1.3 EXECUTIVE SUMMARY 1
1.3.2 OVERVIEW OF THE 2015/16 MTREF
OPERATING BUDGET
The operating budget, which funds the continued provision of services provided by the municipality, increased from R 30.1 billion in 2014/15 to R 33.1 billion in 2015/16, R 35.8 billion in 2016/17 and R 38.9 billion in 2017/18 respectively.
The growth of the operating budget is mainly due to:
· Cost of bulk purchases - Water and Electricity
· Cost of addressing service delivery backlogs
· Repairs and maintenance of infrastructure
· Employee related costs as a result of filling of vacancies and provision for salary increase
· Impact of capital spending on operating expenditure
The following are the Main Drivers of the 2015/16 Operating Budget of R 33.1 billion.
· WaterServices: R 5.9 billion (17.8 %), increase of R 649 million (11.9%) o Bulk Water Purchases R 1 791 million o Free Basic Water R 705 million o Repairs and Maintenance R 648 million o Interest on Loans R 351 million o Staff Expenditure R 614 million o Depreciation R 237 million
Water services are provided to approximately 946 000 consumers via 327 storage facilities, 98 pumps stations and 5 purification works. The maintenance of these facilities and the reticulation network is vital to ensure that the system is capacitated to deliver at acceptable standards. The capacity to provide the service effectively and efficiently is a critical component in the delivery of sustainable basic services, for the improvement of a healthy living environment and in the support of economic development. Due to the increase in demand, projects to increase the capacity of the bulk water supply in certain areas will continue.
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· Cleansing and Solid Waste: R 1.8 billion (5.4 %), increase of R 106 million (6.1%) o Community based contractors R 266 million o Staff Expenditure R 485 million o Refuse Bags R 81 million o Repairs & Maintenance R 78 million o Depreciation R 100 million
Refuse removal service is provided once a week to over 945 000 households, both formal and informal.
Approximately 74 million refuse bags are distributed and over 963 tons of refuse is removed annually. The unit engages community based contractors as well as major contractors to provide domestic refuse collection and litter picking in their contracted areas. All major streets are cleaned on a daily basis and the CBD streets are swept thrice daily. High pressure washing of streets and pavements takes place at night.
· Sanitation: R 2.1 billion (6.3 %) increase of R 35 million (1.7%)
o Repairs & Maintenance R 295 million o Free Basic Sanitation R 279 million o Ablution Facilities R 124 million o Staff Expenditure R 397 million o Depreciation R 215 million
The service relates to the collection and treatment of waste water produced in the city. A vast infrastructure network of over 7.7 km’s of sewer pipeline, 300 pump stations and 31 waste water treatment works is employed to achieve this. Approximately 491 000 KL of effluent flows into the treatment works daily. The municipality also provides services to the rural areas via environmentally friendly and innovative ways of sanitation disposal, as well as providing community ablution blocks within informal settlements.
· Electricity Service: R 12.5 billion (37.8 %), increase of 1.3 billion (12%) o Bulk Purchases R 7 969 million o Repairs and maintenance R 1 032 million o Staff Expenditure R 1 029 million o Depreciation R 271 million
Electricity services are provided to more than 700 000 customers within the city and surrounding areas. The aim of the unit is to provide electrical services to all sectors of the community and provide energy solutions that promote business growth and enhanced economic stimulation. The electrical network which includes 152 major substations is progressively expanded to cater for growth and new connections. The electrification of Rural and Informal Settlement’s programme will continue with new prepaid customer connections.
· Engineering Services: R 1.6 billion ( 4.8 % )
o Repairs & Maintenance R 545 million o Staff Expenditure R 661 million o Depreciation R 434 million o Hire of Plant and Vehicles R 97 million
The unit provides engineering, buildings and built environmental infrastructure, surveying and land information services. This includes the maintenance of the tarred and gravel municipal road network (over 8 000 km) and sidewalks, the storm-water systems of pipes, open drains and canals as well as the design and construction of road & bridge infrastructure. The unit is also responsible for architectural project and maintenance service as well as infrastructure management.
· Community and Emergency Services: R 3.1 billion ( 9.4 % ) increase of R 140 million
o Staff Expenditure R 2 006 million o Repairs & Maintenance R 114 million o External Security & VIP Guards R 92 million o Verge Maintenance R 54 million o Depreciation R 106 million
The unit provides Parks, Recreation & Culture as well as Safety and Security services. These entail operation and maintenance of facilities which include 336 soccer fields, 163 community halls, 141 Parks, 65 Cemeteries, 95 libraries, 9 museums and 52 swimming pools. The unit also maintains 260 000 ha of verges in the municipal area.
The Health department provides primary health care via its 59 clinics. The Disaster management and emergency control unit provides emergency services on a 24/7 basis across the municipal area. In addition the unit also operates and maintains 20 fire stations and over 350 CCTV cameras.
· Other
o ETA: Transport Unit R 1 745 million o Metro Police Services R 954 million o Information Technology R 290 million o Events R 83 million o Tourism Marketing R 23.5 million o Economic Development Sector Programmes R 27 million o Youth Development Initiatives R 2.7 million o Poverty Alleviation: Soup Kitchens R 40 million o Rural Development & Agriculture R 23 million o Neighbourhood Development R 70 million
TARIFFS
The proposed tariff increases for the medium term are as follows:
SERVICE 2015/2016 2016/2017 2017/2018
Assessment Rates 6.9 % 6.5 % 7 %
Water - Residential - Business
9.5 % 12.9 %
7.5 % 12.0 %
7.5 % 12.0 %
Electricity 12.2 % 12.2 % 12.2 %
Sanitation 7.9 % 7.9 % 7.9 %
Refuse 7.9 % 7.9 % 7.9 %
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The above increases in tariffs reflect an appropriate balance between the interest of poor households, other customers and ensuring the financial sustainability of the municipality.
The following are general contributory factors for the increase in levels of rates and service charges:
· The cost of bulk purchases
· The impact of capital spend on the operating budget
· Salary increase with effect from 1 July 2015
· Provision for the filling of critical vacancies
· Rollout of infrastructure and the provision of basic services
· Increased maintenance of network and structure
The percentage increases of both Eskom and Umgeni Waters’ bulk tariffs are above the inflation rate. Given that these tariff increases are determined by the external bodies, the impacts they have on the municipality’s tariff are largely outside the control of the City. Furthermore, the adverse impacts of the current economic climate coupled with unfavourable external pressures on services, make tariff increases higher than the CPI levels inevitable.
CAPITAL BUDGET
Over the next three financial years, 2015/16 to 2017/18, capital spending is projected to increase to R 6.1 billion in 2015/16 and to R 6.9 billion in 2017/18. R 15.5 billion (approximately 81%) is allocated to meeting infrastructure and household services needs and backlogs over the medium term. R 3.6 billion of this is directed to new housing developments and interim servicing of informal settlements. The capital budget continues to reflect consistent efforts to address backlogs in basic services and the renewal of the infrastructure of existing network services.
Major Capital Programmes in the Medium-Term Capital Budget:
PROJECT / ITEM R’ m
Low cost Housing and Infrastructure 3 212.0
EThekwini Transport Authority (Including PTIS) 3 202.3
Electricity Infrastructure 1 677.5
Addressing Community Service Backlogs 874.9
Water Loss Intervention Programme 174.4
Roads Rehabilitation and Reconstruction, and New Access roads 1 656.9
Wastewater Treatment Works: Upgrades/Expansion 842.9
Northern Aqueduct – Water 271.4
Western Aqueduct – Water 787.6
Solid Waste Fleet Replacement 158.3
New Central Library 354.5
Ablution Blocks-Upgrade: Informal Settlements 720.5
Town Centre Renewals – Nodal developments 230.5