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Presentation to Select Committee on Finance 5 June 2007

GAUTENG PROVINCIAL GOVERNMENT. Presentation to Select Committee on Finance 5 June 2007. 2 TABLE OF CONTENTS. Municipal Make-up for Gauteng Province (Zack)

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Presentation to Select Committee on Finance 5 June 2007

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  1. GAUTENG PROVINCIAL GOVERNMENT Presentation to Select Committee on Finance5 June 2007

  2. 2TABLE OF CONTENTS • Municipal Make-up for Gauteng Province (Zack) • Joint Roles and Responsibilities in line with Municipal Legal Framework (Zack) • Gauteng Treasury & Department of Local Government Year Program for 2007/2008 (Zack) • Financial Performance & Budget Process (Karabo) • Financial Performance for 2006/2007 (Karabo) • Provincial Municipal Debt (Karabo) • Annual Financial Statements and Qualifications (Karabo) • Tabling of Municipal Budgets (Karabo) • 2007/2008 IDP & Budget Engagement Process & Findings (Karabo) • Concluding Remarks (Karabo)

  3. 3Municipal Make-up For Gauteng 3 Metros: City of Joburg, Tshwane & Ekurhuleni In terms of MFMA Implementation Classification all 3 High Capacity 3 District Municipalities: Sedibeng, West Rand & Metsweding In terms of MFMA Implementation Classification 2 Meduim with the exception of Metsweding 8 Local Municipalities: Kungwini, Nokeng Tsa Taemane, Randfontein, Mogale City, Westonaria, Lesedi, Emfuleni, Midvaal High Capacity - Randfontein, Mogale City & Emfuleni Medium Capacity – Kungwini, Nokeng Tsa Taemane, Westonaria, Lesedi, Emfuleni & Midvaal

  4. 4Joint Roles and Responsibilities in line with Municipal Legal Framework Background DLG historically engaged Local Government regarding Governance and Finance matters The Implementation of the MFMA enlarge the scope and ambit of Municipal Finance and introduced a new role for Provincial Treasuries As part of a phase in strategy by National Treasury Provincial Treasury role commenced 1 July 2005 MFMA and its corresponding circulars assigns a number roles and responsibilities to both GT & DLG The Provincial Department of Local Government will take the lead on governance matters & Gauteng Treasury on financial management however we do collaborate on these matters This we hope to achieve through primarily monitoring, support and intervention where necessary

  5. 5Joint Roles and Responsibilities in line with Municipal Legal Framework (conti.) • Core Functional Focus: • Strengthen local governance and accountability; • Ensure functional and sustainable local government; • Monitor municipal performance (financial performance) and evaluate service delivery; • Support local government where there are capacity and institutional constraints; and • Intervene where local government fails to adequately perform its designated functions.

  6. 6Gauteng Treasury & Department of Local Government Year Program for 2007/2008 • Review of joint 2006/07 operational achievements • Institutionalised District CFO Forums – works better in terms of strategic and financial aligment • Provided Training to all Municipalities on Budgets Formats in line with MFMA Circular 28 & Monthly Budget Statement Formats • Published Quarterly Municipal Finance Consolidated Statement and Annual Provincial Gazette (and Adjustment Gazette) • Significant progress has been made towards developing a provincial framework for monitoring municipal performance – DLG looking at introducing EMMA (Electronic municipal monitoring assistance) program. • FIMS (Financial Information Management System) • MPRA Service Provider • As a measure of building and extending LG Capacity we Institutionalised Gauteng Municipal Intern Forum – At first engagement provided extensive training around the MFMA & Supported by DLG with IDP training

  7. 7Gauteng Treasury & Department of Local Government Year Program for 2007/2008 (conti.) • Review of joint 2006/07 successes (conti.) • First support programme for Province aimed at strengthening the technical and financial management capacity of municipalities • Gauteng Municipal Support Plan • Established a TWT with Secretariat • Focus areas • Deployment of Senior Engineers – accelerate Infrastructure spending & development • Deployment of CA’s – Assist with Financial Management and building Institutional Capacity within Municipalities (more specifically the CFO Offices) • PSU Revenue Enhancement Project – primarily focused on Data cleansing as measure of enhancing and building financial integrity in the billing process. Aim is to ring fence Indigents profiles and reclassify Municipal Debtors profile (Household debt, Government & Business Debt)

  8. 8Gauteng Treasury & Department of Local Government Year Program for 2007/2008 (conti.) • Gauteng Municipal Support Plan (conti.) • Gauteng Financial Summit • Based on extensive research by both Departments to understand the current financial and institutional arrangements within muni’s and thus a number of issues emerged • Due to magnitude of the issues decided take the findings back to muni to get buy-in • Pre – Summit @ Indaba on 2 & 3 April 2007 • CFO in-depth highlighted a number of critical areas • As result decided to escalate the issues to higher level • Final Summit on 19 July 2007– MEC’s for Finance and LG with MMC’s for Finance will make Political pronouncement on the status of Municipal Finance in the Province • The outcomes to be escalated to the Premier’s Coordinating Forum with Mayors where will get a Political mandate to resolve these financial issues

  9. 9Gauteng Treasury & Department of Local Government Year Program for 2007/2008 (conti.) • Functional Focus for 2007/2008 • Build on the success of 2006/2007 & maintain the current support and oversight functions as required in terms of the Municipal Legal Framework • Second Phase of the Gauteng Municipal Support Plan will focus • Capacitating and Training Sec 57 Managers as a measure of ensuring continued municipal stability and improving service delivery • MEC LG Advisory Committee advised on a number of strategies and these included financial management, borrowing, revenue management (billing and debt management, credit control) and compliance to MFMA: • Develop support mechanisms to aid muni’s to improve and augment current institutional arrangements

  10. 10Financial Performance & Budget Process • Financial Performance for 2006/2007 @ end of March 2007 (based on Monthly Budget Statement Reporting) • Combined Municipal Budgets for Gauteng for 2006/2007 amounts to just over R40 billion • R6 835 923 billion budgeted for Capital Expenditure and • R35 911 446 billion allocated for Operating Expenditure. • Significant contributors to the Capex envelope is :- • City of Johannesburg - R3 193 219 billion (46,71%); • Tshwane Metro - R1 586 651 billion (23,21%); • Midvaal - R75 484 million (1,10%); • And the remaining R1 980 569 billion (28,97%) spread across the other municipalities.

  11. 11Financial Performance & Budget Process (conti.) • Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.) • Significant contributors to the Opex envelope is :- • City of Johannesburg R15 053 985 billion (40,22%); • Ekurhuleni R9 225 736 billion (24,65%); • Tshwane R8 587 558 (23,47%); • The remaining R4 563 327 billion (12,19%) spread across the remaining municipalities.

  12. 12Financial Performance & Budget Process (conti.) • Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.) • Municipal Operating Budget is mainly funded by:- • Service Charges: R18 964 550 billion (50,66%); • Property Rates: R7 793 601 (20,82%); • RSC levies R53 462 million; • And other income: R10 618 992 (28,36%) - with Grants from National and Provincial Government being the biggest contributors to other sources of income.

  13. 13Financial Performance & Budget Process (conti.)Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.)

  14. 14Financial Performance & Budget Process (conti.)Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.)

  15. 15Financial Performance & Budget Process (conti.) • Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.) • The capital budgets consist of infrastructure, which includes as: • Water and Sanitation: R1 232 010 billion; • Roads and Storm water: R1 079 169 billion; • Housing: R652 546 million; and • Electricity Reticulation: R1 210 144 billion; • The remainder is spread across community facilities and related assets. • Expenditure to date : • Water and Sanitation: R486 962 million (39,52%); • Roads and Storm Water: R462 356 million (42,84%); • Housing: R311 927 million (47,80%); • Electricity reticulation R709 282 million (58,61%); • The remaining actual of R1 041 550 million (34,57%) is spread across community and related assets.

  16. 16Financial Performance & Budget Process (conti.)Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.)

  17. 17Financial Performance & Budget Process (conti.)Financial Performance for 2006/2007 @ end of March 2007 for the 3rd quarter ending (based on Monthly Budget Statement Reporting (conti.)

  18. Debt Dec’06 Debt March’07 Amnt inc/dec % Inc/dec Johannesburg 5,556,815,411 5,786,915,675 230,100,264 4% Ekurhuleni 7,462,423,249 7,707,139,184 244,715,935 3% City of Tshwane 1,900,324 000 1,989,017,000 88,693,000 5% Total 14,919,562,660 15 483 071 859 563 509 199 4% Debt Dec’06 Debt March’07 Amnt inc/dec % Inc/dec Kungwini 202,379,107 215,721,728 13,342,621 7% Nokeng 55,715,114 59,616,919 3,901,805 7% Total 258,094,221 275,338,647 17,244,426 7% 18Financial Performance & Budget Process (conti.)Provincial Municipal Debt: Consumer Debtors Metropolitan Municipalities Metsweding District

  19. Debt Dec’06 Debt March’07 Amnt inc/dec % Inc/dec Randfontein 148,185,052 147,904,730 -280,322 -0.2% Westonaria 32,051,818 45,028,965 12,977,147 40.5% Mogale 499,565,124 531,915,347 32,350,223 6.5% Total 679,801,994 724,849,042 45,047,040 6.7% Debt Dec’06 Debt March’07 Amnt inc/dec % Inc/dec Emfuleni 2,308,125,505 2,398,562,470 90,436,965 4% Midvaal 63,348,971 62,003,219 -1,345,752 -2% Lesedi 94,184,335 94,872,996 688,661 0.8% Total 2,465,658,811 2,555,438,685 89,779,874 4% 19Financial Performance & Budget Process (conti.)Provincial Municipal Debt: Consumer Debtors Westrand District Sedibeng District

  20. 20Financial Performance & Budget Process (conti.)Provincial Municipal Debt: Debt explanations The reasons for the increasing debt are listed below: Poor and incorrect billing of water and electricity Indigent policy not effectively implemented Incorrect debtors’ records

  21. 21Annual Financial Statements & Qualifications

  22. 22Tabling of Municipal Budgets

  23. 23Financial Performance & Budget Process (conti.) 2007/2008 IDP and Budget Engagement Process & Findings : • IDP Engagements • A number of pieces of legislation regulates the formation and institutionalisation of Integrated Development Plan’s • MFMA Circular 11 requires that municipal IDP’s and budgets should inform and be informed by the development plans of sector departments to ensure a coordinated approach to infrastructure planning and service delivery. • In ensuring this Horizontal and Vertical alignment between the various spheres of Govt. DLG though its MIDP Unit heads a forum representing key stakeholders from all spheres and sector departments

  24. 24Financial Performance & Budget Process (conti.)2007/2008 IDP and Budget Engagement Process & Findings :The Commenting & Engagement Process 2007

  25. 25Financial Performance & Budget Process (conti.) • 2007/2008 IDP and Budget Engagement Process & Findings : : • Horizontal alignment between municipalities also remains fairly weak • IDP’s are not based on any significant engagement with adjacent municipalities. • There is a need to improve the linkage between stated municipal priorities and content of detailed strategies in some of the IDPs. In some cases the IDP appears to be an amalgamation of projects, rather than a strategic plan. • Alignment of budget and IDP remains a challenge. • There is also a need to ensure that capital budgets are better aligned with the GPG integrated sustainable human settlements programme, in particular the relationship between bulk services and housing developments (MIG and counter-funding) in all IDPs.

  26. 26Conclusion The 2 departments has established a very good working relationship with SALGA and we are key members to the SALGA finance committee All municipalities in general in terms of the Budget Process adhered to time frames as set out in the MFMA In the odd instance of non compliance, a letter is sent to the Municipal Manager The National Treasury/Provincial Treasury/ DPLG/Salga MFMA forum has proven to be useful in terms of networking, however we would recommend greater collaboration between provinces Gauteng Treasury & Dept of LG will continue to collaborate on oversight matters and support programmes through the established Technical Working Team which headed by both depts. HOD’s

  27. THANK YOU

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