Municipal Budget: 2010/11

Andrew Layman:  PCB CEO - 15 June 2010

In a very constructive meeting with the Mayor and senior officials of the administration team, the PCB has been able to interrogate the budget proposed for the financial year beginning 1 July 2010.   We believe that those responsible for the budget have done the best they could under very difficult circumstances.  In the main, these relate to the severe shortage of cash resulting from the huge outstanding debt.   Across the budget as a whole, and considering the situation in the current financial year, the provision for outstanding debt has been set at R750 million, R421 million of this being related to the provision of electricity.   The total amount owed to the municipality at present is of the order of R600 million which means that by the end of the next financial year, the debt could be in excess of R1,3 billion.   It is for this reason that considerable effort will be made to recover the outstanding amount.   In doing so, the Municipality may be expected to be ruthless, and this approach will be supported by the PCB.  

There are several areas of particular concern: a large portion of the debt is owed by Business and a good deal is owed by government, either by national or provincial departments or schools and similar institutions which, in many cases, have been provided with the money, but have declined to pay.   The Municipality is not able to recover its cost for about 40% of the water for which it is paying.   Much of this is being lost through theft.  As far as electricity is concerned, the position is even worse.    Illegal connections and the illegal reconnection of supplies that have been cut off, sometimes by bribed people who have been responsible for the earlier disconnection, have resulted in huge losses.   Recently a task team visited several business establishments where such illegal connections were found.    Measures are being put in place to control these areas of loss.    These include tamper-proof equipment which will prevent illegal connections.    While it is very unfair to compliant and honest members of our society to say this, we have the kind of municipality that we collectively deserve.   While there are many unacceptable issues within the Municipality itself, there is no doubt that at the heart of the current difficulties is a cash flow problem caused mainly by the size of the debt.

The amount that has to be allocated to employee costs is as high as 63% of the total costs (excluding bulk purchases, the costs of which are (or should be) covered.  This is almost double what would be an acceptable norm.    Tragically, in some services, such as electricity and water, there is under-staffing, especially in critical posts.   The Administrators have found that there are numerous people employed in posts that are not included in the official post structure.  The implication is that these are ‘jobs for pals’.    The people concerned are clearly unproductive in terms of service delivery.

Unlike last year when the PCB objected strongly, but unsuccessfully, to the large amounts allocated to the Mayor’s office, there is no provision for discretionary expenditure in the new budget.   Officials linked to political office-holders will now be accountable not to the politicians, but to the Municipal Manager who employs them.   Expenditure by whim will not be permitted.

The proposed tariff increases (these are all likely to be approved as a formality) stand at 8% for all tariffs except electricity where the average increase will be 21% (as compared to the authorised 28,5%).    Rates, too, will increase by 8%.

A new structure has been designed.   Portfolio committees (four) will be sub-committees of the Executive Committee and councillors will exercise their oversight function in four matching sub-committees of Council.   There will be three Strategic Executives, in charge of Finance, Infrastructure Services and Community Services.  In addition to being the Accounting Officer and the overall Strategic Manager of the Municipality, the Municipal Manager will be the Strategic Executive responsible for Internal Audit, Council and Committee Support, Legal Services, HR, Marketing and PR, ICT and Economic Development.  He will have people in charge of each of these functions, but they will not be at the Strategic Executive level.   All of them may be considered cross-cutting and the fact that the MM has responsibility for them will prevent the development of the silos that have been characteristic of the former regime.

The Chamber is heartened by the proposals, but even more so by the willingness of the Mayor and Administrators to engage.   Meetings have been characterised by transparency and candidness and we are being heard.  We remain concerned about the sustainability of this effort once the intervention comes to an end.    However, those responsible are aware of this problem and will make every effort to leave the Municipality in good shape with executive officers capable of, and committed to, ensuring that the city continues on an upward path in the future.         

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