Good afternoon ladies and gentlemen.
It is again my privilege to motivate and enlighten Council on the final budget for 2020/2021 financial year. All inputs and comments received from the greater Stellenbosch community, from the public participation process and other stakeholder engagements in April 2020 has been considered.
Speaker, this is a budget year like no other, as we have had to take into account the enormous and disastrous impact of the COVID-19 virus and the imposed lockdown on the lives of our residents and our local, national and international economy. The impact of this virus will still be felt for many years to come, and this must guide our budget.
The impact of COVID-19 on our budget has indeed been significant and we had to carefully consider every cent. We reworked our draft budget many times to get to the best possible final budget. When we crafted the draft budget we already considered the potential impact of COVID-19 on our operational budget, but we know now it will continue to impact our capital budget for quite some time.
The interests of our residents are of great importance and in spite of pressure on our revenue, we have taken significant steps to assist our residents during the time of lockdown. This includes the following measures:
· A payment reprieve/holiday was implemented for a period of three months since April 2020. No interest will be charged for property rates billed for this period. This is subjected to certain criteria including those outlined by Council on 25 March 2020.
· Given the importance of hygiene to combat COVID 19, the free basic water allocation for indigents will be increased from 6 kilolitres to 10 kilolitres of water.
· Suspension of all credit control measures and procedures i.e. cutting off electricity, up and until 30 June 2020.
· We are donating R300 000 in accordance with our Grant-in-aid policy to #StellenboschUnite over the next three months to help provide food for our residents in need.
· We have sourced an additional R900 000 from the Western Cape Government which will be paid to #StellenboschUnite over the next six months, bringing the total contribution to R1, 2 million. We will revise this as the crisis deepens.
· We made available in-kind services like venues, vehicles and drivers to #StellenboschUnite to aid food distribution.
· We installed additional water tanks and toilets in informal settlements to aid and promote hygiene.
· A sanitizing programme of public spaces, roads, taxi ranks and other frequently used spaces commenced and will be rolled out as needed.
National Treasury has given permission to present a late adjustment budget as per Section 28: 2C of the MFMA, not later than by 15 June 2020. This will take place on 12 June in order to authorise the unforeseen and unavoidable expenses due to COVID-19.
Being in government for four years now, the new financial year was anticipated with great excitement for the new and wonderful projects we were looking forward to implement. The outbreak of COVID-19 and the subsequent economic difficulties has unfortunately forced us to drastically re-evaluate our priorities. We as Council are facing a balancing act like never before in caring for and delivering the best possible services to our residents, while mitigating the economic devastation left by COVID-19 and also remain a stable and sustainable Municipality.
This therefore has had to be a conservative budget, carefully crafted to do more with less and to drive efficiencies, thus allowing us the necessary space to focus on our core functions of service delivery and also supporting our community and our local economy during this difficult unforeseen time.
The effect of the lockdown and the economic impact thereof will seriously impact the amount of revenue, grants and assistance we receive. It will also not be possible to expand our reserves. We therefore have less of our own funding available and furthermore have to reduce our loan funding. We did however not make cuts in our grant funding as this does not have an impact on our reserves or loan capacity. All projects funded by grants from Provincial or National Government have been retained. We have been notified that future grants will be cut drastically and this may be our last opportunity to utilise these grants.
Unfortunately, we have very little control with regards to our operating budget. Approximately 80% of our operating budget is dictated to us by outside forces such as NERSA, Eskom and Employee Costs determined at national government level. Non-cash events like depreciation and debt impairment also falls outside of our control. Of the 20% we can control, we have made cuts to the bone to ensure savings wherever possible and to channel funds into critical capital projects.
On Monday 25 May 2020, Provincial Treasury issued Circular No 10, providing guidance and advice for municipalities as we finalise our annual budgets for the new financial year. Provincial Treasury provides guidance on how we, as a local municipality should deal with the economic impact and fallout of the national lockdown and COVID-19. I am satisfied that our proposed budget is in line with the advice, suggestions and guidance provided by the Provincial Treasury.
In line with the circular request we will place special emphasis on:
· Revenue management
· Active and robust cost containment measures
· Senior municipal personnel (and all staff members) who are able, are encouraged to waive benefits in efforts to save costs. This is however voluntary. An item with regards to the solidarity fund is also serving today before this council.
This budget is aligned to Stellenbosch Municipality’s Integrated Development Plan (IDP) with its vision statement, mission statement, corporate values, key performance areas and its key focus areas as well as from inputs by all councillors and our communities’ right throughout the year.
This budget was drawn up in line with guidelines set by political leadership and reflects our determination in spite of the COVID-19 crisis, to reduce poverty, create job opportunities, support and expand our economy, build and maintain our infrastructure and maintain and improve our levels of service delivery and to mitigate the impact of COVID -19 as much as possible.
This budget is fairly distributed to ensure a fair slice for all communities of the Municipality. Unfortunately, the current economic climate, the impact of continued load shedding and the outbreak of COVID-19 have necessitated us to carefully manage our spending, to be conservative in our planning and to determine which projects are urgent and must be prioritised to ensure service delivery and improvement of our communities.
The budget has been prepared in accordance with National Treasury’s circular guidelines and the Municipal Budget and Reporting Regulations, taking cognisance of scarce available resources. Section 152(2) of The Constitution of the Republic of South Africa, 1996 clearly determines that “a municipality must strive, within its financial and administrative capacity, to achieve the objects of local government.” And we are doing that.
Speaker, I present the 2020/2021 financial year and the two outer years’ budget patterns. Our resources for this budget cycle are limited and it will continuously necessitate us to work smarter and to carefully manage our spending. We however remain committed to continue our focus of upliftment, redress and opportunity.
Speaker, as to the revenue of the tabled 2020/2023 forecast it is important to note: Affordable revenue streams through affordable property rates and service charge tariffs formed the basis of the budgeted operating revenue. The capital programme’s capital project expenditure was also reduced to affordable own funding and external borrowing levels.
Speaker, the IDP informs the budget and the Service Delivery and Budget Implementation Plan (SDBIP). The SDBIP with performance indicators with smart targets are developed to ensure that progress in achieving the objectives as set out in the IDP are achieved. Room for improvement and inputs are welcome from our councillors and residents.
Taking into account the restrictions of COVID-19, we will immediately start with the implementation of our capital projects on 1 July 2020, to ensure that we spend our capital budget effectively, efficiently and economically so as to achieve the ultimate goal of acceleration of service delivery and infrastructure development.
Speaker, I have requested the Municipal Manager to continue to follow a zero tolerance approach to officials who do not implement their CAPEX budget due to whatever reason deemed negligent. COVID-19 poses real challenges, but should not be an excuse for bad planning and poor execution.
Planning has already started, and as soon as the budget is finally approved by Council, the bid processes through our Capital Projects Implementation Plan will kick into operation. Progress with these plans will be monitored on a monthly basis to limit future capital project carry-overs to the minimum. We do our local community no favour by not implementing our capital projects approved in the capital budget – it is our job to implement.
Speaker, the tabled MTREF Budget Report clearly spells out the legislative requirements this budget is governed by. The capital and operating budget was compiled compliant with these legislative requirements, taking also the budget circulars guidelines received National Treasury into consideration.
TOTAL EXPENDITURE BUDGET OVERVIEW
Speaker, our tabled 2020/2021 capital budget expenditure, rounded, amounts to R375 million. Our operating budget expenditure amounts to R1,88 billion. Our total budgeted expenditure therefore amounts to R2,263 billion compared to our current budget of R2,45 billion. This amount is estimated to increase to R2,43 billion and increase R2,59 billion, respectively for the two outer years of the MTREF.
CAPITAL BUDGET EXPENDITURE
Speaker because of COVID-19 and the decrease in the amount of capital we will receive, it was necessary to cut the capital budget with R144 million. This means letting some projects go and postponing others. We must however prioritise to save money and not jeopardise our own position.
The tabled capital budget decreased from R612 million in 2019/20 to R375 million in 2020/2021 because of the completion of major projects.
The MTREF proposes capital expenditure of R436 million and R458 million for the two outer financial years. A comprehensive list of all our capital programme needs is attached as Appendix 1, Section N to the Tabled 2020/2021 MTREF Budget Report.
Speaker, safety and security is one of the top priorities for our community and indeed all over our province. This has been highlighted by the Premier during his State of the Province address and is also the first vision inspired project raised by MEC for Finance, David Marnier during his budget speech.
Poor economic conditions have unfortunately contributed to increase crime and to cause less safe living conditions. We are therefore committed to the implementation of various steps to reduce the opportunity for crime, support crime prevention efforts and create safer and more secure spaces for our residents.
Some less critical projects unfortunately had to be moved to outer years.
We still plan to acquire a fire pumper, but our plans had to be postponed as these budgeted funds are needed for other more urgent projects.
We have also had to reduce funding for some fencing and patrol vehicles to channel the funds to much needed projects.
Street lighting, lighting of public spaces and CCTV is a critical safety feature in our communities. We have however asked that all our councillors apply ward funding to this project so as to ensure the safety of our residents. I am grateful that most councillors have agreed to this and we have therefore been able to budget R3,5 million for this project. We intend to consult councillors for inputs as to where these security measures are most needed.
I hereunder list some of the safety and security projects we have inter alia budgeted for over the next 3 years:
· An incident command vehicle for Disaster Management R1 500 000
· Rapid Response vehicle for Fire and Rescue Services R2 500 000
· Vehicle Fleet Law Enforcement R2 400 000
· Neighbourhood Watch Safety Equipment R1 500 000
· Bicycle Lock Up Facilities R1 500 000
· Upgrading of fencing R600 000
· Replacement of Patrol Vehicles R2 425 000
Speaker, we continue to battle a legacy of aging infrastructure throughout our municipality. It is a priority for us to address this challenge so that we can continue to create a sustainable environment that is conducive to economic development. Better infrastructure is also needed to address the inequalities of the past. As we face some of our most severe economic challenges of the decade, providing strong and sufficient infrastructure will provide our citizens with advantage and opportunity going forward. That is why over the next three years we have provided inter alia for:
· Bulk Water Supply Pipeline and Reservoir James Town R20 000 000
· Dwarsrivier Bulk Supply Augmentation and Network Upgrades R14 340 000
· New Reservoir Rosendal R12 000 000
· New Reservoir and Pipeline Vlottenburg/New Reservoir Polkadraai R30 000 000
· Bulk Sewer Outfall Jamestown R36 000 000
· Water Pipe Replacement R12 000 000
· Franschhoek Sewer Network Upgrade R5 000 000
· Bulk Sewer Upgrade for Dwarsrivier Area R31 000 000
· Upgrade of WWTW Pniel and Decommissioning of Franschhoek R94 684 431
· Upgrade of WWTW Wemmershoek R15 000 000
· Upgrade of WWTW Klapmuts R17 655 000
The upgrading of the various WWTW is especially important as these communities continue to expand and grow and the existing infrastructure is not sufficient to meet their needs. Quality infrastructure is critically important for dignified and secure living spaces and economic growth.
We are also focussing on creating equality, dignity and opportunity for our residents by providing economic opportunities over the next 3 years:
· Local Economic Development Hub Jamestown R4 500 000
· Establishment of Informal Trading Sites: Kayamandi R4 500 000
· Upgrading of the Kayamandi Economic Tourism Corridor R250 000
Creating opportunities especially for the youth through sport and recreation is very important. Sport has the ability to unite, uplift and create opportunities in a unique and positive way. Through the course of the next three years we are investing in the upgrading of various sport facilities, equipment as well as maintaining existing facilities.
· Upgrade of Sport Facilities R15 000 000
· Resurfacing of Netball /Tennis Courts R550 000
· Sight Screens/Pitch Covers for Sport Grounds R750 000
· Special Equipment R900 000
· Structural Improvements at van Der Stel Sport Grounds R1 600 000
We also want to ensure that our community has safe facilities and spaces that they can make use of for cultural and community events. That is why we have provided for the following projects over the next 3 years:
· Upgrading of Eike Town Town Hall R2 000 000
· La Motte Clubhouse R800 000
· Klein Libertas Precinct R22 000 000
· Upgrade of Library in Kayamandi R1 700 000
We will also invest in infrastructure related projects over the next 3 years which will assist in improving the safety as well as improving traffic conditions in our towns for all residents:
· Pedestrian Crossing Implementation R2 100 000
· Implementation of Traffic Calming Project R400 000
· Signalisation Implementation R3 250 000
· Main Road Intersection Improvements Franschhoek R1 700 000
· Main Road Intersection Improvements Helshoogt/La Colline R2 100 000
· Main Road Intersection Improvements R 44/Helshoogte R2 200 000
· Main Road intersection Improvements Strand/Adam Tas/ Alexander Street R4 700 000
· Main Road Intersection Improvements Pniel/Kylemore R4 000 000
We have also budgeted for better living conditions, dignity and addressing inequality over the next 3 years for our residents in informal settlements. We listened to our community and have increased the budget for the upgrading of Steps/Orlean Lounge, Smartie Town.
· Integrated National Electrification Programme R27 037 000
· Northern Extension Bulk Services R24 300 000
· Basic Improvements in Langrug R3 220 682
· Upgrading of the Steps/Orlean Lounge R16 000 000
· Upgrading of Smartie Town R3 000 000
· Interior Upgrading of Flats Cloetesville Kloof and Long Street R1 000 000
We continue our efforts in addressing the plight of the disadvantaged through housing opportunities. Housing remains a challenge as resources and allocations from National and Provincial Government remain limited and the backlog tremendous. However the following has been budgeted for housing projects over the next 3 years to create more housing opportunities:
· La Motte Old Forest Station (approx. 430 serviced plots and approx.. 430 units) R1 200 000
· Kayamandi Town Centre (Planning ± 700 units) R1 000 000
· Jamestown Housing R500 000
· Feasibility of the Northern Extension R49 000 000
· Enkanini Planning R4 279 000
· Upgrading of Watergang farm R10 000 000
A large number of residents rely on public transport. It is also important to reduce congestion on our roads. To work towards better and safer transport opportunities for our people over the next 3 years, we have budgeted for public transport as follows:
· Road transport safety master plan for WC024 R500 000
· Re-design of Bergzicht Public Transport facility R7 000 000
· Pedestrian and Cycle paths, design and phased implementation R2 000 000
· Jamestown South Transport Network R9,000,000
· Non-motorized Transport Implementation R2 000 000
· Taxi Rank: Franschhoek R6 500 000
· Taxi Rank Kayamandi R3 500 000
· Taxi Rank Klapmuts R2 500 000
As you will remember, last year I spoke about the fact that our landfill site has reached capacity. The process to increase space is underway. It is however a lengthy process that we will have to budget for in years to come. We must continue to make clean towns a priority, to create sustainable and healthy living spaces. To continue this very essential service for the next three years we have budgeted as follows:
· Expansion of the landfill site (new cells) R29 000 000
· Formalized skip areas in Franschhoek and Kayamandi R500 000
· Skips (5,5kl) R600 000
· Street Refuse Bins R1 500 000
· Transfer Station Stellenbosch planning and design R19 000 000
We must continue to make every effort to reduce our waste and explore alternative uses for waste in effort to be more sustainable and environmentally conscious. Over the next three years we will invest in the following:
· Waste minimization projects R1 500 000
· Waste to Energy Planning R300 000
· Waste to Energy Implementation R3 000 000
· Landfill Gas to Energy R10 500 000
Speaker, electricity is an absolute necessity for all our residents to live in safety and dignity. Electricity is also critically important for small businesses and the creation of economic opportunity. Despite load shedding and the challenges presented to us by ESKOM we are making the following provisions over the next 3 years we are making provision for:
Network Cable Replace 11 Kv R9 000 000
Kwarentyn Sub Cables R5 500 000
Infrastructure improvement Franschhoek R4 500 000
Substation Equipment R1 950 000
Bien Donne new substation R73 700 000
Electricity Network Pniel R10 500 000
Speaker, to sum up, it is clear that the greatest part of our capital budget expenditure is geared towards infrastructure. This is done, with the goal of excellent service delivery for all residents in mind, and also to create greater long term sustainability equality, economic opportunities and dignified living conditions for our disadvantaged residents. This is also in line with our constitutional mandate of providing basic services.
CAPITAL BUDGET FUNDING
Our capital budget is funded from the following funding sources:
· Own reserves (Capital Replacement Reserve)
· External loans to be taken up
· Government grants and
· Public Contributions and donations.
OPERATING BUDGET EXPENDITURE
The proposed operating budget expenditure for 2020/2021 increases to R1,887 billion (2%) compared with the 2019/2020 adjustments operating budget expenditure of R1,842 billion.
Our operating expenditure for the 2021/2022 to 2022/2023 outer financial years will increase respectively to R2,002 billion (6%) in 2021/2021 and R2,141 billion in 2022/2023.
The main contributors to the operating expenditure of the 2020/2021 financial year are:
· Bulk electricity and water purchases
· Employee related costs;
· Interest on external loans and depreciation costs;
· General expenditure;
· Repair & maintenance costs; and
· Conditional grant expenditure.
Provision for bad debt, leave and landfill sites rehabilitation; contracted services; collection costs; councillor remuneration; special projects; grants and donations represents the remaining operating expenditure.
The increase in employee related costs are due to the limited filling of posts on the new organogram and the national negotiated annual increases as determined in the Bargaining Council. As we acquire new skills, we will become even less dependent on external consultants, which will see a significant drop in the amounts we spend on consultants.
OPERATING BUDGET REVENUE
Our additional revenue will be obtained from interest on selected investments, building plan fees, rates clearance certificate fees, agency fees, traffic fine income, and various other revenue items. We have conservatively budgeted for our operating revenue due to the current economic challenges faced by the country that will directly impact on our residents.
The proposed operating budget revenue for 2020/2021 increases to R2,013 billion (3%) compared with the 2019/2020 adjustments operating budget revenue of R1,952 billion. Our operating revenue for the 2020/2021 to 2022/2023 outer financial years will increase to and respectively to R2,114 billion (5%) in 2021/2022 and R2,273 billion (7%) in 2022/2023.
The exact percentage increase or decrease of each tariff type is reflected in the Tariff List that will available for inspection at municipal offices and all libraries during the public participation process.
As set out in the budget assumptions in the 2020/2021 MTREF Budget Report of the reviewed IDP, the 2020/2021 revenue streams increase approximately with the following percentages. Speaker in setting these tariffs we have been very mindful of the challenging economic conditions in the country as well as and inflation. We have also taken note of the comparative tariffs of other Municipalities. The following increases are proposed:
· Property Rates increase with 6,50 %
· Electricity Tariffs increase with 6.43%
· Water Tariffs increase with 6%
· Sanitation Tariffs increase with 6%
· Refuse Removal tariff will increase with 16,5%
Speaker, as mentioned earlier, this increase is due to the fact we are still in the process of rehabilitating our landfill site, and refuse must be transported to alternative sites. As soon as this process is complete, it will be possible to reduce this tariff. Fortunately this forms a small percentage of the basket of service tariffs.
FINANCIAL SUPPORT TO INDIGENT HOUSEHOLDS
Speaker, Stellenbosch Municipality does provide free basic services to poor households as a means of poverty alleviation. We mainly provide support to households who are unable to pay or struggle to pay for their basic services. This includes households with an income base below a determined threshold (two times the government social grant paid to a pensioner plus 25%), to the unemployed, child-headed households, retired persons and disabled persons. These consumers must apply to be registered as an indigent household on our indigent register in order to obtain this benefit or to qualify for rebates from their municipal basic services or property rates levied.
Indigent households in 2020/2021 will receive:
· 100 units of free electricity per month;
· 6 kilolitres of free water per month,
· free refuse removal services,
· free sanitation services.
This indigent subsidy will be credited to the customer’s account during the monthly billing run. The indigent subsidy is funded through our equitable share allocation. It is important to note that it is expected from indigent households only to pay for electricity consumption above 100 units of electricity per month and only for water consumption above 6 kilolitres of water per month.
For the 2020/2021 financial year the qualifying criteria for indigent status is households (main bread winner/s) earning less than R6,500 per month as indicated by the Municipality’s amended Indigent Policy.
We also acknowledge that not only indigents find it difficult to cope with financial stresses, and therefore provide a sliding scale of rebates also to those households falling outside the indigent band of income. The percentage rebate granted to different monthly household income levels will be determined according to the schedule below. The income bands and rebates for the effective financial period of this Policy are as follows:
· Gross Monthly Household Income Up to R8 000 100% Rebate
· Gross Monthly Household Income Up to R10 000 75% Rebate
· Gross Monthly Household Income Up to R12 000 50% Rebate
· Gross Monthly Household Income Up to R15 000 25% Rebate
Speaker, this budget is a statement from this Council that we are very careful with spending, but that we should still look after all our residents and do more especially during these challenging times. We are working to create greater sustainability within our communities and also eliminate inequality as far as possible. The times we are facing have however forced us to be extremely conservative.
The Provincial and National Government is expected to table adjustment budgets in June and July of this year. Therefore Municipalities will be presenting adjustment budgets for the 2020/2021 financial year in August/September of this year. These adjustments will provide us with more clarity for the new financial year and guide the way ahead.
As the Executive Mayor, it is my strategic vision that we can, in spite of the economic constraints, still achieve economic prosperity, dignity and equality, as it is set out in our Constitution. It is only then, that all residents in the greater Stellenbosch can live in true equality and freedom. We must however be realistic in these difficult times, but still provide and care for our communities to the best of our abilities.
Speaker, as I was looking forward to presenting a budget to finish all our legacy projects in this council cycle, I initially was deeply saddened that we have to cut some projects close to my heart. I however find inspiration in what Martin Luther King said: “We must accept finite disappointment, but never lose infinite hope”
And also by the valuable advice by Haruki Murakami:
‘’And once the storm is over, you won’t remember how you made it through, how you managed to survive. You won’t even be sure whether the storm is really over… When you come out of the storm, you won’t be the same person who walked in. That’s what this storm’s is all about.”
These motivated me to redraft this proposed budget to Council many times, until I am now satisfied that it is a conservative, but sound proposal that will serve our communities and our strategic objectives.
Speaker, with these remarks, I herewith present Stellenbosch’s 2020/2023 Medium Term Revenue and Expenditure Framework Budget Report with its recommendations to Council for consideration and approval as it set out in item 7.2 on page 8 and 9 with recommendations ‘a’ to ‘m’.