briefing to select committee on finance - pmg · 2017. 2. 3. · the national treasury has assisted...

31 January 2017

Briefing to Select Committee on

Finance

Western Cape Municipalities and City of Cape Town Performance

1

Presenter: Templeton Phogole | Local Government Budget Analysis | IGR

SCOPE OF PRESENTATION:

2

National Treasury

Structure for Local

Government

Summary of provincial audit results over a five year period;

Published unaudited national and provincial budget

performance; and

Medium Term Expenditure Framework Allocations.

Audited Results and

Revenue

Management

City of Cape Town 2015/16 audited financial results and trend

analyses;

Conditional Grant spending; and

Revenue management for City of Cape Town.

The National Treasury structure to support Local Government:

and

Delegated and non-delegated municipalities process.

AG Report and

Unaudited

Performance

National Treasury Structure for Local

Government

3

MANDATES OF RELEVANT NT DIVISIONS

4

5 x Chief Directorates:

LG Budget Analysis; Intergovernmental Policy &

Planning; Provincial & LG Infrastructure; Provincial

Budget Analysis; Neighbourhood Development

Programme

Objectives:

Coordinate fiscal relations between 3 spheres

(DoRA);

Monitor budget implementation and reforms in

provincial & local governments;

Facilitate balance of economic & social

infrastructure investment;

Coordinate and support creation of compact &

integrated cities as engines of growth.

6 x Chief Directorates

Transversal Contracting/Policy, Norms and

Standards/Client Support/Information,

Communication & Technology/Governance,

Monitoring, Compliance Regulation & Oversight.

Objectives

Facilitates management of transversal term

contracts;

Manages SCM governance framework in the

three spheres;

Implement cost saving practices and socio-

economic objectives;

Regulate & standardise procuring methods of

similar infrastructure projects.

10 x Chief Directorates:

Capacity Building; MFMA Implementation;

Accounting; Internal Audit; Risk Management;

Specialised Audit Services and Integrated

Financial Management Systems (IFMS).

Objectives:

GRAP Implementation and sets new standards;

Capacity Building in Financial Management;

Enhance effectiveness and uniformity of risk

management;

Support establishment of Internal Audit (IA) and

Audit Committees.

Chief Procurement Office Office of Accountant-General Intergovernmental Relations

DELEGATION TO PROVINCIAL TREASURIES

Legislative framework for local government - National Treasury to provide support to municipalities

with the assistance of the Provincial Treasuries, (MFMA section 3(c));

MFMA Section 6(1)(b) states that the Minister of Finance may delegate powers to the MEC of a

Provincial Treasury;

In effecting this, the National Treasury issued MFMA Circular 20 of 12 August 2005 delegating most

municipalities to the Provincial Treasury excluding the metros and secondary cities;

Municipalities that are not delegated remain within the direct responsibility of the National Treasury in

the Western Cape and other provinces;

There are 17 non-delegated municipalities in South Africa made of;

o 8 metropolitan municipalities; (Western Cape is Cape Town);

o 9 secondary cities; (Western Cape is George Local Municipality); and

o 1 District which is the OR Tambo.

The National Treasury has assisted Provincial Treasuries with documenting Province Specific

Strategies to address failure in municipalities;

The Western Cape Provincial Treasury has institutionalised two process to support municipalities.

National Treasury introduced strtegic engagements to support the non-delegated municipalities. 5

INSTITUTIONALISED ANNUAL STRATEGIC ENGAGEMENTS WITH 17

NON-DELEGATED MUNICIPALITIES

Mid-year Budget & Performance Assessment

• Two-day event held in the city;

• January / February, prior to Adjustment Budget;

• Invitations to NT, National Sector depts., DBSA,

Presidency, Provincial depts., SoEs, etc.

• Discussion of: Plans to address issues raised in A/G report for previous financial

year

Mid-year financial and non-financial results for current financial year,

compared with targets set in IDP, budget & SDBIP

Progress on BEPP and on Infrastructure Plan

Performance & spending on all conditional grants

Analyses of various financial performance ratios

Progress in preparation of adjustment budget

Progress made on IDP and budget schedule for the next financial

year

Benchmark Engagements

• Two-day event, held at NT

• April/May, prior to finalisation of IDP, BEPP and Budget

• Invitations to NT, sector depts., DBSA, Presidency,

provincial depts., SoEs, etc.

• Discussion of: Draft IDP as tabled (functional & institutional planning, spatial

development framework)

Draft BEPP as tabled (Priority areas (Integration zones, Informal Settlements, Growth area); Catalytic projects; and Intergovernmental

Alignment

Draft MTREF as tabled tariffs, collection rates & operating revenues

operating expenditure, cost containment measures, FBS

capital budget, funding of capital budget

cash flow management, cash backed reserves

accumulated surplus reconciliation;

key strategic issues for consideration when adopting the budget

Application & adoption of annual Budget Circulars. 6

AG Report and Unaudited Published

Section 71 performance

7

AUDIT OPINION - FIVE YEAR PERIOD TO 2015/16

8

- Unqualified with no finding improved from 17% to 77% in 2015/16;

- Cape Town is the first and only metro in 2012/13 to get Clean Audit;

- Oudtshoorn LM improved from Adverse in 2014/15 to Qualified Opinion in

2015/16; (LM was under Provincial Administration);

- Kannaland LM regressed from 2 year Unqualified with findings to Adverse

Opinion in 2015/16.

o Kannaland is under Administration i.t.o sec 139(5) of Constitution

effective December 2016.

o Support from Prov Treasury & DCoG assists with Financial Recovery Plan. Source: Auditor General

17%

37%

57%

73% 77%70%60%

43%23%

17%

0%

20%

40%

60%

80%

100%

2011/12 2012/13 2013/14 2014/15 2015/16

Five Year Audit Trends

Unqualified - No findings (Clean) Unqualified - With Findings

Qualified Disclaimer

Adverse Outstanding

Western Cape Audit Report - 2011/12 - 2015/16

2011/12 % 2012/13 % 2013/14 % 2014/15 % 2015/16 %

Unqualified - No findings (Clean) 5 17% 11 37% 17 57% 22 73% 23 77%

Unqualified - With Findings 21 70% 18 60% 13 43% 7 23% 5 17%

Qualified 2 7% 0% 0% 0% 1 3%

Disclaimer 1 3% 0% 0% 0% 0%

Adverse 1 3% 1 3% 0% 1 3% 0%

Outstanding 0% 0% 0% 0% 1 3%

T o tal 30 100% 30 100% 30 100% 30 100% 30 100%

Source: Auditor General

SUMMARY PERFORMANCE (Preliminary sec 71)

9

Achieved 98 per cent or R31.7bn billing

on revenue against adjusted of R32.5bn;

Operating expenditure performance is 92

per cent or R29.6bn of R32.4bn adjusted

budget;

Reported R2.1bn operating surplus

against adjusted operating budget deficit

R191m;

An operating surplus before capital

transfers(capital grants) assist greatly to

improve municipal cash flow.

City of Cape Town reported operating

surplus for two years in a row since

2014/15 year.

City of Cape Town

Nationally municipalities achieved billing of 96 per cent or R292.2bn revenue;

Western Cape (WC) municipalities billing is 96 per cent of R45.9bn of adjusted

revenue budget of R47.7bn;

Operating surplus reported at R2.7bn against adjusted budget deficit of R543m;

o City of Cape Town contributes 78 per cent pf the WC province R2.8bn.

Operating surplus excluding capital grant transfers:

o All 8 metro’s reported R2.5bn;

o 9 secondary cities reported R1.8bn.

All 262(pre-demarcations) reported R6.7bn surplus (Avrg R25m per municipality).

Metros reporting operating deficit (Mangaung R339 thousand, JHB R532 thousand

and Tshwane R1.3bn)

Table 2: Western Cape: Summary of 2015/16 Performance - Section 71 Q4 - Ytd

R thousand Actual Actual Actual

Original Adjusted Actual

Adj

Budg Original Adjusted Actual

Adj

Budg Original Adjusted Actual

Adj

Budg

Total Operating Revenue 304 254 061 305 191 088 292 211 688 96% 46 413 208 47 690 426 45 949 037 96% 31 723 843 32 531 966 31 739 384 98%

Total Operating Expenditure 306 137 714 310 079 478 281 155 970 91% 47 070 715 48 234 323 43 173 861 90% 31 849 422 32 340 172 29 629 378 92%

Operating Surplus/(Deficit) (1 883 652) (4 888 390) 11 055 719 (657 507) (543 897) 2 775 175 (125 579) 191 795 2 110 006

Source: National Treasury Local Government Database

National Western Cape Municipalities City of Cape Town

OPERATING REVENUE PERFORMANCE (Preliminary sec 71)

10

Audited 2014/15 Results

National billing actual reported 96 per cent same as

WC municipalities;

City of Cape Town billing reported at 98 per cent

above 96 per cent national average; and

In all three spheres - Property Rates actuals reported

over 100 per cent billing.

Annual Performance

Contribution to operating revenue

nationally is electricity at 32 per cent;

WC contribution averages 35 per cent of

budgeted 35 per cent - electricity;

Cape Town reported 35 per cent which is

more than 34 per cent adj budget;

Nationally, municipalities second

contributor to revenue is E/Share at 22

per cent; and

Cape Town second revenue contributor

is Property rates at 21 per cent.

Table 2(a): Western Cape: Summary of 2015/16 Op Rev Performance - Section 71 Q4 - Ytd

R thousand

Original Budg

Adjusted

Budg Actual Billed

Original

Budg

Adjusted

Budg

Actual

Billed

Original

Budg

Adjusted

Budg

Actual

Billed

Total Operating Revenue 304 254 061 305 191 088 292 211 688 46 413 208 47 690 426 45 949 037 31 723 843 32 531 966 31 739 384

Performance on Key Services

Property rates 47 358 540 47 338 789 48 896 678 8 631 497 8 689 102 8 809 725 6 546 155 6 578 912 6 712 374

Service charges - electricity revenue 101 887 907 100 514 222 93 922 535 16 367 214 16 393 865 16 361 989 11 137 790 11 159 790 11 214 165

Service charges - water revenue 31 988 992 31 988 992 30 415 164 4 090 638 4 091 351 4 389 664 2 762 941 2 770 738 2 993 946

Service charges - sanitation revenue 12 683 108 12 919 218 12 317 650 2 215 747 2 195 428 2 306 000 1 500 948 1 500 437 1 548 489

Service charges - refuse revenue 9 590 776 9 722 849 9 543 820 1 685 341 1 680 070 1 619 292 1 097 141 1 097 141 1 091 248

Transfers recognised - operational 64 582 003 65 306 061 63 382 011 6 362 427 7 135 341 5 699 131 3 579 752 4 106 009 3 178 916



0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%

OriginalBudg

AdjustedBudg

Actual Billed OriginalBudg

AdjustedBudg

Actual Billed OriginalBudg

AdjustedBudg

Actual Billed


15.6% 15.5% 16.7%18.6% 18.2% 19.2%

20.6% 20.2% 21.1%

33.5% 32.9% 32.1%35.3% 34.4% 35.6% 35.1% 34.3% 35.3%

21% 21% 22%

14% 15% 12% 11% 13% 10%

Contribution to Total Opeating Revenue - Excl Capital Transfers

Property rates Service charges - electricity revenue Service charges - water revenue

Service charges - sanitation revenue Service charges - refuse revenue Transfers recognised - operational

OPERATING EXPENDITURE PERFORMANCE (Preliminary sec 71)

11

National spending on operating expenditure reported

at 91 per cent;

WC municipalities and Cape Town reported 90 per

cent and 92 per cent respectively;

Nationally, depreciation exp is reported at 73 per cent

while Cape Town is at 97 per cent;

National exp on bulk purchases is 95 per cent while

WC municipalities spent 98 per cent

Annual Performance

Nationally, bulk purchases is the highest

accounting for 29 per cent share of total

operating exp of R281.1bn;

WC, the highest spending activity is

employee related costs at 29 per cent;

Cape Town highest spending activity is

employee related costs at 32 per cent; and

Other expenditure reported in all sphere

just below 16 per cent with Cape Town at

14 per cent.

Table 2(b): Western Cape: Summary of 2015/16 Op Exp Performance - Section 71 Q4 - Ytd

R thousand Spent Spent Spent

Original

Budg

Adjusted

BudgActual Spent

Adj

Budg

Original

Budg

Adjusted

Budg

Actual

Spent

Adj

Budg

Original

Budg

Adjusted

Budg

Actual

Spent

Adj

Budg

Total Operating Expenditure 306 137 714 310 079 478 281 155 970 91% 47 070 715 48 234 323 43 173 861 90% 31 849 422 32 340 172 29 629 378 92%

Top Opearting Expenditure

Employee related costs 81 360 627 80 826 842 78 387 810 97% 14 144 882 14 282 724 13 778 788 96% 9 606 684 9 653 369 9 434 233 98%

Depreciation and asset impairment 24 799 984 24 831 533 18 012 336 73% 3 300 496 3 399 263 3 032 487 89% 2 089 827 2 127 123 2 067 276 97%

Bulk purchases 88 798 027 87 981 133 83 450 758 95% 11 801 485 11 783 439 11 518 286 98% 7 967 555 7 959 015 8 044 062 101%

Contracted serv ices 22 032 635 23 554 264 20 882 963 89% 5 399 308 5 477 787 4 050 274 74% 4 818 153 4 622 941 3 371 295 73%

Other expenditure 48 455 632 50 513 817 44 678 739 88% 7 389 159 8 300 150 6 987 429 84% 3 978 981 4 760 978 4 158 437 87%




0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%

OriginalBudg

AdjustedBudg

ActualSpent

OriginalBudg

AdjustedBudg

ActualSpent

OriginalBudg

AdjustedBudg

ActualSpent


26.6% 26.1% 27.9%30.1% 29.6%

31.9% 30.2% 29.8%31.8%29.0% 28.4% 29.7%

25.1% 24.4%26.7%

25.0% 24.6%27.1%

Top Operating Expenditure Share to Total Op Expenditure

Employee related costs Depreciation and asset impairment Bulk purchases Contracted services Other expenditure

FUNDING - CAPITAL EXPENDITURE (Preliminary sec 71 June 2016)

12

Nationally, average capital

grant dependency is over 60

per cent;

Borrowing accounts for about

17 per cent mostly in

metropolitan municipalities;

Some municipalities borrowing

are higher than 50 per cent of

revenue which is unsustainable;

Source: National Treasury Local Government database

60%17%

21%

2%

National Funding - Capital Grant Dependancy

Transfers recognised -capital

Borrowing

Internally generatedfunds

Public contributionsand donations


40%

40%

19%

1%

WC - Capital Grant Dependancy

Transfers recognised- capital

Borrowing

Internally generatedfunds

Public contributionsand donations

WC municipalities have a 40 per

cent capital grant dependency;

Borrowing share is 40 per cent of

total WC capital expenditure;

Municipalities such as Drakenstein

borrowing is over 70 per cent of

revenue (unsustainable).

City of Cape Town capital grant

dependency is 38 per cent;

Borrowing share is 46 per cent

of total capital expenditure; and

Internally generated (own)

funding accounts for 15 per

cent.


Transfers recognised -

capital

38%

Borrowing 46%

Internally generated

funds

15%

Public contributions and donations

1%

Other16%

Cape Town

CAPITAL EXPENDITURE PERFORMANCE (Preliminary sec 71)

13

National spending on

Capex is 80%;

Trading services

national, WC & Cape

Town spending is

below 90%;

Highest spending

share to total capex is

on Trading services at

44% nationally and

over 50% WC ad

Cape Town

Table 3: Western Cape: Summary of 2015/16 Capital Expenditure Performance - Section 71 Q4 - Ytd

R thousand Spent Spent Spent

Original

Budg

Adjusted

Budg

Actual

Spent

Adj

Budg

Original

Budg

Adjusted

Budg

Actual

Spent

Adj

Budg

Original

Budg

Adjusted

Budg

Actual

Spent

Adj

Budg

Total Capital Expenditure 66 872 219 67 953 756 54 690 191 80% 8 442 520 8 966 112 7 165 319 80% 5 780 819 6 129 094 5 095 515 83%

Capital Expenditure - Standard

Governance and Administration 6 104 758 6 054 980 4 506 461 74% 738 510 802 570 638 845 80% 536 234 538 893 480 884 89%

Community and Public Safety 9 697 014 9 889 088 7 499 721 76% 1 241 688 1 361 020 1 016 774 75% 797 058 898 393 676 533 75%

Economic and Environmental Serv ices 20 174 768 21 276 526 18 255 773 86% 2 068 660 2 285 298 1 820 293 80% 1 530 913 1 753 235 1 390 745 79%

Trading Serv ices 30 533 353 30 451 636 24 246 825 80% 4 391 534 4 514 761 3 687 550 82% 2 916 115 2 938 072 2 546 853 87%

Other 362 326 281 526 181 411 64% 2 127 2 463 1 857 75% 500 500 500 100%




8%

14%

34%

44%

0%

National - Spending to Total Cap Exp

Governance andAdministration

Community andPublic Safety

Economic andEnvironmental

Services

Trading Services

Other

9%

14%

25%

52%

0%

Western Cape - Spending to Total Cap Exp




Services

Trading Services

Other

10%13%

27%

50%0%

Cape Town Spending to Total Capital Exp




Services

Trading Services

Other

DEBTORS AGE ANALYSES (Preliminary sec 71)

Table 4: WC Debtors Age Analysis as at 30 June 2016

R thousands Amount % Amount % Amount % Amount % Amount % Amount % Amount %

Debtors Age Analysis By Customer Group

Organs of State 679 037 11.2% 328 361 5.4% 270 216 4.4% 4 803 362 79.0% 6 080 975 5.4% 3 330 0.1% 384 491 6.3%

Commercial 6 201 592 24.0% 1 352 988 5.2% 1 037 030 4.0% 17 227 760 66.7% 25 819 370 22.7% 415 942 1.6% 1 537 342 6.0%

Households 6 797 409 9.2% 2 828 462 3.8% 2 338 232 3.2% 62 063 303 83.8% 74 027 406 65.2% 3 005 308 4.1% 7 642 274 10.3%

Other 504 794 6.6% 198 694 2.6% 409 943 5.4% 6 499 129 85.4% 7 612 560 6.7% 665 241 8.7% 627 123 8.2%

Total 14 182 832 186.3% 4 708 506 61.9% 4 055 420 53.3% 90 593 554 1190.1% 113 540 312 100.0% 4 089 821 3.6% 10 191 231 9.0%

Per Province

Eastern Cape 1 070 703 12.8% 395 754 4.7% 303 278 3.6% 6 588 701 78.8% 8 358 436 7.4% 278 107 3.3% 1 798 373 21.5%

Free State 793 514 6.9% 411 729 3.6% 852 509 7.4% 9 524 416 82.2% 11 582 167 10.2% 533 080 4.6% 2 666 926 23.0%

Gauteng 6 390 929 14.4% 1 683 708 3.8% 1 370 953 3.1% 34 789 839 78.6% 44 235 429 39.0% 2 989 764 6.8% 1 036 328 2.3%

Kw azulu-Natal 1 719 216 12.8% 730 204 5.4% 515 470 3.8% 10 492 711 78.0% 13 457 601 11.9% 93 970 0.7% 3 488 660 25.9%

Limpopo 349 204 8.2% 171 442 4.0% 139 612 3.3% 3 620 454 84.6% 4 280 712 3.8% - 11 040 0.3%

Mpumalanga 502 687 6.3% 324 820 4.1% 213 615 2.7% 6 934 425 86.9% 7 975 548 7.0% - 177 199 2.2%

North West 768 653 7.8% 395 939 4.0% 268 558 2.7% 8 390 036 85.4% 9 823 186 8.7% 62 0.0% -

Northern Cape 246 122 5.7% 169 471 3.9% 127 039 2.9% 3 774 803 87.4% 4 317 435 3.8% - 775 733 18.0%

Western Cape 2 341 804 24.6% 425 439 4.5% 264 387 2.8% 6 478 169 68.1% 9 509 799 8.4% 194 837 2.0% 236 972 2.5%

Total 14 182 832 149.1% 4 708 506 49.5% 4 055 420 42.6% 90 593 554 952.6% 113 540 312 100.0% 4 089 821 3.6% 10 191 231 9.0%


Impairment -Bad Debts 0 - 30 Days 31 - 60 Days 61 - 90 Days Over 90 Days Total Actual Bad Debts

14

DEBTORS AGE ANALYSES (Preliminary sec 71)

Table 4(a): Western Cape: Summary of 2015/16 Debtors Age Analyses - Section 71 Q4 - Ytd

31 - 60 Days 61 - 90 Days Over 90 Days Total

R thousands Amount % Amount % Amount % Amount % Amount %

Debtors Age Analysis By Income Source

Trade and Other Receiv ables from Ex change Transactions - Water 441 032 15.0% 168 448 5.7% 108 128 3.7% 2 216 773 75.5% 2 934 382 30.9%

Trade and Other Receiv ables from Ex change Transactions - Electricity 970 716 73.7% 39 238 3.0% 26 455 2.0% 280 752 21.3% 1 317 161 13.9%

Receiv ables from Non-ex change Transactions - Property Rates 584 256 30.7% 126 845 6.7% 46 684 2.5% 1 146 053 60.2% 1 903 838 20.0%

Receiv ables from Ex change Transactions - Waste Water Management 212 192 15.4% 64 325 4.7% 43 463 3.2% 1 058 669 76.8% 1 378 649 14.5%

Receiv ables from Ex change Transactions - Waste Management 127 525 17.3% 34 629 4.7% 21 821 3.0% 553 421 75.1% 737 395 7.8%

Receiv ables from Ex change Transactions - Property Rental Debtors 54 587 8.0% 11 669 1.7% 11 205 1.6% 606 565 88.7% 684 027 7.2%

Interest on Arrear Debtor Accounts 56 669 6.0% 26 347 2.8% 22 890 2.4% 830 869 88.7% 936 774 9.9%

Recov erable unauthorised, irregular or fruitless and w asteful Ex penditure - - - - - - - - - -

Other (105 174) 27.5% (46 062) 12.0% (16 258) 4.3% (214 933) 56.2% (382 427) (4.0%)

Total By Income Source 2 341 804 24.6% 425 439 4.5% 264 387 2.8% 6 478 169 68.1% 9 509 799 100.0%

Debtors Age Analysis By Customer Group

Organs of State 113 682 39.2% 23 228 8.0% 14 061 4.9% 138 698 47.9% 289 669 3.0%

Commercial 994 525 55.5% 90 848 5.1% 40 000 2.2% 667 865 37.2% 1 793 238 18.9%

Households 1 236 951 16.4% 368 212 4.9% 225 435 3.0% 5 717 917 75.7% 7 548 515 79.4%

Other (3 355) 2.8% (56 849) 46.7% (15 109) 12.4% (46 311) 38.1% (121 624) (1.3%)

Total By Customer Group 2 341 804 24.6% 425 439 4.5% 264 387 2.8% 6 478 169 68.1% 9 509 799 100.0%


0 - 30 Days

15

CREDITORS AGE ANALYSES (Preliminary sec 71)

Table 5(a): Western Cape: Summary of 2015/16 Creditors Age Analyses - Section 71 Q4 - Ytd

31 - 60 Days

R thousands Amount % Amount % Amount % Amount % Amount %

Creditor Age Analysis

Bulk Electricity 188 120 93.9% 4 064 2.0% - - 8 117 4.1% 200 302 17.3%

Bulk Water 545 80.5% - - - - 132 19.5% 677 .1%

PAYE deductions 11 997 69.0% - - - - 5 384 31.0% 17 381 1.5%

VAT (output less input) 5 000 100.0% - - - - - - 5 000 .4%

Pensions / Retirement 1 123 66.5% - - - - 566 33.5% 1 689 .1%

Loan repay ments - - - - - - - - - -

Trade Creditors 840 640 95.2% 14 006 1.6% 3 659 .4% 24 991 2.8% 883 297 76.2%

Auditor-General - - 268 2.3% 128 1.1% 11 446 96.7% 11 842 1.0%

Other 32 251 81.6% 291 .7% 712 1.8% 6 284 15.9% 39 537 3.4%

Total 1 079 675 93.1% 18 629 1.6% 4 499 .4% 56 921 4.9% 1 159 725 100.0%


0 - 30 Days 61 - 90 Days Over 90 Days Total

Nationally municipalities owes over R38bn to creditors;

Gauteng is the highest at 44 per cent (R17bn);

Free State is second – R6.6bn while Western Cape is the 7th of

all 9 provinces at R1.1bn;

National outstanding creditors at R11.9bn;

o Free State stands at 73% or R4.9bn

o Mpumalanga stands at 69% or R2.5bn;

o Western cape stands at 4% or R56 thousands.

Out of R11.9bn, Eskom is owed R5.2bn & Water Boards

R3.1bn jointly representing R8.3bn or 70%.

16

2015/16 National

Per Province

Eastern Cape 1 615 332

Free State 6 638 162

Gauteng 17 240 299

Kw azulu-Natal 4 769 285

Limpopo 1 111 857

Mpumalanga 3 534 947

North West 1 916 084

Northern Cape 928 075

Western Cape 1 159 725

Total 38 913 765

Total


4%

17%

44%

12%3%

9% 5%

3%

3%

11%

Mun - Provincial Share of Creditors

Eastern Cape

Free State

Gauteng

Kwazulu-Natal

Limpopo

Mpumalanga

North West

Northern Cape

Western Cape

LOCAL GOVERNEMENT ALLOCATIONS

17

Western Cape Summary

National

Allocations

R thousands

Western

Cape

WC %

share to

Nat

Allocation

City of Cape

Town

Cape Tow n

% Share to

Prov

Allocation

Direct transfers

Equitable share and related 52 568 706 3 866 184 7% 2 012 945 52%

Fuel lev y sharing 11 223 830 2 197 740 20% 2 197 740 100%

Infrastructure 39 119 734 3 283 375 8% 2 430 587 74%

Capacity building and other current transfers 1 742 773 161 644 9% 57 206 35%

Other - Allocations 269 000

Sub total direct transfers 104 924 043 9 508 943 9% 6 698 478 70%

Indirect transfers

Infrastructure transfers 7 688 917 152 797 2% 44 155 29%

Capacity building and other current transfers 84 349 - 0% - 0%

Sub total indirect transfers 7 773 266 152 797 2% 44 155 29%

Total 112 697 309 9 661 740 9% 6 742 633 70%


Table 7: Western Cape - Local Government Allocation 2016/17 Budget Year

City of Cape Town Audited Results and

Revenue Management

18

AUDITED FINANCIAL PERFORMANCE - 2015/16

19

SUMMARY 2015/16 AUDITED - FINANCIAL PERFORMANCE 'thousand

Description

Revised

Budget

Restated

Results

Original

Budget

Revised

Budget

Audited

Results

2014/15

Revised

2015/16

Original

2015/16

Revised

Operating Budget

- Revenue 32 460 409 31 957 158 34 167 433 35 205 083 35 220 581 98% 103% 100%

- Expenditure 29 469 151 27 505 764 32 292 012 32 814 924 30 849 784 93% 96% 94%

Capital Budget

- Revenue 6 219 585 5 338 941 6 548 092 6 518 668 5 874 991 86% 90% 90%

- Expenditure 6 219 585 5 338 941 6 548 092 6 518 668 5 874 991 86% 90% 90%

Surplus(Deficit) - after capital transfers 2 991 258 4 451 394 1 875 421 2 390 159 4 370 797 149% 233% 183%

Cash Flow Management

- Nett Increase/(Decrease) Cash held ( 579 162) 1 139 961 ( 602 615) (2 406 418) 11 189 -197% -2% 0%

- Cash equivalents - Opening Balance 6 242 688 2 652 774 2 935 601 3 753 780 3 792 735 42% 129% 101%

- Cash equivalents - at year end 5 663 526 3 792 735 2 332 986 1 347 362 3 803 924 67% 163% 282%

Assets and liabilities

- Nett Working Assets 3 717 467 2 546 272 1 136 124 1 025 594 3 210 523 68% 283% 313%

- Total Current Assets 10 897 328 11 275 312 10 019 671 9 449 670 12 216 492 103% 122% 129%

- Total Current Liabilities 7 179 861 8 729 040 8 883 547 8 424 076 9 005 969 122% 101% 107%

Debtors collection Rate 94% 96% 93% 93% 93%

Creditors Payment Rate 30 days 30 days 30 days 30 days 30 days

2014/15 Audited 2015/16 Audited AFS % Percentage Spent to Budget

Cash Flow Movement

Working Assets Movement

COST TO INCOME RATIO

20

City’s Cost to Income for year 2014/15 to 2015/16 is commendable and indicates amongst others, implementation of cot containment;

However, of great concern is the 2016/17 MTREF budgeted operating deficit that negatively increases Cost to income to above 100%;

o City was advised to operate within the 93:7 and 95:5 Cost to Income ratio that would generate cash flow reserves;

o This has been achieved for both 2014/15 and 2015/16 financial years per graph and table above.s

Its important to not Budget Council took resolution in 2015 that all municipalities must budget for operating surplus before capital transfers.

City’s operating surplus before capital transfers stands around R2.2bn;

Capital grant transfers does not contribute to generated cash flow;

Municipalities that operates at operating deceit before capital transfers

are currently in serious financial distress;; Source: National Treasury Local Government database

99.9%

101.7%

93.4% 93.2%

101.0% 100.5% 100.4%

2012/13Audited

Outcome

2013/14Audited

Outcome

2014/15Audited

Outcome

2015/16Audited

Outcome

2016/17Budget Year

2017/18Budget Year

2018/19Budget Year

Operating: Expenditure to Revenue

Cost to Income Break Even

CPT Cape Town - Table A4 Consolidated Budgeted Financial Performance (revenue and expenditure)

Description 2011/12 2012/13 2013/14

R thousandAudited

Outcome

Audited

Outcome

Audited

Outcome

Audited

Outcome

Budget Year

2015/16

Budget Year

+1 2016/17

Budget Year

+2 2017/18

Total Operating Rev enue 24 069 941 26 241 278 29 484 808 33 089 044 34 383 832 37 818 037 41 753 417

Total Expenditure 24 046 460 26 679 626 27 545 606 30 849 784 34 741 753 37 999 647 41 925 906

Surplus/(Deficit) 23 481 (438 347) 1 939 203 2 239 260 (357 921) (181 610) (172 490)

2015/162015/16 Medium Term Rev enue &

Ex penditure Framew ork


CAPITAL EXPENDITURE FUNDING MIX

21

Description 2012/13 2013/14 2014/15

R thousandAudited

Outcome

Audited

Outcome

Audited

Outcome

Adjusted

Budget

Audited

Outcome

Budget Year

2016/17

Budget Year

2017/18

Budget Year

2018/19

Funded by:

Transfers recognised - capital 3 414 645 2 053 319 2 473 313 2 462 825 2 187 424 2 207 636 2 186 641 2 372 276

Public contributions & donations 35 076 44 022 44 219 68 392 61 483 75 800 83 900 86 700

Borrowing 1 753 425 1 856 889 2 152 377 2 529 240 2 441 423 2 969 823 2 395 200 2 670 268

Internally generated funds 694 991 589 322 664 242 1 584 871 799 499 1 214 239 926 010 831 543

Total Capital Funding 5 898 137 4 543 552 5 334 151 6 645 328 5 489 829 6 467 498 5 591 751 5 960 787


Table 9(a): City of Cape Town Consolidated Capital Funding

2015/162016/17 Medium Term Revenue &

Expenditure Framework


50.3%

0.8%

36.5%

12.4%

39.8%

1.1%

44.5%

14.6%

37.6%

1.4%

44.6%

16.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Transfers recognised - capital Public contributions & donations Borrowing Internally generated funds

Capital Funding Structure - 4 Yr Audited vs 2016/17 MTREF

2012/13 - 2014/15 2015/16 Audited 2016/17 MTREF

City is steadily improving from capital

grant dependency;

Period 2012/13 – 2014/15, City

grants decency declined from50 per

cent to 39 per cent;

The 2016/17 MTREF projections

indicates further improvement on

grants to 37 per cent;

Borrowing increased from 36 per

cent in 2012/13 – 2014/15 period to

44.6 per cent in 2015/16 year;

City should improve own revenue

funding through Cost to income ratio.

CASH FLOW ANALYSES

22

2012/13 2013/14 2014/15

R thousandAudited

Outcome

Audited

Outcome

Audited

Outcome

Adjusted

Budget

Audited

Outcome

Budget Year

2016/17

Budget Year

2017/18

Budget Year

2018/19

NET CASH FROM/(USED) OPERATING ACTIVITIES 5 550 211 4 566 057 6 143 489 4 471 221 6 458 242 4 244 710 4 626 017 5 045 500

NET CASH FROM/(USED) INVESTING ACTIVITIES (6 383 672) (6 588 723) (4 635 435) (6 664 529) (6 272 662) (6 432 866) (5 708 437) (6 112 757)

NET CASH FROM/(USED) FINANCING ACTIVITIES 2 259 368 (232 000) (368 093) (206 665) (174 391) 2 099 998 1 099 377 1 520 533

NET INCREASE/ (DECREASE) IN CASH HELD 1 425 907 (2 254 666) 1 139 961 (2 399 973) 11 189 (88 159) 16 957 453 276

Cash/cash equiv alents at the y ear begin: 3 481 533 4 907 440 2 652 774 3 753 780 3 792 735 1 353 806 1 265 648 1 282 605

Cash/cash equiv alents at the y ear end: 4 907 440 2 652 774 3 792 735 1 353 806 3 803 924 1 265 648 1 282 605 1 735 881

Table 10: City of Cape Town Consolidated Audited Cash Flow

2015/162016/17 Medium Term Revenue &

Expenditure Framework



R4.9bn

R2.6bn

R3.89bn

R3.8bn

R1.2bn

R1.3bn

R1.7bn

2012/13 AuditOutcome



2015/16Audited

2016/17Forecast

2017/18Forecast

2018/19Forecast

Cash Flow Analyses - 2015/16

Cash/cash equivalents at the year begin: Cash/cash equivalents at the year end:

City’s cash flow indicates downward trend from R4.9bn in 2012/13

to R3.7bn in 2014/15;

Improvement noted for the audited 2015/16 audited year from

R3.7bn to R3.8bn;

The 2016/17 MTREF indicates slight increase from R1.2bn in

2016/17 to R1.7bn in 2018/19;

The City has long term investment of R3.9bn as at 30 June 2016;

R1.9bn is sinking fund ring fenced to cover repayments of

other loans;

The City’s implements stringent cash collection strategies to

further improve its cash flow.

CONDITIONAL GRANTS

23

Table 11: City of Cape Town Conditional Grants Roll Over

2015/16 Year

Opening

Balance

(Rollover) Original Adjustment

Total

Available Amount Spent % Spent Unspent

Approved

Roll over

Rejected

Rollover

Infrastructure Grants 436 492 2 546 261 -227 690 2 755 063 2 060 770 75% 694 293 149 538 135 091

Urban settlement development grant 163 495 1 387 760 1 551 255 1 401 717 90% 149 538 149 538

Public transport netw ork grant 272 997 1 093 501 -212 000 1 154 498 622 876 54% 531 622 128 961

Integrated national electrif ication programme (municipal)

grant

5 000 5 000 4 997 100% 3

Neighbourhood development partnership grant (capital

grant)

60 000 -15 690 44 310 31 180 70% 13 130 6 130

Capacity Building and other Infrastructure 31 638 108 721 0 140 359 107 895 77% 32 464 0 26 043

Local government f inancial management grant 1 050 1 050 1 027 98% 23

Municipal systems improvements grant 0

Expanded public w orks programme integrated grant for

municipalities

58 23 616 23 674 23 669 100% 5

Infrastructure skills development grant 7 526 7 526 7 220 96% 306 34

Water services operating subsidy grant 0

Energy eff iciency and demand side management grant 12 000 12 000 11 450 95% 550

Municipal disaster grant 0

Integrated city development grant 50 826 50 826 50 826 100% 0

Municipal human settlements capacity grant 31 580 13 703 45 283 13 703 30% 31 580 26 009

Total 468 130 2 654 982 -227 690 2 895 422 2 168 665 75% 726 757 149 538 161 134


City spent 75 per cent of its capital grants, according to unaudited results;

City presented during 2017 Mid-year visit audited conditional spending audited performance at; 89 per cent;

Public Transport Grant reported at 54 per cent (unaudited) & City presented 78 per cent spending during mid year.

LOCAL GOVERNEMENT ALLOCATIONS

24

Western Cape Summary

National

Allocations

R thousands

Western

Cape

WC %

share to

Nat

Allocation

City of Cape

Town

Cape Tow n

% Share to

Prov

Allocation

Direct transfers

Equitable share and related 52 568 706 3 866 184 7% 2 012 945 52%

Fuel lev y sharing 11 223 830 2 197 740 20% 2 197 740 100%

Infrastructure 39 119 734 3 283 375 8% 2 430 587 74%

Capacity building and other current transfers 1 742 773 161 644 9% 57 206 35%

Other - Allocations 269 000

Sub total direct transfers 104 924 043 9 508 943 9% 6 698 478 70%

Indirect transfers

Infrastructure transfers 7 688 917 152 797 2% 44 155 29%

Capacity building and other current transfers 84 349 - 0% - 0%

Sub total indirect transfers 7 773 266 152 797 2% 44 155 29%

Total 112 697 309 9 661 740 9% 6 742 633 70%


Table 7: Western Cape - Local Government Allocation 2016/17 Budget Year

REVENUE MANAGEMENT AND STRATEGIES

25

WC Province Municipalities:

Total 11 municipalities were assisted by Provincial Treasury to implement revenue enhancement initiatives which are:

o (a) Bergrivier, (b) Cederberg, (c) Matzikama, (d) Witzenburg, (e) Breede Valley, (f) Cape Agulhas, (g) Swellendam,

(h) Theewaterskloof, (i) Hessequa, (j) Laingsburg and (k) Prince Albert.

The support is both through financial resources and technical support.

City of cape Town

City’s strategies are first driven through political support with well documented end to end business processes;

Strategic initiatives includes:

o Upfront Credit Control check before providing services;

o SCM: tenders are not considered / awarded to tenderers who owe the City money;

o Staff and Councillor arrears – Salary/bonus/back-pay deductions;

o Business Licences are not granted to those who owe the City money;

o Payment to suppliers are withheld from those who owe the City money;

o Installing prepaid Electricity Meters (PPEMs) and water management devices (WMD) for regular defaulters; and

o Allocating high value accounts to area offices to follow up on debtors within their respective areas.

Establishing a Revenue Management Task Team (RMTT) of senior officials from all departments.

END OF PRESENTATION

26

briefing to select committee on finance - pmg · 2017. 2. 3. · the national treasury has assisted...

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