The challenges the city faces

2009-11-23 00:00

South Africa’s municipalities are struggling — and the Msunduzi Municipality is no exception — for the simple reason that they have neither the essential financial nor necessary human resour­ces to meet all of their challenges. Therefore, in response to several issues which have made the headlines lately, it is important to understand the context in which we are currently operating.

1. The Financial Picture

MUCH has been written about the new valuation roll, but to describe it as a “fiasco” is irresponsible and unwarranted. The municipality received some 8 800 objections and bearing in mind that there are some 92 000 properties, this is not an inordinately large number. All of these objections have been assessed and ratepayers will receive the outcome of their objections shortly in a Section 53 notice. For the record, the objections resulted in a decrease in values of some R912 million from a total value of R49 billion — again not a fiasco-suggestive figure. Ratepayers who are not satisfied with the outcome of their objection may lodge a formal appeal, which will be evaluated by an independent appeals board to be appointed by the provincial authority.

Given that the municipality took a conscientious decision not to burden ratepayers unduly, by capping the total rates revenue at around R420 million — it was R379 million last year — it is most unfortunate that legal action is now intended. My door is, and always has been, open for frank and honest discussions on this matter. I apologise for any lack of communication in this regard and, as a public servant, I am available to meet anywhere and anytime. We are about to commence a process which will culminate in the 2010/2011 budget, which will include rates randages. Should we alter the randages applied to residential and business properties so that business properties contribute more than residential ones? Surely this is the debate we should be having, mindful of the economic recession and the escalating cost of electricity.

South Africa’s municipalities are struggling — and the Msunduzi Municipality is no exception — for the simple reason that they have neither the essential financial nor necessary human resour­ces to meet all of their challenges. Therefore, in response to several issues which have made the headlines lately, it is important to understand the context in which we are currently operating.

2. Capital Expenditure This Year

MUNICIPALITIES have, to a very large degree, to raise their own revenue. It is fundamental to appreciate that our municipal area comprises three distinct components, each of which is home to some 200 000 people: the city, its suburbs and industrial areas, the townships of Greater Edendale and the Vulindlela Tribal Area. Given that the tribal area is nonrateable and that Greater Edendale is largely a low-income and low-value residential area, and that Eskom reticulates electricity to Edendale, our municipality is very largely dependent on the revenue emanating from the city area. In 2009/10, we have budgeted to receive, out of a total operating budget of R2,196 billion, R429 million from rates, and R1,543 billion from electricity, water, sewerage and other service charges. We, therefore will only receive some R212 million, or just less than 10%, of our revenue from the other spheres of government, to subsidise the cost of providing free basic services to our poorest residents. Growing our rates base — and that means actively facilitating economic growth — is essential, yet we receive no share of the levies and taxes generated by such growth. We are therefore overdependent on the revenue from rates and electricity.

Similarly, in terms of our capital budget, which totals R327 million, we will receive only R126 million in grants from national government. We will have to borrow, or use reserves, to fund the balance of R200 million. In previous years, we have been unable to expend fully our capital budget, which meant we were not developing new assets, such as roads and improved sanitation in the former townships of Greater Edendale or in the Vulindlela Tribal Area, and we were not maintaining or replacing the existing assets in the built-up city.

3. How can we grow?

FAILURE to expend our capital budget fully was unacceptable and we set ourselves the target of achieving 100% capital expenditure, which we achieved in our 2008/09 year. We dramatically improved conditions in Vulindlela by tarring 11 roads, and by installing more than 10 000 ventilation improved pit toilets. This is the biggest investment in our tribal area since its demarcation in 1848. In addition, we have purchased six new fire vehicles in the past two years and invested heavily in new electricity transformers.

Currently, we are tarring roads, and have facilitated the sale of land for two shopping centres in Edendale. Our increased expenditure was funded from reserves, rather than borrowing upfront and incurring avoidable interest, but this, coupled with the effects of the economic recession — namely a decrease in rates income, electricity and water sales, and an increase in debts, as consumers struggle to make ends meet — means that we are dependent, more than before, on our monthly revenue from rates and tariffs. In order to come through this difficult period, we have to collect all that is due and reduce expenditure. We are determined to do just that. We will soon publish a list of the main rates defaulters, whereupon they will have 14 days to pay to avoid repossession of their property.

WE are also, by way of a new Spatial Development Framework, identifying and facilitating new nodes and corridors of economic activity, particularly along the N3, in order to increase our rates base and to spread development more evenly and equitably across our municipal area. We simply have to transform our monocentric and segregated colonial and apartheid city structure into an integrated metropolitan system. We cannot afford to have very valuable land along the N3 lying almost fallow when it can be developed to create both vital employment and rates revenue. We have to bring in rates from newly developable areas, rather than increasing the rate randages applied to the already developed city area year after year. We have to double our capital budget over the next few years in order to meet the absolute necessity of both development and maintenance, and we have to reduce the negative impact of our city on our environments.

4. Staff costs

TURNING to our operating expenses, our personnel costs are around 30% of that budget. We cannot, therefore, afford to employ many more staff, even though there are many vacancies. This fact, plus the unreliability of our aged fleet of refuse-removal vehicles, contributes substantially to our overtime expenditure. If we had more revenue we could and should replace our entire fleet in waste, parks, fire and traffic, but we don’t. So we are exploring the leasing of vehicles. In filling vacancies we will give priority to both improving service delivery and reducing the need for overtime.

It is a sad fact that our political office bearers need to be protected on an almost 24/7 basis, and this has resulted in exorbitant overtime. We are introducing a system of three eight-hour shifts to reduce such expenditure, but national and local risk assessments point to the need for security. Let me assure everyone that we have taken measures to ensure that expenditure on overtime is drastically reduced and kept within budget. I must also add that in our next budget, we must allocate sufficient funds to meet the costs of responding to all the calls for electricity and water repairs and for the attendance of traffic officers at events, for instance, which fall outside normal working hours. None of this is an excuse for excessive overtime, but it has to be appreciated that overtime is as essential in a service- delivery environment as is strict control. We have already identified all of the excessive overtime claims and these will be subjected to a thorough investigation. In this regard, allow me to place on record that five employees have been dismissed for other fraudulent activities during this year.

5. Forensic audit

MUCH has been made of our failure to deal with the recommendations arising from the forensic audit. Given the serious nature of the allegations, additional investigations were necessary, so that comprehensive charges could be drawn up.

It is, after all, critically important that justice is seen to be done rather than engaging in hastily convened hearings. It is also instructive to note that, with all their legal resources, the erstwhile Scorpions have not yet brought a case to court against the staff member they arrested more than two years ago.

Given that the staff implicated have engaged the services of an attorney and an advocate, the municipality had to do likewise. Most unfortunately, at the 11th hour and after charges had been set, our attorney withdrew. This has caused a further delay, but I give the assurance that justice will be done, that there will be no cover-ups, and that the hearings will take place as early in 2010 as possible.

6. New valuation roll

MUCH has been written about the new valuation roll, but to describe it as a “fiasco” is irresponsible and unwarranted. The municipality received some 8 800 objections and bearing in mind that there are some 92 000 properties, this is not an inordinately large number. All of these objections have been assessed and ratepayers will receive the outcome of their objections shortly in a Section 53 notice. For the record, the objections resulted in a decrease in values of some R912 million from a total value of R49 billion — again not a fiasco-suggestive figure. Ratepayers who are not satisfied with the outcome of their objection may lodge a formal appeal, which will be evaluated by an independent appeals board to be appointed by the provincial authority.

Given that the municipality took a conscientious decision not to burden ratepayers unduly, by capping the total rates revenue at around R420 million — it was R379 million last year — it is most unfortunate that legal action is now intended. My door is, and always has been, open for frank and honest discussions on this matter. I apologise for any lack of communication in this regard and, as a public servant, I am available to meet anywhere and anytime. We are about to commence a process which will culminate in the 2010/2011 budget, which will include rates randages. Should we alter the randages applied to residential and business properties so that business properties contribute more than residential ones? Surely this is the debate we should be having, mindful of the economic recession and the escalating cost of electricity.

7. Electronic metres

MUCH has also been written about my awarding of a contract to install electronic electricity/water meters. In terms of the Municipal Finance Management Act, contracts in excess of R10 million have to be awarded by the accounting officer/municipal manager alone. It is an onerous responsibility, which I take very seriously. Given that “no person may impede the accounting officer in fulfilling this responsibility”, and that councillors are barred from serving on tender committees, a high degree of confidentiality and impartiality is called for. Allow me therefore to repeat that I awarded the contract to, in my view and that of an evaluating committee, the most functionally competent company. These “smart meters” will significantly reduce our lost revenue in electricity and water, which currently stands at R100 million per annum.

We have to eliminate the theft of electricity and water in order to restrict our annual tariff adjustments to as close to inflation as possible. These meters are working in Port Elizabeth and are being purchased by Eskom from the company I appointed. Yet, on the flimsiest hearsay, it was written off as a “flop”. We are about to install some 250 meters as the first phase of a project, which has the potential largely to pay for itself over the next two to three years.

In conclusion, I want to emphasise that senior management are accountable and always receptive to constructive input, as we certainly don’t profess to have all the answers.

I trust that all of the above indicates that we are grappling with real and substantial issues in a highly politicised, unionised, volatile and dangerous environment, that there are no quick fixes, that legal action is not necessary, that we do not tolerate corruption, and that labelling issues as fiascos and flops is sensationalism at its worst, for it discourages honest public servants and contributes to negativity and resentment on the part of the public, whom we are paid to serve, with — as I hope is now better appreciated — limited and insufficient resources.

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