (2,152,465) 1,797,119 Sundry Debtors 679,482 - 679,482

Total Receivables from Exchange Transactions 4,633,249 (2,152,465) 2,480,783 0.00 0.00 0.00 Gross Provision for Net Balances Impairment Balances R R R As at 30 June 2018

Other Receivables 3,025,097 (2,184,284) 840,813 Property Rental Debtors 61,705 - 61,705 Shared Services 2,931,598 (2,184,284) 747,315 Sundry Debtors 31,793 - 31,793

Total Receivables from Exchange Transactions 3,025,097 (2,184,284) 840,813 0.00 0.00 0.00 Other Receivables include outstanding debtors for various other services, e.g. Shared Services, Medical Aid Receivables and Property Rental.

The average credit period for Receivables is 30 days. No interest is charged for outstanding debtors. The Municipality strictly enforces its approved credit control policy to ensure the recovery of Receivables.

The Municipality does not hold deposits or other security for its Receivables.

None of the Receivables have been pledged as security for the Municipality's financial liabilities.

The Management of the Municipality is of the opinion that the carrying value of Receivables approximate their fair values.

2.1 Ageing of Receivables from Exchange Transactions

As at 30 June 2019 Current Past Due Total 0 - 30 days 31 - 60 Days 61 - 90 Days + 90 Days

Property Rental Debtors: Gross Balances 4,182 - - - 4,182 Less: Provision for Impairment - - - - -

Net Balances 4,182 - - - 4,182

Shared Services: Gross Balances 486,722 - - 3,462,863 3,949,585 Less: Provision for Impairment - - - (2,152,465) (2,152,465)

Net Balances 486,722 - - 1,310,397 1,797,119

Sundry Debtors: Gross Balances 643,377 - 2,866 33,239 679,482 Less: Provision for Impairment - - - - -

Net Balances 643,377 - 2,866 33,239 679,482

40 138 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

2. RECEIVABLES FROM EXCHANGE TRANSACTIONS (continued)

As at 30 June 2019, Receivables of 1 343 636 were past due but not impaired. The age analysis of these Receivables are as follows:

Past Due Total 31 - 60 Days 61 - 90 Days + 90 Days

All Receivables: Gross Balances - 2,866 3,496,102 3,498,968 Less: Provision for Impairment - - (2,152,465) (2,152,465)

Net Balances - 2,866 1,343,636 1,346,502

As at 30 June 2018 Current Past Due Total 0 - 30 days 31 - 60 Days 61 - 90 Days + 90 Days

Property Rental Debtors: Gross Balances 10,217 10,217 10,082 31,189 61,705 Less: Provision for Impairment - - - - -

Net Balances 10,217 10,217 10,082 31,189 61,705

Shared Services: Gross Balances 597,477 149,838 - 2,184,284 2,931,598 Less: Provision for Impairment - - - (2,184,284) (2,184,284)

Net Balances 597,477 149,838 - (0) 747,315

Sundry Debtors: Gross Balances - - - 31,793 31,793 Less: Provision for Impairment - - - - -

Net Balances - - - 31,793 31,793

As at 30 June 2018, Receivables of R233 119 were past due but not impaired. The age analysis of these Receivables are as follows:

Past Due Total 31 - 60 Days 61 - 90 Days + 90 Days

All Receivables: Gross Balances 607,694 160,055 10,082 2,247,265 2,417,403 Less: Provision for Impairment - - - (2,184,284) (2,184,284)

Net Balances 607,694 160,055 10,082 62,981 233,119

2.2 Reconciliation of Provision for Impairment

Balance at beginning of year (2,184,284) - Impairment Losses recognised - (2,184,284) Impairment Losses reversed 31,818 -

Balance at end of year (2,152,466) (2,184,284)

The Provision for Impairment was calculated after grouping all the financial assets of similar nature and risk ratings and assessing the recoverability.

In determining the recoverability of the Receivables from Exchange Transactions, the Municipality considers any change in the credit quality of the Debtor from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the management believe that there is no further credit provision required in excess of the Provision for Impairment.

2.3 Derecognition of Financial Assets

No Financial Assets have been transferred to other parties during the year.

41 139 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

3. VAT RECEIVABLE (PAYABLE)

VAT Receivable (Payable) (310,548) 195,920 0.00 0.00 VAT is payable on the receipts basis. Only once payment is received from debtors, VAT is paid over to SARS.

No interest is payable to SARS if the VAT is paid over timeously, but interest for late payments is charged according to SARS policies. The Municipality has financial risk policies in place to ensure that payments are affected before the due date.

4. CASH AND CASH EQUIVALENTS

Current Investments 10,052,363 3,034,073 Bank Accounts 1,996,079 219,986

Total Bank, Cash and Cash Equivalents 12,048,442 3,254,059 - - For the purposes of the Statement of Financial Position and the Cash Flow Statement, Cash and Cash Equivalents include Cash-on-Hand, Cash in Banks and Investments in Money Market Instruments, net of outstanding Bank Overdrafts.

4.1 Current Investment Deposits

Call Deposits 10,052,363 3,034,073

Total Current Investment Deposits 10,052,363 3,034,073 10,052,363 3,034,073 Call Deposits are investments with a maturity period of less than 3 months and earn interest rates varying from 5.10% to 5.75% (2017: 5.10% to 5.75%) per annum.

Notice Deposits are investments with a maturity period of less than 12 months and earn interest rates varying from 5.54% to 5.68% (2017: 5.54% to 5.68%) per annum.

Deposits attributable to Unspent Conditional Grants 10,000,969 2,749,406

Total Deposits attributable to Commitments of the Municipality 10,000,969 2,749,406

Deposits of R3 175 806 (2017: R2 381 101) are ring-fenced and attributable to Unspent Conditional Grants.

4.2 Bank Accounts

Cash in Bank 1,996,079 219,986

Total Bank Accounts 1,996,079 219,986 - - The Municipality has the following bank accounts:

Primary Bank Account

ABSA Bank Limited - De Aar Branch - Cheque Account Number 185 000 0197 Cash book balance at beginning of year - 1,330,209 Cash book balance at end of year - -

Bank statement balance at beginning of year - 1,330,209 Bank statement balance at end of year - -

Standard Bank - De Aar Branch - Cheque Account Number 04 171 8046 Cash book balance at beginning of year 219,986 - Cash book balance at end of year 1,996,079 219,986

Bank statement balance at beginning of year 219,986 - Bank statement balance at end of year 1,996,079 219,986

42 140 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

4. CASH AND CASH EQUIVALENTS (continued)

Call Deposits

Standard Bank - De Aar Branch - Call Deposit Number 048872555 Cash book balance at beginning of year 3,034,073 - Cash book balance at end of year 10,051,363 3,034,073

Bank statement balance at beginning of year 3,034,073 - Bank statement balance at end of year 10,051,363 3,034,073

Standard Bank - De Aar Branch - Call Deposit Number 082929963 Cash book balance at beginning of year - - Cash book balance at end of year 1,000 -

Bank statement balance at beginning of year - - Bank statement balance at end of year 1,000 -

ABSA Bank Limited - De Aar Branch - Call Deposit Number 927 463 4894 Cash book balance at beginning of year - 5,351 Cash book balance at end of year - -

Bank statement balance at beginning of year - 5,351 Bank statement balance at end of year - -

ABSA Bank Limited - De Aar Branch - Call Deposit Number 912 355 2505 Cash book balance at beginning of year - 1,419,373 Cash book balance at end of year - -

Bank statement balance at beginning of year - 1,419,373 Bank statement balance at end of year - -

ABSA Bank Limited - De Aar Branch - Call Deposit Number 927 624 8065 Cash book balance at beginning of year - 2,303 Cash book balance at end of year - -

Bank statement balance at beginning of year - 2,303 Bank statement balance at end of year - -

ABSA Bank Limited - De Aar Branch - Call Deposit Number 929 8348 243 Cash book balance at beginning of year - 428,718 Cash book balance at end of year - -

Bank statement balance at beginning of year - 428,718 Bank statement balance at end of year - -

The Municipality did not pledge any of its Cash and Cash Equivalents as collateral for its financial liabilities.

No restrictions have been imposed on the Municipality in terms of the utilisation of its Cash and Cash Equivalents.

The management of the Municipality is of the opinion that the carrying value of Current Investment Deposits, Bank Balances, Cash and Cash Equivalents recorded at amortised cost in the Annual Financial Statements approximate their fair values.

5. OPERATING LEASE RECEIVABLES

Operating Leases are recognised on the straight-line basis as per the requirement of GRAP 13. In respect of Non- cancellable Operating Leases the following assets have been recognised:

Balance at beginning of year 11,764 17,160 Operating Lease Revenue recorded (11,764) (5,396)

Total Operating Lease Receivables - 11,764

Less: Amounts due for settlement within 12 months (Current Portion) - (11,764)

Total Operating Lease Receivables - - 0.00 0.00

43 141 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

5. OPERATING LEASE RECEIVABLES (continued)

5.1 Leasing Arrangements

The Municipality as Lessor: Operating Leases relate to Property owned by the Municipality with lease terms of between 2 to 5 (2018: 2 to 5) years, with an option to extend.

All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have an option to purchase the property at the expiry of the lease period.

5.2 Amounts receivable under Operating Leases

At the Reporting Date the following minimum lease payments were receivable under Non-cancellable Operating Leases for Property, Plant and Equipment, which are receivable as follows:

Up to 1 year - 11,764 2 to 5 years - - More than 5 years - -

Total Operating Lease Arrangements - 11,764

The impact of charging the escalations in Operating Leases on a straight-line basis over the term of the lease has been a decrease of R11 764 (2018: decrease of R5 396) in current year income.

The following payments have been recognised for Rental Income and Repairs and Maintenance Expense in the Statement of Financial Performance:

Rental Income 100,714 100,714 Repairs and Maintenance - -

The following restrictions have been imposed by the municipality in terms of the lease agreements: (i) The lessee shall not have the right to sublet, cede or assign the whole or any portion of the premises let. (ii) The lessor or its duly authorised agent, representative or servant shall have the right at all reasonable times to inspect the premises let. (iii) The lessee shall use the premises let for the sole purpose prescribed in the agreement.

44 142 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

6. PROPERTY, PLANT AND EQUIPMENT

30 June 2019

Reconciliation of Carrying Value

Land and Infrastructure Computer Furniture and Machinery Description Transport Assets Leased Assets Total Buildings Assets Equipment Fittings Equipment

R R R R R R R R

Carrying values at 1 July 2018 6,612,818 - 467,547 329,734 156,448 1,540,429 3,003,110 12,110,085 Cost 15,098,960 - 1,409,559 1,906,059 1,024,798 2,108,619 3,899,772 25,447,767 - Completed Assets 15,098,960 - 1,400,257 1,906,059 1,024,798 2,108,619 3,899,772 25,438,465 - Under Construction - - 9,302 - - - - 9,302 Accumulated Impairment Losses - - (872) (3) (2,843) - - (3,718) Accumulated Depreciation (8,486,142) - (941,140) (1,576,321) (865,507) (568,190) (896,662) (13,333,964)

Acquisitions - 1,556,304 217,652 272,409 - 2,830,987 567,190 5,444,542 Depreciation (913,295) - (117,476) (47,512) (25,619) (163,577) (810,421) (2,077,901)

Carrying value of Disposals - - (1,681) - - (260,953) - (262,634) - Cost - - (6,929) - - (459,207) (296,423) (762,559) - Accumulated Impairment Losses ------Accumulated Depreciation - - 5,248 - - 198,254 296,423 499,925

Impairment Losses ------

Carrying values at 30 June 2019 5,699,523 1,556,304 566,041 554,631 130,828 3,946,885 2,759,879 15,214,093 Cost 15,098,960 1,556,304 1,620,282 2,178,468 1,024,798 4,480,399 4,170,539 30,129,751 - Completed Assets 15,098,960 - 1,620,282 2,178,468 1,024,798 4,480,399 4,170,539 28,573,447 - Under Construction - 1,556,304 - - - - - 1,556,304 Accumulated Impairment Losses - - (872) (3) (2,843) - - (3,718) Accumulated Depreciation: (9,399,437) - (1,053,369) (1,623,833) (891,127) (533,514) (1,410,660) (14,911,940)

30 June 2018

Reconciliation of Carrying Value

Land and Infrastructure Computer Furniture and Machinery Description Transport Assets Leased Assets Total Buildings Assets Equipment Fittings Equipment

R R R R R R R R

Carrying values at 1 July 2017 7,526,113 - 303,911 374,304 196,117 1,633,139 1,781,520 11,895,033 Cost 15,098,960 - 1,158,401 1,901,183 1,024,798 2,108,619 2,644,526 24,016,416 - Completed Assets 15,098,960 - 1,149,099 1,901,183 1,024,798 2,108,619 2,644,526 24,007,114 - Under Construction - - 9,302 - - - - 9,302 Accumulated Impairment Losses - - (872) (3) (2,843) - - (3,718) Accumulated Depreciation (7,572,847) - (853,618) (1,526,876) (825,838) (475,480) (863,006) (12,117,666)

Acquisitions - - 251,158 4,876 - - 3,136,350 3,392,383 Depreciation (913,295) - (87,522) (49,445) (39,669) (92,710) (643,603) (1,826,245)

Carrying value of Disposals ------(1,271,157) (1,271,157) - Cost ------(1,881,104) (1,881,104) - Accumulated Impairment Losses ------Accumulated Depreciation ------609,947 609,947

Impairment Losses ------

Carrying values at 30 June 2018 6,612,818 - 467,547 329,734 156,448 1,540,429 3,003,110 12,110,085 Cost 15,098,960 - 1,409,559 1,906,059 1,024,798 2,108,619 3,899,772 25,447,767 - Completed Assets 15,098,960 - 1,400,257 1,906,059 1,024,798 2,108,619 3,899,772 25,438,465 - Under Construction - - 9,302 - - - - 9,302 Accumulated Impairment Losses - - (872) (3) (2,843) - - (3,718) Accumulated Depreciation: (8,486,142) - (941,140) (1,576,321) (865,507) (568,190) (896,662) (13,333,964)

Refer to Appendices B, C and E (4) for more detail on Property, Plant and Equipment, including those in the course of construction.

45 143 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

6. PROPERTY, PLANT AND EQUIPMENT (continued)

6.1 Gross Carrying Amount of Property, Plant and Equipment that is fully depreciated and still in use

There are no Property, Plant and Equipment that is fully depreciated at year-end and still in use by the Municipality.

6.2 Carrying Amount of Property, Plant and Equipment retired from active use and held for disposal

No Property, Plant and Equipment were retired from active use and held for disposal during the financial year.

6.3 Assets pledged as security

The Municipality’s obligations under Finance Leases (see Note 12) are secured by the lessors’ title to the leased assets. No other assets of the Municipality have been pledged as security.

6.4 Impairment of Property, Plant and Equipment

No impairment losses have been recognised on Property, Plant and Equipment of the Municipality at the reporting date.

6.5 Change in Estimate - Useful Life of Property, Plant and Equipment reviewed

A change in the estimated useful life of various assets of the Municipality has resulted in the following decreases in depreciation for the mentioned asset categories for the financial year:

Other Assets (164,537) (207,100)

Total Change in Estimate for Useful Life of Property, Plant and Equipment (164,537) (207,100)

The change in estimates will result in a decrease of R164 537 (2018: R207 100) in the Depreciation Expense for the Municipality over the next three financial years.

6.6 Land and Buildings carried at Fair Value

The Municipality's Land and Buildings are accounted for according to the cost model and therefore no fair value has been determined.

7. INTANGIBLE ASSETS

At Cost less Accumulated Amortisation 2,660 4,137

The movement in Intangible Assets is reconciled as follows:

Carrying values at 1 July 4,137 9,306 Cost 397,692 397,692 Accumulated Amortisation (393,555) (388,386)

Amortisation (1,477) (5,169)

Carrying values at 30 June 2,660 4,137 Cost 397,692 397,692 Accumulated Amortisation (395,032) (393,555) 0.00 The amortisation expense has been included in the line item Depreciation and Amortisation in the Statement of Financial Performance (see Note 22).

All of the Municipality’s Intangible Assets are held under freehold interests and no Intangible Assets had been pledged as security for any liabilities of the Municipality.

No restrictions apply to any of the Intangible Assets of the Municipality.

Refer to Appendix B for more detail on Intangible Assets.

7.1 Intangible Assets with Indefinite Useful Lives

The Municipality amortises all its Intangible Assets and no of such assets are regarded as having indefinite useful lives.

The useful lives of the Intangible Assets remain unchanged from the previous year.

46 144 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

7. INTANGIBLE ASSETS (continued)

7.2 Impairment of Intangible Assets

No impairment losses have been recognised on Intangible Assets of the Municipality at the reporting date.

8. INVESTMENT PROPERTY

At Fair Value 1,210,000 1,210,000

The movement in Investment Property is reconciled as follows:

Carrying values at 1 July 1,210,000 1,210,000 Fair Value 1,210,000 1,210,000 Accumulated Impairment Losses - -

Net Gains / (Losses) from Fair Value Adjustments - -

Carrying values at 30 June 1,210,000 1,210,000 Fair Value 1,210,000 1,210,000 Accumulated Impairment - - 0.00 0.00 Estimated Fair Value of Investment Property at 30 June 1,210,000 1,210,000

Revenue and Expenditure disclosed in the Statement of Financial Performance include the following: Rental Revenue earned from Investment Property 100,714 100,714 Direct Operating Expenses - incurred to generate rental revenue - - Direct Operating Expenses - incurred which did not generate rental revenue - -

All of the Municipality’s Investment Property is held under freehold interests and no Investment Property had been pledged as security for any liabilities of the Municipality.

There are no restrictions on the reliability of Investment Property or the remittance of revenue and proceeds of disposal.

There are no contractual obligations on Investment Property.

Refer to Appendix B for more detail on Investment Property.

8.1 Investment Property carried at Fair Value

The Municipality’s Investment Property is valued annually at 30 June at fair value by an independent, professionally qualified, valuer. The valuation, which conforms to International Valuation Standards, is arrived at by reference to market evidence of transaction prices for similar properties.

The following assumptions were used: Discount Rate 11.50% 11.50%

8.2 Impairment of Investment Property

No impairment losses have been recognised on Investment Property of the Municipality at the reporting date.

9. CURRENT PORTION OF EMPLOYEE BENEFIT LIABILITIES

Current Portion of Ex-Gratia Benefit Liabilty (See Note 13) 16,908 20,160 Current Portion of Post-retirement Health Care Benefits Liability (See Note 13) 1,198,000 1,115,708

Total Current Portion of Employee Benefit Liabilities 1,214,908 1,135,868 0.00 0.00 The movement in provisions are reconciled as follows:

Current Portion of Employee Benefit Liabilities Ex-Gratia Post-retirement R R 2019

Balance at beginning of year 20,160 1,115,708 Contributions to provision (3,252) 82,292

Balance at end of year 16,908 1,198,000 0.00 0.00

47 145 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

9. CURRENT PORTION OF EMPLOYEE BENEFIT LIABILITIES (continued)

Ex-Gratia Post-retirement R R 2018

Balance at beginning of year 20,160 1,104,569 Contributions to provision - 11,139

Balance at end of year 20,160 1,115,708 0.00 0.00 10. PAYABLES FROM EXCHANGE TRANSACTIONS

Trade Creditors 1,722,358 1,403,069 Salary Control Accounts 78,272 24,033 Payments received in Advance 20,741 33,138 Performance Bonuses 779,464 746,313 Staff Bonuses 992,193 876,888 Advances from Road Department 240,750 240,750 Other Creditors 474,135 1,288,016 Accrued Leave 1,835,914 1,808,537

Total Payables 6,143,827 6,420,744 0.00 0.00 The average credit period on purchases is 30 days from the receipt of the invoice, as determined by the MFMA. No interest is charged for the first 30 days from the date of receipt of the invoice. Thereafter interest is charged in accordance with the credit policies of the various individual creditors that the Municipality deals with. The Municipality has financial risk policies in place to ensure that all payables are paid within the credit timeframe.

The Municipality did default on payment of its Creditors. However, no terms for payment have been re-negotiated by the Municipality.

The management of the Municipality is of the opinion that the carrying value of Creditors approximates their fair values.

11. UNSPENT CONDITIONAL GRANTS AND RECEIPTS

11.1 Conditional Grants from Government 10,000,969 2,749,406 National Government Grants 8,135,568 202,991 Provincial Government Grants 1,865,401 2,546,415

11.2 Other Conditional Receipts - - Public Contributions - -

Total Conditional Grants and Receipts 10,000,969 2,749,406 0.00 0.00 The Unspent Conditional Grants and Receipts are invested in investment accounts until utilised.

See Note 15 for the reconciliation of Grants from Government. The Unspent Grants are cash backed by term deposits. The Municipality complied with the conditions attached to all grants received to the extent of revenue recognised. No grants were withheld.

Refer to Appendix F for more detail on Conditional Grants.

12. LONG-TERM LIABILITIES

Annuity Loans 1,773,306 526,983 Finance Lease Liabilities 3,928,416 3,632,780

Sub-total 5,701,722 4,159,763

Less: Current Portion transferred to Current Liabilities (1,147,816) (634,224) Annuity Loans (600,574) (526,983) Finance Lease Liabilities (547,242) (107,241)

Total Long-term Liabilities (Neither past due, nor impaired) 4,553,906 3,525,539

48 146 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

12. LONG-TERM LIABILITIES (continued)

12.1 Summary of Arrangements

Annuity Loans are repaid over periods varying from 3 to 5 (2018: 3 to 3) years and at interest rates varying from 12.25% to 12.75% (2018: 12.25%) per annum. Annuity Loans are not secured.

The management of the Municipality is of the opinion that the carrying value of Long-term Liabilities recorded at amortised cost in the Annual Financial Statements approximate their fair values.

The fair value of Long-term Liabilities was determined after considering the standard terms and conditions of agreements entered into between the Municipality and the relevant financing institutions.

Refer to Appendix "A" for more detail on Long-term Liabilities.

12.2 Obligations under Finance Lease Liabilities

The Municipality as Lessee: Finance Leases relate to Property, Plant and Equipment with lease terms not more than 3 years (2017: 3 years). The effective interest rate on Finance Leases is between 2.16% and 7.93% (2017: 2.16% and 7.93%).

The Municipality has options to purchase the Property, Plant and Equipment for a nominal amount at the conclusion of the lease agreements. The Municipality’s obligations under Finance Leases are secured by the lessors’ title to the leased assets. Present Value of Minimum Lease Minimum Lease Payments Payments The obligations under Finance Leases are as follows: 2019 2018 2019 2018 R R R R Amounts payable under finance leases:

Within one year 1,769,753 1,514,477 547,242 107,241 In the second to fifth years, inclusive 4,974,801 6,659,375 3,381,174 3,525,538 6,744,554 8,173,852 3,928,416 3,632,779

Less: Future Finance Obligations (2,816,138) (4,541,073) - -

Present Value of Minimum Lease Obligations 3,928,416 3,632,779 3,928,416 3,632,779

Less: Amounts due for settlement within 12 months (Current Portion) (547,242) (107,241)

Finance Lease Obligations due for settlement after 12 months (Non-current Portion) 3,381,174 3,525,538

The Municipality has finance lease agreements for the following significant classes of assets: - IT equipment

Included in these classes are the following significant leases:

(i) IT Equipment 3,928,416 3,632,779 - Installments are payable quarterly in advance - Average period outstanding 1 month 1 month - Average effective interest rate 40.59% 40.59% - Average monthly installment 136,679 116,448

12.3 Breach of Loan Agreement

The Municipality did not default on any payment of its Long-term Liabilities. No terms for payment have been re- negotiated by the Municipality.

49 147 PIXLEY-KA-SEME DISTRICT MUNICIPALITY PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 2019 2018 R R R R

13. EMPLOYEE BENEFIT LIABILITIES 13. EMPLOYEE BENEFIT LIABILITIES (continued)

Ex-Gratia Benefit Liability 63,186 56,060 The history of experienced adjustments is as follows: Post-retirement Health Care Benefits Liability 11,506,717 12,247,673 2019 2018 2017 2016 R R R R Total Employee Benefit Liabilities 11,569,903 12,303,733 0.00 0.00 Present Value of Defined Benefit Obligation 80,094 76,220 79,778 79,778 13.1 Ex-Gratia Benefit Liability Deficit 80,094 79,778 79,778 107,201 Balance at beginning of Year 76,220 79,778 Increase due to Discounting 5,114 5,224 Experienced adjustments on Plan Liabilities 80,094 64,842 79,778 93,259 Expenditure incurred (20,160) (20,160) Actuarial (Gains) /Losses 18,920 11,378 The effect of a 1% movement in the assumed rate of health care cost inflation is as follows:

Balance at end of Year 80,094 76,220 Increase: Effect on the aggregate of the current service cost and the interest cost 5,593 5,724 Transfer to Current Provisions (16,908) (20,160) Effect on the defined benefit obligation 77,944 74,084

Total Post-retirement Health Care Benefits Liability 63,186 56,060 Decrease: 0.00 0.00 Effect on the aggregate of the current service cost and the interest cost 4,602 4,687 Effect on the defined benefit obligation 82,375 78,492 The Municipality provides certain ex-gratia (pension) benefits by funding the pension fund contributions of qualifying retired members of the Municipality. According to the rules of the Pension Funds, with which the Municipality is associated, a member (who is on the current Conditions of Service) is entitled to remain a continued member of such Refer to Note 42: Multi-employer Retirement Benefit Information to the Annual Financial Statements for more pension fund on retirement, in which case the Municipality is liable for a certain portion of the pension fund information regarding the Municipality's other retirement funds that is Provincially and Nationally administered. membership fee. The Municipality operates an unfunded defined benefit plan for these qualifying employees. No other post-retirement benefits are provided to these employees. 13.2 Post-retirement Health Care Benefits Liability

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were Balance at beginning of Year 13,363,381 14,017,673 carried out at 30 June 2019 by Mr C Weiss, Fellow of the Actuarial Society of South Africa. The present value of the Contributions to Provision 362,583 396,239 defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. Increase due to Discounting 1,170,666 1,186,743 Expenditure incurred (1,105,289) (1,081,410) The members of the Ex-Gratia Benefit Plan are made up as follows: Actuarial (Gains) /Losses (1,086,624) (1,155,865)

Continuation Members (Retirees, widowers and orphans) 3 3 Balance at end of Year 12,704,717 13,363,381

Total Members 3 3 Transfer to Current Provisions (1,198,000) (1,115,708)

The liability in respect of past service has been estimated as follows: Total Long Service Awards Liability 11,506,717 12,247,673 - - Continuation Members (Retirees, widowers and orphans) 80,094 76,220 The Municipality provides certain post-retirement health care benefits by funding the medical aid contributions of qualifying retired members of the Municipality. According to the rules of the Medical Aid Funds, with which the Municipality is associated, a member (who is on the current Conditions of Service) is entitled to remain a continued Total Liability 80,094 76,220 member of such medical aid fund on retirement, in which case the Municipality is liable for a certain portion of the 0.00 medical aid membership fee. The Municipality operates an unfunded defined benefit plan for these qualifying The principal assumptions used for the purposes of the actuarial valuations were as follows: employees. No other post-retirement benefits are provided to these employees. Discount Rate 7.42% 7.71% Health Care Cost Inflation Rate 0.00% 0.00% The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were Net Effective Discount Rate 0 0 carried out at 30 June 2018 by Mr C Weiss, Fellow of the Actuarial Society of South Africa. The present value of the Expected Retirement Age - Females 60 60 defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method. Expected Retirement Age - Males 60 60

The members of the Post-employment Health Care Benefit Plan are made up as follows: Movements in the present value of the Defined Benefit Obligation were as follows: Balance at the beginning of the year 76,220 79,778 In-service Members (Employees) 33 28 Interest cost 5,114 5,224 Continuation Members (Retirees, widowers and orphans) 28 28 Benefits paid (20,160) (20,160) Actuarial losses / (gains) 18,920 11,378 Total Members 61 56

Total Recognised Benefit Liability 80,094 76,220 The liability in respect of past service has been estimated as follows: 0.00 0.00 The amounts recognised in the Statement of Financial Position are as follows: In-service Members 2,619,000 4,268,000 Present value of fund obligations 80,094 76,220 Continuation Members 10,086,000 9,095,000

Total Benefit Liability 80,094 76,220 Total Liability 12,705,000 13,363,000 0.00 0.00 The amounts recognised in the Statement of Financial Performance are as follows: The Municipality makes monthly contributions for health care arrangements to the following Medical Aid Schemes: Interest cost 5,114 5,224 - Hosmed Expenditure incurred (20,160) (20,160) - Keyhealth Actuarial losses / (gains) 18,920 11,378 - LA Health - Samwumed Total Post-retirement Benefit included in Employee Related Costs (Note 20) 3,874 (3,558)

50 51 148 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

13. EMPLOYEE BENEFIT LIABILITIES (continued)

The history of experienced adjustments is as follows: 2019 2018 2017 2016 R R R R

Present Value of Defined Benefit Obligation 80,094 76,220 79,778 79,778

Deficit 80,094 79,778 79,778 107,201

Experienced adjustments on Plan Liabilities 80,094 64,842 79,778 93,259

The effect of a 1% movement in the assumed rate of health care cost inflation is as follows:

Increase: Effect on the aggregate of the current service cost and the interest cost 5,593 5,724 Effect on the defined benefit obligation 77,944 74,084

Decrease: Effect on the aggregate of the current service cost and the interest cost 4,602 4,687 Effect on the defined benefit obligation 82,375 78,492

Refer to Note 42: Multi-employer Retirement Benefit Information to the Annual Financial Statements for more information regarding the Municipality's other retirement funds that is Provincially and Nationally administered.

13.2 Post-retirement Health Care Benefits Liability

Balance at beginning of Year 13,363,381 14,017,673 Contributions to Provision 362,583 396,239 Increase due to Discounting 1,170,666 1,186,743 Expenditure incurred (1,105,289) (1,081,410) Actuarial (Gains) /Losses (1,086,624) (1,155,865)

Balance at end of Year 12,704,717 13,363,381

Transfer to Current Provisions (1,198,000) (1,115,708)

Total Long Service Awards Liability 11,506,717 12,247,673 - - The Municipality provides certain post-retirement health care benefits by funding the medical aid contributions of qualifying retired members of the Municipality. According to the rules of the Medical Aid Funds, with which the Municipality is associated, a member (who is on the current Conditions of Service) is entitled to remain a continued member of such medical aid fund on retirement, in which case the Municipality is liable for a certain portion of the medical aid membership fee. The Municipality operates an unfunded defined benefit plan for these qualifying employees. No other post-retirement benefits are provided to these employees.

The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out at 30 June 2018 by Mr C Weiss, Fellow of the Actuarial Society of South Africa. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The members of the Post-employment Health Care Benefit Plan are made up as follows:

In-service Members (Employees) 33 28 Continuation Members (Retirees, widowers and orphans) 28 28

Total Members 61 56

The liability in respect of past service has been estimated as follows:

In-service Members 2,619,000 4,268,000 Continuation Members 10,086,000 9,095,000

Total Liability 12,705,000 13,363,000

The Municipality makes monthly contributions for health care arrangements to the following Medical Aid Schemes: - Hosmed - Keyhealth - LA Health - Samwumed

51 149 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

13. EMPLOYEE BENEFIT LIABILITIES (continued)

The Current-service Cost for the year ending 30 June 2019 is estimated to be R362 583, whereas the cost for the ensuing year is estimated to be R216 335 (2018: R396 239 and R362 583 respectively).

The principal assumptions used for the purposes of the actuarial valuations were as follows: Discount Rate 8.68% 9.13% Health Care Cost Inflation Rate 6.26% 7.07% Net Effective Discount Rate 2.28% 1.93% Expected Retirement Age - Females 62 58 Expected Retirement Age - Males 62 58

Movements in the present value of the Defined Benefit Obligation were as follows: Balance at the beginning of the year 13,363,381 14,017,673 Current service costs 362,583 396,239 Interest cost 1,170,666 1,186,743 Benefits paid (1,105,289) (1,081,410) Actuarial losses / (gains) (1,086,624) (1,155,865)

Total Recognised Benefit Liability 12,704,717 13,363,381 0.00 0.00 The amounts recognised in the Statement of Financial Position are as follows: Present value of fund obligations 12,704,717 13,363,381

Total Benefit Liability 12,704,717 13,363,381

The amounts recognised in the Statement of Financial Performance are as follows: Current service cost 362,583 396,239 Interest cost 1,170,666 1,186,743 Benefits paid (1,105,289) (1,081,410) Actuarial losses / (gains) (1,086,624) (1,155,865)

Total Post-retirement Benefit included in Employee Related Costs (Note 20) (658,664) (654,292)

The history of experienced adjustments is as follows: 2019 2018 2017 2016 R R R R

Present Value of Defined Benefit Obligation 12,704,717 13,363,381 14,017,673 14,655,101

Deficit 12,704,717 14,017,673 14,017,673 15,584,738

Experienced adjustments on Plan Liabilities 13,780,922 14,496,087 15,196,793 15,142,544

The effect of a 1% movement in the assumed rate of health care cost inflation is as follows:

Increase: Effect on the aggregate of the current service cost and the interest cost 1,744,700 1,820,500 Effect on the defined benefit obligation 14,079,000 14,792,000

Decrease: Effect on the aggregate of the current service cost and the interest cost 1,359,500 1,390,100 Effect on the defined benefit obligation 11,554,000 12,155,000

The Municipality expects to make a contribution of R1 197 636 (2018: R1 104 569) to the Defined Benefit Plans during the next financial year.

14. ACCUMULATED SURPLUS

The Accumulated Surplus consists of the following Internal Funds and Reserves:

Accumulated Surplus / (Deficit) due to the results of Operations (3,985,897) (9,142,734)

Total Accumulated Surplus (3,985,897) (9,142,734) 0.00 0.00 Refer to Statement of Changes in Net Assets for more detail and the movement on Accumulated Surplus.

52 150 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

15. GOVERNMENT GRANTS AND SUBSIDIES

National Equitable Share 47,820,000 39,861,400 Provincial: Health Subsidy 500,000 165,533 Unconditional Grants 48,320,000 40,026,933

Conditional Grants 14,244,181 9,903,008 National: EPWP 1,171,133 797,867 National: FMG 1,320,000 1,250,000 National: MIG 1,789,750 - Provincial: Roads 946,498 848,355 Provincial: COGHSTA (Housing Accreditation) 1,045,889 2,282,845 Provincial: Project Hopetwon - 465,202 Provincial: DPSA Grant 870,935 525,971 Provincial: NEAR - 350,000 Provincial: EPWP Renosterberg 122,435 379,768 Provincial: Pula Nala 4,000,000 - Provincial: EPWP De Aar - - National: Rural Roads Asset Management System 2,977,541 3,003,000

Total Government Grants and Subsidies 62,564,181 49,929,941

Government Grants and Subsidies: Conditional Grants - Operational 9,198,292 7,620,163 Unconditional Grants - Operational 49,365,889 42,309,778

Total Government Grants and Subsidies 58,564,181 49,929,941

Summary of Transfers: Conditions met - transferred to Revenue: Operating Expenses 58,564,181 49,929,941

Total Transfers 58,564,181 49,929,941

Unconditional Grants:

15.1 National: Equitable Share 47,820,000 39,861,400

The Municipality's Equitable Share allocation of the Local Government Sphere's share of revenue raised nationally. No funds were withheld.

15.2 Provincial: Health Subsidy

Balance unspent at beginning of year - 165,533 Current year receipts 500,000 - Conditions met - transferred to Operating Revenue (500,000) (165,533) Conditions met - transferred to Capital Revenue - - Conditions met - transferred to Other Revenue (Own Income) - - Other Adjustments / Refunds - - Conditions still to be met - transferred to Current liabilities (see Note 11) - -

To promote and support HIV Aids programmes within the Municipal area. No funds were withheld.

Conditional Grants:

15.2 Provincial: COGHSTA (Housing Accreditation)

Balance unspent at beginning of year - - Current year receipts 1,045,889 2,282,845 Conditions met - transferred to Operating Revenue (1,045,889) (2,282,845) Conditions still to be met - transferred to Current liabilities (see Note 11) - -

This grant was allocated to improve capacity within the administration of the Municipality in respect to the Housing Department. All conditions attached to the grant were met. No funds have been withheld.

53 151 PIXLEY-KA-SEME DISTRICT MUNICIPALITY PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 2019 2018 R R R R

15. GOVERNMENT GRANTS AND SUBSIDIES (continued) 15. GOVERNMENT GRANTS AND SUBSIDIES (continued)

15.4 National: Expanded Public Works Programme 15.10 Provincial: NEAR

Balance unspent at beginning of year 202,992 427,259 Balance unspent at beginning of year 1,274,130 1,274,130 Current year receipts 1,000,000 1,000,000 Current year receipts - 350,000 Conditions met - transferred to Operating Revenue (1,171,133) (797,867) Conditions met - transferred to Operating Revenue - (350,000) Repayment of funds (withheld from Equitable Share allocation) - (426,400) Conditions still to be met - transferred to Current liabilities (see Note 11) 1,274,130 1,274,130 Conditions still to be met - transferred to Current liabilities (see Note 11) 31,859 202,992 This grants is provided for disaster management within the boundries of the district. All conditions attached to the To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in grant were met. No funds have been withheld. the identified focus areas in compliance with the EPWP Guidelines. All conditions attached to the grant were met. No funds have been withheld. 15.11 Provincial: Electrification Programme

15.5 National: Financial Management Grant (FMG) Balance unspent at beginning of year 898 898 Current year receipts - - Balance unspent at beginning of year - - Conditions still to be met - transferred to Current liabilities (see Note 11) 898 898 Current year receipts 1,320,000 1,250,000 Conditions met - transferred to Operating Revenue (1,320,000) (1,250,000) This grant was allocated to improve and upgrade the electrify infrastructure and enhance the electricity capacity Conditions still to be met - transferred to Current liabilities (see Note 11) - - within the Municipality. All conditions attached to the grant were met. No funds have been withheld.

The Financial Management Grant is paid by National Treasury to municipalities to help implement the financial 15.12 Provincial: Pula Nala reforms required by the Municipal Finance Management Act (MFMA), 2003. The FMG Grant also pays for the cost of the Financial Management Internship Programme (e.g. salary costs of the Financial Management Interns). All Balance unspent at beginning of year - - conditions attached to the grant were met. No funds have been withheld. Current year receipts 4,000,000 - Conditions met - transferred to Operating Revenue (4,000,000) - Conditions still to be met - transferred to Current liabilities (see Note 11) - - 15.6 National: Municipal Infrastructure Grant (MIG)

Balance unspent at beginning of year - - The grant was allocated to expedite township revitalization and rural development initiatives through labour intensive Current year receipts 9,862,000 - methods, using the Extended Public Works Programme principles. All conditions attached to the grant were met. No Conditions met - transferred to Operating Revenue (1,789,750) - funds have been withheld. Conditions still to be met - transferred to Current liabilities (see Note 11) 8,072,250 - 15.13 Provincial: EPWP De Aar

The Municipal Infrastructure Grant (MIG) was allocated for the construction of roads, basic sewerage and water Balance unspent at beginning of year - - infrastructure as part of the upgrading of poor households, micro enterprises and social institutions. To provide for Current year receipts 200,000 - new, rehabilitation and upgrading of infrastructure within the municipal boundaries. No funds have been withheld. Conditions met - transferred to Operating Revenue - - Conditions still to be met - transferred to Current liabilities (see Note 11) 200,000 - 15.7 Provincial: Department of Roads To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in Balance unspent at beginning of year - - the identified focus areas in road infrastructure and usage. All conditions attached to the grant were met. No funds Current year receipts 946,498 848,355 have been withheld. Conditions met - transferred to Operating Revenue (946,498) (848,355) 15.14 National: Rural Roads Asset Management System Conditions still to be met - transferred to Current assets (see Note 2) - - Balance unspent at beginning of year - - The Roads Grant was allocated for the payment of the medical aid ex gratia for personnel that is and has been on Current year receipts 3,009,000 3,003,000 pension. No funds have been withheld. Conditions met - transferred to Operating Revenue (2,977,541) (3,003,000) Conditions still to be met - transferred to Current liabilities (see Note 11) 31,459 - 15.8 Provincial: Project Hopetown To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in the identified focus areas in road infrastructure and usage. All conditions attached to the grant were met. No funds Balance unspent at beginning of year - 465,202 have been withheld. Current year receipts - - Conditions met - transferred to Operating Revenue - (465,202) 15.15 Provincial: EPWP Renosterberg Conditions still to be met - transferred to Current liabilities (see Note 11) - - Balance unspent at beginning of year 134,279 - This grant was allocated to the Municipality for a cleaning project. All conditions attached to the grant were met. No Current year receipts - 514,047 funds have been withheld. Conditions met - transferred to Operating Revenue (122,435) (379,768) Conditions still to be met - transferred to Current liabilities (see Note 11) 11,843 134,279

15.9 Provincial: DPSA Grant To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in the identified focus areas in road infrastructure and usage. All conditions attached to the grant were met. No funds Balance unspent at beginning of year 1,137,109 48,080 have been withheld. Current year receipts 112,357 1,615,000 Conditions met - transferred to Operating Revenue (870,935) (525,971) 16. PUBLIC CONTRIBUTIONS AND DONATIONS Conditions still to be met - transferred to Current liabilities (see Note 11) 378,531 1,137,109 Other Donations - 473,100

The purpose of the DPSA grant is to assist the Municipality to comply with the MSCOA regulations and to upgrade its Total Public Contributions and Donations - 473,100 computer service, in order to run GIS. All conditions attached to the grant were met. No funds have been withheld. The Other Donations are represented by donated funds.

54 55 152 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

15. GOVERNMENT GRANTS AND SUBSIDIES (continued)

15.10 Provincial: NEAR

Balance unspent at beginning of year 1,274,130 1,274,130 Current year receipts - 350,000 Conditions met - transferred to Operating Revenue - (350,000) Conditions still to be met - transferred to Current liabilities (see Note 11) 1,274,130 1,274,130

This grants is provided for disaster management within the boundries of the district. All conditions attached to the grant were met. No funds have been withheld.

15.11 Provincial: Electrification Programme

Balance unspent at beginning of year 898 898 Current year receipts - - Conditions still to be met - transferred to Current liabilities (see Note 11) 898 898

This grant was allocated to improve and upgrade the electrify infrastructure and enhance the electricity capacity within the Municipality. All conditions attached to the grant were met. No funds have been withheld.

15.12 Provincial: Pula Nala

Balance unspent at beginning of year - - Current year receipts 4,000,000 - Conditions met - transferred to Operating Revenue (4,000,000) - Conditions still to be met - transferred to Current liabilities (see Note 11) - -

The grant was allocated to expedite township revitalization and rural development initiatives through labour intensive methods, using the Extended Public Works Programme principles. All conditions attached to the grant were met. No funds have been withheld.

15.13 Provincial: EPWP De Aar

Balance unspent at beginning of year - - Current year receipts 200,000 - Conditions met - transferred to Operating Revenue - - Conditions still to be met - transferred to Current liabilities (see Note 11) 200,000 -

To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in the identified focus areas in road infrastructure and usage. All conditions attached to the grant were met. No funds have been withheld.

15.14 National: Rural Roads Asset Management System

Balance unspent at beginning of year - - Current year receipts 3,009,000 3,003,000 Conditions met - transferred to Operating Revenue (2,977,541) (3,003,000) Conditions still to be met - transferred to Current liabilities (see Note 11) 31,459 -

To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in the identified focus areas in road infrastructure and usage. All conditions attached to the grant were met. No funds have been withheld.

15.15 Provincial: EPWP Renosterberg

Balance unspent at beginning of year 134,279 - Current year receipts - 514,047 Conditions met - transferred to Operating Revenue (122,435) (379,768) Conditions still to be met - transferred to Current liabilities (see Note 11) 11,843 134,279

To incentivise municipalities to expand work creation efforts through the use of labour intensive delivery methods in the identified focus areas in road infrastructure and usage. All conditions attached to the grant were met. No funds have been withheld.

16. PUBLIC CONTRIBUTIONS AND DONATIONS

Other Donations - 473,100

Total Public Contributions and Donations - 473,100

The Other Donations are represented by donated funds.

55 153 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

17. SERVICE IN-KIND CONTRIBUTIONS

Service In-kind Contribution - 1,951,874

Total Service In-kind Contribution - 1,951,874

The Other Donations are represented by the outstanding account of the Auditor-General of South Africa, which was written-off / reduced after consultation with National Treasury and an agreement reached between the two parties. The agreement resulted in a number of invoices being written back resulting the decrease of the outstanding balance.

18. RENTAL OF FACILITIES AND EQUIPMENT

Rental Revenue from Other Facilities 100,714 100,714

Total Rental of Facilities and Equipment 100,714 100,714 0.00- 0.00- Rental revenue earned on Facilities and Equipment is in respect of Non-financial Assets rented out.

19. INTEREST EARNED

External Investments: Bank Account - 42,925 Investments 1,066,477 673,543

1,066,477 716,468

Total Interest Received Interest - Fixed Deposits - 756 Interest - Notice Deposits 1,066,477 608,946 Interest - Other - 42,925

Interest - Variable Rate Instruments 1,066,477 652,627

Total Interest Earned 1,066,477 652,627

Interest Earned on Financial Assets, analysed by category of asset, is as follows: Available-for-Sale Financial Assets 1,066,477 652,627

1,066,477 652,627 0.00- 0.00- 20. OTHER REVENUE

Other Income 41,550 3,144 SETA Claims 147,802 54,514 Administration Cost 200,450 225,852 Insurance Claims Received 100,109 - Tender Documents 21,600 15,500 Contribution from Municipalities 3,995,316 2,878,646

Total Other Revenue 4,506,827 3,177,656

The amounts disclosed above for Other Revenue are in respect of services, other than described in Notes 15 to 18, rendered which are billed to or paid for by the users as the services are required according to approved tariffs. Inter- departmental Recoveries are received from other trading and economic services.

56 154 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

21. EMPLOYEE RELATED COSTS

Employee Related Costs - Salaries and Wages 27,271,297 27,074,772 Basic Salaries and Wages 24,908,137 24,396,741 Long Service Award 53,171 - Contribution to Leave Fund 196,187 194,647 Performance Bonuses 779,464 746,313 Service Bonuses 1,334,338 1,737,071 Employee Related Costs - Contributions for UIF, Pensions and Medical Aids 4,579,352 4,413,820 Medical 868,784 728,796 Pension 3,542,090 3,515,507 Industrial Council Levy 13,604 8,184 UIF 154,874 161,333 Travel, Motor Car, Accommodation, Subsistence and Other Allowances 2,380,991 1,882,034 Allowances 2,355,573 1,861,874 Pensioners Allowances 25,418 20,160 Housing Benefits and Allowances 234,569 266,481 Overtime Payments 685,051 574,046 Learnerships 142,543 - Defined Benefit Plan Expense: 450,499 423,559 Current Service Cost 362,583 396,239 Interest Cost 1,175,780 1,191,967 Net Actuarial (gains)/losses recognised (1,087,864) (1,164,647)

Total Employee Related Costs 35,744,302 34,634,712

No advances were made to employees.

Included in Employee Related Costs is an amount of R3 515 507 (2017: R3 287 683) paid by the Municipality to Defined Contribution Plans at rates specified by the rules of the plans.

Remuneration of Section 57 Employees:

Remuneration of the Municipal Manager Annual Remuneration 896,997 1,012,066 Performance Bonus 162,610 154,516 Service Bonus 74,750 88,250 Car and Other Allowances 204,352 101,277 Company Contributions to UIF, Medical and Pension Funds 2,582 113,079 Total 1,341,290 1,469,188

Remuneration of the Chief Financial Officer Annual Remuneration 1,005,600 947,160 Performance Bonus 189,712 180,229 Service Bonus 83,800 79,100 Car and Other Allowances 95,477 97,212 Company Contributions to UIF, Medical and Pension Funds 184,755 172,740 Total 1,559,344 1,476,441

Remuneration of the Infrastructure Manager Annual Remuneration 802,440 856,868 Performance Bonus 146,838 141,476 Service Bonus 66,870 63,750 Car and Other Allowances 191,375 98,942 Company Contributions to UIF, Medical and Pension Funds 3,363 1,884 Total 1,210,886 1,162,920

Remuneration of the Chief Audit Executive Annual Remuneration 722,304 676,676 Performance Bonus 133,466 128,615 Service Bonus 49,430 49,430 Car and Other Allowances 179,838 93,018 Company Contributions to UIF, Medical and Pension Funds 6,082 108,652 Total 1,091,120 1,056,391

57 155 PIXLEY-KA-SEME DISTRICT MUNICIPALITY PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 2019 2018 R R R R

21. EMPLOYEE RELATED COSTS (continued) 26. FINANCE COSTS

Remuneration of the Chief Corporate Services Current Borrowings 111,848 120,225 Annual Remuneration 858,416 792,277 Finance Leases 1,251,531 1,554,021 Performance Bonus 146,838 141,476 Overdue Creditors 7,992 3,289 Service Bonus - 99,333 Car and Other Allowances 190,699 88,533 Total Interest Paid on External Borrowings 1,371,371 1,677,535 Company Contributions to UIF, Medical and Pension Funds 13,125 128,244 Total 1,209,078 1,249,863 The weighted average capitalisation rate on funds borrowed generally is 5.27% per annum (2017: 5.27% per annum).

No compensation was payable to key management personnel in terms of GRAP 25 as at 30 June. 27. MATERIALS 22. REMUNERATION OF COUNCILLORS Other Projects 1,797,844 2,841,557 Executive Mayor 751,711 807,913 Speaker 637,721 647,531 Total Materials 1,797,844 2,841,557 Members of Mayoral Committee 1,891,239 1,819,608 Councillors 1,042,969 931,268 28. GRANTS AND SUBSIDIES PAID

Project Pula Nala 4,000,000 - Total Councillors' Remuneration 4,323,640 4,206,320

Total Grants and Subsidies 4,000,000 - Remuneration of Councillors:

29. GENERAL EXPENSES In-kind Benefits The Councillors occupying the positions of Mayor, Speaker, Chief Whip and four members of the Executive Included in General Expenses are the following: Committee of the Municipality serve in a full-time capacity. They are provided with office accommodation and secretarial support at the expense of the Municipality in order to enable them to perform their official duties. Advertisements 288,071 102,403 Consulting Cost 2,420,313 2,093,367 Insurance Casualty - - Councillors may utilise official Council transportation when engaged in official duties. The Mayor has use of a Council Administration Cost 402,450 225,852 owned vehicle for official duties. Bank Cost 72,041 66,471 Protective Clothing 77,667 41,827 Training 379,281 316,507 23. DEPRECIATION AND AMORTISATION Audit Cost 1,466,086 1,166,397 Printing and Stationary 474,780 208,305 Depreciation: Property, Plant and Equipment 2,077,901 1,826,245 Property Tax 97,338 54,764 Amortisation: Intangible Assets 1,477 5,169 Electricity and Water 206,397 220,325 Office Expenditure 24,458 35,357 Total Depreciation and Amortisation 2,079,378 1,831,414 Congress Cost 36,881 52,053 Membership Fees 596,786 554,104 0.00- Skills Development Levy 313,979 292,967 24. IMPAIRMENT LOSSES Licences - 17,544 Audit Committee 71,898 71,609 23.1 Impairment Losses on Financial Assets Travel and Subsistance 2,992,766 2,470,095 Fuel and Oil - 15,658 Cellphone & Telephone 256,408 344,940 Impairment Losses Recognised: - 1,916,038 Entertainment : Councillors 1,172,819 379,059 Receivables from Exchange Transactions - 1,916,038 Postage - 1,316 Water Samples 269,485 213,565 Impairment Losses Reversed: (27,911) - Insurance General 269,325 226,696 Receivables from Exchange Transactions (27,911) - Operating Lease Assets - 56,999 Compensation Commissioner 185,118 161,840 (27,911) 1,916,038 Penalties and Interest 53,326 -

23.2 Bad Debts Written-off Total General Expenses 12,175,674 9,390,020

Bad Debts Written-off: - - The amounts disclosed above for Other General Expenses are in respect of costs incurred in the general Receivables from Exchange Transactions - - management of the Municipality and not direct attributable to a specific service or class of expense. Inter- departmental Charges are charged to other trading and economic services for support services rendered. - - No other extra-ordinary expenses were incurred. Total Impairment Losses (27,911) 1,916,038 30. GAINS / (LOSSES) ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT 25. REPAIRS AND MAINTENANCE Proceeds on Sale of Assets 75,000 1,814,321 Other Assets 1,429,430 1,000,187 Assets Disposed at Carrying Value: (262,634) (1,271,157) Cost of Disposed Assets (762,559) (1,881,104) Total Repairs and Maintenance 1,429,430 1,000,187 Accumulated Depreciation of Disposed Assets 499,925 609,947

Total Gains / Losses on Disposal of Capital Assets (187,634) 543,164

31. CHANGE IN ACCOUNTING POLICY

No Changes in Accounting Policies occurred during the year.

58 59 156 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

26. FINANCE COSTS

Current Borrowings 111,848 120,225 Finance Leases 1,251,531 1,554,021 Overdue Creditors 7,992 3,289

Total Interest Paid on External Borrowings 1,371,371 1,677,535

The weighted average capitalisation rate on funds borrowed generally is 5.27% per annum (2017: 5.27% per annum).

27. MATERIALS

Other Projects 1,797,844 2,841,557

Total Materials 1,797,844 2,841,557

28. GRANTS AND SUBSIDIES PAID

Project Pula Nala 4,000,000 -

Total Grants and Subsidies 4,000,000 -

29. GENERAL EXPENSES

Included in General Expenses are the following: Advertisements 288,071 102,403 Consulting Cost 2,420,313 2,093,367 Insurance Casualty - - Administration Cost 402,450 225,852 Bank Cost 72,041 66,471 Protective Clothing 77,667 41,827 Training 379,281 316,507 Audit Cost 1,466,086 1,166,397 Printing and Stationary 474,780 208,305 Property Tax 97,338 54,764 Electricity and Water 206,397 220,325 Office Expenditure 24,458 35,357 Congress Cost 36,881 52,053 Membership Fees 596,786 554,104 Skills Development Levy 313,979 292,967 Licences - 17,544 Audit Committee 71,898 71,609 Travel and Subsistance 2,992,766 2,470,095 Fuel and Oil - 15,658 Cellphone & Telephone 256,408 344,940 Entertainment : Councillors 1,172,819 379,059 Postage - 1,316 Water Samples 269,485 213,565 Insurance General 269,325 226,696 Operating Lease Assets - 56,999 Compensation Commissioner 185,118 161,840 Penalties and Interest 53,326 -

Total General Expenses 12,175,674 9,390,020

The amounts disclosed above for Other General Expenses are in respect of costs incurred in the general management of the Municipality and not direct attributable to a specific service or class of expense. Inter- departmental Charges are charged to other trading and economic services for support services rendered.

No other extra-ordinary expenses were incurred.

30. GAINS / (LOSSES) ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT

Proceeds on Sale of Assets 75,000 1,814,321 Assets Disposed at Carrying Value: (262,634) (1,271,157) Cost of Disposed Assets (762,559) (1,881,104) Accumulated Depreciation of Disposed Assets 499,925 609,947

Total Gains / Losses on Disposal of Capital Assets (187,634) 543,164

31. CHANGE IN ACCOUNTING POLICY

No Changes in Accounting Policies occurred during the year.

59 157 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

32. CORRECTION OF ERROR

32.1 VAT review

During the year management reviewed its VAT affairs for the preceeding years. It was found that not all Input VAT was correctly claimed. These amounts were claimed in the current year as allowed by the VAT Act.

The effect of the correction is as follows:

Statement of Financial Position: Increase (decrease) in VAT Receivable 611,897 611,897 (Increase) decrease in Accumulated Surplus (611,897) (611,897)

- -

32.2 Prior year commitments

Duirng the preparation of the 2019 commitments register, management found that commitments were not correctly disclosed in the 2018 annual financial statements.

The effect of the correction is as follows:

Notes to the Annual Financial Statements: Increase (decrease) in Commitments - 1,856,757

32.3 Assets disposed off in prior year not accounted for

During the verification of the municipality's movable assets, management discovered that a vehicle written-off in a prior year was not removed from the asset register. The adjustment was made retrospectively.

The effect of the correction is as follows:

Statement of Financial Position: Increase (decrease) in Property, Plant and Equipment (44,353) (44,353) (Increase) decrease in Accumulated Surplus 44,353 43,467

Statement of Financial Performance: Increase (decrease) in Depreciation and Amortisation - 886

- -

32.4 Nashua creditor adjustment

During the current year, management was informed that the balance owed to Nashua, as previously reported, is not to be paid back. As this arrangement was made prior to 1 July 2017, this was adjusted retrospectively.

The effect of the correction is as follows:

Statement of Financial Position: Increase (decrease) in Payables from Exchange Transactions 1,708,458 1,708,458 (Increase) decrease in Accumulated Surplus (1,708,458) (1,235,358)

Statement of Financial Performance: (Increase) decrease in Donations Received - (473,100)

- -

60 158 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 R R

33. CHANGE IN ACCOUNTING ESTIMATES

33.1 Review of Residual Values and Estimated Useful Lives

The residual values, estimated useful lives and depreciation method were reviewed at 30 June 2017. Adjustments to the useful lives affect the amount of depreciation for the current year and is expected to affect future periods as well. The adjustments are as follows:

Increase / (Decrease) in Depreciation due to adjustments to Useful Lives of PPE (164,537) (207,100) Increase / (Decrease) in Amortisation due to adjustments to Useful Lives of Intangible Assets (39,701) -

Increase / (Decrease) in Depreciation and Amortisation (204,238) (207,100)

Depreciation and Amortisation as previously stated 2,283,616 2,038,514 Adjustment due to Change in Accounting Estimate (204,238) (207,100)

Depreciation and Amortisation as per Note 22 2,079,378 1,831,414

34. CASH GENERATED BY OPERATIONS

Surplus / (Deficit) for the Year 5,156,838 (604,866) Adjustment for: Donations Received - - Service In-kind Contributions - (1,951,874) Depreciation and Amortisation 2,079,378 1,831,414 Losses / (Gains) on Disposal of Property, Plant and Equipment 187,634 (543,164) Fair Value Adjustment on Investment Property - - Contribution to Post-retirement Health Care Benefits (654,790) (657,850) Contribution to Impairment Provision - - Bad Debts Written-off - - Operating surplus before working capital changes 6,769,060 (1,926,340)

Decrease/(Increase) in Receivables from Exchange Transactions (1,639,970) 1,380,334 Decrease/(Increase) in VAT Receivable 506,468 240,082 Decrease/(Increase) in Operating Lease Assets 11,764 5,396 Increase/(Decrease) in Payables from Exchange Transactions (276,917) 1,562,732 Increase/(Decrease) in Conditional Grants and Receipts 7,251,563 368,305

Cash generated by / (utilised in) Operations 12,621,968 1,630,508

35. NON-CASH INVESTING AND FINANCING TRANSACTIONS

During the 2019 financial year, the municipality acquired equipment of R103 190 (2018: R3 136 350) under a finance lease. Any acquisition will be reflected in the cash flow statement over the term of the finance lease via lease repayments.

36. FINANCING FACILITIES

Unsecured Fleet Card Facility, reviewed annually and payable monthly: - Amount used - - - Amount unused 100,000 100,000

- -

37. UTILISATION OF LONG-TERM LIABILITIES RECONCILIATION

Long-term Liabilities (See Note 12) 5,701,722 4,159,763 Used to finance Property, Plant and Equipment - at cost (5,701,722) (4,159,763)

Sub-total - -

Cash set aside for the Repayment of Long-term Liabilities - -

Cash invested for Repayment of Long-term Liabilities - -

Long-term Liabilities have been utilised in accordance with the Municipal Finance Management Act. Sufficient cash is available to ensure that Long-term Liabilities can be repaid on the scheduled redemption dates.

61 159 PIXLEY-KA-SEME DISTRICT MUNICIPALITY PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

2019 2018 2019 2018 R R R R

38. UNAUTHORISED, IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE DISALLOWED 39. ADDITIONAL DISCLOSURES IN TERMS OF MUNICIPAL FINANCE MANAGEMENT ACT

38.1 Unauthorised Expenditure 39.1 Contributions to organised local government - SALGA

Reconciliation of Unauthorised Expenditure: Opening Balance - - Opening balance 6,597,902 2,220,039 Council Subscriptions 499,058 500,000 Unauthorised Expenditure current year 251,246 4,377,863 Amount Paid - current year (974,058) (500,000) Condoned or written off by Council (6,597,902) - Amount Paid - previous years - - Transfer to Receivables for recovery (see Note 2) - - Unauthorised Expenditure awaiting authorisation 251,246 6,597,902 Balance Prepaid (included in Debtors) (475,000) -

Incident Disciplinary Steps / Criminal Proceedings 39.2 Audit Fees Budgeted Votes exceeded: Vote 2: Municipal Manager - R0 (2018: R8 659) Opening Balance 469,297 1,784,685 Vote 3: Budget and Treasury - R0 (2018: R1 151 284) No disciplinary steps have been taken as no individual or group of Current year audit fee 1,685,999 1,344,751 Vote 4: Human Resource Management - R0 (2018: R27 576) individuals have been identified to be the guilty of the expenses incurred. Current year interest 7,992 3,289 Vote 7: Economic Development and Planning / Development and Infrastructure - R0 (2018: R623 Based on the nature of the expenditure items, the expenditure is not Amount Paid - current year (270,703) (446,178) 505) recoverable. No criminal or disciplinary steps have been taken as a result Amount Paid - prior year (469,297) - of the expenditures / losses. Council has written off the expenditure. Vote 8: Economic Development and Planning / IDP - R0 (2018: R2 282 910) Service In-kind benefit received - (2,217,249) Vote 9: Health - R197 164 (2018: R2 282 910) Vote 11: Public Safety - R54 082 (2018: R283 928) Balance Unpaid (included in Creditors) 1,423,289 469,297

38.2 Fruitless and Wasteful Expenditure 39.3 VAT

Reconciliation of Fruitless and Wasteful expenditure: The net of VAT input payables and VAT output receivables are shown in Notes 3. All VAT returns have been Opening balance 938,034 934,745 submitted by the due date throughout the year. Fruitless and Wasteful Expenditure current year 71,149 3,289 Correction of Prior Year Estimate (3,289) - 39.4 PAYE, Skills Development Levy and UIF Condoned or written off by Council - - Fruitless and Wasteful Expenditure awaiting condonement 1,005,894 938,034 Opening Balance - - Current year Payroll Deductions 6,858,807 6,482,415 Incident Disciplinary Steps / Criminal Proceedings Amount Paid - current year (6,858,807) (6,482,415) The Fruitless and Wasteful Expenditure identified was inspected and it can be categorised as follows: Council to condone expenditure. The municipality incurred interest of R64 207 (2018: R3 289) on the account of the Auditor-General Balance Unpaid (included in Creditors) - - and SARS (in respect to employee taxes). This is the result of the balance outstanding at yearend, which could not be paid by the municipality due to cash flow constraints. During the 2019 financial year, the R3 289 incurred in the previous year was reversed by the Auditor-General. 39.5 Pension and Medical Aid Deductions

38.3 Irregular Expenditure Opening Balance - - Current year Payroll Deductions and Council Contributions 7,933,614 7,138,269 Reconciliation of Irregular Expenditure: Amount Paid - current year (7,933,614) (7,138,269) Opening balance 4,886,061 1,506,829 Amount Paid - previous years - - Irregular Expenditure current year 2,118,600 2,471,733 Irregular Expenditure current year (additionally identified) 662,691 907,499 Balance Unpaid (included in Creditors) - - Written off by Council (7,004,661) - Irregular Expenditure awaiting write-off 662,691 4,886,061 39.6 Non-Compliance with the Municipal Finance Management Act

Incident Disciplinary Steps / Criminal Proceedings The Municipality incurred non-compliance to the following section of the indicated chapters of the MFMA during the The Irregular Expenditure identified was inspected and it can be categorised as follows: year under review: Original tax Clearance certificates not provided: Instance occurred whereby the municipality acquired services in excess of R15 000 from providers for which it did not have an Orignal Tax Certificate = R0 Description Chapter Section Sub-section (2018: R76 322). No disciplinary steps have been taken as no individual or group of Unauthorised, Irregular or Fruitless and Wasteful Expenditure 4 32 4 Preferential procurement not followed: The municipality incurred expenditure in excess of R30 000 individuals have been identified to be the guilty of the expenses incurred. General Financial Management Functions 8 62 1 whereby the PPPFA stipulations and requirements were not followed = R886 605 (2018: R340 751). Based on the nature of the expenditure items, the expenditure is not Revenue Management 8 64 2 SCM process not followed: The Municipality incurred expenditure amounting to R1 348 928 (2018: R2 recoverable. No criminal or disciplinary steps have been taken as a result Expenditure Management 8 65 1 & 2 101 313) where the SCM process was not followed. of the expenditures / losses. Council has written off the expenditure. Disclosures on Intergovernmental and Other Allocations 12 123 Contract amount exceeded: The Municipality incurred expenditure above the contracted amount of Disclosures concerning Councillors, Directors and Officials 12 124 R545 759 (2018: R0) during the year. Other Compulsory Disclosures 12 125 Audit Committees 14 166 Possible irregular expenditure amounting to R662 691 is still under investigation and has been included in the above. The full extent is still under investigation. 39.7 Deviation from, and ratification of minor breaches of, the Procurement Processes

In terms of section 36(2) of the Municipal Supply Chain Management Regulations approved by the council, any deviation from the Supply Chain Management Policy needs to be approved / condoned by the Municipal Manager, noted by Council and bids where the formal procurement processes could not be followed must be noted in the Annual Financial Statements.

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39. ADDITIONAL DISCLOSURES IN TERMS OF MUNICIPAL FINANCE MANAGEMENT ACT

39.1 Contributions to organised local government - SALGA

Opening Balance - - Council Subscriptions 499,058 500,000 Amount Paid - current year (974,058) (500,000) Amount Paid - previous years - -

Balance Prepaid (included in Debtors) (475,000) -

39.2 Audit Fees

Opening Balance 469,297 1,784,685 Current year audit fee 1,685,999 1,344,751 Current year interest 7,992 3,289 Amount Paid - current year (270,703) (446,178) Amount Paid - prior year (469,297) - Service In-kind benefit received - (2,217,249)

Balance Unpaid (included in Creditors) 1,423,289 469,297

39.3 VAT

The net of VAT input payables and VAT output receivables are shown in Notes 3. All VAT returns have been submitted by the due date throughout the year.

39.4 PAYE, Skills Development Levy and UIF

Opening Balance - - Current year Payroll Deductions 6,858,807 6,482,415 Amount Paid - current year (6,858,807) (6,482,415)

Balance Unpaid (included in Creditors) - -

39.5 Pension and Medical Aid Deductions

Opening Balance - - Current year Payroll Deductions and Council Contributions 7,933,614 7,138,269 Amount Paid - current year (7,933,614) (7,138,269) Amount Paid - previous years - -

Balance Unpaid (included in Creditors) - -

39.6 Non-Compliance with the Municipal Finance Management Act

The Municipality incurred non-compliance to the following section of the indicated chapters of the MFMA during the year under review:

Description Chapter Section Sub-section Unauthorised, Irregular or Fruitless and Wasteful Expenditure 4 32 4 General Financial Management Functions 8 62 1 Revenue Management 8 64 2 Expenditure Management 8 65 1 & 2 Disclosures on Intergovernmental and Other Allocations 12 123 Disclosures concerning Councillors, Directors and Officials 12 124 Other Compulsory Disclosures 12 125 Audit Committees 14 166

39.7 Deviation from, and ratification of minor breaches of, the Procurement Processes

In terms of section 36(2) of the Municipal Supply Chain Management Regulations approved by the council, any deviation from the Supply Chain Management Policy needs to be approved / condoned by the Municipal Manager, noted by Council and bids where the formal procurement processes could not be followed must be noted in the Annual Financial Statements.

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39. ADDITIONAL DISCLOSURES IN TERMS OF MUNICIPAL FINANCE MANAGEMENT ACT (continued)

The following deviations from the SCM stipulations in terms of the municipality's supply chain management policy were ractified by the Municipal Manager and reported to Council:

Reason Month Emergency Exceptional Service Provider Total Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the July 2018 - 27,329 5,109 32,438 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the August 2018 - 106,475 9,572 116,047 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the September 2018 - 12,758 26,968 39,726 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the October 2018 - 146,593 47,903 194,497 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the November 2018 - 29,548 9,128 38,677 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the December 2018 3,112 35,337 34,954 73,403 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the January 2019 - 12,977 15,125 28,102 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the minimum required number of quotations could not be February 2019 21,603 32,799 6,330 60,732 obtained. Emergency cases totalling R3 186 are also included. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the March 2019 - 84,183 158,605 242,787 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the April 2019 - 128,375 5,826 134,201 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the May 2019 - 21,656 16,837 38,493 minimum required number of quotations could not be obtained. Reason for the deviations in the month are the fact that a number of exceptional cases occurred where the June 2019 - 4,585 45,551 50,136 minimum required number of quotations could not be obtained.

24,714 642,617 381,907 1,049,239

40. COMMITMENTS FOR EXPENDITURE

40.1 Capital Commitments

Commitments in respect of Capital Expenditure: - Approved and Contracted for:- 4,834,628 1,856,757 Other 4,834,628 1,856,757

Total Capital Commitments 4,834,628 1,856,757

This expenditure will be financed from: Government Grants 4,834,628 1,856,757 Own Resources - -

4,834,628 1,856,757

40.2 Lease Commitments

Non-cancellable Operating Lease Commitments are disclosed in Note 12.

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41. FINANCIAL INSTRUMENTS

41.1 Classification

FINANCIAL ASSETS: In accordance with GRAP 104.13 the Financial Assets of the Municipality are classified as follows:

Financial Assets Classification

Receivables from Exchange Transactions Property Rental Debtors Amortised cost 4,182 61,705 Shared Services Amortised cost 1,797,119 747,315 Sundry Debtors Amortised cost 679,482 31,793

Cash and Cash Equivalents Call Deposits Amortised cost 10,052,363 3,034,073 Bank Balances Amortised cost 1,996,079 219,986

SUMMARY OF FINANCIAL ASSETS

Financial Assets at Amortised Cost: Receivables from Exchange Transactions Property Rental Debtors 4,182 61,705 Receivables from Exchange Transactions Shared Services 1,797,119 747,315 Receivables from Exchange Transactions Sundry Debtors 679,482 31,793

Cash and Cash Equivalents Call Deposits 10,052,363 3,034,073 Cash and Cash Equivalents Bank Balances 1,996,079 219,986

Total Financial Assets 14,529,225 4,094,872

FINANCIAL LIABILITIES: In accordance with GRAP 104.13 the Financial Liabilities of the Municipality are classified as follows:

Financial Liabilities Classification

Long-term Liabilities Annuity Loans Amortised cost 2,373,880 1,053,966

Payables from Exchange Transactions Trade Creditors Amortised cost 1,722,358 1,403,069 Payments received in Advance Amortised cost 20,741 33,138 Performance Bonuses Amortised cost 779,464 746,313 Staff Bonuses Amortised cost 992,193 876,888 Advances from Road Department Amortised cost 240,750 240,750 Other Creditors Amortised cost 474,135 1,288,016 Accrued Leave Amortised cost 1,835,914 1,808,537

Current Portion of Long-term Liabilities Annuity Loans Amortised cost 600,574 526,983

SUMMARY OF FINANCIAL LIABILITIES

Financial Liabilities at Amortised Cost: Long-term Liabilities Annuity Loans 2,373,880 1,053,966

Payables from Exchange Transactions Trade Creditors 1,722,358 1,403,069 Payables from Exchange Transactions Payments received in Advance 20,741 33,138 Payables from Exchange Transactions Performance Bonuses 779,464 746,313 Payables from Exchange Transactions Staff Bonuses 992,193 876,888 Payables from Exchange Transactions Advances from Road Department 240,750 240,750 Payables from Exchange Transactions Other Creditors 474,135 1,288,016 Payables from Exchange Transactions Accrued Leave 1,835,914 1,808,537

Current Portion of Long-term Liabilities Annuity Loans 600,574 526,983

Total Financial Liabilities 9,040,010 7,977,660 0.00- 0.00-

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41. FINANCIAL INSTRUMENTS (continued)

41.2 Capital Risk Management

The Municipality manages its capital to ensure that the Municipality will be able to continue as a going concern while delivering sustainable services to consumers through the optimisation of the debt and equity balance. The Municipality’s overall strategy remains unchanged from 2016.

The capital structure of the Municipality consists of debt, which includes the Long-term Liabilities disclosed in Note 12, Cash and Cash Equivalents and Equity, comprising Funds, Reserves and Accumulated Surplus as disclosed in Note 14 and the Statement of Changes in Net Assets.

Gearing Ratio In terms of the Municipality’s five year financial plan, financial benchmarks, year-on-year in respect of the debt-to-equity ratio, is reflected at 95,00%, reducing 90,00%. This aggressive ratio is as a result of the development challenges faced by the Municipality. The rate of borrowing is well below market related rates.

The gearing ratio at the year-end was as follows:

Debt 5,701,722 4,159,763 Cash and Cash Equivalents 12,048,442 3,254,059

Net Debt 17,750,164 7,413,822

Equity 3,985,897 9,142,734

Net debt to equity ratio 445.32% 81.09%

Debt is defined as Long-term Liabilities, together with its Short-term Portion.

Equity includes all Funds and Reserves of the Municipality, disclosed as Net Assets in the Statement of Financial Performance and Net Debt as described above.

41.3 Financial Risk Management Objectives

The Accounting Officer has overall responsibility for the establishment and oversight of the Municipality's risk management framework. The Municipality's risk management policies are established to identify and analyse the risks faced by the Municipality, to set appropriate risk limits and controls and to monitor risks and adherence to limits.

Due to the largely non-trading nature of activities and the way in which they are financed, Municipalities are not exposed to the degree of financial risk faced by business entities. Financial Instruments play a much more limited role in creating or changing risks that would be typical of listed companies to which the IAS's mainly apply. Generally, Financial Assets and Liabilities are generated by day-to-day operational activities and are not held to manage the risks facing the Municipality in undertaking its activities.

The Department Financial Services monitors and manages the financial risks relating to the operations through internal policies and procedures. These risks include interest rate risk, credit risk and liquidity risk. Compliance with policies and procedures is reviewed by the internal auditors on a continuous basis, and annually by external auditors. The Municipality does not enter into or trade financial instruments for speculative purposes.

Internal audit, responsible for initiating a control framework and monitoring and responding to potential risk, reports periodically to the Municipality’s audit committee, an independent body that monitors the effectiveness of the internal audit function.

Further quantitative disclosures are included throughout these Annual Financial Statements.

41.4 Significant Risks

It is the policy of the Municipality to disclose information that enables the user of its Annual Financial Statements to evaluate the nature and extent of risks arising from Financial Instruments to which the Municipality is exposed on the reporting date.

The Municipality has exposure to the following risks from its operations in Financial Instruments: - Credit Risk; - Liquidity Risk; and - Market Risk.

Risks and exposures are disclosed as follows:

Market Risk Market Risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Municipality’s income or the value of its holdings in Financial Instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Credit Risk Credit Risk is the risk of financial loss to the Municipality if a customer or counterparty to a Financial Instrument fails to meet its contractual obligations and arises principally from the Municipality’s receivables from customers and investment securities.

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41. FINANCIAL INSTRUMENTS (continued)

Liquidity Risk Liquidity Risk is the risk that the Municipality will encounter difficulty in meeting the obligations associated with its Financial Liabilities that are settled by delivering cash or another financial asset. The Municipality’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Municipality’s reputation.

Liquidity Risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in relation to cash flow requirements. Liabilities are managed by ensuring that all contractual payments are met on a timeous basis and, if required, additional new arrangements are established at competitive rates to ensure that cash flow requirements are met.

A maturity analysis for Financial Liabilities (where applicable) that shows the remaining undiscounted contractual maturities is disclosed in Note 41.8 to the Annual Financial Statements.

41.5 Market Risk

The Municipality’s activities expose it primarily to the financial risks of changes in interest rates (see Note 41.7 below). No formal policy exists to hedge volatilities in the interest rate market.

There has been no change to the Municipality’s exposure to market risks or the manner in which it manages and measures the risk.

41.5.1 Foreign Currency Risk Management

The Municipality’s activities do not expose it to the financial risks of foreign currency and therefore has no formal policy to hedge volatilities in the interest rate market.

41.5.2 Interest Rate Risk Management

Interest Rate Risk is defined as the risk that the fair value or future cash flows associated with a financial instrument will fluctuate in amount as a result of market interest changes.

Potential concentrations of interest rate risk consist mainly of variable rate deposit investments, long-term receivables, consumer debtors, other debtors, bank and cash balances.

The Municipality limits its counterparty exposures from its money market investment operations by only dealing with Absa Bank, First National Bank, Nedbank and Standard Bank. No investments with a tenure exceeding twelve months are made.

Consumer Debtors comprise of a large number of ratepayers, dispersed across different industries and geographical areas. Consumer debtors are presented net of a provision for impairment.

In the case of debtors whose accounts become in arrears, it is endeavored to collect such accounts by "levying of penalty charges", "demand for payment", "restriction of services" and, as a last resort, "handed over for collection", whichever procedure is applicable in terms of Council's Credit Control and Debt Collection Policy. Consumer Deposits are increased accordingly.

Long-term Receivables and Other Debtors are individually evaluated annually at Balance Sheet date for impairment or discounting. A report on the various categories of debtors is drafted to substantiate such evaluation and subsequent impairment / discounting, where applicable.

The Municipality is not exposed to credit interest rate risk as the Municipality has no borrowings.

The Municipality’s exposures to interest rates on Financial Assets and Financial Liabilities are detailed in the Credit Risk Management section of this note.

Interest Rate Sensitivity Analysis The sensitivity analysis has been determined based on the exposure to interest rates at the Statement of Financial Position date. The analysis is prepared by averaging the amount of the investment at the beginning of the financial year and the amount of the investment at the end of the financial year. A 100 basis point increase or decrease was used, which represents management’s assessment of the reasonably possible change in interest rates. The short and long-term financial instruments at year-end with variable interest rates are set out in Note 56.8 below:

Cash and Cash Equivalents: If interest rates had been 100 basis points higher / lower and all other variables were held constant, the Municipality’s: Surplus for the year ended 30 June 2019 would have decreased by R113 724 (2018: R41 925). This is mainly attributable to the Municipality’s exposure to interest rates on its variable rate investments.

41.6 Credit Risk Management

Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Municipality. The Municipality has a sound credit control and debt collection policy and obtains sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Municipality uses its own trading records to assess its major customers. The Municipality’s exposure of its counterparties are monitored regularly.

Potential concentrations of credit rate risk consist mainly of variable rate deposit investments, long-term receivables, consumer debtors, other debtors, bank and cash balances. 67 165 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

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41. FINANCIAL INSTRUMENTS (continued)

Investments/Bank, Cash and Cash Equivalents The Municipality limits its counterparty exposures from its money market investment operations (financial assets that are neither past due nor impaired) by only dealing with Absa Bank, First National Bank, Nedbank and Standard Bank. No investments with a tenure exceeding twelve months are made.

Trade and Other Receivables Trade and Other Receivables are amounts owed by consumers and are presented net of impairment losses. The Municipality has a credit risk policy in place and the exposure to credit risk is monitored on an ongoing basis. The Municipality is compelled in terms of its constitutional mandate to provide all its residents with basic minimum services without recourse to an assessment of creditworthiness.

There were no material changes in the exposure to credit risk and its objectives, policies and processes for managing and measuring the risk during the year under review. The Municipality’s maximum exposure to credit risk is represented by the carrying value of each financial asset in the Statement of Financial Position, without taking into account the value of any collateral obtained. The Municipality has no significant concentration of credit risk, with exposure spread over a large number of consumers, and is not concentrated in any particular sector or geographical area.

The Municipality establishes an allowance for impairment that represents its estimate of anticipated losses in respect of trade and other receivables.

Payment of accounts of consumer debtors, who are unable to pay, are renegotiated as an ongoing customer relationship in response to an adverse change in the circumstances of the customer in terms of the Credit Control and Debt Collection Policy.

Long-term Receivables and Other Debtors are individually evaluated annually at reporting date for impairment or discounting. A report on the various categories of debtors is drafted to substantiate such evaluation and subsequent impairment / discounting, where applicable.

The Municipality does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Municipality defines counterparties as having similar characteristics if they are related entities. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings.

The maximum credit and interest risk exposure in respect of the relevant financial instruments is as follows:

Receivables from Exchange Transactions 4,633,249 3,025,097 Bank, Cash and Cash Equivalents 12,048,442 3,254,059

Maximum Credit and Interest Risk Exposure 16,681,691 6,279,156

The major concentrations of credit risk that arise from the Municipality's receivables in relation to customer classification are as follows: % % Other Debtors: - Other not Classified 100% 100%

Total Credit Risk 100% 100%

Bank and Cash Balances ABSA Bank Ltd 12,048,442 3,254,059

Total Bank and Cash Balances 12,048,442 3,254,059 - - Credit quality of Financial Assets: The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

Receivables from Exchange Transactions Group 1 4,633,249 3,025,097 Group 2 - - Group 3 - -

Total Receivables from Exchange Transactions 4,633,249 3,025,097

Credit quality Groupings: Group 1 - High certainty of timely payment. Liquidity factors are strong and the risk of non-payment is small. Group 2 - Reasonable certainty of timely payment. Liquidity factors are sound, although ongoing funding needs may enlarge financing requirement. The risk of non- payment is small. Group 3 - Satisfactory liquidity factors and other factors which qualify the entity as investment grade. However, the risk factors of non-payment are larger.

None of the financial assets that are fully performing have been renegotiated in the last year.

68 166 PIXLEY-KA-SEME DISTRICT MUNICIPALITY NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019

41. FINANCIAL INSTRUMENTS (Continued)

41.7 Liquidity Risk Management

Ultimate responsibility for liquidity risk management rests with the Council, which has built an appropriate liquidity risk management framework for the management of the Municipality’s short, medium and long-term funding and liquidity management requirements. The Municipality manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in Note 36 is a listing of additional undrawn facilities that the Municipality has at its disposal to further reduce liquidity risk (cash).

Liquidity and Interest Risk Tables The Municipality ensures that it has sufficient cash on demand or access to facilities to meet expected operational expenses through the use of cash flow forecasts.

The following tables detail the Municipality’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the municipality can be required to pay. The table includes both interest and principal cash flows.

Note Average 6 Months 6 - 12 1 - 2 2 - 5 More than Description ref in effective Total AFS Interest Rate or less Months Years Years 5 Years # % R R R R R 30 June 2019

Non-interest Bearing 6,143,827 6,143,827 - - - - - Payables from Exchange transactions 10 0.00% 6,143,827 6,143,827 - - - -

Fixed Interest Rate Instruments 6,347,076 948,170 972,710 2,073,604 2,352,591 - - Standard Bank 12 Various 2,318,897 437,582 437,582 875,163 568,571 - - Nashua 12 Various 4,028,179 510,589 535,129 1,198,441 1,784,021 -

12,490,903 7,091,997 972,710 2,073,604 2,352,591 -

30 June 2018

Non-interest Bearing 6,420,744 6,420,744 - - - - - Payables from Exchange transactions 10 0.00% 6,420,744 6,420,744 - - - -

Fixed Interest Rate Instruments 8,816,636 1,078,518 1,078,743 1,741,648 4,917,727 - - Standard Bank 12 11.00% 642,785 321,280 321,505 - - - - Nashua 12 Various 8,173,851 757,238 757,238 1,741,648 4,917,727 -

15,237,380 7,499,262 1,078,743 1,741,648 4,917,727 - 6 6 12 36

The Municipality did not have access to financing facilities at the reporting date. The Municipality expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets. The Municipality expects to maintain current debt to equity ratio. This will be achieved through increased service tariff charges and the increased use of unsecured bank loan facilities.

41.8 Other Price Risks

The Municipality is not exposed to equity price risks arising from equity investments as the Municipality does not trade these investments.

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42. MULTI-EMPLOYER RETIREMENT BENEFIT INFORMATION

The Municipality makes provision for post-retirement benefits to eligible councillors and employees, who belong to different pension schemes.

All councillors belong to the Pension Fund for Municipal Councillors.

Employees belong to a variety of approved Pension and Provident Funds as described below.

These funds are governed by the Pension Funds Act and include both defined benefit and defined contribution schemes.

All of these afore-mentioned funds are multi-employer plans and are subject to either a tri-annual, bi-annual or annual actuarial valuation, details which are provided below.

Sufficient information is not available to use defined benefit accounting for the pension and retirement funds, due to the following reasons:- (i) The assets of each fund are held in one portfolio and are not notionally allocated to each of the participating employers. (ii) One set of financial statements are compiled for each fund and financial statements are not drafted for each participating employer. (iii) The same rate of contribution applies to all participating employers and no regard is paid to differences in the membership distribution of the participating employers.

It is therefore seen that each fund operates as a single entity and is not divided into sub-funds for each participating employer.

The only obligation of the Municipality with respect to the retirement benefit plans is to make the specified contributions. Where councillors / employees leave the plans prior to full vesting of the contributions, the contributions payable by the municipality are reduced by the amount of forfeited contributions.

The total expense recognised in the statement of financial performance of R3 542 090 (2018: R3 515 507) represents contributions payable to these plans by the municipality at rates specified in the rules of the plans. These contributions have been expensed.

The Retirement Funds have been valued by making use of the Discounted Cash Flow method of valuation.

DEFINED CONTRIBUTION SCHEMES

Cape Joint Retirement Fund: The scheme is subject to an annual actuarial valuation. The last statutory valuation was performed as at 30 June 2015.

The statutory valuation performed as at 30 June 2015 revealed that the assets of the fund amounted to R18,322 (30 June 2014: R17,212 million, with funding levels of 112.1% and 100.0% (30 June 2014: 112.6% and 99.9%) for the Share Account and the Pensions Account respectively. The contribution rate paid by the members (7,50%) and the municipalities (19,50%) is sufficient to fund the benefits accruing from the fund in the future.

43. RELATED PARTY TRANSACTIONS

All Related Party Transactions are conducted at arm's length, unless stated otherwise.

43.1 Interest of Related Parties

No relationships have been identified.

43.2 Services rendered to Related Parties

The Municipality did not render any services during the year to anyone that can be considered as a related party.

43.3 Loans granted to Related Parties

In terms of the MFMA, the municipality may not grant loans to its Councillors, Management, Staff and Public with effect from 1 July 2004. No such loans existed at yearend.

43.4 Compensation of Related Parties

Compensation of Key Management Personnel and Councillors is set out in Appendix G, Statement of Remuneration of Managment, to the Annual Financial Statements.

43.5 Purchases from Related Parties

The Municipality did not buy goods from any companies which can be considered to be Related Parties.

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44. CONTINGENT LIABILITIES

No Contingent Liabilities existed at yearend.

45. CONTINGENT ASSETS

The Municipality was not engaged in any transaction or event during the year under review involving Contingent Assets.

46. IN-KIND DONATIONS AND ASSISTANCE

The Municipality received in-kind donations totalling R0 (2018: R473 100) for the repayment of leases.

47. PRIVATE PUBLIC PARTNERSHIPS

The Municipality was not a party to any Private Public Partnerships during the year under review.

48. EVENTS AFTER THE REPORTING DATE

No events having financial implications requiring disclosure occurred subsequent to 30 June 2019.

49. COMPARATIVE FIGURES

The Comparative Figures were restated.

50. GOING CONCERN ASSESSMENT

Management considered the following matters relating to the Going Concern:

(i) During January 2019 the Council adopted the 2018/19 Adjusted Budget. This three-year Medium Term Revenue and Expenditure Framework (MTREF) to support the ongoing delivery of Municipal services to residents reflected that the Budget was cash-backed over the three-year period.

(ii) The Municipality’s Budget is subjected to a very rigorous independent assessment process to assess its cash- backing status before it is ultimately approved by Council.

(iii) Strict daily cash management processes are embedded in the municipality’s operations to manage and monitor all actual cash inflows and cash outflows in terms of the cash-flow forecast supporting the Budget. The cash management processes is complemented by monthly and quarterly reporting, highlighting the actual cash position, including the associated risks and remedial actions to be instituted.

(iv) As the Municipality has the power to levy fees, tariffs and charges, this will result in an ongoing inflow of revenue to support the ongoing delivery of municipal services. Certain key financial ratios, such as liquidity, cost coverage, debtors’ collection rates and creditors’ payment terms are closely monitored and the necessary corrective actions instituted.

(v) The unspent conditional grant balance is currently cash-backed. Certain expenses were incurred during the current and previous financial years, which did not meet the requirements of certain grants. These costs were reversed against the grant. The Municipality has begun to generate the shortfall within its own operating budget.

(vi) Due financial constraints, the Municipality is current unable to ensure short term debt is paid within the legislative deadline, as per section 65(2)(e) of the MFMA. The Municipality has prioritised outstanding payments and made the necessary arrangements with the respective third parties to ensure the debt is settled.

(vii) As at 30 June 2019, the Municipality's total liabilities exceeded its total assets by R5 112 989 (30 June 2018: R9 142 734). The Municipality's current cash reserves are not sufficient to settle all overdue outstanding short term debt.

(viiI) During the current year, the Municipality incurred a net surplus of R4 029 746 (2018: (R604 866)).

Taking the aforementioned into account, management has prepared the Annual Financial Statements on the Going Concern Basis.

71 169 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX A SCHEDULE OF EXTERNAL LOANS AS AT 30 JUNE 2019

Original Received Redeemed/ Interest Balance at 1 July Balance at 30 June Loan Number Redeemable during Written Off Details Loan Rate 2018 2019 Amount the Period during Period R R R R R ANNUITY LOANS Standard Bank 1,403,509 12.25% 40283593 0001 2019/06/30 526,983 - (526,983) - Standard Bank 442,534 12.75% 40283593 0002 2022/01/31 - 442,534 (51,632) 390,902 Standard Bank 204,807 12.75% 40283593 0003 2022/02/28 - 204,807 (19,799) 185,008 Standard Bank 204,807 12.75% 40283593 0004 2022/02/28 - 204,807 (19,799) 185,008 Standard Bank 204,807 12.75% 40283593 0005 2022/02/28 - 204,807 (19,799) 185,008 Standard Bank 915,924 12.75% 40283593 0006 2022/02/28 - 915,924 (88,544) 827,381

Total Annuity Loans 3,376,388 526,983 1,972,879 (726,556) 1,773,307

CAPITAL LEASE LIABILITIES Nashua 3,703,540 Various Various 2021/09/01 3,632,779 567,190 (271,553) 3,928,416

Total Capital Lease Liabilities 3,703,540 3,632,779 567,190 (271,553) 3,928,416

TOTAL EXTERNAL LOANS 7,079,928 4,159,762 2,540,069 (998,109) 5,701,722 0.00 0.00 ANNUITY LOANS: Standard Bank: The annuity loan is repaid over a period of 3 years, at an interest rate of 12.25% - 12.75% per annum. The annuity loan is not secured.

CAPITAL LEASE LIABILITIES: Nashua: Finance leases relate to property, plant and equipment with lease terms of 5 years. The effective interest rate on Finance Leases is between 14.03% and 39.55%.

Note: The rates of interest payable on the above structured loans and finance leases are based on certain underlying assumptions relating to the lenders’ statutory costs and the allowability of deductions by the lenders for income tax purposes in connection with these loans. In the event of changes to, or interpretation of, the Income Tax Act or any other relevant legislation which impact on the loan structure costs, the lenders have the right to increase or decrease the future rates of interest payable on the loans over their remaining lives, in order to absorb the increase or decrease in costs.

17072 170

PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX B ANALYSIS OF PROPERTY, PLANT AND EQUIPMENT AS AT 30 JUNE 2019 Cost / Revaluation Accumulated Depreciation / Impairment Carrying Description Opening Fair Value Closing Opening Closing Additions Disposals Additions Disposals Balance Adjustment Balance Balance Balance Value R R R R R R R R R R Land and Buildings Land 27,000 - - - 27,000 - - - - 27,000 Buildings 15,071,960 - - - 15,071,960 8,486,142 913,295 - 9,399,437 5,672,523

15,098,960 - - - 15,098,960 8,486,142 913,295 - 9,399,437 5,699,523

Infrastructure Assets Water - 1,556,304 - - 1,556,304 - - - - 1,556,304

- 1,556,304 - - 1,556,304 - - - - 1,556,304

Leased Assets Office Equipment 3,899,773 567,190 - (296,423) 4,170,540 825,281 810,421 (296,423) 1,339,279 2,831,261

3,899,773 567,190 - (296,423) 4,170,540 825,281 810,421 (296,423) 1,339,279 2,831,261

Other Assets Emergency Equipment Emergency Equipment 140,089 - - - 140,089 121,110 1,320 - 122,430 17,659

Vehicles Motor Vehicles 1,433,791 1,530,345 - (66,129) 2,898,008 373,402 101,870 (27,419) 447,852 2,450,156 Trucks 663,938 1,300,641 - (393,078) 1,571,501 261,166 61,644 (170,835) 151,976 1,419,525 Trailers 10,890 - - - 10,890 5,005 63 - 5,069 5,821

Furniture And Fittings Tables and desks 706,405 41,204 - - 747,609 597,980 12,591 - 610,571 137,038 Furniture And Fittings 778,444 51,966 - - 830,410 656,174 14,788 - 670,962 159,448 Chairs 421,209 71,871 - - 493,079 322,169 20,133 - 342,302 150,777

Office Equipment Electronic Equipment 263,588 28,946 - - 292,533 222,540 8,271 - 230,810 61,723 Air Conditioner 398,638 67,778 - - 466,416 331,180 12,635 - 343,814 122,601 Computer Hardware 1,409,558 217,652 - (6,929) 1,620,281 942,012 117,476 (5,248) 1,054,241 566,040 Other Office Equipment 174,800 10,644 - - 185,444 152,017 3,015 - 155,032 30,412

Plant And Equipment Compressor/Generator 47,684 - - - 47,684 41,504 379 - 41,882 5,802

6,449,034 3,321,048 - (466,136) 9,303,946 4,026,260 354,185 (203,502) 4,176,943 5,127,003

Total 25,447,767 5,444,542 - (762,559) 30,129,750 13,337,683 2,077,901 (499,925) 14,915,659 15,214,091

17173 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX B ANALYSIS OF INVESTMENT PROPERTIES AS AT 30 JUNE 2019 Cost / Revaluation Accumulated Depreciation / Impairment Carrying Description Opening Fair Value Closing Opening Closing Additions Disposals Additions Disposals Balance Adjustment Balance Balance Balance Value R R R R R R R R R Investment Properties Land and Buildings 1,210,000 - - - 1,210,000 - - - - 1,210,000

1,210,000 - - - 1,210,000 - - - - 1,210,000

ANALYSIS OF INTANGIBLE ASSETS AS AT 30 JUNE 2019 Cost / Revaluation Accumulated Depreciation / Impairment Carrying Description Opening Closing Opening Closing Additions Disposals Additions Disposals Balance Balance Balance Balance Value R R R R R R R R R Intangible Assets Computer Software 397,692 - - 397,692 393,556 1,477 - 395,033 2,659

397,692 - - 397,692 393,556 1,477 - 395,033 2,659 0.00 0.00 -0.00

Total Asset Register 27,055,459 5,444,542 (762,559) 31,737,442 13,731,239 2,079,378 (499,925) 15,310,692 16,426,750

17274 172

PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX C SEGMENTAL ANALYSIS OF PROPERTY, PLANT AND EQUIPMENT AS AT 30 JUNE 2019 Cost / Revaluation Accumulated Depreciation / Impairment Description Opening Closing Opening Closing Carrying Additions Disposals Additions Disposals Balance Balance Balance Balance Value R R R R R R R R R

Budget And Treasury Office 27,055,459 5,444,542 (762,559) 31,737,442 13,731,239 2,079,378 (499,925) 15,310,692 16,426,750

Total 27,055,459 5,444,542 (762,559) 31,737,442 13,731,239 2,079,378 (499,925) 15,310,692 16,426,750

17375 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX D SEGMENTAL STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2019 2018 2018 2018 2019 2019 2019 Actual Actual Surplus/ Description Actual Actual Surplus/ Income Expenditure (Deficit) Income Expenditure (Deficit) R R R R R R

100,714 (8,069,013) (7,968,299) Administration 100,714 (9,438,758) (9,338,044) 46,672,521 (14,101,260) 32,571,261 Finance 52,123,171 (13,686,744) 38,436,427 - (3,983,505) (3,983,505) Development and Infrastructure - (4,857,457) (4,857,457) - (4,017,093) (4,017,093) Environmental Health - (5,610,014) (5,610,014) 2,282,845 (2,043,453) 239,392 Housing 1,045,889 (2,119,423) (1,073,534) - (4,470,613) (4,470,613) Internal Audit - (5,072,195) (5,072,195) 3,160,000 (8,199,750) (5,039,750) Council Expenses 3,348,997 (9,064,876) (5,715,879) - (1,832,657) (1,832,657) Municipal Manager - (1,863,193) (1,863,193) 4,326,838 (7,965,281) (3,638,443) I D P 11,431,794 (8,012,995) 3,418,799 350,000 (2,815,158) (2,465,158) Protection Services - (3,168,073) (3,168,073) - - - Shared Services - - -

56,892,918 (57,497,784) (604,866) Total 68,050,565 (62,893,727) 5,156,839

17476 174

PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX E(1) RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE BY STANDARD CLASSIFICATION FOR THE YEAR ENDED 30 JUNE 2019 2019 2018 Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Reported Restated Description Total Adjustments of Variance as % of as % of Unauthorised Audited Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget Expenditure Outcome R R R R R R R R R R R R REVENUE - STANDARD Governance and Administration: Executive and Council 3,350,000 - 3,350,000 - 3,350,000 3,348,997 - (1,003) (0.03)% (0.03)% - 3,260,714 Budget and Treasury Office 49,372,085 2,763,203 52,135,288 - 52,135,288 52,123,171 - (12,117) (0.02)% 5.57% - 46,672,521 Corporate Services 71,000 9,000 80,000 - 80,000 100,714 - 20,714 25.89% 41.85% - - - Community and Public Safety: Public Safety 389,000 - 389,000 - 389,000 - - (389,000) (100.00)% (100.00)% - 350,000 Housing - 720,000 720,000 - 720,000 1,045,889 - 325,889 45.26% 100.00% - 2,282,845 Health ------

Economic and Environmental Services: Planning and Development 4,009,000 14,174,356 18,183,356 - 18,183,356 11,431,794 - (6,751,562) (37.13)% 185.15% - 4,326,838

Total Revenue - Standard 57,191,085 17,666,559 74,857,644 - 74,857,644 68,050,565 - (6,807,079) - 56,892,918

EXPENDITURE - STANDARD Governance and Administration: Executive and Council 11,253,614 224,326 11,477,940 - 11,477,940 10,928,068 - (549,872) (4.79)% (2.89)% - 18,101,420 Budget and Treasury Office 18,058,070 1,504,674 19,562,744 - 19,562,744 13,686,744 - (5,876,000) (30.04)% (24.21)% - 14,101,260 Corporate Services 8,791,222 651,829 9,443,051 - 9,443,051 14,510,953 - 5,067,902 53.67% 65.06% - 4,470,613

Community and Public Safety: Public Safety 2,887,817 226,173 3,113,990 - 3,113,990 3,168,073 - 54,083 1.74% 9.70% - 2,815,158 Housing 2,513,908 98,802 2,612,710 - 2,612,710 2,119,423 - (493,287) (18.88)% (15.69)% - 2,043,453 Health 4,607,374 805,476 5,412,850 - 5,412,850 5,610,014 - 197,164 3.64% 21.76% - 4,017,093

Economic and Environmental Services: Planning and Development 7,660,682 14,737,359 22,398,041 - 22,398,041 12,870,452 - (9,527,589) (42.54)% 68.01% - 11,948,787

Total Expenditure - Standard 55,772,687 18,248,639 74,021,326 - 74,021,326 62,893,727 - (11,127,599) - 57,497,784

Surplus/(Deficit) for the year 1,418,398 (582,080) 836,318 - 836,318 5,156,839 - 4,320,521 - (604,866) -

17577 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX E(2) RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE BY MUNICIPAL VOTE FOR THE YEAR ENDED 30 JUNE 2019 2019 2018 Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Reported Restated Description Total Adjustments of Variance as % of as % of Unauthorised Audited Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget Expenditure Outcome R R R R R R R R R R R R REVENUE BY VOTE Vote 1 - Mayor & Council 3,350,000 - 3,350,000 - 3,350,000 3,348,997 - (1,003) (0.03)% (0.03)% - 350,000 Vote 2 - Municipal Manager ------100,714 Vote 3 - Budget & Treasury Office 49,372,085 2,763,203 52,135,288 - 52,135,288 52,123,171 - (12,117) (0.02)% 5.57% - 46,672,521 Vote 4 - Human Resources 71,000 9,000 80,000 - 80,000 100,714 - 20,714 25.89% 41.85% - 3,160,000 Vote 5 - Internal Audit ------4,326,838 Vote 6 - Shared Services ------Vote 7 - Development & Infrastructure ------Vote 8 - IDP 4,009,000 14,174,356 18,183,356 - 18,183,356 11,431,794 - (6,751,562) (37.13)% 185.15% - - Vote 9 - Health ------Vote 10 - Housing - 720,000 720,000 - 720,000 1,045,889 - 325,889 45.26% 100.00% - 2,282,845 Vote 11 - Public Safety 389,000 - 389,000 - 389,000 - - (389,000) (100.00)% (100.00)% - -

Total Revenue by Vote 57,191,085 17,666,559 74,857,644 - 74,857,644 68,050,565 - (6,807,079) - 56,892,918

EXPENDITURE BY VOTE Vote 1 - Mayor & Council 9,296,695 143,990 9,440,685 - 9,440,685 9,064,876 - (375,809) (3.98)% (2.49)% - 2,815,158 Vote 2 - Municipal Manager 1,956,919 80,336 2,037,255 - 2,037,255 1,863,193 - (174,062) (8.54)% (4.79)% - 8,069,013 Vote 3 - Budget & Treasury Office 12,857,113 1,406,192 14,263,305 - 14,263,305 13,686,744 - (576,561) (4.04)% 6.45% - 14,101,260 Vote 4 - Human Resources 8,791,222 651,829 9,443,051 - 9,443,051 9,438,758 - (4,293) (0.05)% 7.37% - 8,199,750 Vote 5 - Internal Audit 5,200,957 98,482 5,299,439 - 5,299,439 5,072,195 - (227,244) (4.29)% (2.48)% - 7,965,281 Vote 6 - Shared Services ------1,832,657 Vote 7 - Development & Infrastructure 3,652,132 1,212,153 4,864,285 - 4,864,285 4,857,457 - (6,828) (0.14)% 33.00% - 4,470,613 Vote 8 - IDP 4,008,550 13,525,206 17,533,756 - 17,533,756 8,012,995 - (9,520,761) (54.30)% 99.90% - 3,983,505 Vote 9 - Health 4,607,374 805,476 5,412,850 - 5,412,850 5,610,014 - 197,164 3.64% 21.76% - 4,017,093 Vote 10 - Housing 2,513,908 98,802 2,612,710 - 2,612,710 2,119,423 - (493,287) (18.88)% (15.69)% - 2,043,453 Vote 11 - Public Safety 2,887,817 226,173 3,113,990 - 3,113,990 3,168,073 - 54,083 1.74% 9.70% - -

Total Expenditure by Vote 55,772,687 18,248,639 74,021,326 - 74,021,326 62,893,727 - (11,127,599) - 57,497,784

Surplus/(Deficit) for the year 1,418,398 (582,080) 836,318 - 836,318 5,156,839 - 4,320,521 - (604,866) -

17678 176

PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX E(3) RECONCILIATION OF BUDGETED FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2019 2019 2018 Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Reported Restated Description Total Adjustments of Variance as % of as % of Unauthorised Audited Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget Expenditure Outcome R R R R R R R R R R R R Revenue by Source Government Grants and Subsidies Received 53,538,000 16,307,632 69,845,632 - 69,845,632 62,564,181 - (7,281,451) (10.43)% 16.86% - 49,929,941 Public Contributions and Donations ------473,100 Service In-kind Contributions ------1,951,874 Rental of Facilities and Equipment 71,000 9,000 80,000 - 80,000 100,714 - 20,714 25.89% 41.85% - 100,714 Interest Earned - External Investments 510,000 90,000 600,000 - 600,000 1,066,477 - 466,477 77.75% 109.11% - 716,468 Other Revenue 3,072,085 1,259,927 4,332,012 - 4,332,012 4,506,827 - 174,815 4.04% 46.70% - 3,177,656 Other Gains and Losses ------Profit on Disposal of Property, Plant and Equipment ------543,164

Total Revenue (excluding Capital Transfers & Contributions) 57,191,085 17,666,559 74,857,644 - 74,857,644 68,238,199 - (6,619,445) - 56,892,918

Expenditure Employee Related Costs 33,571,287 2,894,780 36,466,067 - 36,466,067 35,744,302 - (721,765) (1.98)% 6.47% - 34,634,712 Remuneration of Councillors 4,456,400 (8,945) 4,447,455 - 4,447,455 4,323,640 - (123,815) (2.78)% (2.98)% - 4,206,320 Depreciation and Amortisation 2,000,000 - 2,000,000 - 2,000,000 2,079,378 - 79,378 3.97% 3.97% - 1,831,414 Impairment Losses - - - - - (27,911) - (27,911) - - - 1,916,038 Repairs and Maintenance 895,000 1,240,000 2,135,000 - 2,135,000 1,429,430 - (705,570) (33.05)% 59.71% - 1,000,187 Finance Costs 60,000 (60,000) - - - 1,371,371 - 1,371,371 - 2185.62% - 1,677,535 Contracted Services 1,852,000 11,013,900 12,865,900 - 12,865,900 1,797,844 - (11,068,056) (86.03)% (2.92)% - 2,841,557 Grants and Subsidies Paid - 500,000 500,000 - 500,000 4,000,000 - 3,500,000 700.00% - - - General Expenses 12,938,000 2,668,904 15,606,904 - 15,606,904 12,175,674 - (3,431,230) (21.99)% (5.89)% - 9,390,020 Loss on Disposal of Property, Plant and Equipment - - - - - 187,634 - 187,634 - - - -

Total Expenditure 55,772,687 18,248,639 74,021,326 - 74,021,326 63,081,361 - (10,939,965) - 57,497,784 - - Surplus/(Deficit) for the Year 1,418,398 (582,080) 836,318 - 836,318 5,156,838 - 4,320,520 - (604,866) - -

17779 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX E(4) RECONCILIATION OF BUDGETED CAPITAL EXPENDITURE FOR THE YEAR ENDED 30 JUNE 2019 2019 2018 Original Budget Final Shifting Final Actual Unauthorised Actual Outcome Actual Outcome Reported Restated Description Total Adjustments of Variance as % of as % of Unauthorised Audited Budget Adjustments Budget Funds Budget Outcome Expenditure Final Budget Original Budget Expenditure Outcome R R R R R R R R R R R R CAPITAL EXPENDITURE - VOTE Multi-year Expenditure Vote 1 - Emergency and Disaster Management ------Vote 2 - Support and Social Services ------Vote 3 - Budget and Treasury ------Vote 4 - Council Expenses ------Vote 5 - IDP ------Vote 6 - Municipal Manager ------Vote 7 - Internal Audit ------Vote 8 - Development ant Infrastructure ------Vote 9 - Environmental Health ------Vote 10 - Housing ------Vote 11 - Shared Service ------

Total Capital Expenditure - Multi-year ------

Single-year Expenditure Vote 1 - Emergency and Disaster Management ------Vote 2 - Support and Social Services ------Vote 3 - Budget and Treasury 1,650,000 2,242,000 3,892,000 - 3,892,000 5,444,542 - 1,552,542 39.89% 229.97% - 3,392,383 Vote 4 - Council Expenses ------Vote 5 - IDP ------Vote 6 - Municipal Manager ------Vote 7 - Internal Audit ------Vote 8 - Development ant Infrastructure ------Vote 9 - Environmental Health ------Vote 10 - Housing ------Vote 11 - Shared Service ------

Total Capital Expenditure - Single-year 1,650,000 2,242,000 3,892,000 - 3,892,000 5,444,542 - 1,552,542 - 3,392,383

Total Capital Expenditure - Vote 1,650,000 2,242,000 3,892,000 - 3,892,000 5,444,542 - 1,552,542 - 3,392,383

CAPITAL EXPENDITURE - STANDARD Governance and Administration: Executive and Council ------Budget and Treasury Office 1,650,000 2,242,000 3,892,000 - 3,892,000 5,444,542 - 1,552,542 39.89% 229.97% - 3,392,383 Corporate Services ------

Community and Public Safety: Public Safety ------Housing ------Health ------

Economic and Environmental Services: Planning and Develiopment ------Environmental Protection ------

Total Capital Expenditure - Standard 1,650,000 2,242,000 3,892,000 - 3,892,000 5,444,542 - 1,552,542 - 3,392,383

FUNDED BY:

National Government ------Provincial Government ------Transfers Recognised - Capital ------

Borrowing - 2,500,000 2,500,000 - 2,500,000 3,398,177 - 898,177 35.93% #DIV/0! - 3,136,350 Internally Generated Funds 1,382,000 - 1,382,000 - 1,382,000 2,046,366 - 664,366 48.07% 48.07% - 256,033

Total Capital Funding 1,382,000 2,500,000 3,882,000 - 3,882,000 5,444,542 - 1,562,542 - 3,392,383

17880 178

PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX E(5) RECONCILIATION OF BUDGETED CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 2019 2018 Original Budget Final Final Actual Variance Actual Outcome Actual Outcome Audited Description Total Adjustments as % of as % of Budget Adjustments Budget Budget Outcome Final Budget Original Budget Outcome R R R R R R R R R CASH FLOW FROM OPERATING ACTIVITIES Receipts Government - Operating 47,800,000 3,753,272 51,553,272 51,553,272 69,815,744 18,262,472 35.42% 46.06% 50,298,247 Government - Capital - 13,980,000 13,980,000 13,980,000 - (13,980,000) (100.00)% (100.00)% - Interest - - - - 1,066,477 1,066,477 100.00% 100.00% 716,468 Other Receipts 2,985,010 540,958 3,525,968 3,525,968 2,994,849 (531,119) (15.06)% 0.33% 2,757,042

Payments Suppliers and Employees - (64,662,880) (64,662,880) (64,662,880) (61,255,103) 3,407,777 (5.27)% #DIV/0! (52,141,251) Finance Charges ------Transfers and Grants ------

NET CASH FROM / (USED) OPERATING ACTIVITIES 50,785,010 (46,388,650) 4,396,360 4,396,360 12,621,967 8,225,607 1,630,506

CASH FLOWS FROM INVESTING ACTIVITIES Receipts Proceeds on Disposal of PPE - - - - 75,000 75,000 100.00% 100.00% -

Payments Capital Assets - - - - (2,046,366) (2,046,366) (100.00)% (100.00)% (256,033)

NET CASH FROM / (USED) INVESTING ACTIVITIES - - - - (1,971,366) (1,971,366) (256,033)

CASH FLOWS FROM FINANCING ACTIVITIES Receipts New Loans raised - - - - 3,398,177 3,398,177 100.00% 100.00% 3,632,780

Payments Loans repaid - - - - (5,254,395) (5,254,395) (100.00)% (100.00)% (4,939,150)

NET CASH FROM / (USED) FINANCING ACTIVITIES - - - - (1,856,218) (1,856,218) (1,306,370)

NET INCREASE / (DECREASE) IN CASH HELD 50,785,010 (46,388,650) 4,396,360 4,396,360 8,794,383 4,398,023 68,103 Cash / Cash Equivalents at the Year begin: 3,472,775 - 3,472,775 3,472,775 3,254,059 (218,716) (6.30)% (6.30)% 3,185,954 Cash / Cash Equivalents at the Year end: 54,257,785 (46,388,650) 7,869,135 7,869,135 12,048,442 4,179,307 53.11% (77.79)% 3,254,059

17981 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX F DISCLOSURE OF GRANTS AND SUBSIDIES IN TERMS OF SECTION 123 OF MFMA, 56 0F 2003 Grants and Subsidies Received Grants and Reason for Name of Organ Opening Total Total Total Net Subsidies Delay / Compliance to Reason for Non- Name of Grant of State or Delayed / Withholding of Revenue Act (*) compliance Municipal Entity Balance Receipts Expenses Repayments Grant Withheld Funds Total Total Total Total Total Yes / No

Equitable Share National Treasury - 47,820,000 (47,820,000) - - - N/a Yes N/a Housing Accreditation COGSTHA - 1,045,889 (1,045,889) - - - N/a Yes N/a Health Subsidy Provincial - 500,000 (500,000) - - - N/a Yes N/a EPWP National Treasury 202,992 1,000,000 (1,171,133) - 31,859 - N/a Yes N/a Financial Management (FMG) National Treasury - 1,320,000 (1,320,000) - - - N/a Yes N/a Municipal Infrastructure Grant (MIG) National Treasury - 9,862,000 (1,789,750) - 8,072,250 - N/a Yes N/a Department of Roads Provincial - 946,498 (946,498) - - - N/a Yes N/a Project Hopetown Provincial ------N/a Yes N/a DPSA Grant Provincial 1,137,109 112,357 (870,935) - 378,531 - N/a Yes N/a NEAR Provincial 1,274,130 - - - 1,274,130 - N/a Yes N/a Electrification Programme Provincial 898 - - - 898 - N/a Yes N/a Pula Nala Provincial - 4,000,000 (4,000,000) - - - N/a Yes N/a EPWP De Aar Provincial - 200,000 - - 200,000 - N/a Yes N/a Rural Roads Asset Management System National Treasury - 3,009,000 (2,977,541) - 31,459 - N/a Yes N/a EPWP Renosterberg Provincial 134,279 - (122,435) - 11,843 - N/a Yes N/a

Total Grants and Subsidies Received 2,749,408 69,815,744 (62,564,181) - 10,000,971 -

18082 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX G STATEMENT OF REMUNERATION OF MANAGEMENT

30 June 2019

Any Total Incumbent Basic Salaries Bonuses Allowances Other Remuneration Benefits R R R R R Mayor MT Kibi 740,969 - 10,742 - 751,711

Speaker NL Hermans 627,251 - 10,470 - 637,721

Executive Committee UR Itumeleng 620,813 - 9,600 - 630,413 TA Sintu 620,813 - 9,600 - 630,413 GL Nkumbi 620,813 - 9,600 - 630,413

Councillors H Marais 262,063 - 1,500 - 263,563 J Grobbelaar 336,171 - 1,500 - 337,671 AM Metebus 261,952 - 1,500 - 263,452 SL Billie 11,115 - - - 11,115 J Hoffman 16,672 - - - 16,672 JEJ Hoorne 16,672 - - - 16,672 ME Bitterbos 16,672 - - - 16,672 PP Mhlawuli 5,557 - - - 5,557 LC van Niekerk 6,680 - - - 6,680 JT Yawa 16,672 - - - 16,672 S Swartling 16,672 - - - 16,672 A Oliphant 1,158 - - - 1,158 SE Humphries 16,672 - - - 16,672 N Batties 14,841 - - - 14,841 CC Jantjies 16,672 - - - 16,672 DV Smous 6,947 - - - 6,947 PJ McKlein 15,283 - - - 15,283

Total for Councillors 4,269,129 - 54,512 - 4,323,641 180 Municipal Manager RE Pieterse 896,997 237,360 204,352 2,582 1,341,291

Chief Financial Officer BF James 1,005,600 273,512 95,477 184,755 1,559,344

Manager: Infrastructure HP Greeff 802,440 213,708 191,375 3,363 1,210,886

Manager: Chief Corporate Services TA Loko 858,416 146,838 190,699 13,125 1,209,078

Manager: Office of the Executive Mayor MK Mfazwe 492,476 40,393 88,200 136,667 757,736

Manager: Chief Audit Executive R Sors 722,304 182,876 179,838 6,082 1,091,100

Communication Manager BA Bosch 479,034 40,393 87,000 107,493 713,920

Total for Senior Managers 5,257,267 1,135,080 1,036,941 454,067 7,883,355

Total for Management 9,526,396 1,135,080 1,091,453 454,067 12,206,996

83 181 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX G STATEMENT OF REMUNERATION OF MANAGEMENT

30 June 2018

Any Total Incumbent Basic Salaries Bonuses Allowances Other Remuneration Benefits R R R R R Mayor MT Kibi 795,913 - 12,000 - 807,913

Speaker NL Hermans 636,731 - 10,800 - 647,531

Executive Committee UR Itumeleng 596,936 - 9,600 - 606,536 TA Sintu 596,936 - 9,600 - 606,536 GL Nkumbi 596,936 - 9,600 - 606,536

Councillors H Marais 251,877 - - - 251,877 J Grobbelaar 251,877 - - - 251,877 AM Metebus 251,877 - - - 251,877 SL Billie 16,031 - - - 16,031 J Hoffman 16,031 - - - 16,031 JEJ Hoorne 16,031 - - - 16,031 ME Bitterbos 16,031 - - - 16,031 JH George 2,521 - - - 2,521 LC van Niekerk 16,031 - - - 16,031 JT Yawa 16,031 - - - 16,031 S Swartling 16,031 - - - 16,031 JH Vorster 13,360 - - - 13,360 SE Humphries 16,031 - - - 16,031 N Batties 16,031 - - - 16,031 CC Jantjies 2,370 - - - 2,370 PJ McKlein 13,104 - - - 13,104

Total for Councillors 4,154,719 - 51,600 - 4,206,319

Municipal Manager RE Pieterse 1,012,066 242,766 101,277 113,079 1,469,187

Chief Financial Officer BF James 947,160 259,329 97,212 172,740 1,476,441

Manager: Infrastructure HP Greeff 856,868 205,226 98,942 1,884 1,162,920

Manager: Chief Corporate Services TA Loko 792,277 240,809 88,533 128,244 1,249,862

Manager: Office of the Executive Mayor MK Mfazwe 462,731 36,865 88,200 128,387 716,183

Manager: Chief Audit Executive R Sors 676,676 178,045 93,018 108,652 1,056,392

Communication Manager BA Bosch 437,028 36,865 87,000 99,948 660,841

Total for Senior Managers 5,184,806 1,199,906 654,182 752,932 7,791,826

Total for Management 9,339,525 1,199,906 705,782 752,932 11,998,145

84 182 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX H RATIO ANALYSIS SCHEDULE FOR THE YEAR ENDED 30 JUNE 2019

Ratio Norm / Range Input Description Data Inputs and Results Management Comments (#)

2019 2018 1. FINANCIAL POSITION A. Asset Management / Utilisation 7.95% 5.57% Total Operating Expenditure 63,081,361 57,497,784 As the Municipality is a District Municipality, it does not 1. Capital Expenditure to Total Expenditure 10% - 20% Taxation Expense - - invest in Infrastructure Assets. Total Capital Expenditure 5,444,542 3,392,383

0.00% 0.00% Impairment of Property, Plant and PPE, Investment Property & Intangible Impairment - - 2. Equipment, Investment Property and 0% PPE at Carrying Value 15,214,093 12,110,085 Intangible assets (Carrying Value) IP at Carrying Value 1,210,000 1,210,000 Intangible Assets at Carrying Value 2,660 4,137

8.70% 7.51% Repairs and Maintenance as a % of Total Repairs and Maintenance Expenditure 1,429,430 1,000,187 As the Municipality is a District Municipality, it does not 3. Property, Plant and Equipment and 8% invest in Infrastructure Assets and the repair / Investment Property (Carrying Value) PPE at Carrying Value 15,214,093 12,110,085 maintenance thereof. Investment Property at Carrying Value 1,210,000 1,210,000

B. Debtors Management 77.23% 60.21% Gross Debtors Closing Balance 3,953,767 2,993,304 1. Collection Rate 95% Gross Debtors Opening Balance 2,993,304 1,807,911 Due to unpaid Shared Service Debtors at yearend. Bad Debts Written-off (27,911) - Billed Revenue 4,096,030 2,979,360

0.00% 0.00% Bad Debts Written-off as % of Provision 2. 100% Consumer Debtors Bad Debts Written-off - - for Bad Debt Consumer Debtors Current Bad Debt Provision (27,911) 1,916,038

355 Days 132 Days Gross Debtors 3,953,767 2,993,304 3. Net Debtors Days 30 Days Due to unpaid Shared Service Debtors at yearend. Bad Debts Provision (27,911) 1,916,038 Billed Revenue 4,096,030 2,979,360

C. Liquidity Management 0 Months 0 Months Cash and Cash Equivalents 12,048,442 3,254,059 Cash / Cost Coverage Ratio (Excluding Unspent Conditional Grants 10,000,969 2,749,406 The Municipality ensures that all debt is paid within the 1. 1 - 3 Months Unspent Conditional Grants) Overdraft - - 30 day requirement as per the MFMA. Short-term Investments - - Total Annual Operational Expenditure 63,081,361 57,497,784

0.77 0.39 The unfavourbale ratio is due to the current portion of 2. Current Ratio 1.5 - 2:1 Current Assets 14,529,225 4,302,556 the Retirement Benefit Liabilities. Current Liabilities 18,818,069 10,940,242

C. Liability Management -5.66% -5.67% Capital Cost (Interest Paid and Interest Paid 1,371,371 1,677,535 1. Redemption) as a % of Total Operating 6% - 8% Redemption (4,939,150) (4,939,150) Expenditure Total Operating Expenditure 63,081,361 57,497,784 Taxation Expense - -

58.94% 59.74% Total Debt 5,701,722 4,159,763 The unfavourbale ratio is due to additions, which was 2. Debt (Total Borrowings) / Revenue 45% Total Operating Revenue 68,238,199 56,892,918 financed through finance leases and annuity loans. Operational Conditional Grants 58,564,181 49,929,941

C. Sustainability 100.00% 100.00% Cash and Cash Equivalents 12,048,442 3,254,059 Bank Overdraft - - Short Term Investment - - Long Term Investment - - Level of Cash Backed Reserves (Net Unspent Grants 10,000,969 2,749,406 1. 100% Assets - Accumulated Surplus) Net Assets (3,985,897) (9,142,734) Share Premium - - Share Capital - - Revaluation Reserve - - Fair Value Adjustment Reserve - - Accumulated Surplus (3,985,897) (9,142,734)

2. FINANCIAL PERFORMANCE A. Efficiency 7.56% -1.06% Total Operating Revenue 68,238,199 56,892,918 1. Net Operating Surplus Margin = or > 0% Depreciation - Revalued Portion - - No material fluctuation / variance identified. Total Operating Expenditure 63,081,361 57,497,784 Taxation Expense - -

0.00% 0.00% The Municipality is a District Municipality and the ratio is 2. Net Surplus / Deficit Electricity 0% - 15% Total Electricity Revenue - - therefore not applicable. Total Electricity Expenditure - -

0.00% 0.00% The Municipality is a District Municipality and the ratio is 3. Net Surplus / Deficit Water = or > 0% Total Water Revenue - - therefore not applicable. Total Water Expenditure - -

85 183 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX H RATIO ANALYSIS SCHEDULE FOR THE YEAR ENDED 30 JUNE 2019

Ratio Norm / Range Input Description Data Inputs and Results Management Comments (#)

2019 2018 0.00% 0.00% The Municipality is a District Municipality and the ratio is 4. Net Surplus / Deficit Refuse = or > 0% Total Refuse Revenue - - therefore not applicable. Total Refuse Expenditure - -

0.00% 0.00% Net Surplus / Deficit Sanitation and The Municipality is a District Municipality and the ratio is 5. = or > 0% Total Sanitation and Waste Water Revenue - - Waste Water therefore not applicable. Total Sanitation and Waste Water Expenditure - -

B. Distribution Losses 0.00% 0.00% Electricity Distribution Losses The Municipality is a District Municipality and the ratio is 1. 7% - 10% Number of Units Purchased and/or Generated - - (Percentage) therefore not applicable. Number of Units Sold - -

0.00% 0.00% The Municipality is a District Municipality and the ratio is 2. Water Distribution Losses (Percentage) 15% - 30% Number of Kilolitres Purchased and/or Purified - - therefore not applicable. Number of Kilolitres Sold - -

C. Revenue Management 0.00% 0.00% Growth in Number of Active Consumer The Municipality is a District Municipality and the ratio is 1. None Number of Active Debtors Accounts (Previous) - - Accounts therefore not applicable. Number of Active Debtors Accounts (Current) - -

19.94% 11.36%

CPI 6.60% 5.50% Due to less local municipalities using the internal audit 2. Revenue Growth (%) = CPI services provided by the Municipality. Total Revenue (Previous) 56,892,918 51,089,785

Total Revenue (Current) 68,238,199 56,892,918

19.94% 11.36%

CPI 6.60% 5.50% Revenue Growth (%) - Excluding Capital Due to less local municipalities using the internal audit 3. = CPI Grants services provided by the Municipality. Total Revenue, excluding Capital Grants (Previous) 56,892,918 51,089,785

Total Revenue, excluding Capital Grants (Current) 68,238,199 56,892,918

D. Expenditure Management 41 Days 39 Days Trade Creditors 1,722,358 1,403,069 Contracted Services 1,797,844 2,841,557 Creditors Payment Period (Trade The Municipality has an arrangement with the Auditor- 1. 30 Days Repairs and Maintenance 1,429,430 1,000,187 Creditors) General by which it is repaying its outstanding debt. General Expenses 12,175,674 9,390,020 Bulk Purchases - - Capital Credit Purchases - -

3.87% 11.92% Irregular, Fruitless & Wasteful and Due to the increase in the Unauthorised expenditure. Irregular, Fruitless & Wasteful and Unauthorised Expenditure 2,440,995 6,852,885 2. Unauthorised Expenditure / Total 0% Funds are received for projects which were not Operating Expenditure Total Operating Expenditure 63,081,361 57,497,784 budgeted for. Taxation Expense - -

63.52% 67.55% Employee / Personnel Related Cost 35,744,302 34,634,712 As the Municipality is a District Municipality, the Remuneration as % of Total Operating Employee Related Costs represent the majority of its 3. 25% - 40% Councillors Remuneration 4,323,640 4,206,320 Expenditure Operating Expenditure due to the nature of service Total Operating Expenditure 63,081,361 57,497,784 provided. Taxation Expense - -

2.85% 4.94% Contracted Services % of Total Contracted Services 1,797,844 2,841,557 4. 2% - 5% Operating Expenditure Total Operating Expenditure 63,081,361 57,497,784 Taxation Expense - -

E. Grant Dependency 100.00% 100.00% (Own funded Capital Expenditure Internally Generated Funds (40,178) (240,397) 1. (Internally Generated Funds) + None Borrowings) to Total Capital Expenditure Borrowings 3,928,416 3,632,780 Total Capital Expenditure 3,888,238 3,392,383

-1.03% -7.09% Own funded Capital Expenditure Internally Generated Funds (40,178) (240,397) Due to the material decrease in the Municipality's cash 2. (Internally Generated Funds) to Total None reserves, it had to finance its capital needs through the Capital Expenditure use of finance leases and annuity loans. Total Capital Expenditure 3,888,238 3,392,383

8.32% 11.41% Total Revenue 68,238,199 56,892,918 Own Source Revenue to Total Operating 3. None Government Grant and Subsidies 62,564,181 49,929,941 Revenue (Including Agency Revenue) Public Contributions and Donations - 473,100 Capital Grants - -

86 184 PIXLEY-KA-SEME DISTRICT MUNICIPALITY APPENDIX H RATIO ANALYSIS SCHEDULE FOR THE YEAR ENDED 30 JUNE 2019

Ratio Norm / Range Input Description Data Inputs and Results Management Comments (#)

2019 2018 3. BUDGET IMPLEMENTATION A. Efficiency 139.89% 30839.85% In the current year, R3 398 177 of the total additions Capital Expenditure Budget were financed through finance leases and annuity 1. 95% - 100% Actual Capital Expenditure 5,444,542 3,392,383 Implementation Indicator loans, which resulted in the unfavourbale ratio. Only R490 061 was actual spend by the Municipality. Budgeted Capital Expenditure 3,892,000 11,000

85.22% 106.84% Operating Expenditure Budget 2. 95% - 100% Actual Operating Expenditure 63,081,361 57,497,784 No material fluctuation / variance identified. Implementation Indicator Budgeted Operating Expenditure 74,021,326 53,819,018

91.16% 109.68% Operating Revenue Budget 3. 95% - 100% Actual Operating Revenue 68,238,199 56,892,918 No material fluctuation / variance identified. Implementation Indicator Budgeted Operating Revenue 74,857,644 51,870,732

Service Charges and Property Rates 100.00% 100.00% The Municipality is a District Municipality and the ratio is 4. Revenue Budget Implementation 95% - 100% Actual Service Charges and Property Rates Revenue 0 0 therefore not applicable. Indicator Budgeted Service Charges and Property Rates Revenue 0 0

Interpretation of Results: The green colour indicates that the result is within the norm and is acceptable. The red colour indicates that the result is not acceptable and corrective actions/plans should be put in place to improve the results. Data should be captured in the blue coloured cell to calculate a ratio. # In situations where the results are not within the acceptable norm, corrective actions/plans should be taken and referenced.

87 185 Pixley Ka Seme District Municipality Annual Report 2018/19

Annexure B: Report of the Auditor-General

186 99 111-169

187 2 - 94

188 39 - 41

41

44 - 45

45

189 35-80

190 191 192 193 194 Pixley ka Seme DiStrict munciPality

AnnuAl RepoRt 2018/19 , Tel: 053, Tel: 839 2900, Kimberley RED APPLE MEDIA Printed APPLE by RED