GCTCA submits objection to City budget for 2012-2013

On the 28 March 2012, the City of Cape Town tabled a draft budget amounting to just over R24 billion in operating expenditure and over R5 billion in capital expenditure.

The draft budget now follows the processes of public participation as laid out in legislation, especially the Municipal Finance Management Act. As per the MFMA, this budget is available to the public at large for everyone to have a say and input before the budget is put before the Council for debate in May.

As part of the communicated public engagement and participation process the GCTCA submitted questions and requests to the City. These questions and requests were addressed to: The Executive Mayor, Ms Patricia de Lille; The Executive Deputy Mayor and Mayco member for Finance, Mr Ian Neilson; The City Manager, Mr Achmat Ebrahim and The Executive Director : Finance, Mr Kevin Jacoby.

The Greater Cape Town Civic Alliance has to date received limited responses to our request for information (see: GCTCA interrogates the City budget) and has subsequently tabled the following objection to the City of Cape Town’s draft budget for 2012/2013.

21st April 2012

The City Manager,
City of Cape Town
Achmat Ebrahim
5th Floor, Podium,
Civic Centre, Cape Town, 8001
E-mail: city.manager@capetown.gov.za

Copies to:
idp@capetown.gov.za

Mayor: Patricia de Lille, mayor.mayor@capetown.gov.za

Executive Deputy Mayor: Ian Neilson, ian.neilson@capetown.gov.za

MEC for Local Government: Anton Bredell, abredell@pgwc.gov.za

 

Objection to the City of Cape Town Draft Budget for 2012/13

The Greater Cape Town Civic Alliance (GCTCA), a voluntary association of residents’, ratepayers’, civic and other interest groups within the City of Cape Town municipal area, submitted a request for information relating to the above budget on Thursday 4 April 2012.

To date we have received limited responses to this request. It appears unlikely that sufficient information will be received soon enough to enable detailed study of the budget content before the closing date for public comment.

Based on information gleaned from the published Draft Budget for 2012/13,and the Annual Report for 2010/11, the GCTCA wishes to record its concern and dismay with the unbridled, unhealthy, exorbitant growth of revenue and expenditure proposed for the next three years commencing on 1 July 2012. Affordability has now become a real and major concern.

In light of the aforementioned the GCTCA formally objects to:

  1. The proposed increases in utility tariffs which exceed the inflation rate by a huge margin. It is accepted that actual price increases from bulk suppliers of electricity and water have to be recovered, but the cost of distribution and administration should not exceed inflation.
    Optimization and savings measures should be instituted to contain costs. The composition of cost and of tariff increases should be made available to the public;

  1. The exorbitant surplus of R1.5bn (19.5%) budgeted on the sale of electricity, in addition to the surcharge in (3) below, is completely unacceptable.
    Together this amounts to a surplus of R2.4bn, effectively a 35% mark-up. Tariffs have to be revised downward drastically to more reasonable and affordable levels;

  1. A surcharge concealed within the electricity tariffs charged to users.
    Residents are not provided with any information regarding the huge amount so charged, i.e. approx. R845 million in 2011/12, R925 million in 2012/13, R1,140 million in 2013/14 and R1,386 million in 2014/15. Because the surcharge is reflected as part of the tariffs, users are subject to VAT. The surcharge, if justifiable, should be reflected separately and clearly stated on monthly accounts to users, and should be free of VAT;

  1. The tax (surcharge) so raised is currently used for unknown purposes not disclosed in budget documents. This is totally unacceptable. It must be ring fenced and used only within the Electricity Department for the expansion, upgrading and maintenance of the electricity supply infrastructure and distribution network within the city. The rate (percentage) at which the tax is calculated should be revised downwards to generate only that much revenue as can be sensibly and usefully applied within the electricity department;

  1. The electricity loss projected at 9.3% (para. 2.3.1.6) for 2012/13 at an estimated cost of R860 million (100% = R9,256 million). This is totally unacceptable;

  1. The Environment Levy currently collected on behalf of central government is also concealed within the electricity tariffs, subject to VAT, and not disclosed to users. This is unacceptable. It must be reflected separately and clearly stated on monthly accounts to users, free of VAT;

  1. No clear indication given how the substantial surpluses for water and sanitation will be applied. These should be ring fenced for improvement and maintenance of infrastructure, especially in view of the huge loss of water -20% at a cost of R500 million in 2010/11;

  1. In addition to the exorbitant surpluses derived from utility services, the lack of clear definition(s) of the purposes for which the surpluses are used is unacceptable;

  1. Until convincing proof is made available that the 2009 GVR is on par with market values as at the date thereof, and that extensive research has been done to verify the market value aspect beyond any reasonable doubt, the proposed increase in property rates is unacceptable.

    The GCTCA has done considerable research regarding values and has made a number of attempts to engage the City of Cape Town in this regard, to no avail due to council disinterest. The current rates should remain in force in the meantime;

  1. The lavish subsidies currently available, expressed as a revenue forfeited cost, is about double the Equitable Share received from the National Treasury. This is unaffordable to the paying public and should be scaled down to more reasonable levels. The necessary steps should be taken to ensure that only the destitute, very poor and certain defined worthy causes are subsidized. Many small volume users, well able to afford normal prices, currently share in subsidized and free services because the city has neglected to find innovative ways to exclude the well-off;

  1. Any increase in the total remuneration cost of R7.125bn contemplated for 2011/12, including councilors and political employees, is unacceptable. The proposed increase of R688 million in remuneration expenses for 2012/13, followed by further increases of R839 million and R856 million each in the two outer years, is unacceptable.

    Official statistics released by the National Department of Statistics on a quarterly basis, indicate that Local Authority employees are paid 22% more than private sector employees for similar jobs, on average. City council employees should therefore perform well above average to justify their existing remuneration.

    Any increases in the cost of remuneration can only be considered once:

    1. Convincing evidence has been disclosed to prove that concerted, meaningful steps are being taken to improve efficiencies, effectiveness and levels of output commensurate with the already high remuneration;
    2. Proven measures are in place to ensure only competent staff are employed and that laggards, under performers and stragglers are suitably brought into line or dismissed;
    3. Suitable measures are in place to ensure optimum organizational structures and procedures. Business Process Re-engineering should be seriously considered. It could hold substantial rewards;
    4. The huge number of so-called contract workers (temporary staff), other than councilors, are reduced to zero. These contracts, which should be of limited duration, should not be renewed upon expiry. Temporary absences of permanent employees should be covered by the existing huge staff complement.
  1. The huge extent of risk involved (R2bn) in non-conformance with laws, rules and prescribed procedures, within the Centralized Procurement department, as reported by the Auditor General for the 2010/11 book-year, is cause for grave concern. The measures / steps taken to prevent more such cavalier use of public funds should be disclosed. Control measures must be improved and more strictly applied. Severe corrective actions should be applied to discourage such reckless behavior.

 

The GCTCA reserves the right to further comments and submissions once the City of Cape Town has responded to this communication, or has provided responses to the GCTCA request for information.

Please direct all enquiries or correspondence to:
Henri Wolfaardt
ExCo member: Public Finance
E-mail: jhwollie@gmail.com
082 407 8046

Signed:
Henri Wolfaardt
ExCo member: Public Finance

 

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