BUDGET LEKGOTLA RESOLUTIONS

1
GAUTENG PROVINCIAL GOVERNMENT
Presentation to Select Committee on
Finance5 June 2007
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2TABLE
OF CONTENTS

• Municipal Make-up for Gauteng Province (Zack)
• Joint Roles and Responsibilities in line with
  Municipal Legal Framework (Zack)
• Gauteng Treasury Department of Local Government
  Year Program for 2007/2008 (Zack)
• Financial Performance Budget Process (Karabo)
• Financial Performance for 2006/2007 (Karabo)
• Provincial Municipal Debt (Karabo)
• Annual Financial Statements and Qualifications
  (Karabo)
• Tabling of Municipal Budgets (Karabo)
• 2007/2008 IDP Budget Engagement Process
  Findings (Karabo)
• Concluding Remarks (Karabo)

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3Municipal Make-up For Gauteng

• 3 Metros
• City of Joburg, Tshwane Ekurhuleni
• In terms of MFMA Implementation Classification
  all 3 High Capacity
• 3 District Municipalities
• Sedibeng, West Rand Metsweding
• In terms of MFMA Implementation Classification
  2 Meduim with the exception of Metsweding
• 8 Local Municipalities
• Kungwini, Nokeng Tsa Taemane, Randfontein,
  Mogale City,
• Westonaria, Lesedi, Emfuleni, Midvaal
• High Capacity - Randfontein, Mogale City
  Emfuleni
• Medium Capacity Kungwini, Nokeng Tsa Taemane,
  Westonaria, Lesedi, Emfuleni Midvaal

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4Joint Roles and Responsibilities in line with
Municipal Legal Framework

• Background
• DLG historically engaged Local Government
  regarding Governance and Finance matters
• The Implementation of the MFMA enlarge the scope
  and ambit of Municipal Finance and introduced a
  new role for Provincial Treasuries
• As part of a phase in strategy by National
  Treasury Provincial Treasury role commenced 1
  July 2005
• MFMA and its corresponding circulars assigns a
  number roles and responsibilities to both GT
  DLG
• The Provincial Department of Local Government
  will take the lead on governance matters
  Gauteng Treasury on financial management however
  we do collaborate on these matters
• This we hope to achieve through primarily
  monitoring, support and intervention where
  necessary

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5Joint Roles and Responsibilities in
line with Municipal Legal Framework (conti.)

• Core Functional Focus
• Strengthen local governance and accountability
• Ensure functional and sustainable local
  government
• Monitor municipal performance (financial
  performance) and evaluate service delivery
• Support local government where there are capacity
  and institutional constraints and
• Intervene where local government fails to
  adequately perform its designated functions.

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6Gauteng Treasury Department of Local
Government Year Program for 2007/2008

• Review of joint 2006/07 operational achievements
• Institutionalised District CFO Forums works
  better in terms of strategic and financial
  aligment
• Provided Training to all Municipalities on
  Budgets Formats in line with MFMA Circular 28
  Monthly Budget Statement Formats
• Published Quarterly Municipal Finance
  Consolidated Statement and Annual Provincial
  Gazette (and Adjustment Gazette)
• Significant progress has been made towards
  developing a provincial framework for monitoring
  municipal performance DLG looking at
  introducing EMMA (Electronic municipal monitoring
  assistance) program.
• FIMS (Financial Information Management System)
• MPRA Service Provider
• As a measure of building and extending LG
  Capacity we Institutionalised Gauteng Municipal
  Intern Forum
• At first engagement provided extensive
  training around
• the MFMA Supported by DLG with IDP
  training

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7Gauteng Treasury Department of Local
Government Year Program for 2007/2008 (conti.)

• Review of joint 2006/07 successes (conti.)
• First support programme for Province aimed at
  strengthening the technical and financial
  management capacity of municipalities
• Gauteng Municipal Support Plan
• Established a TWT with Secretariat
• Focus areas
• Deployment of Senior Engineers accelerate
  Infrastructure spending development
• Deployment of CAs Assist with Financial
  Management and building Institutional Capacity
  within Municipalities (more specifically the CFO
  Offices)
• PSU Revenue Enhancement Project primarily
  focused on Data cleansing as measure of enhancing
  and building financial integrity in the billing
  process. Aim is to ring fence Indigents profiles
  and reclassify Municipal Debtors profile
  (Household debt, Government Business Debt)

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8Gauteng Treasury Department of Local
Government Year Program for 2007/2008 (conti.)

• Gauteng Municipal Support Plan (conti.)
• Gauteng Financial Summit
• Based on extensive research by both Departments
  to understand the current financial and
  institutional arrangements within munis and thus
  a number of issues emerged
• Due to magnitude of the issues decided take the
  findings back to muni to get buy-in
• Pre Summit _at_ Indaba on 2 3 April 2007
• CFO in-depth highlighted a number of critical
  areas
• As result decided to escalate the issues to
  higher level
• Final Summit on 19 July 2007 MECs for Finance
  and LG with MMCs for Finance will make Political
  pronouncement on the status of Municipal Finance
  in the Province
• The outcomes to be escalated to the Premiers
  Coordinating Forum with Mayors where will get a
  Political mandate to resolve these financial
  issues

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9Gauteng Treasury Department of Local
Government Year Program for 2007/2008 (conti.)

• Functional Focus for 2007/2008
• Build on the success of 2006/2007 maintain the
  current support and oversight functions as
  required in terms of the Municipal Legal
  Framework
• Second Phase of the Gauteng Municipal Support
  Plan will focus
• Capacitating and Training Sec 57 Managers as a
  measure of ensuring continued municipal stability
  and improving service delivery
• MEC LG Advisory Committee advised on a number of
  strategies and these included financial
  management, borrowing, revenue management
  (billing and debt management, credit control) and
  compliance to MFMA
• Develop support mechanisms to aid munis to
  improve and augment current institutional
  arrangements

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10Financial Performance Budget Process

• Financial Performance for 2006/2007 _at_ end of
  March 2007 (based on Monthly Budget Statement
  Reporting)
• Combined Municipal Budgets for Gauteng for
  2006/2007 amounts to just over R40 billion
• R6 835 923 billion budgeted for Capital
  Expenditure and
• R35 911 446 billion allocated for Operating
  Expenditure.
• Significant contributors to the Capex envelope is
  -
• City of Johannesburg - R3 193 219 billion
  (46,71)
• Tshwane Metro - R1 586 651 billion (23,21)
• Midvaal - R75 484 million (1,10)
• And the remaining R1 980 569 billion (28,97)
  spread across the other municipalities.

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11Financial Performance Budget Process
(conti.)

• Financial Performance for 2006/2007 _at_ end of
  March 2007 for the 3rd quarter ending (based on
  Monthly Budget Statement Reporting (conti.)
• Significant contributors to the Opex envelope is
  -
• City of Johannesburg R15 053 985 billion
  (40,22)
• Ekurhuleni R9 225 736 billion (24,65)
• Tshwane R8 587 558 (23,47)
• The remaining R4 563 327 billion (12,19) spread
  across the remaining municipalities.

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12Financial Performance Budget Process
(conti.)

• Financial Performance for 2006/2007 _at_ end of
  March 2007 for the 3rd quarter ending (based on
  Monthly Budget Statement Reporting (conti.)
• Municipal Operating Budget is mainly funded by-
• Service Charges R18 964 550 billion (50,66)
• Property Rates R7 793 601 (20,82)
• RSC levies R53 462 million
• And other income R10 618 992 (28,36) - with
  Grants from National and Provincial Government
  being the biggest contributors to other sources
  of income.

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13Financial Performance Budget Process
(conti.)Financial Performance for 2006/2007 _at_
end of March 2007 for the 3rd quarter ending
(based on Monthly Budget Statement Reporting
(conti.)
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14Financial Performance Budget Process
(conti.)Financial Performance for 2006/2007 _at_
end of March 2007 for the 3rd quarter ending
(based on Monthly Budget Statement Reporting
(conti.)
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15Financial Performance Budget Process
(conti.)

• Financial Performance for 2006/2007 _at_ end of
  March 2007 for the 3rd quarter ending (based on
  Monthly Budget Statement Reporting (conti.)
• The capital budgets consist of infrastructure,
  which includes as
• Water and Sanitation R1 232 010 billion
• Roads and Storm water R1 079 169 billion
• Housing R652 546 million and
• Electricity Reticulation R1 210 144 billion
• The remainder is spread across community
  facilities and related assets.
• Expenditure to date
• Water and Sanitation R486 962 million (39,52)
• Roads and Storm Water R462 356 million (42,84)
• Housing R311 927 million (47,80)
• Electricity reticulation R709 282 million
  (58,61)
• The remaining actual of R1 041 550 million
  (34,57) is spread across community and related
  assets.

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16Financial Performance Budget Process
(conti.)Financial Performance for 2006/2007 _at_
end of March 2007 for the 3rd quarter ending
(based on Monthly Budget Statement Reporting
(conti.)
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17Financial
Performance Budget Process (conti.)Financial
Performance for 2006/2007 _at_ end of March 2007 for
the 3rd quarter ending (based on Monthly Budget
Statement Reporting (conti.)
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18Financial Performance Budget Process
(conti.) Provincial Municipal Debt Consumer
Debtors
Metropolitan Municipalities
Metsweding District
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19Financial Performance Budget Process
(conti.) Provincial Municipal Debt Consumer
Debtors
 
Westrand District
 

Sedibeng District
 
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20Financial Performance Budget Process
(conti.) Provincial Municipal Debt Debt
explanations

• The reasons for the increasing debt are listed
  below
• Poor and incorrect billing of water and
  electricity
• Indigent policy not effectively implemented
• Incorrect debtors records

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21Annual Financial Statements Qualifications
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22Tabling of Municipal Budgets
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23Financial Performance Budget
Process (conti.)

• 2007/2008 IDP and Budget Engagement Process
• Findings
• IDP Engagements
• A number of pieces of legislation regulates the
  formation and institutionalisation of Integrated
  Development Plans
• MFMA Circular 11 requires that municipal IDPs
  and budgets should inform and be informed by the
  development plans of sector departments to ensure
  a coordinated approach to infrastructure planning
  and service delivery.
• In ensuring this Horizontal and Vertical
  alignment between the various spheres of Govt.
  DLG though its MIDP Unit heads a forum
  representing key stakeholders from all spheres
  and sector departments

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24Financial Performance Budget Process
(conti.) 2007/2008 IDP and Budget Engagement
Process Findings The Commenting Engagement
Process 2007
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25Financial Performance Budget Process
(conti.)

• 2007/2008 IDP and Budget Engagement Process
  Findings
• Horizontal alignment between municipalities also
  remains fairly
• weak
• IDPs are not based on any significant engagement
  with adjacent
• municipalities.
• There is a need to improve the linkage between
  stated municipal priorities and content of
  detailed strategies in some of the IDPs. In some
  cases the IDP appears to be an amalgamation of
  projects, rather than a strategic plan.
• Alignment of budget and IDP remains a challenge.
• There is also a need to ensure that capital
  budgets are better aligned with the GPG
  integrated sustainable human settlements
  programme, in particular the relationship between
  bulk services and housing developments (MIG and
  counter-funding) in all IDPs.

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26Conclusion

• The 2 departments has established a very good
  working relationship with SALGA and we are key
  members to the SALGA finance committee
• All municipalities in general in terms of the
  Budget Process adhered to time frames as set out
  in the MFMA
• In the odd instance of non compliance, a letter
  is sent to the Municipal Manager
• The National Treasury/Provincial Treasury/
  DPLG/Salga MFMA forum has proven to be useful in
  terms of networking, however we would recommend
  greater collaboration between provinces
• Gauteng Treasury Dept of LG will continue to
  collaborate on oversight matters and support
  programmes through the established Technical
  Working Team which headed by both depts. HODs

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• THANK YOU