STEVE TSHWETE LOCAL MUNICIPALITY
BUDGET SPEECH
2006/2007 Financial Year
By the Executive Mayor Councillor I.M.T. Mahlangu
To the full sitting of Council
Tuesday, 30 May 2006 17:15
Mr. Speaker, colleagues, distinguished guests, ladies and gentlemen,
The draft 2006/2007 multi-year annual budget was tabled in Council at end March this year and was followed by extensive public participation and community consultation by meetings as required by the Municipal Finance Management Act (MFMA) and the Municipal Systems Act (MSA). It is also important to note that the budget was made available at all libraries, the offices of the Town Secretary and the Manager : Finance and on our website.
Mr. Speaker, the public participation process undertaken was not only to comply with the legal requirements of the MFMA and MSA, but it also sought to give effect to the bold pledge made in the Freedom Charter that “the people shall govern and that all people shall be entitled to take part in the administration of the country”. As Steve Tshwete Municipality we have in the past, and will continue, to make sustained efforts in reaching out to our people and engage with them in a meaningful way on matters affecting their daily livelihoods as citizens of our municipality. In order to give substance to these consultations and to formally comply with legislation, I will later formally respond in this speech to give feedback on the submissions received during this process.
Mr. Speaker, ladies and gentlemen,
It is critical that we place this budget in its proper developmental and service delivery context and I want to quote from a viewpoint expressed by Minister Sydney Mufamadi when opening the National Forum on Municipal Finance held at the Emperors Palace last year: “Government takes the view that the basic tasks of development and democratic institution-building cannot be undertaken without a sound municipal fiscal base. We are also of the view that municipal finances play an important role in the daily lives of our people.
Our ability to access such basic services as water, electricity, refuse removal and sanitation depends on the efficiency with which the finances of our municipalities are managed and the efficient way in which these and other resources are allocated”.
PAST ACHIEVEMENTS
The Council can proudly report to our citizenry that during the previous term of Council since demarcation of the municipality in 2001, the following outcomes were achieved:
Community facilities
- new library at Nasaret - new clinic at Hendrina - new fire station at Hendrina/Kwazamokuhle - refurbishment of Kwazamokuhle Community Hall - construction of 24-hour Service Centre - extension of cemeteries at Mhluzi - upgrading of the clinics in Mhluzi - expansion of Mhluzi Clinic - upgrading of the cloakroom at sport stadium
Rural developments
- water network at Doornkop where land restitution took place - township establishment at Doornkop - purchase of farm Bankfontein for establishment of rural village and township establishment is already 90% complete - purchase of farm Rockdale for township establishment which consist of 3062 stands
Town planning projects
- township establishment at Kwazamokuhle Extension 7 - aerial photography of the entire municipal area - floodline studies of streams in Middelburg and Mhluzi
Creation of infrastructure
- in total a distance of 35 kilometer new roads constructed at a cost of R23,5-million - a bridge built over the railway line in Oranje Street - water and toilets installed at 280 stands in Tokologo - water and toilets installed at 430 stands in Middelburg Extension 24 - total distance of 2,1 kilometer storm water channels installed in Newtown - 903 street lights installed in Mhluzi and Kwazamokuhle - 6057 new electricity house connections done - fifty high mast lights erected in Mhluzi, Kwazamokuhle, Extension 24 and Doornkop - new 10 mega liter reservoir constructed in Aerorand - the installation of services in Middelburg Extension 18 and Aerorand - continuous upgrading of storm water network in Mhluzi
BUDGET PRIORITIES
The budget that is before Council for consideration and approval today is focused on three key areas on the way to fiscal stability and economic vitality. These three key areas are: expanded economic development; improved quality of life and greater accountability and efficiency in the government of the municipality.
Expanded Economic Development
Mr. Speaker, turning to the economic outlook, ABSA Econo Trends mentions with regard to the present economic upswing:
“South Africa is considered to be experiencing one of the best economic periods in many years. Lower inflation outcomes and interest rates are creating an economic environment for all time high consumer confidence. However, external factors such as the huge increase in the cost of oil will place upward pressure on inflation”.
The local economy in Steve Tshwete benefited over the past year through property development in industrial, commercial and significantly in the residential sector. Residential development largely involved the erection of cluster units which is a reflection of confidence in investment on the one hand and a demand for housing accommodation on the other hand. The improved investment in industrial and commercial property can be attributed to the spin-offs of increased mining activity in and around the municipal area. This source has to be fully exploited to ensure most support service to the industry gets done locally.
As main property developer Steve Tshwete ensures that prices are extremely competitive and market-related and development is encouraged through affordable incentives.
Improved quality of life
The Integrated Development Plan as approved in March was developed from consultative meetings with Steve Tshwete residents and government departments.
The residents have told us of their concerns about affordable residential accommodation, the availability of potable water, electricity, basic sanitation and quality roads as well as the addressing of poverty, HIV and Aids. The political priorities for the national and provincial spheres of government also supported these concerns.
Substantial information from the process as well as input from our citizenry exchanged paths and this had significant bearing on the final product being presented here today. Like all other public institutions, the problems of unlimited resources versus the ever increasing needs of society remain a challenge that always requires skillful consideration.
However, the views of the community have manifested in a non-negotiable commitment to me, my committee and the administration to achieve the IDP priorities by way of: Expansion of basic services; Acceleration of delivery of water, electricity and sanitation to the poor; Extension of services to areas not presently serviced; Creation of jobs through expanded public works programmes; Ensure local capacity through administrative and financial management reforms; Proper maintenance of current infrastructure; Establishment of control measures to ensure organized settlements; and Strengthen law enforcement to ensure compliance to municipal by- laws.
The municipality has strived to utilize all its financial and administrative capacity to achieve its mandates to deliver on these priorities.
The dilemma of resources versus needs, however, requires viewing some aspects as multi-year issues, reviewable annually through a Medium Term Expenditure Framework (MTEF). This is therefore a multi-year budget.
Accountability and Efficiency
Mr. Speaker, I need to quote form the Premier’s State of the Province Address where he stated: “We are a nation with great goals. We may not reach them all this year. Maybe not even this decade. But we will eventually reach them. The lesson of our history – and the lesson of the last eleven years – is that great goals are reached step by step, always building on our progress. Always gaining ground as we build on the hope of our people. Of course, you cannot gain ground if you are standing still”.
Mr. Speaker, the medium term budget for the next three years was prepared within the context of governments macro-economic and fiscal framework as well as the imperatives of the Development Strategy as contained in the Performance Management Monitoring and Evaluation System of the municipality.
The inevitable tariff adjustments are proposed in a most considered way to determine the most acceptable and equitable funding regime taking into consideration the actual cost of delivering services, budget priorities, national legislation, regulations and policy guidelines.
The Premier also made mention in the above-mentioned Address that last year findings of a skills audit among senior and middle management levels in municipalities was done and it will be followed this coming financial year by the rolling out of a comprehensive programme to build capacity of management.
The Premier announced an executive development programme will soon be launched that will be compulsory for all senior managers in the province. Other elements include strengthening recruitment and selection, performance management as well as coaching and mentoring. This will assist in building an executive team as a province, and to ensure senior management to work from the same basic script.
THE NATIONAL FISCUS
Mr. Speaker, the honourable Minister of Finance, Mr. Trevor Manuel, in his Budget Speech for 2006, on 15 February 2006, made mention that “to budget is to choose” and “budgetary choices we make give life and meaning to the Age of Hope …”. We must however safeguard the transparency and integrity of these choices.
The National Budget already provides as much as R70-billion a year for social security and social assistance grants, which is 3,4 percent of Gross Domestic Product (GDP). This is more than enough reason for the Council to fulfill its obligation to pass on a fair share of the Equitable Share in support of indigent households and a number of 10 845 poor households already benefit from our initiative.
Minister Manuel made mention of a R23-billion allocation for 500 000 housing units over the next three years, complimented by rising expenditure on community sport facilities, police stations, transport infrastructure and administrative services. Already, the Minister in reaction to this statement, requested Council for projects to be included under the newly initiated Neighbourhood Development Partnership Grant (NDPG). The Council already submitted application for projects close to five million Rand for consideration.
The increase in benefits for ordinary citizens over the past twelve years can be measured by the honourable Minister’s statement that during 2005 the government spent R4 800 a year, per person, on community and household services and income transfers, compared to R2 000 a decade ago – an increase of nearly 50 percent in real terms. This had partially been made possible by financial policy and debt management: in 1998, for every Rand of revenue collected, 24 cents was spent on servicing state debt; in 2005 the debt costs 14 cents, and by 2009 it will be 10 cents.
Mr. Speaker, as part of the fiscus, the budget of this municipality also has to contain sound choices.
However, irrespective of our choices, the greater part of success, as the Minister states, lie in the quality and energy of people working together, citizens and civil servants, community activists and business people, workers and managers – “people working together, because this is what is needed to get things done”.
It was also mentioned that under the Department of Public Works and the Construction Industry Board, an assessment of the state of public infrastructure maintenance is under way and improved maintenance standards and management systems will be implemented. Under the umbrella of Project Consolidate, focused attention will be given to municipal financial management and procurement administration.
This municipality, Mr. Speaker, gladly subscribes and conforms to national government undertaking to alongside enhanced planning and project management capacity, also reinforce tools and procedures for fighting corruption and waste, as well as the rules under supply chain management reforms to prohibit illegitimate business activity of public employees and elected office bearers.
Improved guidelines for tender practice, transparency, prompt payment and performance management were received and are diligently implemented.
The honourable Minister Mufamadi mentioned in Parliament of envisaged regulations for the performance measuring and evaluation of capacity of officials in senior positions. Once promulgated the Council will have them applied with responsibility.
BUDGET FRAMEWORK
Addressing the 2006/2007 Medium Term Budget Framework, in the words of the Minister of Finance, Mr. Trevor Manuel, our budget “seeks to contribute to the season of hope ... through reinforcing the momentum of our social and economic progress. In framing the Budget, it is this vision that has been our practical guide – a vision in the actual, lived experience and struggles of ordinary people”.
Steve Tshwete the ANC led Municipality entered the new five-year term of office with a clear popular mandate for Local Development:
• Service Delivery • Participatory democracy • Transformation of apartheid landscape • Effective Management in municipalities • Maximization of revenue base • Capacity building of municipalities for effective service delivery • Local Economic Development • Fighting crime, corruption and abuse of women and children • Job creation, Development of Small Medium and Micro Enterprises and skills provision.
Coming to the Budget itself, Mr. Speaker, the following provisions specifically need to be elucidated:
This Budget has been prepared as a Medium Term Economic Forecast in strict compliance with the National Treasury framework through the lengthy budget schedule, as approved by Council in August 2005.
As part of a three-year rolling budget process, the budget framework for the next three years sees total expenditure increasing from 494,3-million Rand in 2006/2007 to 510,4-million Rand in 2008/2009.
The main sources of own revenue over the medium term will be derived from electricity and property rates, with water sanitation and refuse removal also contributing significantly to the municipality’s revenue raising capacity. The review of the local government fiscal framework by National Treasury may have sizeable impact on our revenue budget in the outer two years, particularly with respect to the possible effects of the establishment of regional electricity distributors (RED’s) and the new property tax legislation. These impacts should therefore be taken into account during the 2007/2008 budget process.
Total revenue from intergovernmental grants comprise 9,91% of total operating revenue and will increase from 37,3-million Rand in 2006/2007 to 46,7-million Rand in 2008/2009.
The municipality’s total allocation in terms of the equitable share, which supplements own revenue to deliver free basic services, will amount to 105,3-millon Rand over the next three years.
The bulk of operating expenditure is allocated to the infrastructure- related votes of electricity (27,95%), water (6,48%), sanitation, including solid waste disposal (10,52%) and roads and storm water (10,12%).
This accounts for just over 55,07% of total operating expenditure. Community safety and health and social development votes are allocated 9,13% and 5,01% respectively of the operating budget.
Employee costs increase by 6,36% compared to a total of 6,89% of the total operating budget. It reflects however a decrease of 0,18% as component of the total operating budget.
The capital budget amounts to 144,6-million Rand which is an increase of 37,6-million Rand from the previous year and for the two outer financial years expenditure is planned for 135,9-million Rand and 116,8-million Rand respectively. Approximately 85,2% of the capital budget will be earmarked for infrastructure and residential related projects over the next three years to address backlogs, rehabilitate existing infrastructure and create much needed jobs through the use of labour intensive methods wherever possible.
Mr. Speaker, I need to mention that 72,84% of the capital budget will be financed from the Council’s own financial sources.
In the year ahead we will see greater impetus given to investment in the development of residential communities.
Steve Tshwete is earmarked to receive a significant support from the Municipal Infrastructure Grant (MIG) and the Integrated Electrification Grant (INEP) from National Government.
The Nkangala District Municipality’s contribution for the respective three years is R18,1-million, R18-8-million and R16,8-million Rand.
Despite the mentioned sources of funding it is further foreseen that borrowing facility of R35-million will be acquired toward the third quarter of 2006/2007.
Mr. Speaker, as a further token of commitment to the community, provision is made for a R1,5-million contribution in the form of grants-in- aid and donations to a number of meritorious local institutions.
In responding to some of the key issues raised during the public participation meetings, it is also important to emphasize that community expectations must be matched with the reality that we operate with a finite resource base whose expansion require greater co-operation between the municipality and the people. Following the submissions received, it can however be confirmed that the bulk of aspirations are accommodated. Limited amendments to the budget as contained in the report, are recommended.
Mr. Speaker, a basket of differential tariff adjustments are proposed to determine the most acceptable and equitable funding regime taking into consideration the actual cost of delivering services, budget priorities, national legislation, regulations and policy guidelines. Whilst the increase proposed for assessment rates is 8,5%, sanitation 8,75%, solid waste disposal 9,6%, for water 5,5% and 5% for electricity on average, the weighted average increase in 2006/2007 is proposed at 6,5% compared to the current forecast of the Municipal Cost Index of 6,7%, the CPIX forecast of 4,9% and the National Treasury growth limit of 5,2%.
The proposed tariff increases will yield additional revenue of R17,2- million in the next financial year. Mr. Speaker, an increasing number of schools in our municipality experience difficulty in honouring their obligations with Council because of curtailed subsidy by the Department of Education. In an effort to consider support, the tariffs for services were reconsidered and it was decided to propose in this budget relief in sewerage tariffs of schools that amounts to a decrease of 38%. As a result consumer accounts of schools decrease in average by 4%.
KEY SERVICE DELIVERY TARGETS
Mr. Speaker, there is an increased focus in Government on improved service delivery, value for money and quality of spending. The President in his State of the National Address set the example by clearly spelling out the marching orders for all spheres of government and public entities.
Based on the important role of the local sphere of government in that it impacts directly and immediately on the livelihood of our people, the municipality has committed itself to the following key service delivery targets over the budget period:
Continue to build new roads in urban areas. Continue with the maintenance of roads in the urban and rural areas. Further improvement of the quality of electricity supply. Continue with park development along the Mpanama River. Repair Cosmos Hall in Hendrina, for use as a multi-purpose community facility. Build a multi-purpose community hall which will accommodate a minimum of 800 persons for a single event. Create more industrial stands. Create at least three new rural villages. Fully servicing of the 3000 stands at Rockdale. Create 650 serviced stands at Kwazamokuhle Extension 7. Service more stands in Aerorand and Extension 18 for sale to the public. Develop approximately 500 stands at Kwazamokuhle Extension 8. Complete multi-purpose community centres at Mhluzi Extension 7 and Doornkop and develop two additionally. Provide more and upgrade existing sport facilities.
Assist with provision of RDP housing within budget limits. Ensure sufficient and stable water and electricity supply for future generations. Develop recreational facilities at the Klein Olifants River. Improve traffic flow through Middelburg and Mhluzi. Improve disaster management arrangements. Convert the old Thushanang School into a facility for development of emerging entrepreneurs.
Mr. Speaker, these are only some of the high-level indicators and targets and further detail can be obtained from the Five-Year Manifesto.
Mr. Speaker, colleagues, ladies and gentlemen, the service delivery objectives elucidated in this budget can only be achieved in partnership with our community and it therefore means that all of us must and should honour our part of the social contract by paying for services to ensure that we succeed in our quest to remain viable and sustainable as a municipality and in rolling back the frontiers of poverty and under- development.
CONCLUSION
In conclusion I want to express my sincere gratitude to:
Members of the Mayoral Committee for the necessary political oversight during the budget process. Councillors,Ward Committee Representatives , CDW’s and members of the community who gave valuable contributions and commitment during the compilation and scrutiny of the budget. The Municipal Manager. Manager finance and his staff
All officials who played a pivoted role with the compilation of this budget.
With that, Honourable Speaker, I now formally table the 2006/2007 Medium-Term Budget including Annexures A to D for Council’s consideration and approval, in terms of Section 24(1) of the Municipal Finance Management Act.
I thank you.