2018 REVENUE MANAGEMENT MASTER CLASS Overview of fiscal context and key strategic issues

1. 2018 REVENUE MANAGEMENT MASTER CLASSOverview of fiscal context and key strategic issues • Mr HC Malila: DDG-Fiscal & Economic Services

2. Sustainability Model – Developmental Local Government • Section 152 of the Constitution of South Africa • Part B of Schedule 4 and Part B of Schedule 5 of the Constitution of South Africa Overview of fiscal context and key strategic issues

3. Navigating and developing a shared purpose - “globally connected, locally relevant approach”

4. It’s a VUCA World • Uncertainty • Surprises • Unpredictability • Unknown outcomes • Volatility • Risk • Instability • Flux • Within this VUCA state, economic intelligence provides credible, reliable and robust data and information in the area of economics and socio-economics for well-informed decisions to be made Vision Understanding Clarity Agility • Ambiguity • Doubt • Distrust • Complexity • Dualities • Unproductive Overview of fiscal context and key strategic issues

5. Good Governance Drivers An integrated value-based financial governance approach is followed towards achieving: • The mobilisation of sufficient resources to sustainably finance developmental goals; • The implementation of policies and related priorities effectively utilising budget; and • Effective financial oversight • Key drivers identified to ensure sound financial governance practices and optimal service delivery to communities are: • Governance • Ethical and Effective Leadership – Strategic Policy Direction and Oversight • Integrated thinking and reporting - linking performance to governance thereby improving value • Integrated capacity development to develop and empower a corps of competent and committed high-performance employees • Data and systems enablement - creating operational efficiency and enabling informed decision and problem identification and resolution Overview of fiscal context and key strategic issues

6. 2018/19 Economic and Fiscal Environment • South Africa’s GDP in the first quarter of 2018 fell by 2.2 per cent following an increase of 3.1 per cent in the 4th quarter of 2017 • The IMF maintained its GDP growth projections of 1.5 per cent 2018 and 1.7 per cent for 2019 • The IMF continues to caution that South Africa faces significant fiscal risks • According to the National Treasury, the national economic outlook is unlikely to improve • Economic growth in the WC is estimated to have remained largely flat in 2017, with a contraction in growth predicted for 2018 – impact of the drought • Risks to the National Fiscal Framework remains elevated: • Despite years of fiscal consolidation government still borrows approximately R160 billion per year • Debt to GDP ratio is under threat due to large spending pressures • The gap between revenue and expenditure reflects policy decisions (e.g. high wage settlements) and declining growth (i.e. revenue shortfalls) • Despite the recent VAT increase and budget reductions measures of fiscal consolidation and tough budget decisions will continue to bridge the gap between revenue and expenditure – affecting both province and municipalities Overview of fiscal context and key strategic issues

7. Provincial and Municipal risks and issues • Increased service load pressures, particularly in the social sector, due to increasing population and heightened levels of poverty and unemployment • Extent of crime • Risks to infrastructure delivery, including reductions to funding, bulk infrastructure and maintenance backlogs and shortage of professional staff • Drought, water crisis, disasters and other issues relating to climate change • Current economic pressures as well as resource capacity and governance constraints across province and municipalities • Downward revision to conditional grant allocations to municipalities impacts on revenue raising capacity • Financing capacities of municipalities - which are shrinking owing to the difficulty in obtaining loans and the increase in the cost of money • Impact of Public Transport challenges in the City of Cape Town Overview of fiscal context and key strategic issues

8. Debtors’ 5-year trend – 3 Major categories Overview of fiscal context and key strategic issues

9. Responding to the economic and fiscal context • Principles that need to be considered: Rule of Law Evidence-based Public value Policy principles underpinning the WCG planning and budgeting process Constitu-tionalism Partnerships Citizen centric Whole of Society Approach Overview of fiscal context and key strategic issues

10. Essential measures to maximise the potential of existing revenue sources include amongst others • The billing system must correctly reflect all billing data and customer data that are required to issue an accurate invoice on time to the relevant customer • All properties within the municipality’s area of jurisdiction must be correctly valued whether in the General Valuation Roll or Supplementary Valuation Rolls; and the billing system must be updated with any change in property ownership. This is necessary to grow and protect the municipality’s property rates base • Effective business processes to ensure that new property development and improvements to existing properties are valued as required and that billing records are updated accordingly; this requires good working relations between the municipality’s town planning, valuations and revenue management functions • Correct categorisation of properties in terms of the Municipal Property Rates Policy; this impacts usage and property rates tariffs applied to the properties Overview of fiscal context and key strategic issues 10

11. Concluding Remarks • The Revenue Management Master Class is part of the WCPT integrated capacity building strategy and assists with evidence-based methodology in respect of revenue planning, budgeting and implementation • Provides for “Consolidation of efforts for maximum service delivery impact” - a sustainable local government fiscal path that enables delivery on policy priorities and managing economic and fiscal risks • Assist with strengthening and enhancement of existing strategies and practices that contributes towards sustainable local government • Presents opportunities for peer learning and sharing of best practices amongst municipalities Overview of fiscal context and key strategic issues