The Buffalo City Medium Term Revenue & Expenditure Framework (commonly referred to as “the budget”) can best be described as an instrument used to manage public funds, one that ensures the improvement of the quality of life of our people, and as an instrument of development – all of which are achieved through planning, allocation, control and proper accounting of every cent entrusted to the municipality.
The auditor-general’s adverse report on the 2009/10 financial year was warmly welcomed by the ANC as an “improvement” on the disclaimed audits the municipality has received for the last several years in spite of the fact that it highlighted numerous financial and operational problems. The audit report attributed the poor quality of the municipality’s annual financial statements to:
- A lack of understanding of the accounting requirements;
- Insufficient skill levels to manage the accounting function properly;
- A lack of supervision, monitoring and review of daily activities, resulting in underlying information that is inaccurate or not readily available;
- A lack of supervision and review during the preparation of the annual financial statements; and
- An inappropriate attitude towards accounting discipline in the municipality.
Much has been made of the credibility of this year’s budget and IDP process, and to the administration’s credit, the public participation was more inclusive than ever before. However, in order for a budget to be truly credible, it must meet certain criteria – and key among these is sustainability. In other words, is the municipality able to keep doing what it should be doing? Does the budget realistically address the needs of Buffalo City or is it simply in keeping with the denialism so characteristic of this council, namely, to carry on as if nothing is wrong?
It is the DA’s opinion that the budget has been balanced by imposing rates and tariff increases significantly above the inflation rate, and well outside the 6% upper limit required by National Treasury in MFMA Circular 58. Good governance demands stringent control of the finances of the city, but instead of seeking ways to reduce the costs of running the metro, this budget places further burdens on already stretched personal finances. Is this sustainable? Not if Buffalo City wants to attract and retain business, jobs and investment in our city. We are strangling the goose that lays the golden eggs. Rather than simply imposing rates and tariff increases, we should be demanding greater efficiency and cost reduction from municipal departments and officials.
The DA acknowledges the urgent need for maintenance and repair of our ailing municipal infrastructure, and welcomes the renewed focus on this aspect of our obligations as a municipality. But is this too little, too late? I spent part of last weekend at a rural village on the outskirts of East London. This community has no running water, no electricity, no refuse collection and no sanitation. Their water supply frequently runs dry, as they have only 3 tanks serving the entire village, and the supply from municipal tankers is infrequent and irregular. Although they were promised land and housing several years ago, nothing has materialised, and not one resident has been registered as a housing beneficiary. This is indicative of a municipality that does not care.
The April financial reports submitted to the Finance Portfolio Committee indicate our capital expenditure for the 10 months to the end of April is 21% of budget. Our expenditure on operating projects for the same period is 31% of budget. The DA questions the ability of the municipality to do better in the forthcoming financial year. In particular, we question the supply chain management processes, given that so many legal challenges are being brought against us by suppliers and/or bidders. We are also concerned that municipal planning is lacking, given that the processes only seem to kick off mid-way through the financial year.
Our capital budget of R749 million is woefully inadequate to meet the many infrastructural needs and backlogs our metro faces. Worse, it only represents a 3.2% increase on last year’s budget – which we were not able to spend! According to our own figures, we need some R7.6 billion to immediately address these backlogs. We recommend that various external financing options be investigated to urgently allow us to do this.
One of our major concerns relates to the prioritization of capital expenditure. This budget spends 50% of its Capex on transportation and waste water management. It is our belief that the priorities of the municipality should be unemployment, housing and our decaying municipal infrastructure – in particular the provision of basic services such as electricity, water and roads.
The creation of an environment conducive and attractive to business is of paramount importance, if we are to address the scourge of unemployment. It is untenable that nearly a year after closing down Tourism Buffalo City, no proposal has been presented to Council on how the tourism function is to be handled. Tourism is one of the primary drivers of employment in our metro, and we ignore it at our peril! Similarly, the future role of the Buffalo City Development Agency has not been clarified. These two entities could, with proper management and an embracing vision, empower and uplift broad sectors of the city. Council took resolutions on these matters months ago, calling for the Mayor to present alternative models. Nothing has happened!
In addition, there are a number of services that could be enhanced by outsourcing their function to entities dedicated to their fulfilment. The public-private partnership model has proven successful around the world, and in our own country. One example that springs to mind would be refuse collection and solid waste management. It is not without good reason that our city is nicknamed “Slummies”! By outsourcing this service, and re-allocating the municipality’s resources to other understaffed functions, we turn challenges into employment and opportunity, and provide a much needed improvement to our urban environment.
Last week, my colleague, Cllr. Sanele Magaqa, visited housing projects in Sweetwaters. What he found came as no surprise: contractors that walk off site, houses that crumble weeks after the beneficiaries take occupation, and incomplete houses that have been looted. The beneficiary lists are a mess, and people are allocated more than one house. We need to take innovative and decisive action to address the housing backlog in this city. We already have one excellent example of how this can be done – the award-winning SOHCO Amalinda social housing project. We can no longer permit our poor and disadvantaged to be abused by those who seek to enrich themselves at the public purse. Unless drastic steps are taken, we are only going to get further behind in the provision of houses and services.
Much has been said about revenue collection over the past few months. Buffalo City is averaging collections of approximately 92% of its revenue. We are pleased to note that action has at last been taken against provincial departments that are not paying their bills. But that 8% that we are under-collecting amounts to some R320 million in the forthcoming financial year. That is R320 million we will be unable to use for the projects that desperately need it. R320 million that could have improved our electricity or water supply. R320 million that we could use to fill vacant posts.
Speaking of vacant posts, the DA reiterates its call for the urgent appointment of the section 56 & 57 officials – specifically the position of Chief Financial Officer. The Municipal Systems Act states in s56(1)(c) that no person may “act” in a position for longer than 3 months. With no disrespect to the incumbents, it appears that Buffalo City may be contravening the law in this regard.
In summary, the DA proposes the following urgent remedial actions to improve the financial and operational performance of the municipality:
- An immediate focus on improving revenue collection;
- The implementation of public-private partnerships to enhance service delivery and ease the burden on the municipality;
- The re-establishment of Tourism Buffalo City and the Buffalo City Development Agency as bona fide municipal entities as provided for in the MFMA;
- The urgent conclusion of appointment processes for s56 & 57 officials – especially that of Chief Financial Officer;
- An immediate review of the Supply Chain Management Unit and SCM processes to enhance efficiency and increase transparency; and
- Greater investment in basic infrastructure – electricity, roads, water and sanitation – through leveraged financing.
The DA cannot support this budget.
Prepared by DA BCMM Finance Spokesperson, Cllr Kevin Mileham.
