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CITY OF EKURHULENI BUDGET SPEECH 2022 DELIVERED BY THE MEMBERS OF THE MAYORAL COMMITTEE

CITY OF EKURHULENI BUDGET SPEECH 2022 DELIVERED BY THE MEMBER OF THE MAYORAL COMMITTEE FOR FINANCE, ECONOMIC DEVELOPMENT AND INFORMATION AND COMMUNICATION TECHNOLOGY, CLLR FANA NKOSI, COUNCIL CHAMBERS, OR TAMBO GOVERNMENT PRECINCT, GERMISTON

The Executive Mayor, Alderman Tania Campell

The Speaker of Council, Cllr Raymond Dlamini

The Whip of Council, Alderman Khetha Shandu

Members of the Mayoral Committee

Chair of Chairs and Chairpersons of Oversight Committees

Leaders of all Political Parties in Council

Honourable Councillors

The City Manager, Dr Imogen Mashazi

The Senior Management of the City

Leaders of Business, Labour, and Civil Society

Fellow residents of Ekurhuleni

Distinguished Guests

Members of the Media

Ladies and Gentlemen

Good Morning! Sanibonani! Dumelang, Ndaa, Avuxeni, Molweni! Goeie Môre!

INTRODUCTION

I rise this morning to present the first Budget and Medium-Term Revenue and Expenditure Framework (MTREF) of the Multi-Party Coalition government. I am humbled to have been given this big responsibility.

Mr Speaker,

South Africans are increasingly asserting their preference for better service delivery and a more just society through greater plurality in their politics. As politicians, we need to get better at cooperating across political fault lines to solve the challenges our people face. It is what our Constitution, now in its 25th year, calls on us to do.

Passing a prudent and just, pro-poor budget is an important step in this process. This is ultimately what I am here to appeal for – not merely on behalf of our Multi-Party Coalition government, but on behalf of all of our ratepayers and residents.

Making this appeal for more just communities through constructive budgeting on this day is not without poignance:

  • It is done as we commemorate Africa Day two decades after the establishment of the African Union, amongst others, to promote the sustainable economic development for our people and raise their living standards;
  • It is done exactly two years after the murder of George Floyd sparked a social awakening about structural injustice and brutality in our societies globally, enjoining us to act locally to deliver better services, and safer communities ever more equitably; and
  • It is done in the run-up to Youth Month, on which the Executive Mayor, Alderman Tania Campbell, will this weekend be addressing 2 000 students from around Tembisa at a Career Expo to be held at the Sam Ntuli Mall. They must know that our Multi-Party Coalition government budget prioritises intergenerational equity: that our youth won’t be the future victims of irresponsible spending today.

Mr Speaker,

Many of our students will have successfully progressed in their schooling despite the pandemic-related disruptions of the last two years. We need to draw inspiration from their perseverance, for the economic outlook indicates that we could face many disruptions of our own.

Economic Outlook

In his National Budget Speech delivered on 23 February 2022, the Minister of Finance quoted the International Monetary Fund figures projecting the global economy to grow by 4.4% in 2022, which is lower than the 4.9% projected towards the end of 2021. The lower than expected world economic growth does not bode well for economic recovery to pre-COVID-19 pandemic levels.

Russia’s invasion of Ukraine, rising world inflation, disruptions in the world supply chain, and the resurgence of a new COVID-19 variant in China exacerbate the situation. Our country, as a player in the global economy, is not isolated from these factors.

On the domestic front, the Minister of Finance projected real economic growth of 2.1% in 2022, compared to 4.8% in 2021. The lower-than-expected economic growth has an impact on job creation and employment. Official unemployment in the country was recorded at 34.9% in the third quarter of 2021.

Rising fuel and energy costs, continued Eskom load shedding and rising food prices are likely to affect the economic recovery to pre-pandemic levels.

LOCAL ECONOMIC RECOVERY INITIATIVES

For our local economic recovery, the Multi-Party Coalition government will leverage the City of Ekurhuleni’s strong, established manufacturing, aviation, aeronautic and logistics base, together with its large cluster of industrial anchor tenants and transportation capability that is centred around air travel, freight movement, and transport corridors.

For this purpose, we have in our March Mayoral Strategic Session resolved that there should be a review of the City’s Growth and Development Strategy 2055 and Economic Development Plans, on which we look forward to updating the Councillors in the next financial year.

We will demonstrate a strong commitment to the creation of a conducive environment that enables regional economic development, competitiveness and inclusive growth. In this regard, our sights are currently set on the following five-year economic development targets:

  • R50 billion in Rand-value of investments attracted and secured from Airport City, Aerotropolis, Special Economic Zone, Strategic Urban Developments and Industrial Cluster Development Proclamations, Development Investment Attraction, Facilitation and Retention;
  • 2 500 SMMES and Cooperatives development and R1 billion in Rand ‘value of City’ procurement opportunities awarded for Township Economy Development, Community Enterprise Development and Empowerment and Business Regulation;
  • R125 million in Rand value of Revenue Generated from the leasing of township hubs and Business Licenses and Permits;
  • R200 million in Rand value of Revenue Generation from Ekurhuleni Fresh Produce Market Operations, Facilities and Municipal Farm Release; and
  • 70 000 work opportunities are generated in the regional economy through the implementation of EPWP, PEP and Private Sector Jobs Initiatives.

There are limits to what we can achieve on our own in the context of slow national structural reforms. We can only call on our counterparts in the national government to do all they can to expedite the reforms associated with the South Africa Reconstruction and Recovery Plan and Operation Vulindlela; that they can accelerate the improvement of freight rail and other logistics services under Transnet and the recovery of Eskom and the security of energy supply.

BACK TO BASICS FOR SERVICE DELIVERY AND INCLUSIVE GROWTH

Despite the economic headwinds, Mr Speaker,

The Multi-Party Coalition government reaffirms its commitment to breathe life into the theme outlined by the Executive Mayor for 2022 in her State of the City Address, namely, “Back to Basics for Service Delivery and Inclusive Growth”.

The central tenets of the Back to Basics are to refocus the priorities of the City of Ekurhuleni much more closely on:

  •  Better quality service delivery along the lines of the powers and functions of municipalities as set out in the Constitution; and,
  • Not to pursue vanity projects and duplicate programmes that are either the responsibility of other spheres of government or through parallel initiatives within our own municipality.

Our nine Back to Basic priorities draw heavily on our Multiparty Coalition Agreement:

  1. Giving residents back their power by helping to reduce their vulnerability to load shedding and enhance access to reliable, affordable, and sustainable electricity;
  2. Ensuring that every community has access to reliable, clean, running water, that is safe to drink and to prepare food; that we modernise water management and prevent untreated wastewater from contaminating the environment;
  3. Investing in safe, reliable, affordable public transport; well-maintained roads; and infrastructure renewal with measures to safeguard infrastructure from vandalism and theft;
  4. Ensuring there is a hygienic environment to live and play, delivered through the effective waste collection and waste disposal, working landfill sites, the implementation of recycling programmes through reclaiming of untidy public parks and cemeteries;
  5. Promoting housing options, ensuring more people own their homes by receiving their valid title deeds;
  6. Being tough on crime and tougher on the causes of crime by investing in localised law enforcement;
  7. Minimising the risks which lead to poor health, responding effectively to health emergencies, and promoting the resilience of communities through effective disaster risk management;
  8. Regaining the financial stability of the city by ensuring good governance; and
  9. Using Back to Basics service delivery as a foundation to bring in investment and jobs to the local economy by making it easier to do business within the municipality.

FINANCIAL RECOVERY AND GOOD GOVERNANCE

It is early days, Mr Speaker, but despite the economic headwinds, the Multi-Party Coalition government has already made some headway with the financial recovery of the City of Ekurhuleni.

On our accession to the office, we found a city with:

  • a collection rate of around 84%, compared to the budgeted 90%;
  • cash on hand deteriorated to a 14-days reserve, which we have since improved to a 21-day reserve, with some way to go to meet National Treasury’s 30-day minimum requirements;
  •  a Moody’s downgrade at the end of November 2021, necessitating a R500m reduction in borrowing, thus impacting negatively on capital expenditure.

With the tabling of the draft budget in March, we indicated:

  •  our recognition that we need to be both disciplined in our service delivery, as well as in our finances to achieve our back-to-basics ethos to the benefit of our ratepayers and residents;
  •  our intention to, in comparison with the adjustment budget tabled in February, increase our surplus for the next financial year from around R140m to around R300m, approaching R500m in the outer two years.

We are glad to report that this has already yielded results.

Last week, the City management had a benchmarking meeting with National Treasury, in terms of which favourable feedback was reported on the City’s recovery efforts, boding well for securing future grants.

National Treasury has also been clear that municipalities should steer clear of unfunded mandates, which also resonates well with Back to Basics.

At the end of April, Gauteng MEC for Human Settlements, Urban Planning and Cooperative Governance and Traditional Affairs, Lebogang Maile, in his update on the state of municipalities in Gauteng, singled out the City of Ekurhuleni:

  •  As one of only three municipalities in the province with no overdue accounts for bulk services from Eskom and Rand Water; and
  • As the only municipality that is considered stable, meaning it is not considered at risk of being dysfunctional, in financial distress or requiring close monitoring and support

Later in April credit rating agency GCR upgraded the City’s credit rating from junk to stable. This was attributed particularly to an expectation of improved operating performance under the Multiparty Coalition Government, characterised by stronger income growth, tight expenditure management, improved debtor collections, and realising modest cash surpluses. It is however crucial that the benefits of these gains – in other words, improved and more affordable access to financing – in the longer term be applied to Capex would grow revenue and, ultimately, fund better services provision.

We will get there if we keep on applying sound principles of good governance.

In this regard, Mr Speaker,

The Multi-Party Coalition government places particular emphasis on the very important work performed by the City’s Internal Audit function and Audit Committee, which they must enjoy the freedom to execute without fear or favour, with the cooperation of all elected and appointed officials, in accordance with the City’s policies.

As is her duty, the Executive Mayor has met quarterly with Audit Committee Chair since her appointment in December. Together with all councillors, the Multi-Party Coalition government looks forward to the Audit Committee’s reports to the Legislature.

This should not only ensure that the clean audits, for which we have congratulated our city management, continue. We should also be responding positively to the Auditor-General of South Africa’s call for a culture shift to be engendered in the public service: that is that good audit outcome not only be about compliance but about ever greater improvements in the lived reality of our citizens – in other words, the types of improvements in service delivery that the Back to Basics agenda is all about.

KEY BUDGET PRINCIPLES

Service delivery and revenue generation and protection were indeed top among the key priorities that the Multi-Party Coalition government agreed with the city management. Further principles included reducing the duplication of effort and resources, pursuing economies of scale and centralise common processes. These latter goals need to be realised through:

  • Tasking Real Estate Department with all furniture acquisitions;
  • Centralising the procurement of Information and Communication Technology (ICT) and related services to the ICT Department; and,
  • Making the Transport and Fleet Department responsible for all vehicle registration and licensing, and the repair of all non-specialised vehicles.

These centralisations of functions would explain the high increase in the repairs and maintenance allocation for the Transport Planning and Provision Department and the steadier increases for the ICT Department.

In terms of the consolidated operating expenditure, I wish to point out that employee-related costs in the budget are increased by Consumer Price Inflation of 4.8% based on National Treasury guidelines and the South African Local Government Bargaining Council agreement.

FORMULATION OF THE BUDGET

Mr Speaker,

The people of Ekurhuleni, through a public participating process and budget tips campaign conducted last month, overwhelmingly directed us to among others, fix the state of our roads; speedily deliver housing; put an end to water interruptions and most of all drastically reduce power outages.

TARIFFS

Without the levying of tariffs, any municipality will simply not be able to provide the basic municipal services that it is constitutionally obliged to provide. In levying tariffs, the City was mindful to strike a fine balance between affordability to consumers and financial sustainability of the City. The following tariff increases are proposed:

  • There will be no increase in assessment rates for any categories of properties. This is to shield ratepayers from increases associated with the new valuation roll implemented with effect from 1 July 2021. The deadline for the objection and appeal process was on 29th April 2022. The Valuation Appeal Board is expected to commence in August.
  • Sundry tariff increases are capped at 4.8% in line with the CPI rate. This is somewhat below likely consumer price inflation increases for the next 12 to 24 months.
  • Refuse removal tariff increase is proposed at 7.0%. Waste management services, with the exception of landfills, are in essence transport and labour-intensive operations and are therefore sensitive to the substantial and constant increases in the price of the oils and lubricants, fuels, repairs and maintenance of the fleet and labour costs. Although this service is within the control of the City, there are input costs that are outside our control.

Mr Speaker,

We also have limited power to control increases for services such as water and sanitation and electricity that relies on bulk service procurement from external utilities – in this case, Rand Water and Eskom.

• Electricity tariff increases are proposed at 9,61%

• Water and Sanitation tariff increases are proposed at 11%

Around 62% of the City’s budget revenue of R48bn for 2022/23 is projected to come from electricity, water, sanitation and refuse collection charges. Outside of the poor state of our roads, which I will come to later, these are also the service delivery areas on which residents and ratepayers have for years been the most dissatisfied. As a result, we have resolved that more than R1.6bn, or 63%, of our repairs and maintenance budget, will go to the trading services departments for the 2022/23 financial year.

In the State of the City Address, the Executive Mayor announced key service delivery objectives on behalf of the Multi-Party Coalition to make real progress in the lives of our citizens. This budget facilitates the achievement of those objectives through a consolidated expenditure of R51,2bn. The breakdown is an operating expenditure budget of R47,9bn and a capital expenditure budget of R3,3bn.

The operating budget is funded from R42,5bn in internally generated revenue and R5.7bn in operating grants.

The capital budget will be funded by R273m in internal revenue, R2,2bn in government grants and R746m in loans.

SOCIAL PACKAGE

Mr Speaker,

The Multi-Party Coalition government believes wholeheartedly that free basic services in line with the National Framework for Municipal Indigent Policies should continue as an essential measure to support the poor. The city is providing relief to the registered and deemed indigent households amounting to R4,5bn. A household is deemed indigent if it resides in a property worth R250 000 or less. The social package for indigent relief consists of:

• 100% rebates on assessment rates;

• Free refuse removal;

• 50kwh of free electricity per month;

6kl of water and sewer per month;

• Free indigent burial to registered and deemed indigents; and

Special rates on emergency services such as ambulance and fire-fighting.

DEBT REHABILITATION INCENTIVE, ARRANGEMENTS FOR DECEASED ESTATES AND ACCOUNT PAYMENT INCENTIVE

Further support to cash-strapped ratepayers will be provided in the form of a debt rehabilitation incentive, Mr Speaker.

This will comprise a 50% write-off of debt in excess of one year on the date of application approval – inclusive of rates, service charges, interest and other costs.

The balance of the account on the date of application approval, excluding the current account and after the 50% write-off, will be placed in a consolidated arrangement account to be written off incrementally over a three-year period. However, this will be on condition that all scheme provisions are being complied with during that timeframe. The scheme will be available to qualifying applicants from 1 July 2022 until 31 March 2023.

We are also aware that it has been complicated for family members of deceased ratepayers to make payment arrangements on accounts linked to deceased estates. It will now be possible for citizens of Ekurhuleni who find themselves in this position, to obtain letters of authority providing copies of the deceased death certificate and an accompanying affidavit to make such arrangements.

To our loyal paying customers who keep their accounts up to date, we are also providing some cost relief in the form of an incentive to keep up the good work.

Business and residential customers who keep their accounts up to date for six months will receive a 2% rebate credit against their accounts in the 7th month.

BUDGET ALLOCATION

In respect of the overall allocation to the Energy Department, MMC Senzi Sibeko will rightly hold that no amount of maintenance and repair budgeting will be able to correct the years of underinvestment in the infrastructure backbone of the City’s electricity grid. Accordingly, capital expenditure on energy will increase at a much quicker rate than maintenance and repair spending, with a 39% increase (R558m) for 2022/23 and at double the rate of inflation for the outer two years.

Repairs and maintenance expenditure allocation is R922m for 2022/23, split 90/10 between provision for electrical network repairs (inclusive of substations, transformers and meter boxes) on the one hand, and street lights on the other. The maintenance and repair allocations for the outer two years will also exceed inflation.

The idea is to ensure the replacement of infrastructure at the rate of at least 10km of cabling per annum and ensure the refurbishment of circuits and equipment. We look forward to the Energy Department’s reporting on measures to reduce cable and equipment theft and vandalism and cannot urge their cooperation with the private sector in this regard enough. Finally, supply from Eskom will be supplemented by 47 Renewable Independent Power Producers, who will come on board from 2024 onwards.

For 2022/23, R782m in capital expenditure is allocated to the Water and Sanitation Department and the Ekurhuleni Water Company in another roughly 90/10 split, also to increase around double the rate of inflation. As the Executive Mayor indicated earlier in the year, investment in further treatment capacity expansion to support development in the city alone requires an estimated R2.5bn over the next five years, for which we are considering the utilisation of the Build-Operate-Transfer mechanism.

For now, our resources are directed at additional reservoirs and water towers that will be completed to reduce vulnerability to bulk water outages. An amount of R80m is specifically budgeted for the reduction in excess water consumption and was directed to the Water and Sanitation Department to install smart meters in indigent household properties.

This will be mated to a 30% increase for the repair and maintenance of water and sewer systems to R382m for 2022/23, which will also increase at extra-inflationary rates in outer years. This will see to the replacement of major over capacitated sewer lines in the Southern and Northern regions of the city, as well as the replacement and upgrading of sewer pipes across the city.

This much-increased expenditure on water and sewer systems is also meant to mitigate the development of further sinkholes, which is a major problem in the dolomitic areas of the city, which have been left long unattended, and in terms of which there are now significant backlogs. Thanks to MMC Heather Hart’s efforts, it is very much on the City’s budgeting radar. The allocation of R34m to the City Planning Department to tackle sinkholes may not be enough but it demonstrates our resolve to eradicate the problem.

Mr Speaker,

While we have already detailed some of the early results of our Back to Basics approach, it is not always easy for an administration to report improvements that are publicly visible. While acknowledging there is still some way to go, we must here congratulate MMC Andre du Plessis, who together with the Environment and Waste Department, have significantly improved the state of cleanliness of the City of Ekurhuleni over the past six months.

On average, capital, repairs and maintenance expenditure allocations to this department will decrease slightly over the medium term. This is because of the better utilisation of resources, such as utilising spares from dismantled equipment and avoiding duplication of programmes. More than half the annual operating budget of around R600m will go to refuse removal and will be escalated at inflationary rates, with around 15% or R90m per annum being allocated to grass cutting.

NON-TRADING SERVICES

Mr Speaker,

Whether they are from businesses, residents, outside of town or employees in our City, the poor state of our roads is a menace to all drivers. MMC Themba Kalipa will therefore be glad that in the 2022/23 financial year, R370m is allocated to the Roads and Stormwater Department for repairs and maintenance including the patching of potholes. An additional R283m is allocated for asset renewal.

Our objective is to review the allocation for pothole repair upwards with the January 2023 adjustment budget. As we are well aware that the City will have to work hard towards a minimum 3% equivalent of installed infrastructure value per annum provision for maintenance, all avenues are currently being pursued. One of these was to ask National Treasury for a review of the allocation received by the City for road maintenance from the Fuel Levy, as the amount currently received in comparison to other cities is not in proportion to the road network that the City maintains.

On the issue of potholes, the Multi-Party Coalition government very much welcomes offers of public-private partnerships. Our Roads and Stormwater Department is currently also working with a social enterprise to brand our own pothole repair unit that would offer sponsorship and operating partnership opportunities for the private sector, and on which we hope to announce progress in the coming financial year.

Ekurhuleni needs to be a city on the move, Mr Speaker.

In the coming financial year, the Multi-Party Coalition government will support Phase 1A of the Harambee Bus Rapid Transport Network, running from Thembisa via Kempton Park to OR Tambo International Airport, to be fully operational. We will also support the extension of the network in Thembisa and the service from Kempton Park/Rhodesfield to Boksburg (Phase 1B).

Under MMC Alco Ngobese, the condition of various public transport facilities is being assessed and the Germiston Bus Depot, the Germiston Intermodal Facility and the Somhlolo Public Transport Facility will all be refurbished in the coming financial year.

To assist, the Transport Planning and Provision Department will receive a capital budget of R303m, and repairs and fleet maintenance has an allocation of R170m.

Being able to move and live in the City safely is a key priority for the Multi Party Coalition and in this regard, MMC Thlogi Moseki has proved a tireless champion of the Ekurhuleni Municipal Police Department and Disaster and Emergency Services. As revenue recovers, a key priority will be the funding of further police deployment, further equipment resourcing and the establishment of K9 units.

As it stands, 480 EMPD recruits will finish their basic training at the end of June 2022 to hit the streets running. The EMPD will also supplement its human capital by enrolling traffic wardens into the police academy next month so that they can be trained as Metropolitan Police Officers.

The city’s security services is currently operated on a hybrid model of in-house and outsourced provision. The Multi Party Coalition is considering various avenues to bring insource all of the security services.

When it comes to DEMS, our efforts to bring emergency services closer to the people will receive a major boost when the department undertakes the construction of the following projects:

  • The Katlehong Fire Station – R20m allocated for completion in the next financial year;
  • The Isando/Elandsfontein Fire Station at Klopper Park – R5m has been allocated for the next financial year to ensure its completion in 2023/24; and
  • The Etwatwa Fire Station upgrade – R5m is allocated in the next financial year.

Mr Speaker,

The demand for housing remains a critical need. It is one of the issues that were dominant when we were undertaking public participation – and as a Multi-Party Coalition we have heard our people. In this regard, we shall fast-track all the mega projects while at the same time ensuring that our people gain security of tenure by receiving their title deeds.

Our Human Settlements Department under MMC Dino Peterson has received a Gazetted amount of R126.2m from Gauteng Provincial Department of Human Settlements for the 2022/23 financial year in order to deliver 725 housing units in:

  • Alliance Ext 1;
  • Payneville Ext 1;
  • Mayfield Ext 32 and 34; and
  • Leeuwpoort.

In terms of the department’s capital budget, the allocation is R582m to go to among others:

  • The Leeuwpoort megaproject has a budget allocation of R25m for the 2023/23 financial year. It is due to deliver designs and construction of engineering services for Sunward park portions of the development, as well as remaining engineering services in Parkdene around the Cinderella hostel to unlock the housing development. The project is expected to be completed in the 2023/24 financial year.
  •  R9,7m is budgeted for the completion of 259 planned serviced stands for completion in Balmoral Ext 4; and
  • R15.3m is budgeted for the completion of 144 social housing units in Portion 62 Airport Park Ext

Allocations to the Health and Social Development Department will be significantly strengthened by the R190m in grant funding for the 2022/23 financial year that they have secured from the Gauteng Provincial Government. The funds are for Primary Health Care as well as the City’s AIDS Unit.

The Department of Sport, Heritage, Recreation, Arts and Culture Department was awarded just under R21m in grants to be spent on our City’s libraries, which will benefit the youth in particular.

CONCLUSION

Mr Speaker,

In closing, let us take a leaf out of the book of the 44th President of the United States, Barack Obama, who once said: “A budget is more than just a series of numbers on a page; it is an embodiment of our values.”

What I have come to lay down here today is a budget by the Multi Party Coalition government. However, it is a budget that we believe you can support as sufficiently in line with the values and interests of the residents and ratepayers of the City of Ekurhuleni.

I would like to extend a special word of thanks to all parties of the Multi Party Coalition for their support in putting the budget together: it was not a simple exercise and hard choices certainly needed to be made given the situation we find ourselves in, but the fact that we did it means we can do it again and should imbue confidence with our citizens and investors alike.

I would like to extend a special word of thanks to the Executive Mayor, Alderman Tania Campbell for her support and guidance.

This budget was brought to fruition with the hard work and leadership provided by my predecessor, Cllr Graham Gersbach, whose efforts we greatly appreciate.

Finally, we also express our great appreciation to the City Manager, Dr Imogen Mashazi, and the Group Chief Finance Officer Kagiso Lerutla and his team for their persistent efforts to keep the budget process on track and to consult stakeholders in other spheres of government and in funding institutions as appropriate.

With that Mr Speaker, my task here is done. I thank you, all councillors and dignitaries present here today very much for your attention. Gratitude also goes to the people of Ekurhuleni for taking interest in this budget speech.

Now we must roll up our sleeves and get to work!

I Thank You

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