Dear Members,
The draft 2024/25 budget has been tabled in council and comments are due by 11 May. The new budget becomes effective on 1 July 2024.
The key numbers are as follows;
- Total revenue of R1,104,3m (includes capital transfers)
- Operational revenue is R973,4m + 7.1%
- Total expenditure is R970,1m +7.1%
- Surplus at R3,3m
- Revenue based on current collection rate of 90%.
- Capital budget of R183m +42%
Tariff increases:
- Water – 7.5%
- Sanitation – 7%
- Refuse removal – 6%
- Electricity – 10.9%
- Property rates – 6%
Our Assessment
On the positive side, the financial recovery led by CFO Lotter and team continues to gain traction.
- The revenue collection has improved markedly to 90%, the highest in 7 years.
- The key financial ratios are improving, although not yet at best practice benchmark levels.
- The capital funding is increased, but in light of decreasing grants from National Government, 27% will be municipal-own funding from borrowing.
- Meters will be moved from within household walls to outside so they can be easily and accurately read if they cannot be accessed, and meters to read consumption remotely are in the planning.
Of concern however,
- Most tariffs are once again above inflation. While we accept the importance of tariffs being cost reflective, these increases could have been further mitigated by disciplined cost control and efficiencies.
- Employee costs continue to grow, driven in part by the ‘correction factors’ between senior manager/ director and manager salaries.
- It is our view that overall management capability and competence levels have deteriorated due to the various open positions and acting appointments within the administration.
- Judging from the internal debate on which political party gets to fill key administrative positions, we anticipate further instability and we fear that political agendas are driving recruitment decisions and not competence nor experience.
Specific Issues worthy of mention;
- Over R12 million is budgeted for EPWP workers, of which only R1.5 m is subsidized by National Treasury. That R12 m figure is for salaries only; it does not include the cost of uniforms, transport, supervision, administration, etc. A more sustainable form of job creation should be pursued. We would like to see the plan for EPWP workers – what tasks will they be assigned to do, how will the projects be measured, etc.
- Bitou is spending R100 million on free services for the indigent; a 40% increase over 2023/24. It is National Government’s responsibility to fund this program, but they only subsidize a portion with an “equitable share” grant. We have asked what portion Bitou will fund but have not received a response yet.
- Employee costs will increase by 10.2% to R377m (including councillors) which is 38.8% of the operating budget. The increases are due to higher salaries, provision for performance bonuses, more bodyguards for elected officials, increased cell phones allowance, and other perks. The “senior manager” remuneration will increase from R12.9m to 17.5m, or 34.9%. “Other staff” will increase from R322m to R352m, for an 9.4% increase. Just in 2023/24 the salary for the MM and 3 directors increased by R1million pa.
- The Repairs and Maintenance budget for infrastructure will only increase from R19m to R22m, less than half of the overall maintenance budget of R48.4 m. We question whether this is sufficient to deal with the almost daily pipe bursts, electricity problems and sewerage spills, which contribute greatly to the R20m in overtime. Water tariffs are based on a 25% water distribution loss, so capital funds for pipe replacement and better meters are critical to controlling our water costs.
An Overview Capital budget allocations: R183m in 2024/25
- Roads, Storm water and Buildings: R47m ( Ebenezer R27m)
- Water Services and Purification: R47m ( Ebenezer R21m)
- Water Distribution: R45m ( Ebenezer R12m)
- Electrical and mechanical Engineering: R26m (Brakkloof transformer R8M)
- Fleet management: R7m
- Fire Department: R0.8m
- Public safety: R0.8m
- Parks and recreation: R5m
- Integrated Waste Management: R2.3m
- Information Communication Technology: R2.1m
- Human settlements are unsurprisingly taking a significant allocation of capital funds. It is disappointing to see the upgrades required for High street, Sewell street and Longships Drive in Ward 2 have been relegated to year 3 investments!
In Conclusion
The budget is comprehensive and well articulated. However our key concerns are mainly in three areas:
Firstly, the sustainability of the rates and services paying base to continually absorb above inflation increases and to subsidise the exponential growth in indigents and non payers. Bitou had zero economic growth in 2023, and while indigent support and upliftment are important, they need to be balanced with economic drivers that provide a more enabling environment for growth and job creation.
Secondly, cost increases are inevitable and while we agree with cost reflective tariffs, the municipality must demonstrate greater fiscal discipline and eliminate the unnecessary expenditures. This budget should outline these efforts more clearly if we are to trust their claims of austerity measures and operational efficiencies.
Lastly, we are increasingly concerned about the quality of leadership and management capability. Despite ongoing employee cost increases, especially in senior management where we know experience and skills gaps exist, little is said about the hiring of top talent. Political interference in senior management hiring is often at the expense of competence. The increase in capital spend in 2024/25 to R183m, will demand greater project management skills and financial management and controls.
If you would like to comment to Bitou Municipality, comments can be directed to Mayor Terblanche at cterblanche@plett.gov.za, Acting Municipal Manager Ralph Links at rlinks@plett.gov.za, or CFO Lotter at flotter@plett.gov.za. The deadline is 11 May.
Kind regards,
Steve Pattinson
