The following remarks were delivered by the Executive Mayor of Tshwane, Solly Msimanga, during a press briefing on the City of Tshwane’s financial statements and Auditor-General Report for the 2016/17 financial year. The Executive Mayor was joined by the Tshwane MMC for Finance, Mare-Lise Fourie, at Tshwane House, in Pretoria.
The 2016/17 financial year marked the start of a new political leadership for the City of Tshwane. The original budget was prepared and approved by the previous leadership and it was only during the process of drafting the Adjustments Budget that a start could be made with the re-alignment of resources to compile a funded budget in accordance with guidelines provided by National Treasury.
The focus of the 2016/17 financial year was to ensure that the City becomes financially viable and sustainable. This required reviewing the current spending levels within prudent financial limits, necessitating re-alignment and addressing basic service delivery. The IDP remains the implementation framework for service delivery interventions, good governance and a mobilisation platform for partnership with the private sector, social partners and communities.
The responsible management of public finances which represents our shared wealth, is central to the City’s operations. The difficult journey of restoring the financial sustainability of the City started with the 2016/17 financial year and we are happy to present the positive progress made in this regard.
The DA-led multi-party administration is pleased to announce that it has received an unqualified audit within its first year of office. This is as declared by the Auditor-General (A-G) in the financial statements to serve in Council tomorrow, 25 January 2017.
This administration has, to date, made great strides towards stabilizing its finances. This was achieved by strengthening the controls over supply chain processes, slashing unauthorized and unnecessary expenditure, extricating the City from unlawful and expensive contracts like the PEU contract which the A-G flagged as one of the biggest items of irregular expenditure which has now been addressed.
Similarly, the City of Tshwane is currently in the process of disentangling itself from wholly unaffordable broadband and fleet management contracts and we are optimistic that the close of the next financial year will see us free from these contracts.
This has contributed to our successes in correcting the R2 billion deficit we inherited and has resulted in the surplus in these financial statements.
It is common cause that a long-term financial plan is an essential tool that a municipality needs to facilitate financial sustainability and resilience and improve the municipality’s capacity on its developmental and service delivery mandate on a sustainable basis.
Appreciating that the biggest of our financial predicaments are behind us; we must now look forward to cultivating a financially sustainable Tshwane.
This is for the purposes of making the City work for its people.
Achieving these ends required us to adhere to the two guiding principles of stabilization and revitalization that will help us realize our commitment to better, more efficient service delivery.
Adherence to these critical principles will go a long way to ensuring that I and this administration achieves that which it was elected to do and that is what I recommit myself every day to do.
Financial sustainability is key for any institution that wants to pursue a developmental agenda and implement change. Fiscal discipline is the basis for all organisations to effectively realise set objectives.
It is this discipline that has garnered us these results.
- Unauthorised expenditure was significantly reduced from R1.658 billion in 2015/16 to R620.0 million in 2016/17. Unauthorised expenditure is defined as expenditure incurred otherwise than in accordance with an approved budget. This over-expenditure can mainly be attributes to employee-related costs, bulk purchases, depreciation, finance charges and contracted services.
- Irregular expenditure decreased from R950 million in 2015/16 to R838 million in 2016/17. The irregular expenditure relating to the PEU Smart Prepaid Meter contract totalled R699 million included in this amount.
- Cash available to the city as at 30 June 2017 totalled R2.1 billion compared to R1.2 billion the previous period. The increase in cash and cash equivalents during the year was therefore R950 million.
- The Financial Performance (Excluding capital transfers recognised) for the CTMM compared to the previous financial year was as follows:
|Total Revenue||25 553 236||28 262 892|
|Total Expenditure||26 908 794||27 558 642|
|Surplus/(Deficit)||-1 355 558||704 250|
The City closed the financial year with an operating surplus of R704 million. The budgeted surplus for the year was R1.130 billion but this included an amount of R750 million for the sale of the smart meters to a new contractor in accordance with the cancellation contract which was subsequently ruled irregular by a Court of Law.
The reported operating deficit for 2015/16 when the financial statements were audited was R2.1 billion. This deficit was restated to R1.3 billion during the audit process for 2016/17. The significant progress made in reversing the negative results in previous years are indeed gratifying.
The increase in consumer debt remains a serious concern for the City. Consumer debt increased by R1.6 billion to R10.2 billion as at 30 June 2017. The difficult economic climate and the rise in unemployment levels have had an impact on payment levels. Actions taken in terms of the Credit Control Policy also were not fully effective and these factors resulted in the average collection rate on current billing regressing to 90.4% compared to the 93.1% in 2015/16
Another area of concern is the material losses of R1.6 billion (2015/16: R1.3 billion) on electricity purchased. Technical losses incurred during the distribution of electricity amounted to R526.7 million. Lack of maintenance over several years has resulted in vulnerable infrastructure that will have to be replaced in future years.
Non-technical losses due to administrative and technical errors, faulty meters, negligence, theft of electricity, tampering of meters and unmetered consumption amounted to R1 billion (2015/16: R858.2 million)
Strategic Planning Session and the way forward
This administration has produced the Tshwane Financial Sustainability Plan which is aimed at setting out the blueprint for how we are to cultivate long-term financial sustainability for the City of Tshwane.
The administration’s annual Strategic Planning Session (SPS) was held in December last year to evaluate its performance and to charter a way forward to ensure the long-term viability of the city beyond putting it on solid financial footing as detailed in the financial performance above.
While we recognise the positive progress made in our financial performance; this is no reason for us to rest on our laurels and we must continue to strive to do better. To this end, the administrations SPS made some resolutions to build on the work we have been doing for more than a year.
These include but are not limited to:
- Stricter implementation of performance monitoring measures to reach and surpass our targets;
- Heads of Departments report performance monthly to their relevant Member of the Mayoral Committee and Mayoral Committee and quarterly to Council;
- We have further introduced the open tender system and improved the e-procurement system aimed at curbing unjustified supply chain processes, corruption and maladministration.
Achieving the gains we have made thus far and the ones we are still to make will not be attributable to just one individual but it will be a team effort.
The City, working together with all quarters of the society both private and public, is at present on a journey to ensure that the services that our people are entitled to are distributed fairly, justly and equitably and are of a world class quality.
For without this commitment there is no hope for a better future for our people. It is the realization of this prosperous and rich future for the City of Tshwane that energizes me and the machinery of this City to forge ahead day in and day out not losing sight of Tshwane’s deep well of potential to be the buzzing metropolis of opportunity and prosperity it brings with it.
The City of Tshwane’s vision is about ensuring that the future Capital City is financial sustainable and remains robust and stable through the optimisation of sustainable alternative revenue streams, improved operational efficiencies.
It is for them, the people of Tshwane that we will steadfastly commit ourselves every day to ensure that that the City works.