CAPITAL BUDGET
Capital expenditure is budgeted to rise to R 6.73 bn in 2016/17 and thereafter to R 7.11 bn in 2017/18 and R 7.22 bn in 2018/19. R 14.8 billion (approximately 71%) is allocated to meeting infrastructure and household services needs and backlogs over the medium term. R 3.4 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 3 351.8
EThekwini Transport Authority (Including PTIS) 3 623.3
Electricity Infrastructure 1 781.8
Addressing Community Service Backlogs 1 012.5
Water Loss Intervention Programme 120.0
Roads Rehabilitation and Reconstruction, and New Access roads 1 621.7
Wastewater Treatment Works: Upgrades/Expansion 644.6
Northern Aqueduct – Water 610.7
Western Aqueduct – Water 338.0
Solid Waste Fleet Replacement 151.8
New Central Library 593.5
Ablution Blocks-Upgrade: Informal Settlements 711.4
Town Centre Renewals – Nodal developments 212.5
28 1.3.4 KEY ISSUES
SUSTAINABILITY CONCERNS ON THE BUDGET
The sustainability of the housing delivery programme is questionable through the current model of delivery. There are huge expectations, and a backlog of over 386 000 units. It will take over 50 years to achieve full delivery of housing to existing backlog; at current spend. In-migration will add to the extent of this period.
The cost of the IRPTN: Whilst absolutely necessary to improve quality of life and create urban efficiency – both the capital and operating costs are large and not sustainable on the current spatial paradigm.
The budget is largely reflective of the social priorities, due in part to the impetus to accelerate housing delivery.
However, the long term sustainability of social investment at a cost of productive and economic investment should be taken note of.
Commonwealth Games: Infrastructure development will place significant pressure on City finances, which are already pressured by housing and IRPTN. Innovative models of financing as well as the opportunities associated with this event need to be capitalized on.
LOAD SHEDDING: ELECTRICITY
Due to the increase demand on the network there has been a shortage in supply of electricity which has resulted in load shedding. New generation opportunities are being explored to contribute to the grid. Load shedding has been identified as one of the risks of the City’s operations. A Multi-lateral Continuity Forum has been established to collectively brainstorm the solutions with stakeholders and to come up with strategies to mitigate the impact of load shedding on the City’s operations and the local economy. As eThekwini boasts the 2nd most significant manufacturing region in the country, the power outages have a negative impact on the GDP output for this secondary sector.
As part of the municipality’s Business Continuity Management and Continuity Strategies Implementation Plan as well as to avoid a total halt of service delivery during load shedding, the municipality has come up with load shedding intervention response strategies. Even though Eskom has announced that there won’t be any load shedding until August this year, the municipality has completed a load assessment for fire and emergency Services, all municipal clinics and Sizakala Centres to avoid interruption of services. The load assessment for water and sanitation unit is still in progress. There are also plans to have 5 municipal clinics per region with alternate power. In the commitment to adopting renewable energy technologies, solar photovoltaic panels will be installed in the roof tops of seven municipal buildings.
UNACCOUNTED FOR WATER (LOSS IN DISTRIBUTION)
Despite the numerous interventions, the water loss in distribution continues to be a serious challenge. Water loss management is an on-going project aimed at reducing the real water losses in the municipal area. The primary objective of the NRW reduction activities is to reduce the NRW levels from 40.9% at present to a targeted and sustained value of 25% by June 2019. The estimated water losses were due mainly to illegal connections and vandalism as well as the aging infrastructure.
In order to address the water losses, “early warning” leak detection monitors will be rolled out on the municipality’s bulk water trunk mains. The challenge faced in reducing water losses are compounded by the mushrooming of informal settlements, some of which are illegally connected to the water supply.
To redress this, various strategies are in place including:
- The installation of consumer water meters in rural areas - the installation of pressure reducing values
- the installation of bulk meters to informal settlements - the leak detection and repair strategy
- the regularization and registration of water connections
- replacement of ageing meters ( Industrial, commercial and institutional )
Initiatives to reduce the water loss are continuing and based on the intervention plan established, a system of performance monitoring and reporting for each of the identified interventions has been established. The municipality has also implemented the water amnesty project whereby citizens using water illegally could come clean and disclose their illegal water connections. Every possible measure will be taken to curb the water loss as this has an impact on the setting of an affordable water tariff. The effectiveness of the measures put into place will be reviewed on an on-going basis.
UNFUNDED MANDATES AND FUNDING REALITIES
Certain non-core functions and services which in terms of the constitution fall under the responsibility of National or Provincial Authorities are being provided by the municipality. These functions include the provision of Health Services, Libraries, Museums, and Housing. The reduction or non – payment of subsidies for these services require the municipality to allocate its own resources to make up the shortfall. The provision of housing is dependent on budget allocations by the Provincial and National governments and the actual funding received does not make it possible for the municipality to reduce the ever increasing housing backlog. These unfunded/ underfunded mandates pose an institutional and financial risk to the municipality as substantial amounts of own funding is being allocated to non-core functions at the expense of basic service delivery. Although we have done much to address the development challenges of our city, meeting targets will continue to depend on financial support from Provincial and to a larger extent National Government. Despite additional grants received, the levels are still not sufficient to meet unfunded mandates. We believe that given adequate levels of funding, the city could meet the huge challenges we still face.
In respect of the Health Services, the municipality and the Provincial Department of Health have concluded a three year service level agreement. This will assist with improved service delivery for better health outcomes within the municipal managed clinics.
The costs of unfunded mandates for 2016/17 are as follows:
R’m
Libraries 161.6
Health – Other than municipal health services 374.5
Museums and Heritage 59.2
Housing: New Development and Hostels 457.4
Formal Housing 30.0
1 082.7
SALARIES AND ALLOWANCES
In order to ensure effective utilisation of available budgetary provisions and contain personnel costs, this expenditure is continually being reviewed and the filling of all vacancies currently has to be authorised prior to the recruitment process. As a result the percentage Salaries and Allowances of the total Operating Budget has declined steadily to a level of 25 %. Whilst this percentage reflects a decreasing trend (mainly due to the bulk electricity purchases increasing at a fast rate thereby driving the relative share of all other expenditure categories down) there has been an increase in the number of posts and positions filled. A rationalisation of all vacant posts will be undertaken with greater scrutiny by the management services unit. Productivity assessments are on-going to ensure that all staff are accounted for, are effectively engaged and are adding value.
30 CLIMATE CHANGE
Climate change already causes and will continue to cause a number of challenges for EM, linked to impacts such as increased temperatures, extreme weather events (e.g. flooding and drought), sea level rise and climate variability.
Temperatures in Durban are projected to increase and projected annual rainfall changes are projected to include an increase in aggregated rainfall. This increase is likely to manifest as an increase in extreme rainfall events and stream flow intensity across the municipal area, with prolonged dry spells between rainfall events. Sea level rise along the Municipality’s coastline is already occurring at 2.7 cm per decade and may accelerate in the future. In order to attempt to address the negative impacts of rising temperatures in the city, an Urban Heat Island Model is being developed to assist the various departments to plan better and prioritise measures.
Sustainability of water: More than ever before, South Africans’ focus of attention has fallen sharply on water resources availability now and in the future. As a result of below average annual rainfall, the city has recently experienced drought in certain areas with interruption to water supply during certain periods. Opportunities for alternate supply of water are being explored together with introduction of additional infrastructure and water saving initiatives. A Drought Recovery Plan was announced to assist KwaZulu-Natal municipalities mitigate the effects of the drought in the province. The Integrated Upper Mgeni system will not be able to meet the water needs of eThekwini in the near future, hence the uMkhomazi Water Project has been proposed as an intervention. There are plans for the proposed Smithfield Dam as part of the uMkhomazi Water Project which will assist to supply adequate water to Durban and meet the long-term water requirements.
The Municipality has recently approved its Durban Climate Change Strategy and is in the process of developing an implementation plan. The development of the strategy has been a fully inclusive and participatory process aimed at producing a cohesive framework that the Municipality and all residents of Durban can use to contribute towards the mitigation of, and adaptation to, climate change in Durban. The municipality is at the forefront of global biodiversity, climate change adaptation and resilience agendas with the joining of the C40 Cities Climate Leadership, a global network of cities committed to tackling climate change and increasing urban resilience.
THEFT OF ELECTRICITY
Theft of infrastructure and electricity continues to be a major challenge. Over the past few years the municipality is faced with a challenge of illegal connections, especially in informal settlements. Illegal connections not only cost the city, but also endanger the lives of residents. Many innocent lives have been lost, and properties destroyed due to fires caused by illegal connections. Legitimate customers also experience continuous outages due to overloaded circuits. Illegal connections are costing the municipality about R 150 million annually. Huge efforts are expended in curbing theft, however, the trend is exacerbated by high electricity prices and a weakened economy. To mitigate this trend, regular sweeps, disconnections and removal of tampered installations are carried out. Furthermore, the electrification of informal settlements is expected to have a positive impact on the number of theft incidents of electrical cables.
To make sure that illegal connections are eradicated in the targeted areas, operations are carried out at least once a week. Other interventions include optimal network configuration, effective network maintenance and network loading, and installation of anti-theft technologies at substations. There are also customer awareness and educational programmes around safety, reporting theft of electricity and the consequences of connecting electricity illegally. In addition, Government has recently enacted harsher penalties for the theft of metals and damages to essential infrastructure.
DURBAN TRANSPORT
A review of the institutional arrangement of Durban Transport including the existing operator model has been undertaken and the Municipal Systems Act Section 78 investigation completed to determine the most appropriate option for the operation of the city’s bus service looking at feasibility, funding and financial implications. Council has resolved that the Durban Municipal bus service should be run as a separate municipal entity. MFMA Section 84 process has been invoked to complete the process to set up the entity. The bus service is currently run by a private company. The proposed assignment of the transport function to municipalities will impact on the costs to the City as the PRASA and bus subsidies are not adequate and this could severely impact on Local Government Finance.
HOUSING / HOSTELS
The municipality has experienced an exponential growth of informal settlements within the city. Increasing urbanization due to a growing number of people moving into the municipal area for better opportunities as well as land invasions is creating a challenge for the municipality and which increases the housing backlog. Often, settlements are established on unsuitable land, making it costly to service and construct homes. The municipality is dependent on the budget provision by National and Provincial departments to deliver houses. The limited budget allocation to the municipality has hindered the delivery of all housing programmes. The current housing subsidy quantum does not cover the total cost of a house due to adverse geological and topographical conditions. As a strategy to deal with these, negotiations with contractors, consultants and suppliers have been instated in an endeavour to align construction with the subsidy quantum. The municipality will lobby the Provincial and National Human Settlements department for increased funding and budget allocation.