draft multi-year operating and capital budget of the …

31 May 2019

3/14/2019

DRAFT MULTI-YEAR

OPERATING AND

CAPITAL BUDGET OF

THE 2019 -2022 2019-2022

Vincent Bongani Mkhefa

1

Copies of this document may be viewed:

In the foyers of all municipal buildings

All public libraries within the municipality

At www.bitou.gov.za

http://www.bitou.gov.za/

Bitou Municipality Multi-Year Budget 2019-2022 MTREF

i

Table of Contents

PART 1 –MULTI-YEAR BUDGET FOR THE 2019/20 MTREF ....................................................................... 4

1.1 COUNCIL RESOLUTIONS ................................................................................................................................ 4

1.2 EXECUTIVE SUMMARY.................................................................................................................................. 5

1.3 OPERATING REVENUE FRAMEWORK ............................................................................................................. 6

1.4 OPERATING EXPENDITURE FRAMEWORK .................................................................................................... 15

1.5 CAPITAL EXPENDITURE ............................................................................................................................... 19

Annexures

Annexure A - Rates, Tariffs and fees for 2018/2019

Annexure B –Supporting Documents and A schedule

Annexure C – Detail Capital Program

Annexure D - Budget Related Policy

Annexure E –MFMA Circular 89 & 91

Annexure F - Quality Certificate

Annexure G - Service level Standards

Bitou Municipality Multi-Year Budget 2019/20 MTREF

ii

Abbreviations and Acronyms

AMR Automated Meter Reading ASGISA Accelerated and Shared Growth

Initiative BPC Budget Planning Committee CBD Central Business District CFO Chief Financial Officer CM City Manager CPI Consumer Price Index CRRF Capital Replacement Reserve Fund DBSA Development Bank of South Africa DoRA Division of Revenue Act DWA Department of Water Affairs EE Employment Equity EEDSM Energy Efficiency Demand Side

Management EM Executive Mayor FBS Free basic services GAMAP Generally Accepted Municipal

Accounting Practice GDP Gross domestic product GDS Gauteng Growth and Development

Strategy GFS Government Financial Statistics GRAP General Recognised Accounting

Practice HR Human Resources HSRC Human Science Research Council IDP Integrated Development Strategy IT Information Technology kℓ kilolitre km kilometre KPA Key Performance Area KPI Key Performance Indicator kWh kilowatt ℓ litre

LED Local Economic Development MEC Member of the Executive Committee MFMA Municipal Financial Management Act

Programme MIG Municipal Infrastructure Grant MMC Member of Mayoral Committee MPRA Municipal Properties Rates Act MSA Municipal Systems Act MTEF Medium-term Expenditure

Framework MTREF Medium-term Revenue and

Expenditure Framework NDP National Development Plan NERSA National Electricity Regulator South

Africa NGO Non-Governmental organisations NKPIs National Key Performance Indicators OHS Occupational Health and Safety OP Operational Plan PBO Public Benefit Organisations PHC Provincial Health Care PMS Performance Management System PPE Property Plant and Equipment PPP Public Private Partnership PTIS Public Transport Infrastructure

System RG Restructuring Grant RSC Regional Services Council SALGA South African Local Government

Association SAPS South African Police Service SDBIP Service Delivery Budget

Implementation Plan SMME Small Micro and Medium Enterprises


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Part 1 –Multi-Year Budget for the 2019/20 MTREF

1.1 Council Resolutions


Page 5 of 24

1.2 Executive Summary

The application of sound financial management principles for the compilation of Bitou

Municipality’s financial plan has been the critical success factor to ensure that Bitou Municipality

remains financially viable and that municipal services are provided sustainably, economically and

equitably to all communities.

Bitou Municipality’s business and service delivery priorities are continuously being reviewed as

part of this year’s planning and Budgeting process. Where appropriate, funds have been

transferred to address crucial service delivery needs and to ensure compliance with legislative

requirements and to meet service delivery obligations in terms of the reviewed IDP.

Table 1 Consolidated Overview of the Final 2019/20 MTREF:

Description Current Year 2018/19 2019/20 Medium Term Revenue &

Expenditure Framework

R thousands Original Budget

Adjusted Budget

Budget Year

2019/20

Budget Year +1 2020/21


Total Revenue (excluding capital transfers and contributions)

638 475 671 655 701 218 768 906 821 201

Total Expenditure 596 566 595 045 630 175 656 534 690 833

Surplus/(Deficit) 41 099 81 390 87 045

112 554 130 550 Transfers recognised - capital

Surplus/(Deficit) for the year 121 071 161 160 124 814 144 502 165 088

Total operating revenue is projected to grow by 4.4% to R701 million for the 2019/20 financial

year when compared to the adjustments Budget. The budget makes provision for the 5.6%

proposed general increase in tariffs.

Total operating expenditure is projected to grow by 5.6% to R630 million in 2019/20 financial

year. The growth in expenditure is influeced by the 6% salary increase to be provided to all

permanent staff and the 9% increase in electricity tariffs by Eskom.

Operating surpluses are projected for each year of the MTREF after taking capital funding into

account. The projected surplus before taking into account capital transfers is R87 million for the

2019/20 financial year and R112 million for 2020/21 and R165 million for 2021/22.

The Capital Budget budget for 2019/20 financial year is estimated at R77 million and a further

R72 million in 2020/21 and T77 million in 2021/22. The internally generated funds is the major

contributor to capital budget for the medium term expenditure framework.


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1.3 Operating Revenue Framework

For Bitou Municipality to continue improving the quality of life of its citizens through the delivery

of high quality services, it is necessary to generate sufficient revenue from rates and service

charges; considering the review of the infrastructure grant by National Treasury and changes to

allocations to Municipalities. It is also important to ensure that all billable revenue is firstly,

charged correctly and secondly, adequately collected. This would mean devising means to collect

revenue in areas that are traditionally Eskom distribution areas and where the Municipality’s

collection efforts have had little to no effect. The prevailing economic circumstances are adding

to the difficulties in collecting the revenue due to the Municipality.

The spending required to address the needs of the community will inevitably always exceed

available funding; hence difficult choices have to be made in relation to tariff increases and

balancing expenditure against realistically anticipated revenue.

The municipality’s revenue strategy is built around the following key components:

• National Treasury’s guidelines and macroeconomic policy;

• Revenue enhancement and maximizing the revenue base;

• Efficient revenue management, which aims to ensure a minimum 95% annual collection

rate for property rates and other key service charges;

• Electricity tariff increases as to be approved by the National Electricity Regulator of South

Africa (NERSA);

• Moving towards cost reflective tariff increases for waste management.

• Ensuring that Electricity services are profitable.

• Budgeting for a moderate surplus to ensure availability of cash reserves to back statutory

funds and current provisions.

• Fully subsidizing all indigent households in terms of the relief offered by the municipality

The following table is a summary of the 2017/18 MTREF (classified by main revenue source):

Table 2 Summary of revenue classified by main revenue source:

Description Budget Year 2019/20



Revenue By Source

Property rates 145,672,032.00 153,829,665.79 162,444,127.08

Service charges - electricity revenue 174,827,891.60 184,618,253.53 194,956,875.73

Service charges - water revenue 70,810,080.00 74,950,286.40 79,404,287.85

Service charges - sanitation revenue 52,846,464.00 55,805,865.98 58,930,994.48

Service charges - refuse revenue 40,437,408.00 42,701,902.85 45,093,209.41

Rental of facilities and equipment 1,647,360.00 1,736,317.44 1,830,078.58

Interest earned - external investments 8,088,960.00 8,525,763.84 8,986,155.09

Interest earned - outstanding debtors 5,970,624.00 6,293,037.70 6,632,861.73

Dividends received

Fines, penalties and forfeits 50,035,392.00 52,737,303.17 55,585,117.54

Licences and permits 367,488.00 387,332.35 408,248.30

Agency services 2,021,184.00 2,130,327.94 2,245,365.64


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Transfers and subsidies 136,831,000.00 103,892,000.00 118,157,000.00

Other revenue 10,836,152.45 11,421,304.68 12,060,897.74

Gains on disposal of PPE 825,792.00 870,384.77 917,385.55

Total Revenue (excluding capital transfers and contributions)

701,217,828.05 699,899,746.43 747,652,604.71

Revenue generated from services charges remain the major source of revenue for the municipality

amounting to 48% (46% for 2017/18) of total revenue. The major sources of revenue for the

2018/2019 financial year can be summarized as follows:

Property rates21%

Service charges -electricity revenue

25%

Service charges -water revenue

11%

Service charges -sanitation revenue

7%

Service charges -refuse revenue

6%

Rental of facilities and equipment

0%

Interest earned -external investments

1%

Interest earned -outstanding debtors

1%

Fines, penalties and forfeits

7%

Licences and permits0%

Agency services0%

Transfers and subsidies

20%

Other revenue1%

Gains on disposal of PPE0%

REVENUE


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Electricity is the major source of revenue followed by Property Rates. As mentioned above

services charges are the main source of municipal revenue. Revenue from transfers recognised

operational makes 23% of the total revenue the same as previous financial year. The revenue

structure of the municipality remains the same. The major services bringing significant

contribution to the municipality is property rates as non exchange revenue and grants from national

and provicnial fiscus. The Water and Sanitation departments are generating sufficient surplus to

assist in provision of other services. The electricity function is not generating sufficient revenue to

contribuite profitably to the municipality.

The municipality generates 80% of the total revenue and this is effect without taking the rebates

into consideration. The revenue only consider the 50kwh provided to more than 6000 consumers

residing in sub economical areas.

Table 4 Operating Transfers and Grant Receipts

Description 2019/20 Medium Term Revenue & Expenditure Framework

R thousand Budget Year

2019/20



RECEIPTS:

Operating Transfers and Grants

National Government: 97,820

105,951

118,157

Local Government Equitable Share 93,691

104,401

116,607

Finance Management 1,550

1,550

1,550

Municipal Systems Improvement –

EPWP Incentive 2,579

–

–

Integrated National Electrification Programme

Municipal Drought Relief

Provincial Government: 40,671

61,483

68,035

Housing 28,721

49,440

55,485

Western Cape Financial Management Capacity Building Grant

710

Library Conditional Grant 2,022

2,142

2,260

Library service: Replacement Funding 9,089

9,654

10,143


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Thusong Grant 100

Fiancial assistance Maitainance and constrution of transport infratructure

129

147

147

Total Operating Transfers and Grants 138,491

167,434

186,192

Capital Transfers and Grants

National Government: 27,001

26,089

27,406

Municipal Infrastructure Grant (MIG) 20,173

21,089

22,406

Integrated National Electrification Programme Grant 6,828

5,000

5,000

Provincial Government: 10,940

6,041

7,315

Regional Socio Economic Projects (Municipal Projects) 2,600

2,000

Fire Service Capacity Building Grant 841

Housing 8,340

3,200

7,315

Total Capital Transfers and Grants 37,941

32,130

34,721

TOTAL RECEIPTS OF TRANSFERS & GRANTS 176,432

199,564

220,913

The municipality will receive R176 million in grants which is a mix of both conditional and

unconditional grants. The municipality will receive R97 million in 2019/2020 increasing to R118

in 2021/22. The MIG grant will be increased to R20 million in the 2019/20 financial which is

insignicant increase as compared to R17 million in the current year. The municipality will receive

an increase in the 2018/19 financial year of R6.8 million and this will result into a decrease in the

grant for 2019/20.

The Department of Human Settlement Western Cape provicial govement have allocated R37

million for the 2019/20 financial year for human settlement projects. This include services for

TRAs and Top Structures in Kwano. A further R52 million is allocated in 2020/21 and R62 million

in 2021/22 financial year.

Tariff Setting

Tariff-setting is a pivotal and strategic part of the compilation of any Budget. When rates, tariffs

and other charges were revised, local economic conditions, input costs and the affordability of

services must be taken into account to ensure the financial sustainability of the Municipality.

Other factors contributing to the rising cost, include the salaries and wages increase above upper

boundary, the level of services provided, the excessive increase in the price of operational cost like

chemicals, spares and other materials that collectively contribute to the extent that tariffs needs to

be increased annually. The comment from Provincial Treasury about the unsustaibility of our

tariffs is noted. Management will be implementing a new tariff model in 2018/2019 that will ensure

that cost are recovered and the municipality continue to be sustainable.


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1.3.1 Property Rates

Property rates cover the cost of the provision of general services. Determining the effective

property rate tariff is therefore an integral part of the municipality’s Budgeting process. The

property rates tariffs is not consumption based and its influenced by the demand in services by

communities. If communities wants more services to be expanded the property rates will mostly

be used to fund the services.

An increase of 5.6% in property rates tariff is proposed for the 2018/2019 financial year. The

increase is in line with the guideline by circular 92.

The following stipulations in the Property Rates Policy are highlighted:

• The first R 15 000 of the market value of a property used for residential purposes is

exempted from the rate-able value (Section 17(h) of the MPRA).

• In terms of the property rates policy of the municipality all residential properties (excluding

vacant stands) with a value of up to R 350,000 are exempted from paying assessment rates.

• Relief measures based on income will be removed in terms of the current tariffs.

• The Municipality may also award a 100% rebate on the assessment rates of rateable

properties of certain classes such as registered welfare organizations, institutions or

organizations performing charitable work and public benefit organizations as defined in

the property rates policy of the municipality. The owner of such a property must apply to

the Chief Financial Officer in the prescribed format and at the prescribed date in order to

qualify for the relief.

The categories of rateable properties for purposes of levying rates and the proposed rates for the

2019/20 financial year based on a 5.6% increase from 1 July 2019 are contained below:

Table 5 Comparison of proposed rates to be levied for 2018/19

Category Proposed tariff

(from 1 July 2019)

Approved tariff

(from 1 July 2018)

R R

Residential properties 0.00547 0.00518

Residential properties - vacant land 0.00713 0.00673

Agricultural 0.00136 0.00129

Agricultural Vacant 0.00136 0.00129

Industrial properties 0.00821 0.00867

Business and commercial properties 0.00821 0.00867

Business Vacant 0.01096 0.01038


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State-owned properties 0.00821 0.00867

Public Service Infrastructure 0.00136 0.00129

1.3.2 Sale of Water and Impact of Tariff Increases

South Africa faces similar challenges with regard to water supply as it did with electricity, since

demand growth outstrips supply. National Treasury Budget Circular 89 makes specific reference

to the fact that water tariffs should be cost reflective and that municipalities should ensure that

water complies with all applicable quality standards. The water tariff structure must therefore

ensure that:

• Water tariffs are fully cost-reflective – including the cost of maintenance and renewal of

purification plants, water networks and the cost associated with reticulation expansion;

• Water tariffs are structured to protect basic levels of service and ensure the provision of

free water to the poorest of the poor (indigent); and

• Water tariffs are designed to encourage efficient and sustainable consumption.

• Punitive tariffs are introduced to encourage efficient water use during drought periods.

A tariff increase of 5.6% is proposed from 1 July 2019 for water. This is based on input cost

assumptions inclusive of the increase in the cost of bulk water from Department of Water Affairs,

standard levels set by the same department and increased wage bill and the cost of other inputs

increasing by between 6% and 7%.

The tariff structure has changed to be in line with the adopted drought levels. This means that the

tariffs will have 5 stages of the penalty tariffs in line with the policy.

1.3.3 Sale of Electricity and Impact of Tariff Increases

The council have re introduced the free basic services that is provided to all consumers in the sub

economic areas irrespective of the Registered indigents will be granted 50 kWh per month free of

charge but this service will be discontinued to sub economical areas.

The following table shows the impact of the proposed increases in electricity tariffs on the

electricity charges for domestic customers:

Table 6 Comparison current vs. new electricity charges (Domestic up to 60A connection)

Monthly

Consumption

Current amount

payable

Proposed amount

Payable

Difference

(Increase)

kWh R R R

100 95.69 101.04 5.36

250 257.88 272.32 14.44


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500 600.28 633.89 33.61

750 1 037.31 1 095.40 58.09

1.3.4 Sanitation and Impact of Tariff Increases

A tariff increase of 5.6% for sanitation from 1 July 2019 is proposed. The increase in tariffs can

also be ascribed to rising wage cost, the increase in electricity used in purification and pumping

processes, the service standards set by Department of Water and Sanitation and the general

increase in the price of goods and services. It must also be emphasized that the municipality must

ensure that purification processes complies with quality standards and that green drop status is

maintained. Additional Budgetary allocation was made for the full time employment of process

controllers and other waste water purification staff members critical in maintaining high quality

purification processes and results. The department also requires additional staff to effectively

perform its functions.

Table 7 Comparison between current sanitation charges and increases

2019/20

TARIFF PER

Annum (R)

2018/2019

TARIFF PER

Annum (R)

Single Residential 5 263.10 4,984.00

Shops, B&B’s Offices, Hotels 8 093.18 7,664.00

Single residential used for business purposes,

restaurants

1 0520.09 9,963.00

Group housing and resort zones 5 263.10 4,984.00

Residential property valuation below R350,000 (70% /

50%rebate on single residential tariff)

5 263.10 4,984.00

Septic tank removals 484.70 459.00

Sanitation fee no waterborne sewerage 2 057.09 1,948.00

The following table shows the impact of the proposed increases of in sanitation tariffs on the

amounts charged per consumer category

1.3.5 Waste Removal and Impact of Tariff Increases

Budget Circulars 89 state that municipalities should strive to Budget with a moderate surplus in

order to ensure that the required funding levels are maintained and to ensure that the provision for

the rehabilitation of the land fill site is cash backed. The Municipality have closed the land fill

site and it is now shipping the waste to Moseelbay.


Page 13 of 24

The municipality has no alternative but to transport its waste to the Petro SA dumpsite in Mossel

Bay at an exorbitant cost. PetroSA has already given five extensions and the last one is that they

will close their dumpsite on 30 June 2018 and will not give any further extension. This is a serious

challenge not only facing Bitou Municipality but the whole of the Eden district Municipalities.

Engagements are continuing at regional level and include provincial departments to find a lasting

solution through development of a regional landfill site. The municipality have made a provision

of R11 million in the budget over two financial years to contribute to the construction of the

regional landfill site by the district municipality.

Waste minimisation become our next strategy in reducing waste management costs and the

department will be developing strategies in addressing the waste minimisation process. The

expectation is that by the end of 2018/2019 financial year the strategy should be in full force and

communities should actively participate in this regard. If the communities are not gonna play role

in this regard the cost of waste management will continue to grow each year.

In accordance with the National Treasury directive cost reflective tariff setting is applied, which

result in an increase of 5.6% in the waste removal tariff with effect from 1 July 2019. To avoid

further higher than normal increases in the refuse tariff it is essential that consumers make use of

composting and recycling to reduce refuse volumes. The Municipality will continue to educate

community on waste management, recycling and composite.

The following table compares current and proposed amounts payable from 1 July 2019:

Table 8 Comparison between current waste removal fees and increases

Proposed

Tariff

2019/20

Approved

Tariff

2018/19

Difference

Per

Annum

One removal per bin per week Per Annum

(R)

Per Annum

(R)

Per month

(R)

Domestic 140ℓ container removed

once a week 2 883.47

2,730.56 152.91

Business/Commercial 240ℓ

container removed once a week 4 181.76

3,960.00 221.76

1.3.6 Overall impact of tariff increases on households

The overall impact of the tariff increases on household’s bills has been kept to between 5.6%, with

the increase for indigent households at 0% due to full subsidization.


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1.4 Operating Expenditure Framework

Bitou Municipality’s expenditure framework for the 2018/20 Budget and MTREF is informed by

the following:

• The new approved organisational structure approved by council.

• Balanced Budget constraints (operating expenditure should not exceed operating revenue)

unless there are existing uncommitted cash-backed reserves to fund any deficit;

• The financial recovery of the municipality to ensure the required funding levels are

achieved and maintained.

• Continued provision of basic services and financial sustainability

• Operational gains and efficiencies will be directed to ensure appropriate cash backing of

statutory funds, provisions and reserves as well as funding the capital Budget and other

core services.

The following table is a high level summary of the 2019/20 Budget and MTREF (classified per

main type of operating expenditure):

Table 8 Summary of operating expenditure by standard classification item

Expenditure By Type Budget Year 2019/20



Employee related costs 221,327,899.58

233,279,606.16

245,876,704.89

Remuneration of councillors 7,122,960.00

7,479,108.00

7,853,063.40

Debt impairment 42,358,272.00

44,645,618.69

47,056,482.10

Depreciation & asset impairment 33,701,184.00

35,521,047.94

37,439,184.52

Finance charges 18,681,862.50

19,690,683.08

20,753,979.96

Bulk purchases 120,219,090.30

129,013,410.10

138,451,165.37

Other materials 4,963,200.00

5,231,212.80

5,513,698.29

Contracted services 109,820,448.00

115,113,096.29

121,329,203.49

Transfers and subsidies 8,830,000.00

7,530,000.00

13,300,000.00

Other expenditure 63,149,856.00

66,559,948.22

66,559,948.22

Loss on disposal of PPE

Total Expenditure 630,174,772.38

664,063,731.28

704,133,430.25


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The budget for employee related cost is R221 million and councillors remuneration is R7.1 million

The total employee cost including councillors remuneration is 36%. The municipality is having

28% vacacy rate and no new position have been budgeted in the 2019/20 financial year.

It is important for council to note that the budget for employee cost is close to the national norm

of 40% as guided by treasury. The cost for employees include overtime and other emeployee cost

that are manageable. Management will have to implement measures to monitor cost related to

overtime and other allowances.

A provision was made for the debt impairment of R42 million for the 2019/20 financial year and

increasing to R47 in 2021/22. The impairement is mainly influenced by the traffic fines income

and the impairment of long outstanding debtors. The collection rate for the municipality is between

80% and 95%. The changes in the debt collection policy will have a significant impact in the

collection rate. The council should note that the impairment might increasing depending on

whether council is able to collect outstanding debtors.

The budget made provision for depreciation provision of R33 million for the 2019/20 financial

year. The depreciation budget its increased by a percentage of assets to be capitalised in the next

financial year. Management could not make an exact estimate of the asset capitalisation thefore

assumptions based on history is used to calculate depreciation.

Finance charges consist primarily of the repayment of interest on long-term borrowing (cost of

capital). Finance charges make up 3% (R18 million) of operating expenditure excluding annual

redemption for 2019/20 and remains constant through the remainder of the MTREF. Bitou

Municipality has small room in its prudential limits for borrowing and care needs to be taken to

ensure that annual finance charges remains within the affordability threshold of ratepayers and

consumers considering the prevailing economic circumstances.

Bulk purchases are directly informed by the purchase of electricity from Eskom. The annual price

increases have been factored into the Budget appropriations and directly inform the revenue

provisions. .

Contracted services relates to the provision of services by means of the appointment of service

providers where the necessary in-house skills are not available or have not yet been adequately

developed. Certain functions also require the contracting of specialist knowledge contracted from

time to time due to the fact that the municipality cannot afford to employ experts on a full-time

basis. This category of expenditure increased to R109 million. 16% of the municipal expenditure

is on contracted services. In terms of mSCOA all services that you request an external service

provider to perform is classified as contracted services. If the municipality orders a service

provider to prepare food for the meeting the transaction classified as contracted services. The

reclassification has neccesitated the Accounting officer to put measure in place before any service

is outsourced. In terms of norms by National treasury the contracted services should not exceed

6% of your operating budget. Management needs to closely monitor expenditure relating to

contracted services and review whether its cost effective to continue to outsource services.

Other expenditure comprises of various line items relating to the daily operations of the

municipality. This group of expenditure has also been identified as an area in which cost savings

and efficiencies can be achieved.


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The following graph provides a breakdown of the main expenditure categories for the 2019/20

financial year.

Figure 2: Main operational expenditure categories for the 2018/19 financial year

1.4.1 Priority given to repairs and maintenance

In order to ensure the health of the assets of the municipality and to prolong the useful lives, it is

necessary to ensure that repairs and maintenance is adequately Budgeted. Budget circular 89

cautions municipalities not to affect savings in repairs and maintenance to balance the Budget but

to ensure that sufficient budgetary allocation is made for this expenditure item. In line with Bitou

Municipality’s repairs and maintenance plan this group of expenditure has been prioritized to

ensure sustainability of Bitou Municipality’s infrastructure.

Repairs and maintenance is increases by R33 million as compared to the adjustment budget. The

budget for repairs and maintainance is 5% of the carrying value of the assets. We have develop a


Page 18 of 24

mechanism to ensure that the budget is linked to the state of each assets. Management have taken

all assets which were classified to be problematic during the last assets verification and requested

various departments to budget for the maintenance of those assets. The system did not work as

expected because it requires planned mainteance plans rather than reactive manitenance.

We hope that management will improve in the asset management division and ensure that each

asset is asse is properly assessed and budget allocated for the repair or maintenance of those assets.

1.4.2 Free Basic Services: Basic Social Services Package

The social package assists households that are poor or face other circumstances that limit their

ability to pay for services. To receive these free services the households are required to register in

terms of Bitou Municipality’s Indigent Policy. It is estimated that between 4378 and 4600

households will receive subsidies on tariffs and rates in the 2019/20 financial year, either by means

of the full basket of services given as Indigent subsidies or in terms of the property value threshold

where owners of properties with a value of less than R 350 000 qualify for services at sub-

economic tariffs. The estimated expenditure on free and subsidized services, inclusive of

assessment rate rebates will exceed R 42 million for the 2019/20 financial year.

The results of Census 2011 has also shown that the population of Bitou have significantly increased

over the last 10 years, making it the fourth fastest growing area, measured by population in the

country from census to census. The indigent process is one of self-registration therefore

households needing assistance must annually apply for the subsidy. Detail relating to free services,

cost of free basis services, revenue lost owing to free basic services as well as basic service delivery

measurement is contained in Table 27 MBRR A10 (Basic Service Delivery Measurement).

The cost of the social package of the registered indigent households is largely financed by national

government through the local government equitable share received in terms of the annual Division

of Revenue Act.


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1.5 Capital expenditure

The following table provides a breakdown of Budgeted Capital Expenditure by vote:Table 10

2019/20 Medium-term capital Budget per vote

Capital Expenditure - Functional

Governance and administration – – – 2,092 (582) (582) (582) 1,954 1,446 –

Ex ecutiv e and council

Finance and administration 2,092 (582) (582) (582) 1,954 1,446 –

Internal audit

Community and public safety – – – 6,031 (1,397) (1,397) (1,397) 3,360 2,247 1,620

Community and social serv ices 703 (397) (397) (397) 1,043 – –

Sport and recreation 4,978 (1,000) (1,000) (1,000) 2,231 2,247 1,620

Public safety 350 87 – –

Housing

Health

Economic and environmental services – – – 27,318 2,715 2,715 2,715 17,176 23,093 21,834

Planning and dev elopment 2,094 – – 3,450 4,900 3,200

Road transport 25,224 2,715 2,715 2,715 13,726 18,193 18,634

Env ironmental protection

Trading services – – – 46,528 1,107 1,107 1,107 54,315 43,505 54,595

Energy sources 12,306 (57) (57) (57) 18,868 10,645 17,167

Water management 13,820 264 264 264 20,838 21,252 25,196

Waste w ater management 19,402 900 900 900 13,610 10,608 11,233

Waste management 1,000 1,000 1,000 1,000

Other – 161

Total Capital Expenditure - Functional 3 – – – 81,969 1,843 1,843 1,843 76,965 70,290 78,049

Funded by:

National Gov ernment 24,210 27,239 23,338 25,522

Prov incial Gov ernment 10,703 608 608 608 9,682 3,200 7,315

District Municipality

Other transfers and grants

Transfers recognised - capital 4 – – – 34,913 608 608 608 36,921 26,538 32,837

Borrowing 6

Internally generated funds 47,056 1,235 1,235 1,235 40,044 43,752 45,212

Total Capital Funding 7 – – – 81,969 1,843 1,843 1,843 76,965 70,290 78,049


Page 20 of 24

Description 2015/16 2016/17 2017/18

R thousandsAudited

Outcome

Audited

Outcome

Audited

Outcome

Original

Budget

Adjusted

Budget

Full Year

Forecast

Pre-audit

outcome

Budget Year

2019/20

Budget Year

+1 2020/21

Budget Year

+2 2021/22

Financial Performance

Property rates – – 121,810 130,947 137,947 137,947 137,947 145,672 153,830 162,444

Serv ice charges – – 278,312 318,405 325,078 325,078 325,078 344,262 363,541 383,899

Inv estment rev enue – – 12,304 8,842 7,660 7,660 7,660 8,089 8,526 8,986

Transfers recognised - operational – – 127,604 149,028 133,075 133,075 133,075 138,491 167,434 186,192

Other ow n rev enue – – 80,506 55,192 67,902 67,902 67,902 71,704 75,576 79,680

Total Revenue (excluding capital transfers and

contributions)

– – 620,535 662,413 671,662 671,662 671,661 708,218 768,907 821,202

Employ ee costs – – 197,932 209,541 209,591 209,591 209,591 221,328 233,280 245,877

Remuneration of councillors – – 6,038 7,047 6,849 6,849 6,849 7,123 7,479 7,853

Depreciation & asset impairment – – 30,600 29,908 31,914 31,914 31,914 33,701 35,521 37,439

Finance charges – – 17,658 17,805 16,945 16,945 16,945 18,682 19,691 20,754

Materials and bulk purchases – – 128,585 115,261 116,724 116,724 116,724 125,182 134,245 143,965

Transfers and grants – – 5,776 11,500 6,571 6,571 6,571 8,830 7,530 13,300

Other ex penditure – – 222,120 226,503 201,672 201,671 201,671 215,329 226,319 234,946

Total Expenditure – – 608,710 617,565 590,265 590,265 590,265 630,175 664,064 704,134

Surplus/(Deficit) – – 11,825 44,848 81,396 81,396 81,396 78,043 104,842 117,068

Transfers and subsidies - capital (monetary allocations) (National / Prov incial and District)– – 51,017 38,545 79,770 79,770 79,770 37,941 32,130 34,721

Contributions recognised - capital & contributed assets – – – – – – – – – –

Surplus/(Deficit) after capital transfers &

contributions

– – 62,842 83,393 161,166 161,166 161,166 115,984 136,972 151,789

Share of surplus/ (deficit) of associate – – – – – – – – – –

Surplus/(Deficit) for the year – – 62,842 83,393 161,166 161,166 161,166 115,984 136,972 151,789

Capital expenditure & funds sources

Capital expenditure – – – 81,969 1,843 1,843 1,843 76,965 70,290 78,049

Transfers recognised - capital – – – 34,913 608 608 608 36,921 26,538 32,837

Borrow ing – – – – – – – – – –

Internally generated funds – – – 47,056 1,235 1,235 1,235 40,044 43,752 45,212

Total sources of capital funds – – – 81,969 1,843 1,843 1,843 76,965 70,290 78,049

Financial position

Total current assets – – 368,102 288,149 331,922 273,154 273,154 354,288 284,759 300,136

Total non current assets – – 1,089,759 1,079,594 1,086,588 1,086,588 1,086,588 1,147,437 1,209,399 1,274,706

Total current liabilities – – 131,755 96,048 96,048 96,048 96,048 101,427 106,904 112,677

Total non current liabilities – – 264,864 234,937 234,937 234,937 234,937 248,093 261,491 275,611

Community w ealth/Equity – – 1,061,242 1,036,758 1,087,525 1,028,757 1,028,757 1,152,205 1,125,764 1,186,555

Cash flows

Net cash from (used) operating – – 114,153 81,373 61,522 61,522 61,522 115,938 135,804 153,087

Net cash from (used) inv esting – – (113,809) (122,456) (124,697) (124,697) (124,697) (70,783) (70,650) (76,744)

Net cash from (used) financing – – 14,414 (18,871) (18,871) (18,871) (18,871) (19,804) (17,812) (15,987)

Cash/cash equivalents at the year end – 120,963 155,571 80,859 58,768 58,768 58,768 84,118 131,459 191,815

Cash backing/surplus reconciliation

Cash and inv estments av ailable – – 305,389 121,963 155,736 96,968 96,968 168,236 88,660 93,448

Application of cash and inv estments – – 56,802 (71,556) (64,931) (64,931) (64,931) (67,218) (70,591) (74,125)

Balance - surplus (shortfall) – – 248,587 193,519 220,667 161,899 161,899 235,454 159,251 167,573

Asset management

Asset register summary (WDV) – – 1,323,175 1,152,407 1,152,407 1,152,407 1,152,407 1,216,150 1,281,822 1,351,553

Depreciation – – 30,600 29,908 31,915 31,915 31,915 31,914 33,701 35,521

Renew al and Upgrading of Ex isting Assets – – – 48,048 1,787 2,589 2,589 – – –

Repairs and Maintenance – – – 65,257 62,651 62,651 62,651 62,191 63,080 66,216

Free services

Cost of Free Basic Serv ices prov ided – – – – – – – – – –

Rev enue cost of free serv ices prov ided – – 52,151 60,418 61,798 61,798 65,431 65,431 69,095 72,964

Households below minimum service level

Water: – – – – – – – – – –

Sanitation/sew erage: – – – 0 0 0 0 0 0 0

Energy : – – – – – – – – – –

Refuse: – – – – – – – – – –

2019/20 Medium Term Revenue &

Expenditure FrameworkCurrent Year 2018/19

WC047 Bitou - Table A1 Budget Summary


Page 21 of 24

WC047 Bitou - Table A2 Budgeted Financial Performance (revenue and expenditure by functional classification)

Functional Classification Description Ref 2015/16 2016/17 2017/18

R thousand 1Audited

Outcome

Audited

Outcome

Audited

Outcome

Original

Budget

Adjusted

Budget

Full Year

Forecast

Budget Year

2019/20

Budget Year

+1 2020/21

Budget Year

+2 2021/22

Revenue - Functional

Governance and administration – – 174,831 200,627 197,763 197,763 226,664 253,488 278,807

Ex ecutiv e and council – – 32,697 48,059 39,097 39,097 50,756 53,496 56,385

Finance and administration – – 142,134 152,569 158,666 158,666 175,909 199,992 222,421

Internal audit – – – – – – – – –

Community and public safety – – – 99,834 141,372 141,372 98,693 104,022 109,639

Community and social serv ices – – – 12,668 11,961 11,961 14,019 14,777 15,574

Sport and recreation – – – 475 524 524 777 819 863

Public safety – – – 26,658 49,552 49,552 118 125 131

Housing – – – 60,033 79,335 79,335 83,778 88,302 93,070

Health – – – – – – – – –

Economic and environmental services – – 8,318 10,267 16,588 16,588 12,165 12,822 13,514

Planning and dev elopment – – 8,318 9,414 15,735 15,735 11,264 11,873 12,514

Road transport – – – 853 853 853 901 949 1,001

Env ironmental protection – – – – – – – – –

Trading services – – 433,795 386,858 395,709 395,709 404,569 426,416 449,443

Energy sources – – – 188,884 186,683 186,683 198,005 208,698 219,967

Water management – – 289,006 95,549 101,753 101,753 105,712 111,420 117,437

Waste w ater management – – – 61,331 58,125 58,125 61,338 64,650 68,141

Waste management – – 144,790 41,094 49,147 49,147 39,514 41,648 43,897

Other 4 – – – 3,371 – – 4,068 4,287 4,519

Total Revenue - Functional 2 – – 616,945 700,958 751,431 751,431 746,159 801,036 855,922

Expenditure - Functional

Governance and administration – – 121,858 144,302 146,530 146,530 155,541 163,236 173,399

Ex ecutiv e and council – – 40,595 27,037 33,262 33,262 35,930 37,165 40,521

Finance and administration – – 81,262 112,484 109,037 109,037 115,143 121,361 127,914

Internal audit – – – 4,781 4,231 4,231 4,468 4,710 4,964

Community and public safety – – – 144,569 140,714 140,714 148,594 156,636 165,113

Community and social serv ices – – – 21,840 20,105 20,105 21,230 22,395 23,623

Sport and recreation – – – 19,440 19,624 19,624 20,723 21,842 23,022

Public safety – – – 47,416 66,963 66,963 70,713 74,532 78,557

Housing – – – 55,873 34,021 34,021 35,927 37,867 39,911

Health – – – – – – – – –

Economic and environmental services – – 27,985 75,915 75,424 75,424 79,648 83,949 88,482

Planning and dev elopment – – 27,985 42,740 43,519 43,519 45,956 48,437 51,053

Road transport – – – 33,175 31,905 31,905 33,692 35,511 37,429

Env ironmental protection – – – – – – – – –

Trading services – – 380,539 243,202 223,329 223,329 239,885 254,494 260,333

Energy sources – – – 149,844 143,888 143,888 149,970 159,687 167,138

Water management – – 228,984 43,008 36,329 36,329 38,363 40,435 42,619

Waste w ater management – – – 18,161 16,567 16,567 17,495 18,439 19,435

Waste management – – 151,555 32,189 26,546 26,546 34,057 35,932 31,142

Other 4 – – – 9,577 4,267 4,267 6,506 5,749 16,806

Total Expenditure - Functional 3 – – 530,382 617,565 590,265 590,265 630,175 664,064 704,133

Surplus/(Deficit) for the year – – 86,562 83,393 161,166 161,166 115,985 136,972 151,788

Current Year 2018/192019/20 Medium Term Revenue &



Page 22 of 24

WC047 Bitou - Table A3 Budgeted Financial Performance (revenue and expenditure by municipal vote)

Vote Description Ref 2015/16 2016/17 2017/18

R thousandAudited

Outcome

Audited

Outcome

Audited

Outcome

Original

Budget

Adjusted

Budget

Full Year

Forecast

Budget Year

2019/20

Budget Year

+1 2020/21

Budget Year

+2 2021/22

Revenue by Vote 1

Vote 1 - Council – – 30,759 3,291 3,301 3,301 3,476 3,664 3,869

Vote 2 - Office of the Municipal Manager – – 1,938 44,768 35,796 35,796 47,275 49,828 52,618

Vote 3 - Community Serv ices – – 146,594 142,336 191,234 191,234 189,253 199,473 210,643

Vote 4 - Corporate Serv ices – – 437 360 701 701 380 401 423

Vote 5 - Financial Serv ices – – 141,698 150,801 157,248 157,248 186,835 211,509 233,381

Vote 6 - Strategic Serv ices – – 6,514 10,171 8,530 8,530 7,545 7,952 8,398

Vote 7 - Engineering Serv ices – – 289,006 349,232 354,621 354,621 311,394 328,210 346,589

Vote 8 - – – – – – – – – –

Vote 9 - – – – – – – – – –

Vote 10 - – – – – – – – – –

Vote 11 - – – – – – – – – –

Vote 12 - – – – – – – – – –

Vote 13 - – – – – – – – – –

Vote 14 - – – – – – – – – –

Vote 15 - – – – – – – – – –

Total Revenue by Vote 2 – – 616,945 700,959 751,431 751,431 746,159 801,036 855,922

Expenditure by Vote to be appropriated 1

Vote 1 - Council – – 19,598 7,209 6,945 6,945 8,705 9,175 9,688

Vote 2 - Office of the Municipal Manager – – 22,548 27,044 27,473 27,473 29,500 30,388 33,438

Vote 3 - Community Serv ices – – 153,496 183,087 178,193 178,193 183,515 195,098 199,280

Vote 4 - Corporate Serv ices – – 38,084 43,066 48,645 48,645 53,746 56,648 59,821

Vote 5 - Financial Serv ices – – 41,238 50,348 45,517 45,517 51,485 54,265 57,304

Vote 6 - Strategic Serv ices – – 27,968 41,122 36,284 36,284 40,919 42,020 55,118

Vote 7 - Engineering Serv ices – – 227,450 265,689 247,208 247,208 262,305 276,469 289,484

Vote 8 - – – – – – – – – –

Vote 9 - – – – – – – – – –

Vote 10 - – – – – – – – – –

Vote 11 - – – – – – – – – –

Vote 12 - – – – – – – – – –

Vote 13 - – – – – – – – – –

Vote 14 - – – – – – – – – –

Vote 15 - – – – – – – – – –

Total Expenditure by Vote 2 – – 530,383 617,564 590,265 590,265 630,175 664,064 704,133

Surplus/(Deficit) for the year 2 – – 86,562 83,395 161,166 161,166 115,984 136,972 151,789

References

1. Insert 'Vote'; e.g. department, if different to functional classification structure

2. Must reconcile to Budgeted Financial Performance (revenue and expenditure)

3. Assign share in 'associate' to relevant Vote

check Surplus/(Deficit) for the year - - - - - - - - -

Current Year 2018/192019/20 Medium Term Revenue &



Page 23 of 24

WC047 Bitou - Table A4 Budgeted Financial Performance (revenue and expenditure)

Description Ref 2015/16 2016/17 2017/18

R thousand 1Audited

Outcome

Audited

Outcome

Audited

Outcome

Original

Budget

Adjusted

Budget

Full Year

Forecast

Pre-audit

outcome

Budget Year

2019/20

Budget Year

+1 2020/21

Budget Year

+2 2021/22

Revenue By Source

Property rates 2 – – 121,810 130,947 137,947 137,947 137,947 145,672 153,830 162,444

Serv ice charges - electricity rev enue 2 – – 134,532 165,845 164,465 164,465 164,465 174,655 184,436 194,765

Serv ice charges - w ater rev enue 2 – – 77,542 67,802 72,269 72,269 72,275 76,322 80,596 85,110

Serv ice charges - sanitation rev enue 2 – – 22,961 53,297 50,044 50,044 50,044 52,846 55,806 58,931

Serv ice charges - refuse rev enue 2 – – 43,277 31,443 38,293 38,293 38,293 40,437 42,702 45,093

Rental of facilities and equipment 1,102 1,560 1,560 1,560 1,560 1,647 1,736 1,830

Interest earned - ex ternal inv estments 12,304 8,842 7,660 7,660 7,660 8,089 8,526 8,986

Interest earned - outstanding debtors 15,691 5,654 5,654 5,654 5,654 5,971 6,293 6,633

Div idends receiv ed

Fines, penalties and forfeits 52,036 23,813 47,382 47,382 47,382 50,035 52,737 55,585

Licences and permits 572 2,500 348 348 348 367 387 408

Agency serv ices 1,665 1,372 1,914 1,914 1,914 2,021 2,130 2,245

Transfers and subsidies 127,604 125,108 133,075 133,075 133,075 138,491 167,434 186,192

Other rev enue 2 – – 9,439 19,510 10,262 10,262 10,262 10,836 11,421 12,061

Gains on disposal of PPE 782 782 782 782 826 870 917

Total Revenue (excluding capital transfers

and contributions)

– – 620,535 638,475 671,655 671,655 671,661 708,218 768,906 821,201

Expenditure By Type

Employ ee related costs 2 – – 197,932 209,541 209,591 209,591 209,591 221,328 233,280 245,877

Remuneration of councillors 6,038 7,047 6,849 6,849 6,849 7,123 7,479 7,853

Debt impairment 3 31,341 20,112 40,112 40,112 40,112 42,358 44,646 47,056

Depreciation & asset impairment 2 – – 30,600 29,908 31,914 31,914 31,914 33,701 35,521 37,439

Finance charges 17,658 17,805 16,945 16,945 16,945 18,682 19,691 20,754

Bulk purchases 2 – – 107,092 112,024 112,024 112,024 112,024 120,219 129,013 138,451

Other materials 8 21,493 3,237 4,700 4,700 4,700 4,963 5,231 5,514

Contracted serv ices – – 68,261 115,525 101,758 101,758 101,758 109,820 115,113 121,329

Transfers and subsidies – – 5,776 11,500 6,571 6,571 6,571 – – –

Other ex penditure 4, 5 – – 56,005 69,867 59,801 59,801 59,801 63,150 66,560 66,560

Loss on disposal of PPE 66,513

Total Expenditure – – 608,710 596,566 590,265 590,265 590,265 621,345 656,534 690,833

Surplus/(Deficit) – – 11,825 41,909 81,390 81,390 81,396 86,873 112,372 130,367

Transfers and subsidies - capital (monetary

allocations) (National / Prov incial and District) 51,017 79,162 79,770 79,770 79,770 37,941 32,130 34,721

Transfers and subsidies - capital (monetary

allocations) (National / Prov incial Departmental

Agencies, Households, Non-profit Institutions,

Priv ate Enterprises, Public Corporatons, Higher 6 – – – – – – – – – –

Transfers and subsidies - capital (in-kind - all)

Surplus/(Deficit) after capital transfers &

contributions

– – 62,842 121,071 161,160 161,160 161,166 124,814 144,502 165,088

Tax ation

Surplus/(Deficit) after taxation – – 62,842 121,071 161,160 161,160 161,166 124,814 144,502 165,088

Attributable to minorities

Surplus/(Deficit) attributable to municipality – – 62,842 121,071 161,160 161,160 161,166 124,814 144,502 165,088

Share of surplus/ (deficit) of associate 7

Surplus/(Deficit) for the year – – 62,842 121,071 161,160 161,160 161,166 124,814 144,502 165,088




Page 24 of 24

WC047 Bitou - Table A7 Budgeted Cash Flows

Description Ref 2015/16 2016/17 2017/18

R thousandAudited

Outcome

Audited

Outcome

Audited

Outcome

Original

Budget

Adjusted

Budget

Full Year

Forecast

Pre-audit

outcome

Budget Year

2019/20

Budget Year

+1 2020/21

Budget Year

+2 2021/22

CASH FLOW FROM OPERATING ACTIVITIES

Receipts

Property rates 121,810 121,803 117,255 117,255 117,255 123,821 130,508 137,555

Serv ice charges 248,332 296,172 277,489 277,489 277,489 301,608 317,895 335,061

Other rev enue 30,053 30,053 30,053 30,053 19,876 20,949 22,080

Gov ernment - operating 1 141,471 125,108 133,075 133,075 133,075 138,491 167,434 186,192

Gov ernment - capital 1 51,017 38,545 38,545 38,545 38,545 37,941 32,130 34,721

Interest 20,292 14,101 14,101 14,101 14,101 11,074 11,672 12,303

Div idends – – –

Payments

Suppliers and employ ees (451,111) (517,337) (521,924) (521,924) (521,924) (498,191) (525,093) (554,032)

Finance charges (17,658) (15,572) (15,572) (15,572) (15,572) (18,682) (19,691) (20,793)

Transfers and Grants 1 (11,500) (11,500) (11,500) (11,500) – – –

NET CASH FROM/(USED) OPERATING ACTIVITIES – – 114,153 81,373 61,522 61,522 61,522 115,938 135,804 153,087

CASH FLOWS FROM INVESTING ACTIVITIES

Receipts

Proceeds on disposal of PPE (113,062) 1,274 1,274 1,274 1,274 – – –

Decrease (Increase) in non-current debtors – – –

Decrease (increase) other non-current receiv ables 3 2 2 2 2 – – –

Decrease (increase) in non-current inv estments (750) (1,146) (1,146) (1,146) (1,146) – – –

Payments

Capital assets (122,586) (124,827) (124,827) (124,827) (70,783) (70,650) (76,744)

NET CASH FROM/(USED) INVESTING ACTIVITIES – – (113,809) (122,456) (124,697) (124,697) (124,697) (70,783) (70,650) (76,744)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts

Short term loans (18,164) – – –

Borrow ing long term/refinancing 30,874 – – –

Increase (decrease) in consumer deposits 1,705 352 352 352 352 – – –

Payments

Repay ment of borrow ing (19,223) (19,223) (19,223) (19,223) (19,804) (17,812) (15,987)

NET CASH FROM/(USED) FINANCING ACTIVITIES – – 14,414 (18,871) (18,871) (18,871) (18,871) (19,804) (17,812) (15,987)

NET INCREASE/ (DECREASE) IN CASH HELD – – 14,758 (59,954) (82,046) (82,046) (82,046) 25,350 47,341 60,356

Cash/cash equiv alents at the y ear begin: 2 126,055 140,813 140,813 140,813 140,813 58,768 84,118 131,459

Cash/cash equiv alents at the y ear end: 2 – – 140,814 80,859 58,768 58,768 58,768 84,118 131,459 191,815

