The Council of Overstrand Municipality approved its R1.83 billion total expenditure budget for the 2022/23 financial year with a supporting vote of a majority of its members on 31 May 2022.

Council adopted a resolution that the lifespan of the existing Integrated Development Plan (IDP) will be extended for the 2022/23 financial year. “This gives us an opportunity to, with effect August 2022, start the design of the new generation IDP with full focus on manifesting the 3C’s (Communication, Crime Prevention, and the Cost and ease of doing business with Overstrand) in pursuit of our overall vision of an Overstrand for All.”

In her IDP and Budget speech, Executive Mayor, Dr Annelie Rabie, said the draft budget that was tabled at the end of March, did not change substantially.

She thanked the residents for their proposals and comments received on the draft budget and confirmed her Council’s commitment to follow up on a number of issues that were raised.

Mayor Rabie rejected the comments from the ANC that the budget does not speak to the poorest of the poor.

To support her statement, she made reference to the reduced electricity tariffs of 7.47% that the Council reviewed, based on the National Energy Regulator’s (NERSA) draft guidelines (subsequently issued as final Guidelines). The proposed increase tabled with the draft budget on 30 March 2022, was based on an anticipated 10.33%, in the absence of any guidance from Nersa at the time.

In addition to that, a number of tariffs for a variety of municipal services, a lot of line item tariffs were either scrapped or substantially reduced. Poverty management is not about water and electricity, sewage and refuse removal only, “the mess that we are in in the informal settlements as a result of National Government who does not allow municipalities to invest in infrastructure in informal settlements”, she added.

Nevertheless, as part of the municipality’s pro-poor approach to the budget, the benefit of 6kl of free water for indigent households will be increased to 10kl of water effective 1 July 2022 and in respect of sewerage the 4,2kl free water water/sewerage will increase to 7kl. In addition, the tariffs to launch fishing boats were reduced substantially and the municipality will offer a rebate relief of 50% for grave sites to low-income households.

The sustainability of a Municipality is a key driver of building investment trust. Whilst Overstrand Municipality is currently financially sound and meets the prescripts of sustainability, we do have to cut our coat according to our cloth.

“We currently have sufficient funding to cover 4.9 months of operational expenditure. The norm set by National Treasury is 1 to 3 months. I am comfortable that we are in a safe position”, added the Mayor.

Turning to the budget for the 2022/23 financial year, Mayor Rabie said the budgeted revenue (excluding capital grants received), amounts to R1.498 billion and the operational expenditure amounts to R1.594 billion (including non-cash items like depreciation) – hence a deficit of R96.8 million is reflected.

The capital budget of R236 million for 2022/23, will be used for very specific capital projects, and is 0.8% less than 2021/22. The decreased own funding from surplus is due to the limited availability of cash for capital investment for the 2022/23 capital budget

The Projected Revenue per functional classification, including capital grants are Governance and administration (R384.9 million), Community and Public Safety (R152.6 million), Economic and Environmental services (R24.3 million), Trading services (R1.0 billion). Trading services include electricity/energy; water management, waste water management, and waste management. The total Projected Revenue is R1.583 billion

The total Projected Operational Expenditure amounts to R1.594 billion with a nett deficit of R11.9 million. “A surplus on any trading service is crucial as it is intended and required to generate surplus cash to partly fund capital expenditure such as vehicles and ICT infrastructure. This is to ensure adequate cash backing of reserves and funds”

Remuneration of Municipal employees and Councillors

In the budget a provision of R516.8 million is made for employee related costs and the remuneration of Councillors. This is 32.40% of the total operating expenditure and is within the National Treasury norm of 25 – 40%.

An additional amount of R21.9 million is provided for as a long-term liability (post-retirement benefits) and therefore not cash remuneration. This is a statutory provision which we may not ignore. In respect of Councillors, the amount provided for is R12.3 million.

However, the SALGBC in 2021 signed a wage and salary collective agreement for Municipalities for a three year period from 1 July 2021 to 30 June 2024. It must be implemented by all municipalities countrywide.

Kindly note, the final Determination of upper limits of the salaries, allowances and benefits of different members of Municipal Councils were published on 2 June 2022, after the Mayor’s budget speech at the end of May, indicating a 3% increase.

Staff vacancies are still frozen and may only be filled following a motivation to the Municipal Manager. No new posts were considered for inclusion in this budget.

New tariffs for basic services

With regards to the cost of rendering basic services, the Mayor said the municipality’s total expenditure for electricity is R543.8 million and the income R578.5 million, which allows for a surplus of R34.7 million or a surplus margin of 6.00% for this service.

In the case of water, the expenditure is R148.9 million against an income of R154.4 million, giving the municipality a surplus margin of 3.61% or R5.6 million.

Waste water management provides for a net surplus margin of 4.70% or R5.3 million, against an income of R112.2 million and an expenditure of R106.9 million.

Waste management generates a total income of R96.8 million against an expenditure of R97.8 million, leaving a deficit of -0.96% or -R932 thousand (just short of a million).

Tariffs

The average increase of services (excluding electricity) amounts to an average increase of 5%. Adding the electricity increase results in a basket increase of approximately 6.4%.

The impact on the average household in terms of municipal accounts will be as follows:

• Rates: 5.9% – A rebate of R15 000 on all residential properties will be awarded, plus an additional R35 000 on improved residential properties. The cent in the Rand assessment on urban residential erven with improvements, will be R0,00657 x the property value = R xyz, plus a further 20% rebate of the property rates payable if used for residential purposes only. The cent in the Rand assessment for bona fide agricultural land is R0,00164 x the property value.
• Sewer: 4.3%
• Refuse: 5.9%
• Water: 4.9%
• Electricity: 7,47%, based on NERSA guidelines (not yet approved)

Grants

Division of revenue allocation (DORA) grants have been published and are therefore receivable from the National and/or Provincial Governments to an amount of R334.9 million.

The contribution is as follows:

National: Equitable Share (R141.9 million), FMG (R1.55 million), EPWP (R2.6 million), MIG (R24.6 million), INEP (electricity) (R21.3 million), Energy efficiency & demand side management (R5 million) and Water infrastructure grant (R27.4 million).

Provincial:

• Resource funding K9 unit: R2.4 million
• Reaction Unit: R2.9 million
• Human Settlements Development grant: R111.7 million (Less R15.2m accelerated spending in 2021/22)
• Construction of Transport Infrastructure: R140 000
• Provincial Library Services Grant: R8.3 million
• Thusong services centres grant: R150 000
• Community Development Workers: R75 000

It is important to note that these amounts consist of both operational and capital budget transfers. MIG, INEP, Water Infrastructure grants and a portion of the Housing grant are examples of capital grants.

Capital budget

The Overstrand Capital budget amounts to R236 million for 2022/23 and is 0.8% less than 2021/22. The decreased own funding from surplus is due to the limited availability of cash for capital investment for the 2022/23 capital budget.

The dedicated infrastructure upgrading and/or replacement project for water and sewerage networks had a three-year lifespan, which came to an end on 30 June 2021, except for a roll-over amount of R35.2 million which was spent during the current financial year.

“Our own funding through new borrowings is anticipated at R50million. Borrowings (including roll-overs) contribute 34% of the funding over the 2022/23 MTREF. Internally generated funds contribute 13,6% and capital grants 52.4%.”

For 2022/23 an amount of R166.6 million has been appropriated for the development of basic services infrastructure which represents 70.6% of the total capital budget of R236 million.

Of this, R65.4 million (or 39.3%) is going towards electricity. Waste water infrastructure has the second highest allocation at R57.7 million (or 34.6%); Water management at R40 million (or 24%) and Waste management at R3.5 million (or 2.1%).

Over the three-year MTREF, the capital housing grant expenditure relating to housing infrastructure provision amounts to R66.4 million.

Highlights on the capital budget include:

• Low-cost housing construction contracts across the Overstrand: R38.8 million
• New 66 kV substation for Franskraal, Kleinbaai and Birkenhead in Gansbaai: R37.5 million
• The upgrading of pump stations and rising mains across Overstrand: R27.5 million
• Kleinmond Waste Water Treatment Works refurbish/upgrade: R22.4 million
• Replacement of waterpipes across the Overstrand: R16.5 million
• Electrification of low-cost housing areas also across the Overstrand: R16 million
• Masakhane Housing project in Gansbaai (Ward 2): R7.6 million
• Upgrade of water lines and new booster pump station valves in Gansbaai (Ward 2): R7 million
• Hermanus (Ward 3) MV/LV upgrade/replacement: R6 million
• Upgrading of bulk water supplies in Stanford (Ward 1): R5.6 million
• Zwelihle Library (Ward 12): R4.4 million