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DRAFT 


ANNUAL BUDGET REPORT FOR 


ABAOULUSI MUNICIPALITY 


2020/21 TO 2022/23 


MEDIUM TERM REVENUE AND EXPENDITURE FORECASTS 


Copies of this document can be viewed: 

In the foyers of all municipal buildings 
All public libraries within the municipality 
Website: www.Abaqulusi.gov.za 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table of Contents 


ABBREVIATIONS AND ACRONYMS . 

PART 1 - ANNUAL BUDGET . 1 

Mayor's Report. . 1 

Council Resolutions . 8 

1.3 Executive Summary . 11 

Operating Revenue Framework . 16 

Property Rates.21 

Sale of Electricity and Impact of Tariff Increases.25 

Sanitation and Impact of Tariff Increases.27 

Waste Removal and Impact of Tariff Increases.28 

Overall impact of tariff increases on households.29 

Operating Expenditure Framework . 32 

Free Basic Services: Basic Social Services Package.38 

Capital Expenditure . 38 

Future operational cost of new infrastructure.41 

Annual Budget Tables . 41 

Overview of the Annual Budget Process . 62 

Budget Process Overview.62 

IDP and Service Delivery and Budget Implementation Plan.63 

Financial Modelling and Key Planning Drivers.64 

Community Consultation.65 

Overview of alignment of annual budget with IDP . 66 

Measurable performance objectives and indicators . 86 

Performance indicators and benchmarks.92 

Borrowing Management . 92 

Safety of Capital . 92 

Liquidity . 92 

Revenue Management . 93 

Creditors Management . 93 

Other Indicators . 93 

Free Basic Services: basic social services package for indigent households.94 

Providing clean water and managing waste water.94 

Overview of budget related-policies . 95 

Review of credit control and debt collection procedures/policies.95 

Asset Management, Infrastructure Investment and Funding Policy.95 

Budget Adjustment Policy.95 

Supply Chain Management Policy.95 

Budget and Virements Policy.96 

Cash Management and Investment Policy.96 

Tariff Policies.96 

Financial Modelling and Scenario Planning Policy.96 

Overview of budget assumptions . 97 

External factors.97 

General inflation outlook and its impact on the municipal activities.97 


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Interest rates for borrowing and investment of funds.97 

Collection rate for revenue services.97 

Growth or decline in tax base of the municipality.97 

Salary increases.98 

Impact of national, provincial and local policies.98 

Ability of the municipality to spend and deliver on the programmes.98 

Overview of budget funding . 98 

Medium-term outlook: operating revenue.98 

Medium-term outlook: capital revenue.102 

Cash Flow Management.116 

Cash Backed Reserves/Accumulated Surplus Reconciliation.117 

Funding compliance measurement.119 

Cash/cash equivalent position . 119 

Cash plus investments less application of funds . 119 

Monthly average payments covered by cash or cash equivalents . 119 

Surplus/deficit excluding depreciation offsets . 119 

Property Rates/service charge revenue as a percentage increase less macro inflation target . 120 

Cash receipts as a percentage of ratepayer and other revenue . 120 

Debt impairment expense as a percentage of billable revenue . 120 

Capital payments percentage of capital expenditure . 121 

Borrowing as a percentage of capital expenditure (excluding transfers, grants and contributions) . 121 

Transfers/grants revenue as a percentage of Government transfers/grants available . 121 

Consumer debtors change (Current and Non-current) . 121 

Repairs and maintenance expenditure level . 121 

Asset renewal/rehabilitation expenditure level . 121 

Expenditure on grants and reconciliations of unspent funds . 122 

Councillor and employee benefits . Error! Bookmark not defined. 

Monthly targets for revenue, expenditure and cash flow . Error! Bookmark not defined. 

Table 48 KZN263 SA25 - Budgeted monthly Revenue and Expenditure . Error! Bookmark not defined. 14 

Contracts having future budgetary implications . 126 

Capital expenditure details . 126 

Legislation compliance status . 127 

Other supporting documents . Error! Bookmark not defined. 


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List of Tables 


Table 1 Consolidated Overview of the Draft 2020/23 MTREF . 14 

Table 2 Summary of revenue classified by Main Revenue Source A4 . 17 

Table 3 Operating Transfers and Grant Receipts - Table SA18 - Transfer & Grant Receipts . 19 

Table 4 Comparison of proposed rates to be levied for the 2020/21 financial year . 22 

Table 5 Proposed Water Tariffs . 24 

Table 6 Comparison between current water charges and increases (Domestic) . 24 

Table 7 Comparison between current electricity charges and increases (Domestic) ' . 26 

Table 8 Comparison between current sanitation charges and increases . 28 

Table 9 Comparison between current sanitation charges and increases, single dwelling- houses . Error! 

Bookmark not defined. 

Table 10 Comparison between current waste removal fees and increases . 28 

Table 11 KZN263 Table SAM - Household Bills . 30 

Table 12 Summary of operating expenditure by type Table A4 by standard classification item . 33 

Table 13 Summary of operating expenditure - Revenue by source -Table A4 by standard classification item... 34 

Table 14 Operational Repairs and Maintenance Schedule SA1 . 37 

Table 15 Repairs and maintenance per asset class (Expenditure other items) - Schedule A9 . 

Table 16 2015/16 Medium-Term Capital Budget per Vote - Schedule SA6 . 

Table 17 KZN263 Table SA1 - Budget Summary . 


Table 18 KZN263 Table SA2 - Budgeted Financial Performance (Revenue and Expenditure by Standard 

Classification) . 

Table 19 KZN263 Table SA3 - Budgeted Financial Performance (Revenue and Expenditure by Municipal Vote) 43 

Table 20 Surplus/ (Deficit) calculations for the trading services . 

Table 21 KZN263 Table A4 - Budgeted Financial Performance (Revenue and Expenditure) . 

Table 22 KZN263 Table A5 - Budgeted Capital Expenditure by vote, standard classification and funding source.. 

Table 23 KZN263 Table A6 - Budgeted Financial Position . 

Table 24 KZN263 Table A7 - Budgeted Cash Flow from Operating activities Statement . 

Table 25 KZN263 Table A8 - Cash & Investments Backed Reserves / Accumulated Surplus Reconciliation . 


Table 26 KZN263 Table A9 - Asset Management . 52 

Table 27 KZN263 Table A10 - Basic Service Delivery Measurement . 58 

Table 28 IDP Strategic Objectives . 67 


Table 29 KZN263 Table SA4 - Reconciliation between the IDP Strategic Objectives and Budgeted Revenue... 
Table 30 KZN263 Table SA5 - Reconciliation between the IDP Strategic Objectives and Budgeted Operating 

Expenditure . 

Table 31 KZN263 Table SA6 - Reconciliation between the IDP Strategic Objectives and Budgeted Capital 
Expenditure . 


Table 32 KZN263 Table SA7 - Measurable performance objectives . 88 

Table 33 KZN263 Table SA8 - Performance Indicators and Benchmarks . 90 

Table 34 Breakdown of the Operating Revenue over the Medium-Term Revenue 8i Expenditure Framework . 

Table 35 Proposed tariff increases over the medium-term - Revenue Category . 

Table 36 KZN263 SA15 - Detail Investment Particulars by type . 100 

Table 37 KZN263 SA16 - Investment Particulars by Maturity . 101 

Table 38 Sources of Capital Revenue over the MTREF - Medium Term Revenue & Expenditure Framework A5 
Capital . 102 


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Table 39 KZN263 Table SA 17 - Detail of Borrowings Categorised by Type . 104 

Table 40 KZN263 Table SA 18 - Capital transfers and Grant Receipts . 107 


Table 41 KZN263 Table A 7 - Budget Cash Flow from Operating Activities Statement . 

Table 42 KZN263 Table A8 - Cash backed reserves / accumulated surplus reconciliation . 

Table 43 KZN263 SA10- Funding compliance measurement . 

Table 44 KZN263 SA 20 - Reconciliation between of transfers, grant receipts and unspent funds . 124 

Table 45 KZN263 SA22 - Summary of Councillor and Staff Benefits . 

Table 46 KZN263 SA23 - Disclosure - Salaries, allowances and benefits (Political Office Bearers /Councillors/ 

Senior Managers) . 

Table 47 KZN263 SA24 - Summary of personnel numbers . 

Table 48 KZN263 SA25 - Budgeted monthly Revenue and Expenditure . 

Table 49 KZN263 SA26 - Budgeted monthly Revenue and Expenditure (Municipal Vote) . 

Table 50 KZN263 SA27 - Budgeted monthly Revenue and Expenditure (Standard Classification) . 

Table 51 KZN263 SA28 - Budgeted monthly Capital Expenditure (Municipal Vote) . 

Table 52 KZN263 SA29 - Budgeted monthly Capital Expenditure (Standard Classification) . 

Table 53 KZN263 SA30 - Budgeted Monthly Cash Flow . 

Table 56 KZN263 SA34a - Capital Expenditure on new Assets by Asset Class . 

Table 57 KZN263 SA34b - Capital Expenditure on the Renewal of existing Assets by Asset Class . 

Table 58 KZN263 SA34c - Repairs and Maintenance Expenditure by Asset Class . 

Table 59 KZN263 SA34d - Future Financial Implications of the Capital Budget (Depreciation by Asset Class) . 

Table 60 KZN263 SA35 - Future Financial Implications of the Capital Budget . 

Table 61 KZN263 SA36 - Detailed Capital Budget per Municipal Vote . 

Table 62 KZN263 SA37 - Projects delayed from previous financial year . 

Table 63 KZN263 Table SA1 - Supporting detail to Budgeted Financial Performance . 

Table 64 KZN263 Table SA2 - Matrix Financial Performance Budget (Revenue Source/ Expenditure type and 


Department) . 

Table 65 KZN263 Table SA3 - Supporting detail to Statement of Financial Position . 128 

Table 66 KZN263 Table SA9 - Social, Economic and Demographic Statistics and Assumptions . 130 

Table 67 KZN263 SA32 - List of External Mechanisms . 135 


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List of Figures 


Figure 1 Main operational expenditure categories for the 2020/21 financial year . 

Figure 2 Capital Infrastructure Programme . 40 

Figure 3 Expenditure by major type . 

Figure 4 Depreciation in relation to repairs and maintenance over the MTREF . 57 

Figure 5 Planning, budgeting and reporting cycle . 87 

Figure 6 Definition of performance information concepts . 87 

Figure 8 Sources of capital revenue for the 2020/21 financial year . 103 

Figure 9 Growth in outstanding borrowing (long-term liabilities) . 106 


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ABBREVIATIONS AND ACRONYMS 


Adjustments Budgets - Prescribed in Section 28 of the Municipal Finance Management Act, this is 
the formal means by which a municipality may revise its budget during a financial year. 

Allocations - Money received from Provincial and National Treasury. 

Budget - The financial plan of a municipality. 

Budget related policy - Policy of a municipality affecting, or affected by, the budget. Examples include 
tariff policy, rates policy and credit control and debt policy. 

Budget Steering committee - Committee established to provide technical assistance to the Mayor in 
discharging the responsibilities set out in Section 53 of the MFMA. 

Capital Expenditure - Spending on municipal assets such as land, buildings and vehicles. Any capital 
expenditure must be reflected as an asset on a municipality's balance sheet. 

Cash Flow Statement - A statement showing when actual cash will be received and spent by the 
municipality, and the month end balances of cash and short-term investments. 

CPI - Fleadline Consumer Price Index 

DORA- Division of Revenue Act. Annual legislation which shows the allocations from national to local 
government. 

DORB - Division of Revenue Bill. Annual legislation tabled in parliament, but not enacted, which shows 
the allocations from national to local government. 

Executive Management Team - A team comprising the Municipal Manager and the Executive 
Directors. It reports to the Municipal Manager. 

Equitable Share - A general grant paid to municipalities. It is predominantly targeted at assisting 
municipalities with the costs of free basic services. 

GDFI - Gross Domestic Fixed Investment 

GFS - Government Finance Statistics. An internationally recognised classification system that 
facilitates comparisons between municipalities. 

IDP - Integrated Development Plan. The main strategic planning document of a municipality. 

KPI- Key Performance Indicators. Measures of service output and/or outcome. 

MFMA - Municipal Finance Management Act (No 53 of2003). The principal piece of legislation relating 
to municipal financial management. 

MSCOA - Municipal Standard Chart of Accounts 


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MTREF- Medium Term Revenue and Expenditure Framework, as prescribed by the MFMA. It sets out 
indicative revenue and projected expenditure for the budget year, plus two outer financial years. 

MYPD - Multi Year Price Determination 

NT-National Treasury 

Operating Expenditure -The day-to-day expenses of a municipality such as general expenses, salaries 
& wages and operational costs. 

Portfolio Committee - In line with Section 79 of the Structures Act, the Municipality's Portfolio 
Committees process policies and bylaws relating to the functional areas within their terms of reference, 
and are responsible for implementation monitoring of these, as well as oversight of the functional 
areas. Portfolio Committees are also responsible for assessing and monitoring services delivery, 
ensuring that annual budgets are spent wisely, and that there is no wastage or corruption. 

Rates - Local Government tax based on assessed valuation of a property. 

TMA - Total Municipal Account 

SCM - Supply Chain Management 

SDBIP - Service Delivery Budget Implementation Plan. A detailed plan comprising quarterly 
performance targets and monthly budget estimates. 

SFA - Strategic Focus Areas. The main priorities of a municipality as set out in the IDP. Budgeted 
spending must contribute towards achievement of these Strategic Focus Areas. 

Vote (Function) - One of the main segments into which a budget is divided, usually at directorate level. 


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Part 1 - Annual Budget 


Mayor's Report 


Today, I submit to the Council the Draft Medium-Term Budget for 2020/2021. It reflects to the best of my 
judgement the financial situation of the municipality. 

Abaqulusi is named after a Zulu clan whose descendants live in the vicinities of Vryheid, Utrecht, eDumbe and 
eNqoje . They hailed from different origins but were unified by their allegiance to local Zulu royal homesteads. 
It is therefore in the interest of our people and community and not in the narrow objectives of any political 
party that I table this Draft Medium-Term Budget, to promote and safeguard the financial status of the 
municipality. We need to provide greater investment into our community, taking collective action using our 
knowledge, skills and resources to enable measurable change in the communities we serve. 

We need to ask ourselves "How does this budget impact the community" further maintaining the Vision of the 
municipality "to be the progressive, prosperous and sustainable hub ofZululand by 2035" 

Does this budget build on the Mission of "creating a conducive environment focused on Agricultural, Industrial 
and Tourism Development in order to attract investment and provision of basic services"? 

Achieving these principles will not be easy as there are no quick fixes but as a Council, we will through focussing 
and working hard, with patience, kindness and understanding, working together conquer any obstacles that 
may face us and through our faith make Abaqulusi a safe environment to invest in. 

Continuing on the remarks made by the Minister of Finance during the tabling of the annual budget, what are 
the conditions under which we must implement our plan to win. We need to consider there are many challenges 
that need to be considered, we must acknowledge there have been mistakes made along the way but through 
commitment to our basic ethical values by working together we can win. 

Due to the global economic activity, high debt and deteriorating credit, the coronavirus outbreak which has 
the further potential to impact on the economy the economy and growth in the financial year will be 
challenging. This is going to impact heavily on funds being available for infrastructure bottlenecks, ageing 
infrastructure and unemployment. 

As the Minister of Finance explained "Budgets are complex, but the numbers are simple. The numbers show 
we have work to do" 

We need to build a strong culture of payment in our community. Collecting the revenue due to the municipality 
is the underlying foundation of our democracy and of building our community. It is our duty to pay for services 
especially if we can afford to do so. National Treasury will be leading a process to encourage those, including 


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government departments who owe money to municipalities to pay for the services. Municipal bills must be 
paid on time. 

The budget is all about the long-term vision of the municipality: 

• To this extend we need to spend a lot on infrastructure by injecting more funding into infrastructure 
projects 

• We need to focus on getting ready for technology 

• Climate change is for real and affects us all, to this extent government is ensuring steps are undertaken 
at Eskom to allow for the expansion of renewable energy 

We need to control our debt, especially in areas such as controlling our wage bill and stimulating the economy. 
The municipality needs to follow the example of Provincial departments in managing the appointment of 
critical staff to ensure that services are delivered to the people. We need to make difficult and painful sacrifices. 
Staff need to be motivated, effective and suitably gualified. 

These are difficult times for the municipality as we are still losing money yet our responsibilities are not 
diminishing. We had to cut our expenditure budget with the least impact on the citizens of Abaqulusi. 

All departmental revenue budgets need to be assessed and where found to be too conservative these 
departments need to increase their budgets. 

To restore the confidence of the community we need to ensure more value for money, we need to deal with 
wasteful expenditure. 

The Auditor-General has been empowered to: 

• Refer matters to a public body for investigation and prosecution 

• Take binding remedial actions 

• Recover money directly from the responsible culprits 

National Treasury have further implemented the following steps to deal with runaway costs by implementing: 

• The abolishment of the current wasteful subsistence and travel system 

• Replacing the cell phone policy 

The cost cutting measures remain in place and are now more than ever important and we have to continue to 
look for efficiency savings in the face of the budget cuts. Every cent saved through cost cutting allows us to 
redirect funds to service delivery. As one world leader put it, " Beware of little expenses. A small leak 
will sink a great ship." 

Determinations to implement the Integrated Resource Plan of 2019 are finalised and await the concurrence of 
the National Energy Regulator. It will shortly be possible for municipalities in financially good standing to 
purchase electricity from independent power producers. 


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For all South Africans, the state is "their municipality" and funds allocated to the municipality are to assist the 
municipality in providing basic services to the community. 


The State of the Province Address spells out the following priorities: 

• Job creation in a growing economy (including SMMEs and Cooperatives) 

• Basic services (especially access to clean potable water) 

• Education, health, and skills development 

• Human settlements and sustainable livelihood 

• Build a peaceful province 

• Build a caring and incorruptible government 

While there have been budget cuts effected in the municipality every effort was made to not effect these cuts 
against the infrastructure budgets of the departments. 

Support will be given to municipalities in ensuring sustainability of tourism structures and providing guidance 
on the development of tourism sector strategies. In this regard, support will be given to municipalities on key 
infrastructure projects emanating from municipal consultations such as visitor information centres, as well as 
tourism signage. In partnership with the Tourism Grading Council of South Africa, the department will support 
Small and Medium Enterprises to become star graded establishments to improve their service and quality 
standards. 

COGTA received funding over the MTREF to continue to support local government to promote good governance 
and to enhance financial management in municipalities for improved service delivery, as well as provide 
support and build the capacity of traditional institutions. 

In terms of local governance, the main focus for 2020/21 includes the implementation of the District Delivery 
Model which advances the idea of One Budget, One Plan for district municipalities, providing support to 
municipalities in the development of their Integrated Development Plans (IDPs) through capacity building 
sessions, workshops, IDP forums and IDP assessments, as well as the implementation of an audit outcome 
strategy to support municipalities to improve their audit status, among others. 

The NDP stipulates that, for the country to support its long-term economic objectives and development goals. 
South Africa needs to focus on investing in basic services, such as electricity, water, sanitation, 
telecommunications and public transport. In this regard, the department will co-ordinate stakeholders to 
develop provincial Water and Energy Master Plans which will indicate the strategies to meet the water demand 
in the province. The department will also monitor the implementation of service delivery programmes relating 
to electricity, water and sanitation, indigent policies, as well as operational and maintenance plans. The 
department will continue with the water, sanitation and electricity backlog study which focuses on existing 
backlogs, as well as assessing the state of existing infrastructure in the province. The backlog study is 
anticipated to be completed in May 2020. The information obtained from the backlog study will be used to 
identify gaps and challenges in water, sanitation and electricity supply in all districts. The result of this study 
will inform the interventions to be implemented. The department will also provide support to municipalities. 

The municipal space will be an area of priority focus for our provincial government. We are very mindful that 
it is in this arena that our crisis of governance, of financial management and of implementation, finds its most 
acute expression. 

Provincial Treasury receives funding over the MTEF that is largely for financial governance for general oversight 
of all departments, municipalities and public entities, internal audit, supply chain management, as well as 
support for transversal financial systems. The key focus areas include improved audit outcomes across the 


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province, as well as on-budget spending, and for the province to remain cash positive. Continued focus will be 
on hands-on engagement and support to departments and public entities to enhance their financial accounting 
and reporting performance, as well as continued staff development and training programmes to develop and 
retain the reguisite financial management skills and expertise. A significant role in the Operation Clean Audit 
campaign will be played, with the main aim being to attain improved provincial audit outcomes. 

Risk-based audits with specific focus on overall good governance will be performed. Areas that require internal 
audit process enhancements will be identified. Departments will be assisted in redesigning these processes to 
ensure all risks are well controlled. There will be continued focus on IT audit reviews, transversal reviews of 
SCM, transfer payments, asset management, as well as performance information. In terms of municipal 
financial management, there will be continued focus on improving technical support to delegated 
municipalities on the preparation of multi-year budgets, as well as the monthly outcomes of those budgets. 

More focus will be placed on in-year monitoring including statutory returns, as well as the preparation of 
monthly, quarterly, mid-year and annual consolidated reports on the state of financial performance. The focus 
will be on assisting, supporting and monitoring municipalities with financial management and compliance with 
the annual reporting framework. This will be achieved by providing accounting services and support, as well as 
implementing systems and processes to improve sound financial management and audit outcomes. 

The Abaqulusi Municipality undertakes to conduct its daily duties incorporating the following core values: 

• Integrity 

• Transparency 

• Fairness 

• Competitiveness 

• Honesty 

• Courage 

• Accountability 

• Ethical 

• Time bound 


The goals set by the Abaqulusi Municipality include but are not limited to: 

• Reducing levels of infrastructure backlogs by providing basic services, facilities and maintaining 
existing infrastructure 

• Empowering and capacitating institutional structures and promotion of transparent cooperative 
governance 

• Ensure sound financial management and accountability 

• Ensure transparency, accountability and community involvement in municipal affairs 

• To promote socio-economic growth and job opportunities 

• To redress the spatial imbalances and promote sustainable environmental planning 

Abaqulusi Municipality is committed as the sphere of government closest to the people to ensure it delivers 
effective service delivery to improve the quality of life. 


Although the municipality has some financial challenges and to ensure a better and safe life for all and in 
keeping with the cost containment measures regulated by the National Treasury, the municipality will be 


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adopting a bold and radical approach in its revenue enhancement and expenditure programs. As a matter of 
urgency, the municipality will be considering the following: 

■S Clean up and compile a credible consumer database 

■S Disconnect fraudulent consumers, in all respects 

■S Provide and replace water meters in areas where there are no meters 

■S Ration water to consumers 

■S Migrate to solar street lighting 

■S Clean up the indigent register 

■S Source funding from National Departments 

S Rehabilitate our environment 

S Improve tourist attractions 

S Make a foot print on local economic development 

■S Deal with employment costs specifically positions that are not budgeted for 
■S Review all by-laws, policies and standard operating procedures to ensure alignment with mSCOA 
S Use funds for purposes they are meant for and have time-lined implementation plans 
S S&T usage needs verification and approval. Fraudulent claims should stop 
S Ward I DP 


Highlights 

The highlights of the 2019/2020 financial year are: 

• The total operating revenue received for the 1 st 6 months is 25,2% more than the budgeted target 

• Operating expenditure is below budget 

• Overtime has reduced 

• Electricity losses have reduced 

• The municipality received an ungualified audit opinion 


'The highlights of the Draft Budget for the 2020/2021 financial year are: 

• Additional funding allocated to Repairs and Maintenance, the %> increases from 2,6% to 6% 

• Salary costs remain at 30% of the total expenditure 

• Contract payments are reduced due to iniativesfrom departments to insource functions that have been 
outsourced in the past and now that the contracts are due to expire will be implemented inhouse. 
These include one of the refuse removal contracts, internal audit, the compilation of Annual Financial 
Statements, amongst other contracts that will be reviewed as the contract period ends 

• Capital funding being allocated from own revenue to replace ageing infrastructure in water and 
electricity 

• The upgrading of street lighting 

• Funding being allocated to poverty alleviation projects 

• Funding for the promotion of special programmes 


I would like to express my appreciation to the members of the Executive Council for their valuable inputs. 
Collectively difficult by informed decisions were made on how best to serve our community. Thank you to all 


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members of this Council, including all representatives of all political parties and all members of the 
administration for their contributions made. A budget is defined as "a plan for spending money wisely" and the 
administration under the Municipal Manager, the CFO and his team are trying to install strict fiscal discipline. 
I would further like to thank all members of the public who assisted and took part in putting the municipality 
on the winning path. Every input, suggestion and all active participation is valued. Abaqulusi Municipality is an 
example of what can be achieved with a partnership of an active and participating community and a 
responding Council. We must never forget that this is the purpose of local government and that we are mere 
servants placed here to serve our community. I would also like to thank all sectors of the community who still 
need upgrading of services and facilities who have been patiently waiting with us to achieve it. Trust us we are 
equal to the task. 

Mr Speaker I am humbled by the huge task entrusted to me as leader of this Council and the opportunity to 
table this Draft Budget to better serve our people. My team and I would like to ensure every citizen of Abaqulusi 
that we shall work tirelessly and leave no stone unturned to create a community of excellence for all with the 
funds entrusted to us. Trust us we will gradually achieve this. This is a budget that plants a seed for the future 
growth and it is our duty to ensure the seed grows strong and healthy. 

I would like to make the following recommendations: 

1. The Council of Abaqulusi Local Municipality, acting in terms of Section 24 of the Municipal Finance 
Management Act, (Act 56 of 2003) notes and adopts: 

1.1. The Draft Annual Budget of the municipality for the Financial Year 2020/21 and the Multi-Year and 
Single-Year Capital appropriations as set out in the following tables: 

1.1.1. Budgeted Financial Performance (revenue and expenditure by standard classification) as 
contained in Table 18; 

1.1.2. Budgeted Financial Performance (revenue and expenditure by municipal vote) as contained in 
Table 19; 

1.1.3. Budgeted Financial Performance (revenue by source and expenditure by type) as contained in 
Table 21; and 

1.1.4. Multi-year and single-year capital appropriations by municipal vote and standard classification 
and associated funding by source as contained in Table 22. 

1.2. The financial position, cash flow budget, cash-backed reserve/accumulated surplus, asset 
management and basic service delivery targets are approved as set out in the following tables: 

1.2.1. Budgeted Financial Position as contained in Table 23; 

1.2.2. Budgeted Cash Flows as contained in Table 24; 

1.2.3. Cash backed reserves and accumulated surplus reconciliation as contained in Table 25; 

1.2.4. Asset management as contained in Table 26; and 

1.2.5. Basic service delivery measurement as contained in Table 27. 


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2. The Council of Abaqulusi Local Municipality, acting in terms of Section 75A of the Local Government: 
Municipal Systems Act (Act 32 of 2000) approves and adopts with effect from 1 July 2020 the proposed 
tariffs of Abaqulusi Municipality 

3. To give proper effect to the municipality's annual budget, the Council of Abaqulusi Local Municipality 
approves: 

3.1. That cash backing is implemented through the utilisation of a portion of the revenue generated from 
property rates to ensure that all capital reserves and provisions and unspent conditional grants are 
cash backed as required in terms of the municipality's funding and reserves policy as prescribed by 
Section 8 of the Municipal Budget and Reporting Regulations. 

4. The Council of Abaqulusi Local Municipality approves and adopts with effect from 1 July 2020 the following 
budget related policies: 

a) The tariffs policy in terms of section 74 of the Municipal Systems Act 

b) The rates policy in terms of section 3 of the Municipal Property Rates Act 

c) The credit control and debt collection policy in terms of section 96 of the Municipal Systems Act 

d) The cash management and investment policy in terms of section 13(2) of the Act 

e) A borrowing policy complying with Chapter 6 of the Act 

f) A funding and reserves policy 

g) A policy related to the long-term financial plan 

h) The supply chain management policy in terms of section 111 of the Act 

i) Any policies dealing with the management and disposal of assets 

j) Any policies dealing with infrastructure investment and capital projects, including the policy governing the 
planning and approval of capital projects and on developer contributions for property developments 

k) The indigent policy of the municipality 

l) Any policy relating to the provision of free basic services 

m) Any policy related to budget implementation and monitoring including the shifting of funds within votes, the 
introduction of adjustment budgets, unforeseen and unavoidable expenditure and management and oversight 

n) Any policy relating to managing electricity and water including the management of losses and promoting 
conservation and efficiency 

o) Any policies relating to personnel including policies on overtime, vacancies and temporary staff 

p) Any policies dealing with entities 

q) Any other budget related or financial management policies of the municipality 

r) Performance Management Policy Framework 


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J^Council Resolutions 


On 26 March 2020 the Council of Abaqulusi Local Municipality met in the Council Chambers of 
Abaqulusi Municipality to consider the draft annual budget of the municipality for the financial year 
2020/21. The Council noted the following draft resolutions: 

5. The Council of Abaqulusi Local Municipality, acting in terms of Section 24 of the Municipal Finance 
Management Act, (Act 56 of 2003) notes: 

5.1. The Annual Budget of the municipality for the Financial Year 2020/21 and the Multi-Year and 
Single-Year Capital appropriations as set out in the following tables: 

5.1.1. Budgeted Financial Performance (revenue and expenditure by standard classification) 
as contained in Table 18; 

5.1.2. Budgeted Financial Performance (revenue and expenditure by municipal vote) as 
contained in Table 19; 

5.1.3. Budgeted Financial Performance (revenue by source and expenditure by type) as 
contained in Table 21; and 

5.1.4. Multi-year and single-year capital appropriations by municipal vote and standard 
classification and associated funding by source as contained in Table 22. 

5.2. The financial position, cash flow budget, cash-backed reserve/accumulated surplus, asset 
management and basic service delivery targets are approved as set out in the following 
tables: 

5.2.1. Budgeted Financial Position as contained in Table 23; 

5.2.2. Budgeted Cash Flows as contained in Table 24; 

5.2.3. Cash backed reserves and accumulated surplus reconciliation as contained in Table 25; 

5.2.4. Asset management as contained in Table 26; and 

5.2.5. Basic service delivery measurement as contained in Table 27. 

6. The Council of Abaqulusi Local Municipality, acting in terms of Section 75A of the Local 
Government: Municipal Systems Act (Act 32 of 2000) approves and adopts with effect from 1 July 
2019 the proposed tariffs of Abaqulusi Municipality 

7. To give proper effect to the municipality's annual budget, the Council of Abaqulusi Local 
Municipality approves: 

7.1. That cash backing is implemented through the utilisation of a portion of the revenue 
generated from property rates to ensure that all capital reserves and provisions and unspent 
conditional grants are cash backed as required in terms of the municipality's funding and 
reserves policy as prescribed by Section 8 of the Municipal Budget and Reporting Regulations. 


Page 8 of 157 







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Draft 2020/21 Annual Budget and MTREF 


8. The Council of Abaqulusi Local Municipality approves and adopts with effect from 1 July 2020 the 
following budget related policies: 

s) The tariffs policy in terms of section 74 of the Municipal Systems Act 

t) The rates policy in terms of section 3 of the Municipal Property Rates Act 

u) The credit control and debt collection policy in terms of section 96 of the Municipal Systems Act 

v) The cash management and investment policy in terms of section 13(2) of the Act 

w) A borrowing policy complying with Chapter 6 of the Act 

x) A funding and reserves policy 

y) A policy related to the long-term financial plan 

z) The supply chain management policy in terms of section 111 of the Act 
aa) Any policies dealing with the management and disposal of assets 

bb) Any policies dealing with infrastructure investment and capital projects, including the policy governing 
the planning and approval of capital projects and on developer contributions for property 
developments 

cc) The indigent policy of the municipality 

dd) Any policy relating to the provision of free basic services 

ee) Any policy related to budget implementation and monitoring including the shifting of funds within 
votes, the introduction of adjustment budgets, unforeseen and unavoidable expenditure and 
management and oversight 

ff) Any policy relating to managing electricity and water including the management of losses and 
promoting conservation and efficiency 

gg) Any policies relating to personnel including policies on overtime, vacancies and temporary staff 
hh) Any policies dealing with entities 

ii) Any other budget related or financial management policies of the municipality 
jj) Performance Management Policy Framework 


The MFMA Circular No 72 indicates that all municipalities must formulate service Level Standards 
which must form part of the 2020/21 tabled MTREF budget documentation. The Service Level 
Standards need to be tabled before the Council for formal adoption. 

The setting of standards is an integral part of the service delivery value chain. It provides 
transparency in understanding performance indicators and strengthens the entire performance 
management system. In addition, it ensures accountability on the part of the officials responsible 
for providing the service. 

Local government is mostly classified in the service delivery and governance category and as such 
needs to be clear on what the public at large can expect as a service delivery standard. Rate payers 
must be placed in a position by which they are able to measure the service outputs against the 
predetermined service standards. This also serves as a performance rating instrument at an 
organisational and individual level. 

It is for this reason that the municipality must adopt service standards as part of our strategic 
objectives and report on the achievements. 


Page 9 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


The service standards must at a minimum incorporate the administrative, technical and economic 
development categories of the municipality. 

The following are to be considered for use: 

Administrative service standards 

• Turnaround time in dealing with correspondence received 

• Turnaround time in opening a consumer account 

Technical service standards 

• Turnaround time in dealing with reported incidents (water leakage, potholes, power 
outages, etc.) 

• Turnaround time in restoring water and electricity connectivity 


Economic development service standards 


Turnaround time in processing rezoning applications 
Turnaround time in processing building plans 
Turnaround time in processing special business applications 


Page 10 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


1.3 Executive Summary 


The application of sound financial management principles for the compilation of the 
Municipality's financial plan is essential and critical to ensure that the Municipality remains 
financially viable and that municipal services are provided sustainably, economically and 
equitably to all communities. 

The Municipality's service delivery priorities were reviewed as part of this year's planning and 
budget process. Where appropriate funds will be transferred from low- to high priority 
programmes so as to maintain sound financial stewardship. A critical review will also be 
undertaken of expenditure on non-essential and 'nice-to-have' items. 2020/21 MTREF was 
drafted in context of an economy that is not projected to grow supported. 

The draft budget for the 2020/21 MTREF period is based on the realisation that revenues and 
cash flows are expected to remain under pressure in 2020/21 and the municipality must adopt 
a conservative approach when projecting expected revenues and cash receipts. The 
municipality must further in terms of MFMA Circular 98 carefully consider the affordability of 
tariff increases especially in relation to domestic consumers which makes up the bulk of the 
municipality's revenue base whilst considering the level and quality of services versus the 
associated cost. 

The draft budget was compiled by ensuring that the financial management processes are 
transparent, aligned to the accountability cycle and facilitate good governance that is 
accountable to the local community. Public perception shows high levels of unhappiness with 
service delivery and perceived corruption at municipalities and sound leadership is required 
as well as measures put in place to address mismanagement by implementing effective 
systems to measure, monitor and evaluate performance. 

The draft budget supports the provision of basic services to the communities, facilitating social 
and economic development, promoting a safe and healthy environment in a sustainable 
manner. 

The main challenges experienced during the compilation of the 2020/21 MTREF can be 
summarised as follows: 

• Ensuring the timely delivery of capital programmes (eliminate under-spending of 
capital budgets) and to review all by-laws and development approval processes with 
a view of removing any bottlenecks to investment and job creation. 

• Under spending on repairs and maintenance - often seen as a way to reduce short 
term spending which shortens the life of assets, increases long term maintenance and 
refurbishment costs and causes a deterioration in the reliability of our infrastructure 

• Spending on non-priorities - including unnecessary travel, luxury furnishings, 
excessive catering and the use of consultants to perform routine tasks. 

• Not just employing more people without any reference to the level of staffing required 
delivering effective services. The municipality must through fully participate in the 
Expanded Public Works Program focus on maximizing its contribution to job creation 


Page 11 of 157 






Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


by ensuring that service delivery and capital projects use labour intensive methods 
wherever appropriate and implement intern's programmes to provide young people 
with on-the-job training. 

• Collecting outstanding debts - this requires political commitment, sufficient 
administration capacity and pricing policies that ensure that bills are accurate and 
affordable. 

• Pricing services correctly - the full cost of services must be reflected in the tariffs 
charged to consumers who can afford to pay. Overly generous subsidies and rebates 
that result in services running at a loss cannot be entertained. 


The following budget principles and guidelines directly informed the compilation of the draft 
2020/21 MTREF: 

• The 2019/20 Adjustment Budget priorities and targets, as well as the base line 
allocations contained in the Adjustment Budget. 

• Service level standards were used to inform the measurable objectives, targets and 
backlog eradication goals. 

• Tariff and property rate increases should be affordable and try not to exceed inflation 
as measured by the CPI, except where the price increases in the services that are 
beyond the control of the municipality, i.e. ESKOM. 

• Cost Containment Regulations have been implemented to curtail spending in terms 
of the regulations. 

• No budget has been allocated to national and provincial funded projects unless the 
necessary grants to the municipality are reflected in the Division of Revenue Act 
gazette. 

National Treasury has issued a Circular (MFMA Circular No 64) giving guidance to 
municipalities of what should be done to maximise the revenue generating potential of 
existing sources of revenue such as property rates and trading services. Further Circulars will 
be issued by National Treasury to guide municipalities in developing credible revenue 
frameworks by reaffirming the fundamental principles of costing, revenue management and 
revenue enhancement. 

Revenue management is described as a fundamental and routine financial management 
function of the municipality's revenue generating business that includes billing and collection 
activities in respect of trading services and property rates. 

Revenue enhancement is about improving by making more, in the case of municipal revenue 
it is associated with increasing the value of revenue generated. Revenue enhancement can be 
broken into two components. The first being national policy developments that give rise to 
additional sources of revenue from government (grant funding) and the second component is 
the ability of the municipality to grow its own revenue base. 


Page 12 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


MFMA Circular No 58 advises that the municipality must ensure that the billing systems are 
accurate; accounts are sent out to residents on a monthly basis and follow-up to collect 
revenue owed to the municipality. 

In terms of MFMA Circular No 64 the main responsibility of the municipality is to deliver 
services. In terms of Section 75A of the Municipal Systems Act the municipality is allowed to 
levy and recover fees, charges or tariffs in respect of municipal service delivery functions and 
recover collection charges and interest on outstanding amounts. The municipality must adopt 
by-laws to give effect to the implementation and enforcement of the tariff policies. 

Revenue generation is everyone's responsibility, not just that of the revenue Section. The 
municipality must effectively manage all functions that impact protecting and growing the 
revenue base. The implementation of internal controls along the revenue value chain will aid 
effective data handovers; utilising system data validation mechanisms and ensuring that 
service level standards are fundamental to ensuring the integrity of the billing data but are 
advised to stay away from costly data cleansing exercises. 

The following are fundamental to maximising the existing revenue: 

• Billing system that correctly reflects all billing and customer information required to 
issue accurate accounts to consumers. 

• All property within the municipal jurisdiction must be correctly valued and the billing 
system must be updated with any change in property ownership. This is necessary to 
protect and grow the property rates base. 

• Effective business processes to ensure new property development as well as 
improvements to existing properties are valued as required. 

• Correct categorisation of properties. 

• Water and electricity meter numbers must be recorded correctly and linked to 
corresponding property. 

• Continual maintenance of water and electricity meters to minimise losses due to 
leakages or incorrectly metered consumption. 

• Accurate meter reading and minimising the amount of meter reading estimates. 

• Refuse and sanitation service charges must be included in all billing records and the 
municipality must ensure these services are not run at a loss. 

• Billing queries to be resolved within reasonable timeframes. 

• Municipal functions must be adequately staffed with competently skilled individuals 
who understand the job requirements and how to deliver on it. 


The Circular further advises municipalities to table "surplus" budgets. To achieve this the municipality 
must ensure cost reflective tariffs; operation efficiencies; maximising revenue regenerating potential 
of own revenue sources and a productive workforce and sound decision making to ensure that the 
limited financial resources are spent wisely so that value for money is achieved. 

National Treasury's MFMA Circular No. 98 was used to guide the compilation of the Draft 2020/21 
MTREF. 


Page 13 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


In view of the aforementioned, the following table is a consolidated overview of the proposed 2020/21 
Medium-term Revenue and Expenditure Framework: 


Table 1 Consolidated Overview of the Draft 2019/22 MTREF 


Description 

2020/21 Medium Term Revenue & 
Expenditure Framework 




R thousands 

Original 

Budget 

Adjusted 

Budget 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Financial Performance 







Property rates 

78 789 

78 789 

63103 

84 637 

88 699 

92 957 

Service charges 

229 847 

238 574 

186 023 

280 439 

293 841 

307 945 

Investment revenue 

1 000 

1 700 

1 460 

1 785 

1 316 

1 379 

Transfers recognised - operational 

179 813 

190 724 

132 883 

184 096 

196 926 

207 308 

Other own revenue 

30 007 

30 829 

16 354 

31 924 

30 755 

32 232 


519 456 

540 617 

399 824 

582 881 

611 537 

641 821 

Total Revenue (excluding capital transfers and contributions) 







Employee costs 

152 728 

155379 

101 872 

162 971 

170 666 

179 073 

Remuneration of councillors 

18 300 

18 300 

9 586 

19 490 

20 425 

21 406 

Depreciation & asset impairment 

60 445 

60152 

- 

40152 

42 914 

48 545 

Finance charges 

- 

- 

912 

- 

- 

- 

Materials and bulk purchases 

185 621 

194 781 

156168 

222 813 

233 441 

244 579 

Transfers and grants 

10 081 

12 076 

8 461 

11 912 

12 484 

13 083 

Other expenditure 

125 260 

135 225 

60 846 

115 547 

120 727 

126 487 

Total Expenditure 

552 436 

575 914 

337 846 

572 885 

600 657 

633 173 

Surplus/(Deficit) 

(32 980) 

(35 297) 

61 978 

9 996 

10 880 

8 648 

Transfers and subsidies - capital (monetary allocations) (National 







1 Provincial and District) 

35 278 

43 983 

22 342 

35 375 

37 899 

39 978 

Transfers and subsidies - capital (monetary allocations) (National 

1 Provincial Departmental Agencies, Households, Non-profit 
Institutions, Private Enterprises, Public Corporatons, Higher 
Educational Institutions) & Transfers and subsidies - capital (in-kind 







-all) 

- 

- 

- 

- 

- 

- 


2 299 

8 686 

84 319 

45 371 

48 779 

48 626 

Surplus/(Deficit) after capital transfers & contributions 







Share of surplus/ (deficit) of associate 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) for the year 

2 299 

8 686 

84 319 

45 371 

48 779 

48 626 

Capital expenditure & funds sources 







Capital expenditure 

35 279 

41 666 

13174 

45 371 

48 779 

48 626 

Transfers recognised - capital 

- 

(52 917) 

(6 884) 

- 

- 

- 

Borrowing 

- 

- 

- 

- 

- 

- 

Internally generated funds 

- 

- 

199 

- 

- 

- 

Total sources of capital funds 

- 

(52 917) 

(6 685) 

- 

- 


Financial position 







Total current assets 

(31 175) 

254 419 

389 759 

131 499 

137 266 

149 559 

Total non current assets 

(32 836) 

1 444 528 

1 483 058 

2 126 

2 624 

(3 316) 

Total current liabilities 

(66 310) 

283 062 

434 495 

88 254 

91 110 

97 618 

Total non current liabilities 

- 

22 847 

22 847 

- 

- 

- 


Page 14 of 157 

























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Community wealth/Equity 

2 299 

8 686 

84 319 

45 371 

48 779 

48 626 

Cash flows 







Net cash from (used) operating 

(312 723) 

(325 035) 

60 408 

(15 526) 

(15 526) 

(13 061) 

Net cash from (used) investing 

(35 279) 

(41 666) 

(8 708) 

(45 371) 

(48 779) 

(48 626) 

Net cash from (used) financing 

- 

- 

10 

- 

- 

- 

Cash/cash equivalents at the year end 

(348 002) 

(365 737) 

49 590 

(60 896) 

(125 202) 

(186 888) 

Cash backinq/surolus reconciliation 







Cash and investments available 

(340 332) 

(337 567) 

67 830 

83 446 

86 965 

96 845 

Application of cash and investments 

(81 432) 

173 464 

95 422 

46 018 

46 932 

51 319 

Balance - surplus (shortfall) 

(258 900) 

(511 031) 

(27 592) 

37 428 

40 033 

45 526 

Asset management 







Asset register summary (WDV) 

- 

- 

- 

- 

- 

- 

Depreciation 

57 591 

57 541 

- 

37 541 

40177 

45 677 

Renewal and Upgrading of Existing Assets 

16 710 

16710 

- 

50 543 

62 449 

19 898 

Repairs and Maintenance 

11 975 

24 056 

- 

22 479 

23 580 

22 614 

Free services 







Cost of Free Basic Services provided 

- 

- 

- 

- 

- 

- 

Revenue cost of free services provided 

- 

- 

- 

- 

- 

- 

Households below minimum service level 







Water: 

- 

- 

- 

- 

- 

- 

Sanitation/sewerage: 

- 

- 

- 

- 

- 

- 

Energy: 

- 

- 

- 

- 

- 

- 

Refuse: 

- 

- 

- 

- 

- 

- 


Total operating revenue has increased by R 42,2 million for the 2020/21 financial year when compared 
to the 2019/20 Adjustment Budget. For the two outer years, operational revenue will increase, 
equating to a total revenue growth of R101,2 million over the MTREF when compared to the 2019/20 
financial year. 


Total operating expenditure for the 2020/21 financial year has been appropriated at R 572,8 million. 
When compared to the 2019/20 Adjustment Budget, operational expenditure has increased by 5% in 
the 2020/21 budget and 5% increases for each of the respective outer years of the MTREF. The budget 
for bulk purchases to Eskom has increased to 8,1% as announced by NERSA and the employment 
budget has increased by 6,5% as per the salary agreement of CPI + 1,25% 


The capital budget of R 45,3 million for 2020/21 is more when compared to the 2019/20 Adjustment 
Budget. The increase is due to capital funding from own revenue being allocated for 2020/21. The 
capital program increases to R48,7 million in the 2021/22 financial year due and then decreases to 
R48,6 million in 2022/23. Currently a limited amount of funding for the capital budget will be funded 
from internally generated funds in each of the financial years of the MTREF. Capital from government 
grants and transfers amounts to R 36,89 million which is R231,000 less than the 2019/20 financial 
year. Of the Rll,4 million allocated to the municipality from INEP an amount of R3,2 million has been 
allocated as capital projects for the municipality, the remainder of the funds is for electrification in 
Eskom areas and the funds for that portion are shown under general expenses as the project does not 
become a capital item of the municipality but is handed back to Eskom on completion. 


Page 15 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Operating Revenue Framework 


For Abaqulusi Municipality to continue improving the quality of services provided to its citizens it 
needs to generate the required revenue. In these tough economic times strong revenue management 
is fundamental to the financial sustainability of every municipality. The reality is that we are faced 
with development backlogs and poverty. The expenditure required to address these challenges will 
inevitably always exceed available funding; hence difficult choices have to be made in relation to tariff 
increases and balancing expenditures against realistically anticipated revenues. 

The municipality's revenue strategy is built around the following key components: 

• National Treasury's guidelines and macroeconomic policy; 

• Growth in the municipal area and continued economic development; 

• Efficient revenue management, which aims to ensure an 85% annual collection rate for 
property rates and other key service charges; 

• Electricity tariff increases as approved by the National Electricity Regulator of South Africa 
(NERSA); 

• Determining the tariff escalation rate by establishing/calculating the revenue requirement of 
each service; 

• The municipality's Property Rates Policy approved in terms of the Municipal Property Rates 
Act, 2004 (Act 6 of 2004) (MPRA); 

• Increase ability to extend new services and recover costs; 

• The municipality's Indigent Policy and rendering of free basic services; and 

• Tariff policies of the Municipality. 

The following table is a summary of the Draft 2020/21 MTREF (classified by main revenue source): 


Page 16 of 157 






Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 2 Summary of revenue classified by Main Revenue Source A4 


KZN263 Abaqulusi - Table A4 Budgeted Financial Performance (revenue and expenditure) 


Description 

Ref 

2016/17 

2017/18 

2018/19 


Current Year 2019/20 


2020/21 Medium Term Revenue & 
Expenditure Framework 

R thousand 

1 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Revenue Bv Source 












Property rates 

2 

16100 

70 448 

70 969 

78 789 

78 789 

- 

63103 

84 637 

88 699 

92 957 

Service charges - electricity revenue 

2 

172 465 

159 402 

170 332 

144 356 

151 053 

- 

129 993 

188 542 

197 592 

207 076 

Service charges - water revenue 

2 

3 236 

32 785 

32 936 

37 020 

39 020 

- 

24 378 

40 971 

42 879 

44 937 

Service charges - sanitation revenue 

2 

40 925 

18 671 

27 041 

28 551 

28 581 

- 

19 296 

30 010 

31 450 

32 960 

Service charges - refuse revenue 

2 

- 

14 904 

18 855 

19 920 

19 920 

- 

12 356 

20 916 

21 920 

22 972 

Rental of facilities and equipment 


- 

1 463 

1 636 

1 425 

1 425 

- 

812 

1 050 

734 

769 

Interest earned - external investments 


- 

5 206 

365 

1 000 

1 700 

- 

1 460 

1 785 

1 316 

1 379 

Interest earned - outstanding debtors 


- 

29 879 

15 288 

- 

- 

- 

7 838 

- 

- 

- 

Dividends received 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Fines, penalties and forfeits 


9 573 

23 262 

21 579 

22 473 

23 099 

- 

4158 

24 254 

25 396 

26 615 

Licences and permits 


4 292 

4 625 

4 493 

4 903 

4 903 

- 

3134 

5148 

3109 

3 258 

Agency services 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Transfers and subsidies 


108 515 

133378 

137 787 

179 813 

190 724 

- 

132 883 

184 096 

196 926 

207 308 

Other revenue 

2 

64 277 

1 295 

17 571 

1 206 

1402 

- 

411 

1472 

1 517 

1 589 

Gains 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Revenue (excluding capital transfers and 
contributions) 


419 383 

495 318 

518 852 

519 456 

540 617 


399 824 

582 881 

611 537 

641 821 


Page 17 of 157 




















Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


In line with the formats prescribed by the Municipal Budget and Reporting Regulations, capital 
transfers and contributions are excluded from the operating statement, as inclusion of these revenue 
sources would distort the calculation of the operating surplus/deficit. 

Revenue generated from rates and services charges forms a significant % of the revenue basket for 
the Municipality. 

Service charge revenues comprise more than 48% of the total revenue mix. In the 2020/21 financial 
year, revenue from services charges is expected to total R 280,4 million. This increases to R 293,8 
million and R307,9 million in the respective financial years of the MTREF. The above table excludes 
revenue foregone arising from discounts and rebates associated with the tariff policies of the 
Municipality. 

Property rates is the second largest revenue source totalling 15% or R 84,8 million rand and increases 
to R92,9 million by 2022/23. 

The third largest sources are "other revenue" which consists of various items such as income received 
from permits and licenses, building plan fees, connection fees and advertisement fees. Departments 
have been urged to review the tariffs of these items on an annual basis to ensure they are cost 
reflective and market related. The anticipated revenue from other revenue is R 1,4 million. 

Operating grants and transfers totals R 184 million in the 2020/21 financial year and increases to 
R207,3 million by 2022/23. Note that the year-on-year growth is 6% in the two outer years. 


The municipality hopes to receive additional funding which will be applied to address: 

• Compensation for rising costs of providing free basic water and electricity to poor households. 

• Accelerate provision of access to clean water through bulk and reticulation projects. 

• Accelerate provision of access to electricity and improving the sustainability of access through 
the refurbishment of key infrastructure. 

• Expand the collection and use of date on the condition of municipal roads. 

• Increase the number of interns with infrastructure-related skills. The following table gives a 
breakdown of the various operating grants and subsidies allocated to the municipality over 
the medium term: 


Page 18 of 157 


Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 3 Operating Transfers and Grant Receipts - SA18 - Transfer & Grant Receipts 


KZN263 Abaqulusi - Supporting Table SA18 Transfers and grant receipts 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure Framework 

R thousand 


Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year +1 
2021/22 

Budget Year +2 
2022/23 

RECEIPTS: 

1,2 










Operating Transfers and Grants 











National Government: 


129 913 

135 462 

150 041 

172 970 

172 970 

172 970 

176191 

190168 

200 206 

Local Government Equitable Share 


106 890 

117 257 

130 276 

148 281 

148 281 

148 281 

160 312 

173368 

185 006 

Finance Management 


1 625 

1 700 

1 770 

2 235 

2 235 

2 235 

2 600 

2 800 

3 200 

Municipal Systems Improvement 


- 

- 

1 700 

1 800 

1 800 

1 800 

- 

- 

- 

Integrated National Electrification Programme 


20 000 

15 000 

15 000 

19 000 

19 000 

19 000 

11 448 

14 000 

12 000 

EPWP Incentive 


1 398 

1 505 

1 295 

1 654 

1 654 

1 654 

1 831 

- 

- 

Other transfers/grants [insert description] 











Provincial Government: 


4 068 

4 052 

4111 

5 503 

5 503 

5 503 

_ 

. 

. 

Sport and Recreation 




50 







Arts & Culture - Museum 


175 

183 


202 

202 

202 




Arts & Culture - Library - Provincial 


3 714 

2 963 

3111 

4 284 

4 284 

4 284 




Arts & Culture - Library - Community Centre 


179 

906 

950 

1 017 

1 017 

1 017 




District Municipality: 


_ 

_ 

_ 

_ 

. 

. 

_ 

. 

. 

[insert description] 











Other grant providers: 


_ 

_ 

_ 

. 

. 

. 

. 

. 

. 

[insert description] 











Total Operating Transfers and Grants 

5 

133 981 

139 514 

154152 

178473 

178 473 

178 473 

176191 

190168 

200 206 

Caoital Transfers and Grants 











National Government: 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 

Municipal Infrastructure Grant (MIG) 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 


Page 19 of 157 































Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Other capital transfers/grants [insert desc] 











Provincial Government: 


_ 

_ 

_ 

. 

_ 

. 

_ 

„ 

. 

Other capital transfers/grants [insert 
description] 











District Municipality: 


„ 

_ 

_ 

. 

. 

. 

. 

. 

. 

[insert description] 











Other grant providers: 


_ 

_ 

_ 

_ 

_ 

_ 

_ 

_ 

_ 

[insert description] 











Total Capital Transfers and Grants 

5 

30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 

TOTAL RECEIPTS OF TRANSFERS & GRANTS 


164136 

177 254 

190 586 

215 608 

215 608 

215 608 

213 095 

230 062 

242 288 


Page 20 of 157 
























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Tariff-setting is a pivotal and strategic part of the compilation of any budget. When rates, tariffs and 
other charges were revised, local economic conditions, input costs and the affordability of services 
were taken into account to ensure the financial sustainability of the Municipality. 

National Treasury continues to encourage municipalities to keep increases in rates, tariffs and other 
charges as low as possible. The municipality must however take into account the labour and other 
input costs of services, the need to ensure financial sustainability, local economic conditions, the 
affordability of services, the indigent policy. An appropriate balance between the interests of poor 
households, other consumers and financial sustainability needs to be maintained as excessive 
increases are likely to be counterproductive, resulting in higher levels of non-payment. 

The percentage increases of ESKOM bulk tariffs are far beyond the mentioned inflation target. Given 
that these tariff increases are determined by external agencies, the impact they have on the 
municipality's electricity and in these tariffs are largely outside the control of the Municipality. 
Discounting the impact of these price increases in lower consumer tariffs will erode the Municipality's 
future financial position and viability. Based on NERSA's approval of a 9,4% increase to Eskom as per 
NERSA announcement. The municipality has allowed for increases between 3 and 9%. 

It must also be appreciated that the consumer price index, as measured by CPI, is not a good measure 
of the cost increases of goods and services relevant to municipalities. The basket of goods and services 
utilised for the calculation of the CPI consist of items such as food, petrol and medical services, 
whereas the cost drivers of a municipality are informed by items such as the cost of remuneration, 
bulk purchases of electricity, petrol, diesel, chemicals, cement etc. The current challenge facing the 
Municipality is managing the gap between cost drivers and tariffs levied, as any shortfall must be made 
up by either operational efficiency gains or service level reductions. Within this framework the 
Municipality has undertaken the tariff setting process relating to service charges as follows. 

Property Rates 

Property rates cover the cost of the provision of general services. Determining the effective property 
rate tariff is therefore an integral part of the municipality's budgeting process. In the 2019/2020 
financial year there was no percentage increase for property rates due to the implementation of the 
new property rates register, however this year there will be a 7% increase. The rates revenue is 
expected to increases the current value from R78,7 million to R84,6 million. All households receive a 
rebate on the first R 15,000 and indigent residents a further R 85,000. 

National Treasury's MFMA Circular No. 51 deals, inter alia with the implementation of the Municipal 
Property Rates Act, with the regulations issued by the Department of Co-operative 
Governance. These regulations came into effect on 1 July 2009 and prescribe the rate ratio for the 
non-residential categories, public service infrastructure and agricultural properties relative to 
residential properties to be 0,25:1. The implementation of these regulations was done in the previous 
budget process and the Property Rates Policy of the Municipality has been amended accordingly. 

The following stipulations in the Property Rates Policy are highlighted: 

• The first R 15 000 of the market value of a property used for residential purposes is excluded 
from the rate-able value (Section 17(h) of the MPRA). 

• 100 % rebate will be granted to registered indigents in terms of the Indigent Policy; 


Page 21 of 157 





Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


For pensioners, physically and mentally disabled persons, a maximum/total rebate of 50 % 
(calculated on a sliding scale) will be granted to owners of rate-able property if the total gross 
income of the applicant and/or his/her spouse, if any, does not to exceed the amount equal 
to twice the annual state pension as approved by the National Government for a financial 
year. In this regard the following stipulations are relevant: 

The rate-able property concerned must be occupied only by the applicant and his/her 
spouse, if any, and by dependants without income; 

The applicant must submit proof of his/her age and identity and, in the case of a physically 
or mentally handicapped person, proof of certification by a Medical Officer of Health, also 
proof of the annual income from a social pension; 

The applicant's account must be paid in full, or if not, an arrangement to pay the debt 
should be in place; and 

The property must be categorized as residential. 


The Municipality may award a 100% grant-in-aid on the assessment rates of rateable 
properties of certain classes such as registered welfare organizations, institutions or 
organizations performing charitable work, sports grounds used for purposes of amateur sport. 
The owner of such a property must apply to the Chief Financial Officer in the prescribed format 
for such a grant. 


The categories of rateable properties for purposes of levying rates and the proposed rates for the 
2020/21 financial year based on a 0,7% increase from 1 July 2020 is contained below: 

Table 4 Comparison of proposed rates to be levied for the 2020/21 financial year 


Category 

Current Tariff 
(1 July 2019) 

Proposed tariff 
(from 1 July 2020) 


C 

C 

Residential properties 

0,0084341 

0,0090245 

State owned properties 

0,0210853 

0,0225613 

Business & Commercial 

0,0210853 

0,0225613 

Agricultural 

0,0021087 

0,0022563 

Vacant land 

0,0210853 

0,0225613 

Municipal rateable - Residential 

0,0084341 

0,0090245 

Industrial 

0,0210853 

0,0225613 

Non-permitted use/lllegal usage 

0,0210853 

0,0225613 

Public benefit organisation properties 

0,0021087 

0,0022563 

Special consent 

0,0210853 

0,0225613 


Page 22 of 157 

















Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


KZN263 Abaqulusi - Supporting Table SA13a Service Tariffs by 
category 



Re 

f 

Provide 
description of 
tariff structure 
where appropriate 

2016/1 

7 

2017/1 

8 

2018/1 

9 

Curre 

nt 

2020/21 Medium 
Term Revenue & 
Expenditure 
Framework 


Description 

Year 

2019/2 

0 

Budge 
t Year 
2020/2 

1 

Budge 
t Year 
+1 

2021/2 

2 

Budge 
t Year 
+2 

2022/2 

3 

Property rates (rate in the Rand) 

1 









Residential properties 






0.0084 

0.0090 

0.0094 

0.0099 

Residential properties - vacant land 

Formal/informal settlements 






0.0211 

0.0225 

0.0236 

0.0248 

Small holdings 






0.0021 

0.0022 

0.0024 

0.0025 

Farm properties - used 






0.0021 

0.0022 

0.0024 

0.0025 

Farm properties - not used 






0.0021 

0.0022 

0.0024 

0.0025 

Industrial properties 






0.0211 

0.0225 

0.0236 

0.0248 

Business and commercial properties 

Communal land - residential 

Communal land - small holdings 






0.0211 

0.0225 

0.0236 

0.0248 

Communal land - farm property 
Communal land - business and 
commercial 










Communal land - other 

State-owned properties 

Municipal properties 










Public service infrastructure 

Privately owned towns serviced by the 
owner 






0.0211 

0.0225 

0.0236 

0.0248 

State trust land 

Restitution and redistribution 
properties 










Protected areas 










National monuments properties 










Exemptions, reductions and rebates 

(Rands) 










Residential properties 










R15 000 threshold rebate 



15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

General residential rebate 










Indigent rebate or exemption 
Pensioners/social grants rebate or 
exemption 



70 000 

70 000 

70 000 

70 000 

85 000 

85 000 

85 000 

Temporary relief rebate or exemption 
Bona fide farmers rebate or 
exemption 










Other rebates or exemptions 

2 










1.3.2 Sale of Water and Impact of Tariff Increases 

South Africa faces similar challenges with regard to water supply as it did with electricity, since 
demand growth outstrips supply. Consequently, National Treasury is encouraging all municipalities to 
carefully review the level and structure of their water tariffs to ensure: 


Page 23 of 157 




















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


• Water tariffs are fully cost-reflective - including the cost of maintenance and renewal of 
purification plants, water networks and the cost associated with reticulation expansion; 

• Water tariffs are structured to protect basic levels of service and ensure the provision of free 
water to the poorest of the poor (indigent); and 

• Water tariffs are designed to encourage efficient and sustainable consumption. 

In addition, National Treasury has urged all municipalities to ensure that water tariffs charged are able 
to cover for the cost of bulk purchases, ongoing operations as well as provision for future 
infrastructure. This has not been possible due to the severe drought in the Abaqulusi area. 

To mitigate the need for water tariff increases, municipalities are encouraged to put in place 
appropriate strategies to limit water losses to acceptable levels. Water losses have decreased from 
71% in 2016/17 to 48% in 2017/18 and increased to 60% in 2018/19. 

Zululand District Municipality as well as Abaqulusi municipality has undertaken a critical assessment 
of its capital infrastructure requirements. The assessment indicates that the current infrastructure is 
unlikely to sustain its long-term ability to supply water and the District Municipality will have no other 
choice but to provide funding for infrastructure upgrades. 

A tariff increase between 4 and 7% from 1 July 2020 for water is proposed. In addition, 6 kl water per 
30-day period will again be granted free of charge to all indigent community members. 


A summary of the proposed tariffs for households (residential) and non-residential are as follows; 
Table 5 Proposed Water Tariffs 



CATEGORY 

CURRENT TARIFFS 

PROPOSED TARIFFS 


2019/20 

2020/21 



Rand per kl 

Rand per kl 

RESIDENTIAL 



d) 

Oto 6 kl per 30-day period 

11.03 

11.80 

00 

6.01 to 30 kl per 30-day period 

11.03 

11.80 

(Hi) 

30.01 to 99 kl per 30-day period 

12.04 

12.88 

(iv) 

More than 99.01 per 30-day period 

13.98 

14.96 

BUSINESS 



d) 

Oto 6 kl per 30-day period 

11.03 

11.80 

00 

6.01 to 30 kl per 30-day period 

11.03 

11.80 

(Hi) 

30.01 to 99 kl per 30-day period 

12.04 

12.88 

(iv) 

More than 99.01 per 30-day period 

13.98 

14.96 


The following table shows the impact of the proposed increases in water tariffs on the water charges 
for a single dwelling-house: 

Table 6 Comparison between current water charges and increases (Domestic) 


Page 24 of 157 

















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Monthly 

Current amount 

Proposed amount 

Difference 

Percentage 

Consumption 

payable 

payable 

(Increase) 

change 

k€ 

R 

R 

R 


6 

66.18 

70.80 

4.62 

6.5% 

10 

110.30 

118.00 

7.70 

6.5% 

20 

220.60 

236.00 

15.40 

6.5% 

30 

330.90 

354.00 

23.10 

6.5% 

50 

602.00 

644.00 

42.00 

6.5% 

80 

963.20 

1030.40 

67.20 

6.5% 

100 

1398.00 

1496.00 

98.00 

6.5% 


The tariff structure for this financial year has changed to include another block tariff. The tariff 
structure is designed to charge higher levels of consumption a higher rate, steadily increasing to a rate 
of R15.00 per kilolitre for consumption in excess of 30k£ per 30-day period. 


Water tariffs 

Domestic 

Basic charge/fixed fee Domestic 
Basic charge/fixed fee Business 
Service point - vacant land (Rands/month) 
Water usage - flat rate tariff (c/kl) 

Water usage - life line tariff 
Water usage - Block 1 (c/kl) 

Water usage - Block 2 (c/kl) 

Water usage - Block 3 (c/kl) 

Water usage - Block 4 (c/kl) 

Other 














47.72 

51.06 

54.12 

57.37 





60.06 

64.26 

68.12 

72.21 





60.06 

64.26 

68.12 

72.21 





47.72 

51.06 

54.12 

57.37 

(describe structure) 








0-6 




11.03 

11.80 

12.51 

13.26 

6.1 - 30 




11.03 

11.80 

12.51 

13.26 

30.01-99 




12.04 

12.88 

13.66 

14.48 

99.1 < 




13.98 

14.96 

15.86 

16.81 


\ Sale of Electricity and Impact of Tariff Increases 

NERSA is responsible for price determination of the bulk costs for electricity. As there has not yet been 
any price determination by NERSA since the application from Eskom and the court case is still pending, 
municipalities should use the 8,1% increase as per the previous guidelines. 

The municipality will submit the request to NERSA for approval and the outcome will be tabled with 
the final document in May 2020. 

An analysis of the municipality's consumption patterns is currently being done to calculate more 
accurate tariffs and sill be submitted to NERSA for approval. The draft tariff increase is between 4 and 
13%. The Section is supposed to be ring fenced, but due to the theft of electricity due to tampering 
and bypassing of meters is not possible and again as in the past the shortfall of approximately R50 
million must be funded from other revenue sources within the municipal revenue stream. 

Registered indigents will again be granted 50 kWh per 30-day period free of charge. 


Page 25 of 157 





















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


The following table shows the impact of the proposed increases in electricity tariffs on the water 
charges for domestic customers: 

Table 7 Comparison between current electricity charges and increases (Domestic) ' 



APPROVED 

PROPOSED 

PROPOSED 

PROPOSED 

DESCRIPTION 

TARIFFS 

TARIFFS 

TARIFFS 

TARIFFS 


2019/2020 

2020/2021 

2021/2022 

2022/2023 



4-13% 

6% 

6% 

Domestic (Conventional) 

Basic charge 

R 113.25 

R 121.18 

R 128.45 

R 136.16 

Cost per unit kWh - 0-50kwh - step tariff 
3% 

R0.94 

R0.99 

R 1.04 

R 1.11 

Cost per unit kWh - 051-350kwh -step 
tariff 4% 

R1.33 

R1.38 

R1.47 

R1.55 

Cost per unit kWh - 351-600kwh - step 
tariff 5% 

R1.87 

R1.95 

R2.06 

R2.19 

Cost per unit kWh - >600kwh - step tariff 
9% 

R2.20 

R2.29 

R2.43 

R2.57 



APPROVED 

PROPOSED 

PROPOSED 

PROPOSED 

DESCRIPTION 

TARIFFS 

TARIFFS 

TARIFFS 

TARIFFS 


2019/2020 

2020/2021 

2021/2022 

2022/2023 



4-13% 

6% 

6% 

Domestic (Prepaid) 

Cost per unit kWh - 0-50kwh - step tariff 
4% 

R1.24 

R1.29 

R1.37 

R1.45 

Cost per unit kWh - 051-350kwh -step 
tariff 5% 

R 1.68 

R1.76 

R1.87 

R1.98 

Cost per unit kWh - 351-600kwh - step 
tariff 6% 

R2.27 

R2.40 

R2.55 

R2.70 

Cost per unit kWh - >600kwh - step tariff 
13% 

R2.82 

R3.19 

R3.38 

R3.58 


The step tariff advised by NERSA and implemented over the previous year's results that the higher the 
consumption, the higher the cost per kWh. The aim is to subsidise the lower consumption users 
(mostly the poor). 


Electricity tariffs 










Domestic 










Basic charge/fixed fee (Rands/month) 






113.25 

121.18 

128.45 

136.16 

Service point - vacant land (Rands/month) 

FBE 










Life-line tariff - meter 

Life-line tariff - prepaid 

Flat rate tariff - meter (c/kwh) 

Flat rate tariff - prepaid (c/kwh) 

Meter- IBT Block 1 (c/kwh) 


0-50 




0.9477 

0.986 

1.0447 

1.1074 

Meter-IBT Block2 (c/kwh) 


51 - 350 




1.3292 

1.382 

1.4653 

1.5532 

Meter - IBT Block 3 (c/kwh) 


351 - 600 




1.8708 

1.946 

2.0624 

2.1861 

Meter - IBT Block 4 (c/kwh) 


601 < 




2.2031 

2.291 

2.4287 

2.5744 


Page 26 of 157 




























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Meter - IBT Block 5 (c/kwh) 

Prepaid - IBT Block 1 (c/kwh) 

Prepaid - IBT Block 2 (c/kwh) 

Prepaid - IBT Block 3 (c/kwh) 

Prepaid - IBT Block 4 (c/kwh) 

Prepaid - IBT Block 5 (c/kwh) 


0-50 

51 - 350 

351 - 600 

601 < 




1.2420 

1.6784 

2.2673 

2.8216 

1.292 

1.762 

2.403 

3.188 

1.3692 

1.8681 

2.5475 

3.3797 

1.4513 

1.9801 

2.7004 

3.5825 


The inadequate electricity bulk capacity and the impact on service delivery and development remains 
a challenge forthe Municipality. Most of the suburbs and inner municipality reticulation network was 
designed or strengthened in the early 1980's with an expected 20-25-year life-expectancy. The 
upgrading of the Municipality's electricity network has therefore become a strategic priority, 
especially the substations and transmission lines. Electricity losses have decreased from 27,8% in 
2016/17 to 22% in 2017/18 and for 2018/19 decreased to 19%. 

The approved budget for the Energy Section can only be utilised for certain committed upgrade 
projects and to strengthen critical infrastructure (e.g. substations without back-up supply. It must be 
noted that ESKOM will receive an amount of R 15,7 million to perform electrification and this will then 
have to be maintained by the municipality. 

In addition, the Section must raise awareness and promote behaviour change through communication 
and education to ensure the 10% reduction in energy consumption is achieved. A renewable and 
cleaner energy plan has to be developed, monitored, evaluated and updated annually. To upgrade 
street lights to LED fittings and other energy efficiency projects is a costly exercise for which funding 
must be sourced. 

Owing to the high increases in Eskom's bulk tariffs, it is clearly not possible to fund these necessary 
upgrades through increases in the municipal electricity tariff - as the resultant tariff increases would 
be unaffordable for the consumers. 

| Sanitation and Impact of Tariff Increases 

A tariff increase of 7% for sanitation from 1 July 2020 is proposed. This Section is currently operating 
at a deficit and it is generally accepted that all service departments should at least break even. This is 
based on the input cost assumptions related to water. It should be noted that electricity costs 
contribute approximately 15% of waste water treatment input costs. The following factors also 
contribute to the proposed tariff increase: 

• Sanitation charges are calculated according to the percentage water discharged as indicated 
in the table below; 

• Free sanitation (100% of 6 kl water) will be applicable to registered indigents; and 

• The total revenue expected to be generated from rendering this service amounts to R30 
million for the 2020/21 financial year. 


Page 27 of 157 















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 8 Comparison between current sanitation charges and increases 



The following table shows the impact of the proposed increases in sanitation tariffs on the sanitation 
charges for a single dwelling-house: 

Waste Removal and Impact of Tariff Increases 

The Municipality will have to implement a solid waste strategy to ensure that this service can be 
rendered in a sustainable manner over the medium to long-term. The service of refuse collection is 
outsourced which is the main contributor of expenditure as well as the cost of remuneration. This 
Section is budgeted to have a deficit. It is recommended that a comprehensive investigation into the 
cost structure of solid waste function be undertaken, and that this include investigating alternative 
service delivery models. 

A 7% increase in the waste removal tariff is proposed from 1 July 2020. Higher increases will not be 
viable in 2020/21 owing to the significant increases implemented in previous financial years as well as 
the overall impact of higher than inflation increases of other services. Any increase higher can be 
counter-productive and will result in affordability challenges for individual rates payers raising the risk 
associated with bad debt. 

The following table compares current and proposed amounts payable from 1 July 2020: 

Table 9 Comparison between current waste removal fees and increases 


Page 28 of 157 















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 



WASTE 

REMOVAL 

2019/20 

WASTE REMOVAL 
2020/21 

Tariff per container/household per month or part of a 
month: 

Areas serviced by means of: (Tariff is multiplied by the 
number of service rounds per week and the number of 
containers/households.) 

Per month (R) 

Residential 

103.76 

111.02 

Businesses per container 

325.34 

348.11 

Businesses bulk container 

3806.29 

4072.73 


Overall impact of tariff increases on households 

The following table shows the overall expected impact of the tariff increases on a large and small 
household, as well as an indigent household receiving free basic services. 

Note that in all instances the overall impact of the tariff increases on household's bills has been kept 
to a 7%, increase, except for electricity which increases between 4 and 13% for all households 
including indigent households. 

In terms of Section 64 2(g) of the MFMA a Municipality must for the purposed of the sub-Section 
take reasonable steps to ensure 

(g) that the municipality charges interest on arrears, except where the council has granted 
exemptions in accordance with its budget related policies and within a prescribed framework; 


Page 29 of 157 












Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 10 KZN263 Table SA14 - Household Bills 


KZN263 Abaqulusi - Supporting Table SA14 Household bills 


Description 

Rand/cent 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term 

Revenue & Expenditure 

Framework 


Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 2020/21 

% incr. 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Monthly Account for Household - 

Ranqe' 

Rates and services charges: 

'Middle Income 

1 











Property rates 



542.11 

574.04 

603.37 

610.00 

610.00 

610.00 

7.0% 

652.70 

685.34 

719.60 

Electricity: Basic levy 



69.42 

73.59 

106.84 

113.25 

113.25 

113.25 

7.0% 

121.18 

127.24 

133.60 

Electricity: Consumption 



1 699.76 

1 801.75 

1 900.85 

1 995.90 

1 995.90 

1 995.90 

7.0% 

2135.61 

2 242.39 

2 354.51 

Water: Basic levy 



40.26 

42.72 

45.02 

47.72 

47.72 

47.72 

7.0% 

51.06 

53.61 

56.29 

Water: Consumption 



- 

300.80 

317.34 

336.38 

336.38 

336.38 

7.0% 

359.93 

377.92 

396.82 

Sanitation 



121.79 

129.28 

136.18 

144.35 

144.35 

144.35 

7.0% 

154.45 

162.18 

170.29 

Refuse removal 



87.54 

92.88 

97.89 

103.76 

103.76 

103.76 

7.0% 

111.02 

116.57 

122.40 

Other 



- 

- 

- 

- 

- 

- 

7.0% 

- 

- 

- 


sub-total 


2 560.88 

3 015.06 

3 207.49 

3 351.36 

3 351.36 

3 351.36 

7.0% 

3 585.96 

3 765.25 

3 953.52 

VAT on Services 



358.52 

422.18 

481.12 

502.70 

502.70 

502.70 

15.0% 

537.89 

564.79 

593.03 

Total large household bill: 



2 919.40 

3 437.24 

3 688.61 

3 854.06 

3 854.06 

3 854.06 

7.0% 

4 123.85 

4 330.04 

4 546.54 

% increase/-decrease 




17.7% 

7.3% 

4.5% 

— 

— 


7.0% 

5.0% 

5.0% 

Monthly Account for Household - 

'Affordable Ranae' 

2 











Rates and services charges: 













Property rates 



300.84 

318.89 

334.83 

400.00 

400.00 

4 000.00 

7.0% 

428.00 

449.40 

471.87 

Electricity: Basic levy 



69.42 

73.59 

106.84 

113.25 

113.25 

113.25 

7.0% 

121.18 

127.24 

133.60 

Electricity: Consumption 



727.84 

771.51 

813.94 

854.64 

854.64 

854.64 

7.0% 

914.46 

960.19 

1 008.20 

Water: Basic levy 



40.26 

42.72 

45.02 

47.72 

47.72 

47.72 

7.0% 

51.06 

53.61 

56.29 

Water: Consumption 




250.69 

263.22 

276.38 

276.38 

276.38 

7.0% 

295.73 

310.51 

326.04 

Sanitation 



121.79 

129.28 

136.18 

144.35 

144.35 

144.35 

7.0% 

154.45 

162.18 

170.29 

Refuse removal 



87.54 

92.88 

97.89 

103.76 

103.76 

103.76 

7.0% 

111.02 

116.57 

122.40 

Other 









7.0% 

- 

- 

- 

VAT on Services 

Total small household bill: 

sub-total 


1 347.69 

1 679.56 

1 797.92 

1 940.10 

1 940.10 

5 540.10 

7.0% 

2 075.91 

2179.70 

2 288.69 

188.68 

235.13 

269.69 

291.01 

291.01 

291.01 

15.0% 

311.39 

326.96 

343.30 

1 536.37 

1 914.69 

2 067.61 

2 231.11 

2 231.11 

5 831.11 

7.0% 

2 387.29 

2 506.66 

2 631.99 


Page 30 of 157 




























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


% increase/-decrease 



24.6% 

8.0% 

7.9% 

- 

161.4% 


(59.1%) 

5.0% 

5.0% 





-0.68 

-0.01 

-1.00 

- 





Monthly Account for Household - 'Indiaent' 

Household receivina free basic services 

3 











Rates and services charges: 












Property rates 


- 

- 

- 

- 


- 

7.0% 

- 

- 

- 

Electricity: Basic levy 


69.42 

73.59 

106.84 

113.25 

113.25 

113.25 

7.0% 

121.18 

127.24 

133.60 

Electricity: Consumption 


- 

- 

- 

- 

- 

- 

7.0% 

- 

- 

- 

Water: Basic levy 


40.26 

42.72 

45.02 

47.72 

47.72 

47.72 

7.0% 

51.06 

53.61 

56.29 

Water: Consumption 


- 

123.54 

129.72 

133.61 

133.61 

133.61 

7.0% 

142.96 

150.11 

157.62 

Sanitation 


121.79 

129.28 

136.18 

144.35 

144.35 

144.35 

7.0% 

154.45 

162.18 

170.29 

Refuse removal 


87.54 

92.88 

97.89 

103.76 

103.76 

103.76 

7.0% 

111.02 

116.57 

122.40 

Other 








7.0% 




sub-total 


319.01 

462.01 

515.65 

542.69 

542.69 

542.69 

7.0% 

580.68 

609.71 

640.20 

VAT on Services 


44.66 

64.67 

77.35 

81.40 

81.40 

81.40 

15.0% 

87.10 

91.46 

96.03 

Total small household bill: 


363.67 

526.68 

593.00 

624.09 

624.09 

624.09 

7.0% 

667.78 

701.17 

736.23 

% increase/-decrease 



44.8% 

12.6% 

5.2% 




7.0% 

5.0% 

5.0% 


Page 31 of 157 






















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Operating Expenditure Framework 


The Municipality's expenditure framework for the draft 2020/21 budget and MTREF is informed by 

the following: 

• The asset renewal strategy and the repairs and maintenance plan; 

• Balanced budget constraint (operating expenditure should not exceed operating revenue) 
unless there are existing uncommitted cash-backed reserves to fund any deficit; 

• Funding of the budget over the medium-term as informed by Section 18 and 19 of the MFMA; 

• The capital programme is aligned to the asset renewal strategy and backlog eradication plan; 

• Operational gains and efficiencies will be directed to funding the capital budget and other core 
services; 

• Strict adherences to the principle of no project plan no budget. If there is no business plan 
no funding allocation can be made; and 

• Creation of job opportunities by the municipality thus an increase in staff costs. 

The following table is a high-level summary of the Draft 2020/21 budget and MTREF (classified per 

main type of operating expenditure): 


Page 32 of 157 







Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 11 Summary of operating expenditure by type Table A4 by standard classification item 


KZN263 Abaqulusi - Table A4 Budgeted Financial Performance (revenue and expenditure) 


Description 

Ref 

2016/17 

2017/18 

2018/19 


Current Year 2019/20 


2020/21 Medium Term Revenue & 
Expenditure Framework 

R thousand 

1 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Expenditure Bv Tvne 

Employee related costs 

2 

143 064 

151 607 

130 942 

152 728 

155 379 


101 872 

162 971 

170 666 

179 073 

Remuneration of councillors 


16145 

15 005 

16 029 

18 300 

18 300 

- 

9 586 

19 490 

20 425 

21 406 

Debt impairment 

3 

- 

25 413 

44 771 

7 881 

7 881 

- 

- 

5612 

5 881 

6164 

Depreciation & asset impairment 

2 

59 952 

141 135 

72 648 

60 445 

60152 

- 

- 

40152 

42 914 

48 545 

Finance charges 


16 

17 463 

513 

- 

- 

- 

912 

- 

- 

- 

Bulk purchases 

2 

149609 

114 329 

165 871 

172 000 

180 000 

- 

148 347 

195 820 

205 219 

215 070 

Other materials 

8 

34 377 

13 095 

19 907 

13 621 

14 781 

- 

7 821 

26 993 

28 221 

29 509 

Contracted services 


60164 

52 768 

79 269 

68 519 

86 276 

- 

38 461 

69 579 

72 576 

76 047 

Transfers and subsidies 

4, 

5 

2160 

(14 667) 

6 526 

10 081 

12 076 

- 

8 461 

11 912 

12 484 

13 083 

Other expenditure 

40 754 

47 292 

41 748 

48 860 

41 068 

- 

22 385 

40 356 

42 270 

44 276 

Losses 


- 

125 

- 

- 

- 

- 

- 

- 

- 

- 

Total Expenditure 


506 239 

563 565 

578 224 

552 436 

575 914 

- 

337 846 

572 885 

600 657 

633 173 


Page 33 of 157 




















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 12 Summary of Revenue and Expenditure by source -Table A4 by standard classification item 


KZN263 Abaqulusi - Table A4 Budgeted Financial Performance (revenue and expenditure; 


Description 

Ref 

2016/17 

2017/18 

2018/19 


Current Year 2019/20 


2020/21 Medium Term Revenue & Expenditure 
Framework 

R thousand 

1 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Revenue Bv Source 

Property rates 

2 

16100 

70 448 

70 969 

78 789 

78 789 


63103 

84 637 

88 699 

92 957 

Service charges - electricity revenue 

2 

172 465 

159 402 

170 332 

144 356 

151 053 

- 

129 993 

188542 

197 592 

207 076 

Service charges - water revenue 

2 

3 236 

32 785 

32 936 

37 020 

39 020 

- 

24 378 

40 971 

42 879 

44 937 

Service charges - sanitation revenue 

2 

40 925 

18 671 

27 041 

28 551 

28 581 

- 

19 296 

30 010 

31 450 

32 960 

Service charges - refuse revenue 

2 

- 

14 904 

18 855 

19 920 

19 920 

- 

12 356 

20 916 

21 920 

22 972 

Rental of facilities and equipment 


- 

1 463 

1 636 

1 425 

1 425 

- 

812 

1 050 

734 

769 

Interest earned - external investments 


- 

5 206 

365 

1 000 

1 700 

- 

1 460 

1 785 

1 316 

1 379 

Interest earned - outstanding debtors 


- 

29 879 

15 288 

- 

- 

- 

7 838 

- 

- 

- 

Dividends received 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Fines, penalties and forfeits 


9 573 

23 262 

21 579 

22 473 

23 099 

- 

4158 

24 254 

25 396 

26615 

Licences and permits 


4 292 

4 625 

4 493 

4 903 

4 903 

- 

3134 

5148 

3109 

3 258 

Agency services 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Transfers and subsidies 


108 515 

133 378 

137 787 

179 813 

190 724 

- 

132 883 

184 096 

196 926 

207 308 

Other revenue 

2 

64 277 

1 295 

17 571 

1 206 

1 402 

- 

411 

1 472 

1 517 

1 589 

Gains 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Revenue (excluding capital transfers and contributions) 


419 383 

495 318 

518 852 

519 456 

540 617 


399 824 

582 881 

611 537 

641 821 

Expenditure Bv Tvoe 

Employee related costs 

2 

143 064 

151 607 

130 942 

152 728 

155379 


101 872 

162 971 

170 666 

179 073 

Remuneration of councillors 


16145 

15 005 

16 029 

18 300 

18 300 

- 

9 586 

19 490 

20 425 

21 406 

Debt impairment 

3 

- 

25413 

44 771 

7 881 

7 881 

- 

- 

5612 

5 881 

6164 

Depreciation & asset impairment 

2 

59 952 

141 135 

72 648 

60 445 

60152 

- 

- 

40152 

42 914 

48 545 

Finance charges 


16 

17 463 

513 

- 

- 

- 

912 

- 

- 

- 

Bulk purchases 

2 

149 609 

114 329 

165 871 

172 000 

180 000 

- 

148347 

195 820 

205 219 

215 070 

Other materials 

8 

34 377 

13 095 

19 907 

13 621 

14 781 

- 

7 821 

26 993 

28 221 

29 509 

Contracted services 


60164 

52 768 

79 269 

68 519 

86 276 

- 

38 461 

69 579 

72 576 

76 047 

Transfers and subsidies 


2160 

(14 667) 

6 526 

10 081 

12 076 

- 

8 461 

11 912 

12 484 

13 083 

Other expenditure 

4,5 

40 754 

47 292 

41 748 

48 860 

41 068 

- 

22 385 

40 356 

42 270 

44 276 


Page 34 of 157 
























Abagulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 


Losses 


- 

125 

- 

- 

- 

- 

- 

- 

- 

- 

Total Expenditure 


506 239 

563 565 

578 224 

552 436 

575 914 

- 

337 846 

572 885 

600 657 

633 173 

Surplus/(Deficit) 


(86 856) 

(68 248) 

(59 372) 

(32 980) 

(35 297) 


61 978 

9 996 

10 880 

8 648 

Transfers and subsidies - capital (monetary allocations) (National / 
Provincial and District) 


- 

317 

45 024 

35 278 

43 983 

- 

22 342 

35 375 

37 899 

39 978 

Transfers and subsidies - capital (monetary allocations) (National / 
Provincial Departmental Agencies, Households, Non-profit Institutions, 
Private Enterprises, Public Corporatons, Higher Educational Institutions) 

6 











Transfers and subsidies - capital (in-kind - all) 


_ 

39 304 

_ 

_ 

_ 

_ 

_ 

_ 

_ 

_ 



(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Surplus/(Deficit) after capital transfers & contributions 












Taxation 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) after taxation 


(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Attributable to minorities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) attributable to municipality 


(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Share of surplus/ (deficit) of associate 

7 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) for the year 


(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 


Page 35 of 157 























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


The budgeted allocation for employee related costs for the 2020/21 financial year totals R162,9 million, 
which equals 28,45% of the total operating expenditure. The multi-year Salary and Wage Collective 
Agreement from SALGBC for municipalities of CPI + 1,25% so the municipality has budgeted for 6,5% for 
the 2020/21 financial year and 5% in the outer two years. As part of the Municipality's cost reprioritization 
and cash management strategy vacancies have been significantly rationalized downwards. As part of the 
planning assumptions and interventions all vacancies were originally removed from the budget and a report 
was compiled by the Finance Department relating to the prioritization of critical vacancies within the 
Municipality. The outcome of this exercise was the inclusion of critical and strategically important 
vacancies. Excessive overtime has been observed by National Treasury during their analysis of municipal 
budgets and although it is considered acceptable as long as it related to essential services an excessively 
high allocation could be an indication of performance inefficiencies as it is an expensive form of 
remuneration easily abused. If National Treasury finds excessive overtime to be legitimate it will be an 
indication that the organisational structure is insufficiently funded and funds being rather appropriated 
against vacancies. The maximum percentage allowable for overtime is of total remuneration. 

The cost associated with the remuneration of councillors is determined by the Minister of Co-operative 
Governance and Traditional Affairs in accordance with the Remuneration of Public Office Bearers Act, 1998 
(Act 20 of 1998). The most recent proclamation in this regard has been taken into account in compiling the 
Municipality's budget. 

The provision of debt impairment was determined based on an annual collection rate of 90% and the Debt 
Write-off Policy of the Municipality. For the 2020/21 financial year this amount equates to R5,6 million and 
an amount of R5,8 for 2021/22 million which escalates to R6,l million by 2022/23. While this expenditure 
is considered to be a non-cash flow item, it informed the total cost associated with rendering the services 
of the municipality, as well as the municipality's realistically anticipated revenues. 

Provision for depreciation and asset impairment has been informed by the Municipality's Asset 
Management Policy. Depreciation is widely considered a proxy for the measurement of the rate asset 
consumption. Budget appropriations in this regard total R45,7 million for the 2020/21 financial and 
equates to 8% of the total operating expenditure. Note that the implementation of GRAP 17 accounting 
standard has meant bringing a range of assets previously not included in the assets register onto the 
register. 

Bulk purchases are directly informed by the purchase of electricity from ESKOM. The annual price increases 
have been factored into the budget appropriations and directly inform the revenue provisions. ESKOM 
increase has been budgeted for at 8,1%. 

Other materials comprise of amongst others the purchase of fuel, diesel, materials for maintenance, 
cleaning materials and chemicals. In line with the Municipality's repairs and maintenance plan this group 
of expenditure has been prioritised to ensure sustainability of the Municipality's infrastructure. For 
2020/21 the percentage of this against the group of expenditure is 4,72% (R26,9 million) and continues to 
grow for the two outer years of which budget allocation is in excess of R29,5 million by 2022/23. 

Contracted services have increased for the Municipality for the 2019/20 financial year. As part of the 
compilation of the 2020/21 MTREF this group of expenditure was critically evaluated and operational 
efficiencies were enforced. In the 2020/21 financial year, this group of expenditure totals R69 million and 
has escalated overall, clearly demonstrating the need to investigate these contracts before the 2020/21 
financial year to try and apply cost containment measures. For the two outer years growth has been limited 
to 5%. As part of the process of identifying further cost efficiencies, a business process re-engineering 
project will commence in the 2020/21 financial year to identify alternative practices and procedures, 
including building in-house capacity for certain activities that are currently being contracted out. The 


Page 36 of 157 


Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


outcome of this exercise will be factored into the next budget cycle and it is envisaged that additional cost 
savings will be implemented. The reason for the escalation is the additional refuse services for the small 
towns where refuse was in the past not being collected and the additional security costs as more security 
guards had to be employed due to theft and damage of infrastructure 

Other expenditure comprises of various line items such as insurances, telephone costs, bank charges, 
Subsistence and travelling, leasing of office equipment, vehicle leases and other costs relating to the daily 
operations of the municipality. This group of expenditure has also been identified as an area in which cost 
savings and efficiencies can be achieved. Growth has been limited to 5% for 2020/21 and curbed at 5% for 
the two outer years, indicating that significant cost savings have been already realised. 


1.4.1 Priority given to repairs and maintenance 

Aligned to the priority being given to preserving and maintaining the Municipality's current infrastructure, 
the 2020/21 budget and MTREF provide for extensive growth in the area of asset maintenance, as informed 
by MFMA Circular 98 as well as the outcome of the 2018/2019 audit the municipality should budget for 8% 
of its expenditure budget to be allocated to repairs and maintenance and the on-going health of the 
municipality's infrastructure must be supported by an asset management plan. A further 40% of the 
municipal budget must be allocated to Capital for the renewal of existing assets and provide a detailed 
explanation and assurance that the budgeted amount is adequate to secure the on-going health of the 
municipality's infrastructure supported by reference to its asset management plan. The municipality in the 
state of local government finances and financial management has been accused of persistent under 
spending on capital and that the municipality is too reliant on capital grants. In terms of the Municipal 
Budget and Reporting Regulations, operational repairs and maintenance is not considered a direct 
expenditure driver but an outcome of certain other expenditures, such as remuneration, purchases of 
materials and contracted services. Considering these cost drivers, the following table is a consolidation of 
all the expenditures associated with repairs and maintenance: 

Table 13 Operational Repairs and Maintenance Schedule SA1 


Repairs and Maintenance 

by Expenditure Item 8 








Employee related costs 

Other materials 

Contracted Services 

Other Expenditure 

Total Repairs and Maintenance Expenditure 9 

18 727 

18413 

19 482 

14 781 

26 993 

28 221 

29 509 

18 727 

18413 

19 482 

14 781 

26 993 

28 221 

29 509 


During the compilation of the 2020/21 MTREF operational repairs and maintenance was identified as a 
strategic imperative owing to the ageing of the Municipality's infrastructure and historic deferred 
maintenance. To this end, repairs and maintenance is allocated an amount of R 26,9 million which is more 
than the adjustment budget of 2019/20 by R12,2 million and will increase in the other two years to R28,2 
million and then R29,5 million by 2022/23. During the 2019/20 Adjustment Budget this allocation was 
increased from R13,6 to R14,7 million. Notwithstanding, as part of the 2020/21 MTREF this strategic 
imperative remains a priority as can be seen by the budget appropriations over the MTREF. The total 
allocation for 2020/21 equates to R 26,9 million in relation to the Adjustment Budget and continues to 
grow over the MTREF. In relation to the total operating expenditure, repairs and maintenance comprises 
of 5% for the respective financial years of the MTREF. 


Page 37 of 157 












Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


For the 2020/21 financial year, R26,9 million of total repairs and maintenance will be spent on 
infrastructure assets. Electricity infrastructure receives R 6,5 million, road infrastructure of R5 million, 
water R5 million, sanitation R2,5 million. 

| Free Basic Services: Basic Social Services Package 

The social package assists households that are poor or face other circumstances that limit their ability 
to pay for services. To receive these free services the households are required to register in terms of 
the Municipality's Indigent Policy on an annual basis. The applications are strictly reviewed annually 
and this year tighter controls were implemented to ensure this service is given to only the poorest of 
the poor. Detail relating to free services, cost of free basis services, revenue foregone owing to free 
basic services as well as basic service delivery measurement is contained in Table 27 KZN263 A10 (Basic 
Service Delivery Measurement). 

The cost of the social package of the registered indigent households is largely financed by national 
government through the local government equitable share received in terms of the annual Division of 
Revenue Act. 

The municipality's cost for the Free Basic Services is Rll,9 million. 


^Capital Expenditure 


The following table provides a breakdown of budgeted capital expenditure by vote: 


Vote Description 

2016/17 

2017/18 

2018/19 






R thousand 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Budget 

Year 

2020/21 

Budget 
Year +1 
2021/22 

Budget 
Year +2 
2022/23 

Capital expenditure - Vote 

Multi-vear expenditure to be appropriated 









Vote 1 

- 

- 

- 

- 



- 

- 

Vote 2: Finance & Administration 


- 

- 

- 



- 

- 

Vote 3: Community & Social Services 

- 

- 

- 

- 



- 

- 

Vote 4: Energy Sources 

- 

- 

- 

- 



- 

- 

Vote 5: Housing 

- 

- 

- 

- 



- 

- 

Vote 6: Internal Audit 

- 

- 

- 

- 



- 

- 

Vote 7: Other 

- 

- 

- 

- 



- 

- 

Vote 8: Planning and Development 


- 

- 

- 



- 

- 

Vote 9: Public Safety 

- 

- 

- 

- 



- 

- 

Vote 10: Road Transport 


- 

- 

- 



- 

- 

Vote 11: Sport and Recreation 


- 

- 

- 



- 

- 

Vote 12: Waste Management 


- 

- 

- 



- 

- 

Vote 13: Waste Water Management 


- 

- 

- 



- 

- 

Vote 14: Water Management 


- 

- 

- 



- 

- 

Capital multi-year expenditure sub-total 



- 

- 

- 

- 

- 

- 

Sinqle-vear expenditure to be appropriated 









Vote 1 - 

- 

13 

- 

- 



- 

- 

Vote 2: Finance & Administration 

- 

(25499) 

(25 387) 

- 


1 000 

- 

- 

Vote 3: Community & Social Services 

66 465 

(3 707) 

11 686 

12 429 

15 340 

11 486 

8 772 

6 200 

Vote 4: Energy Sources 

- 

(4 912) 

9 336 

- 


7 762 

10 880 

9 648 

Vote 5: Housing 

- 

- 

- 

- 



- 

- 


Page 38 of 157 

























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Vote 6: Internal Audit 

Vote 7: Other 

Vote 8: Planning and Development 

Vote 9: Public Safety 

Vote 10: Road Transport 

Vote 11: Sport and Recreation 

Vote 12: Waste Management 

Vote 13: Waste Water Management 

Vote 14: Water Management 

- 

25 550 
(29) 
(15) 

3 316 

224 

26 

30 

15019 

3 303 

1 

185 

22 850 

2 500 

23 826 

2 000 

22123 

1 000 

7 710 

21 418 

20 758 

12 020 

Capital single-year expenditure sub-total 

66 465 

(5 034) 

14172 

35 279 

41 666 

45 371 

48 779 

48 626 

Total Capital Expenditure - Vote 

66 465 

(5 034) 

14172 

35 279 

41 666 

45 371 

48 779 

48 626 

Capital Expenditure - Functional 









Governance and administration 

(928) 

(25 486) 

(25 387) 

- 

- 

1 000 

- 

- 

Executive and council 

- 

13 

- 

- 

- 

- 

- 

- 

Finance and administration 

(928) 

(25 499) 

(25 387) 

- 

- 

1 000 

- 

- 

Internal audit 

- 

- 

- 

- 

- 

- 

- 

- 

Community and public safety 

66 465 

(3 737) 

11 715 

12 429 

17 840 

13 486 

16 482 

26 958 

Community and social services 

66 465 

(3 707) 

11 686 

12 429 

15 340 

11 486 

8 772 

6 200 

Sport and recreation 

- 

- 

- 

- 

- 

- 

- 

- 

Public safety 

- 

(29) 

29 

- 

2 500 

2 000 

7 710 

20 758 

Housing 

- 

- 

- 

- 

- 

- 

- 

- 

Health 

- 

- 

- 

- 

- 

- 

- 

- 

Economic and environmental services 

- 

25 535 

15 020 

22 850 

23 826 

22123 

21 418 

12 020 

Planning and development 

- 

25 550 

- 

- 

- 

- 

- 

- 

Road transport 

- 

(15) 

15 020 

22 850 

23 826 

22123 

21 418 

12 020 

Environmental protection 

- 

- 

- 

- 

- 

- 

- 

- 

Trading services 

- 

(1 347) 

12 824 

- 

- 

8 762 

10 880 

9 648 

Energy sources 

- 

(4 912) 

9 336 

- 

- 

7 762 

10 880 

9 648 

Water management 

- 

26 

185 

- 

- 

1 000 

- 

- 

Waste water management 

- 

224 

1 

- 

- 

- 

- 

- 

Waste management 

- 

3 316 

3 303 

- 

- 

- 

- 

- 

Other 

- 

- 

- 

- 

- 

- 

- 

- 

Total Capital Expenditure - Functional 

65 537 

(5 034) 

14172 

35 279 

41 666 

45 371 

48 779 

48 626 

Funded bv: 









National Government 

- 

- 

(11 008) 

- 

(52 917) 

40 821 

44 001 

43 610 

Provincial Government 

- 

- 

- 

- 

- 

- 

- 

- 

District Municipality 

" 

" 


“ 

" 


" 

" 

Transfers and subsidies - capital (monetary 
allocations) (National / Provincial Departmental 
Agencies, Households, Non-profit Institutions, 
Private Enterprises, Public Corporatons, Higher 









Educational Institutions) 

- 

- 

- 

- 

- 

- 

- 

- 

Transfers recognised - capital 

- 

- 

(11 008) 

- 

(52 917) 

40 821 

44 001 

43 610 

Borrowing 

- 

- 

- 

- 

- 

- 

- 

- 

Internally generated funds 

- 

- 

100 

- 

- 

4 550 

4 778 

5 016 

Total Capital Funding 

- 

- 

(10 908) 

- 

(52 917) 

45 371 

48 779 

48 626 


Page 39 of 157 























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


For 2020/21 R4,5 million from internal funding has been appropriated for the development of 
infrastructure from internal funding and R 45,3 million from grant funding. In the outer years this 
amount also remains constant, but the figures will be relooked at before tabling the final document in 
May 2019 with R39,8 million and R42 million from grant funding respectively for each of the financial 
years. Roads, storm water, bus route and other rural projects receives the highest allocation in 
2020 / 21 . 

Total net assets represent 100 % or R45,3 million of the total capital budget. Some of the capital 
projects to be undertaken over the medium-term includes, amongst others: 

• Electricity for all (backlog eradiation) -from ESKOM and the Municipality; 

• Refurbishment and renewal electrical network; 

• New electricity infrastructure; 

• Public lighting; 

• Waste water treatment works; 

• Upgrading and renewal of sewers; 

• Bulk supply and backlog eradication of water; 

• Refurbishment and renewal of water network; 

• Backlog eradication of roads; 

• Backlog eradication of storm water drainage; 

• Rehabilitation of roads; and 

• Extension of main entry roads. 


Page 40 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Future operational cost of new infrastructure 

The future operational costs and revenues associated with the capital programme have been included in Table 61 A5. 
It needs to be noted that as part of the 2020/21 MTREF, this expenditure has been factored into the two outer years of 
the operational budget. 


Annual Budget Tables 


The following eighteen pages present the ten main budget tables as reguired in terms of Section 8 of the Municipal 
Budget and Reporting Regulations. These tables set out the municipality's 2020/21 budget and MTREF as approved by 
the Council. Each table is accompanied by explanatory notes on the facing page 

Explanatory notes to KZN263 Table A1 - Budget Summary 

1. Table A1 is a budget summary and provides a concise overview of the Municipality's budget from all 
of the major financial perspectives (operating, capital expenditure, financial position, cash flow, and 
MFMA funding compliance). 

2. The table provides an overview of the amounts approved by Council for operating performance, 
resources deployed to capital expenditure, financial position, cash and funding compliance, as well as 
the municipality's commitment to eliminating basic service delivery backlogs. 

3. Financial management reforms emphasise the importance of the municipal budget being funded. This 
requires the simultaneous assessment of the Financial Performance, Financial Position and Cash Flow 
Budgets, along with the Capital Budget. The Budget Summary provides the key information in this 
regard: 

a) The operating surplus/deficit (after Total Expenditure) is negative over the MTREF 

b) Capital expenditure is balanced by capital funding sources, of which 

I. Transfers recognised is reflected on the Financial Performance Budget; 

II. Internally generated funds are financed from a combination of the current operating surplus 
and accumulated cash-backed surpluses from previous years. The amount is incorporated in 
the Net cash from investing on the Cash Flow Budget. The fact that the municipality's cash 
flow remains positive and is improving indicates that the necessary cash resources are 
available to fund the Capital Budget. 

4. The Cash backing/surplus reconciliation shows that in previous financial years the municipality was not 
paying much attention to managing this aspect of its finances, and consequently many of its 
obligations are not cash-backed. This place the municipality in a very vulnerable financial position, as 
the recent slow-down in revenue collections highlighted. Consequently, Council has taken a deliberate 
decision to ensure adequate cash-backing for all material obligations in accordance with the recently 
adopted Funding and Reserves Policy. This cannot be achieved in one financial year. But over the 
MTREF there is progressive improvement in the level of cash-backing of obligations. It is anticipated 
that the goal of having all obligations cash-back can be achieved by 2020/21, even though the deficit 
shows higher the figures will be revisited before tabling the final document to ensure the deficit is 
reflected as being smaller or no deficit. 


Page 41 of 157 








Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


5. Even though the Council is placing great emphasis on securing the financial sustainability of the 
municipality, this is not being done at the expense of services to the poor. The Section of Free Services 
shows that the amount spent on Free Basic Services and the revenue cost of free services provided by 
the municipality continues to increase. In addition, the municipality continues to make progress in 
addressing service delivery backlogs. It is anticipated that by 2022/23 the water backlog will have 
been very nearly eliminated. 


Explanatory notes to KZN263 Table A2 - Budgeted Financial Performance (Revenue and Expenditure by 

Standard Classification) 

1. Table A2 is a view of the budgeted financial performance in relation to revenue and expenditure per 
standard classification. The modified GFS standard classification divides the municipal services into 15 
functional areas. Municipal revenue, operating expenditure and capital expenditure are then classified 
in terms if each of these functional areas which enables the National Treasury to compile 'whole of 
government' reports. 

2. Note the Total Revenue on this table includes capital revenues (Transfers recognised - Capital) and so 
does not balance to the operating revenue shown on Table A4. 

3. Note that as a general principle the revenues for the Trading Services should exceed their expenditures. 
The table highlights that this is not the case for Electricity, Water, Solid Waste and Waste water 
functions. As already noted above, the municipality will be undertaking a detailed study of this function 
to explore ways of improving efficiencies and provide a basis for re-evaluating the function's tariff 
structure. 

4. Other functions that show a deficit between revenue and expenditure are being financed from rates 
revenues and other revenue sources reflected under Governance & Administration. 


Page 42 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 14 KZN263 Table SA3 - Budgeted Financial Performance (Revenue and Expenditure by Municipal Vote) 


KZN263 Abaqulusi - Supporting Table SA3 Supportinging detail to 'Budgeted Financial Position' 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure Framework 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year +1 
2021/22 

Budget Year +2 
2022/23 

R thousand 












ASSETS 












Consumer debtors 












Consumer debtors 


154 844 

183 002 

118 642 

320 636 

421 365 

- 

111 582 

53 665 

56182 

58 878 

Less: Provision for debt impairment 


(13 704) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Consumer debtors 

2 

141 140 

183 002 

118642 

320 636 

421 365 

- 

Ill 582 

53 665 

56182 

58 878 

Debt impairment provision 












Balance at the beginning of the year 
Contributions to the provision 

Bad debts written off 


(13 704) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Balance at end of year 


(13 704) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Property, plant and eauipment (PPE) 












PPE at cost/valuation (excl. finance leases) 


3 196 472 

4 486 281 

2 244 088 

35 279 

2212131 

- 

2199100 

45 371 

48 779 

48 626 

Leases recognised as PPE 

3 

6 010 

6 010 

- 

- 

- 

- 

- 

- 

- 

- 

Less: Accumulated depreciation 


1 727 867 

922 649 

765 591 

67 990 

834 392 

- 

782 952 

43120 

46 024 

51 804 

Total Property, plant and equipment (PPE) 

2 

1 474 614 

3 569 642 

1 478 497 

(32 712) 

1 377 738 

- 

1 416148 

2 251 

2 755 

(3 179) 

LIABILITIES 

Current liabilities - Borrowina 












Short term loans (other than bank overdraft) 


- 

(0) 

- 

- 

- 

- 

- 

- 

- 

- 

Current portion of long-term liabilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Current liabilities - Borrowing 


- 

(0) 

- 

- 

- 

- 

- 

- 

- 

- 

Trade and other pavables 












Trade Payables 

5 

245 555 

205 988 

356 077 

(66 310) 

212 295 

- 

337 999 

88 254 

91 110 

97618 

Other creditors 


- 

- 

557 

- 

- 

- 

- 

- 

- 

- 

Unspent conditional transfers 


10 475 

- 

- 

- 

- 

- 

- 

- 

- 

- 

VAT 


4 502 

44 547 

7 749 

- 

39 285 

- 

65 024 

- 

- 

- 

Total Trade and other payables 

2 

260 532 

250 535 

364 383 

(66 310) 

251 580 

- 

403 023 

88 254 

91 110 

97 618 


Page 43 of 157 

































Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Non current liabilities - Borrowing 












Borrowing 

4 

- 

(197) 

(197) 

- 

(197) 

- 

(197) 

- 

- 

- 

Finance leases (including PPP asset element) 


- 

(14) 

(14) 

- 

(14) 

- 

(14) 

- 

- 

- 

Total Non current liabilities - Borrowing 


- 

(212) 

(212) 

- 

(212) 

- 

(212) 

- 

- 

- 

Provisions - non-current 












Retirement benefits 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 













Refuse landfill site rehabilitation 


- 

27142 

- 

- 

- 

- 

- 

- 

- 

- 

Other 


- 

- 

23 059 

- 

23 059 

- 

23 059 

- 

- 

- 

Total Provisions - non-current 


- 

27142 

23 059 

- 

23 059 

- 

23 059 

- 

- 

- 

CHANGES IN NET ASSETS 

Accumulated Surolus/fDeficit) 












Accumulated Surplus/fDeficit) - opening balance 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

GRAP adjustments 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Restated balance 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/fDeficit) 


(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Transfers to/from Reserves 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Depreciation offsets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other adjustments 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Accumulated Surplus/fDeficit) 

Reserves 

1 

(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Housing Development Fund 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Capital replacement 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Self-insurance 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other reserves 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Revaluation 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Reserves 

2 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL COMMUNITY WEALTH/EQUITY 

2 

(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 


Page 44 of 157 



























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Fund Description 

Revenue 

Amount 

Expenditure 

Amount 

Acquisitions 

Amount 

Balance 

Fund: Capital: Transfers and Subsidies: Monetary Allocations: National Government: Municipal Infrastructure Grant 

35 058 800.00 

- 

(35058 800.00) 

- 

Fund: Operational: Revenue: General Revenue: Equitable Share 

Fund: Capital: Transfers and Subsidies: Monetary Allocations: National Government: Integrated National Electrification 

160 312 000.00 

(126 678 827.00) 

(4 550 000.00) 

29 083 173.00 

Programme Grant 

- 


(5 762 000.00) 

(5 762 000.00) 

Fund: Operational: Revenue: General Revenue: Fines, Penalties and Forfeits 

11 653 974.00 

(5 612 093.00) 


6 041881.00 

Fund: Operational: Revenue: General Revenue: Service Charges: Electricity 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: National Government: Local Government Financial 

188 720 028.00 

(237 646 245.00) 


(48 926 217.00) 

Management Grant 

2 600 000.00 

(2 600 000.00) 


- 

Fund: Operational: Revenue: General Revenue: Sales of Goods and Rendering of Services 

4 079 040.00 

(5 859 600.00) 


(1 780 560.00) 

Fund: Operational: Revenue: General Revenue: Taxes: Property Rates: Levies 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: Provincial Government: KwazuluNatal: Capacity 

97 236 877.00 

(62 957 118.00) 


34 279 759.00 

Building and Other: Specify (Add grant description) 

- 

(1 500 000.00) 


(1 500 000.00) 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: National Government: Municipal Infrastructure Grant 

1 845 200.00 

(1 845 200.00) 


- 

Fund: Operational: Revenue: General Revenue: Service Charges: Water 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: National Government: Integrated National 

40 971 000.00 

(29 055 263.00) 


11 915 737.00 

Electrification Programme Grant 

11 448 000.00 

(5 686 000.00) 


5 762 000.00 

Fund: Operational: Revenue: General Revenue: Service Charges: Waste 

20 916 315.00 

(18 510 921.00) 


2 405 394.00 

#N/A 

- 

(45 753 707.00) 


(45 753 707.00) 

Fund: Operational: Revenue: General Revenue: Service Charges: Waste Water 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: Provincial Government: KwazuluNatal: Capacity 

30 009 945.00 

(18 518 387.00) 


11491558.00 

Building and Other: Specify (Add grant description) 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: Provincial Government: KwazuluNatal: Capacity 

4 284 000.00 

(6 738 520.00) 


(2 454 520.00) 

Building and Other: Specify (Add grant description) 

Fund: Operational: Transfers and Subsidies: Monetary Allocations: National Government: Expanded Public Works 

1 400 000.00 

(1400 000.00) 


“ 

Programme Integrated Grant 

Fund: Operational: Revenue: General Revenue: Interest, Dividend and Rent on Land: Interest: Current and Non-current 

1 831 000.00 

(1 831 000.00) 


“ 

Assets 

1 785 000.00 

- 


1 785 000.00 

Fund: Operational: Revenue: General Revenue: Licences and Permits 

2 362 500.00 

- 


2 362 500.00 

Fund: Operational: Revenue: General Revenue: Rental from Fixed Assets 

1 050 000.00 

- 


1 050 000.00 


617 563 679.00 


572 192 881.00 


45 370 800.00 


( 2 . 00 ) 


Fund: Capital: Transfer from Operational Revenue 


Page 45 of 157 












Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


617 563 679.00 

572 192 881.00 

45 370 800.00 

617 563 679.00 

572 192 881.00 

45 370 800.00 

” 

” 

“ 


Page 46 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Explanatory notes to KZN263 Table A3 - Budgeted Financial Performance (Revenue and Expenditure 

by municipal vote) 

1. Table A3 is a view of the budgeted financial performance in relation to the revenue and 
expenditure per municipal vote. This table facilitates the view of the budgeted operating 
performance in relation to the organisational structure of the Municipality. This means it is 
possible to present the operating surplus or deficit of a vote. The following table is an analysis of 
the surplus or deficit for the electricity and water trading services. 

2. The electricity trading is not showing signs of improvement over the 2020/21 MTREF from a deficit 
in the adjustment budget for 2019/20 of approximately R 47 million to a deficit of R 48,9 million 
in 2020/21 and increases in the outer two years. This is primarily as a result of the high increases 
in ESKOM bulk purchases and the tariff setting policy of the municipality to buffer the impact of 
these increases on individual consumers as well as additional requirements from the Section to 
upgrade the ageing infrastructure which is a non-cash item of depreciation. 

3. The water account remains relatively constant over the MTREF translating into a surplus of R 11 
million for 2020/2021. 

4. Note that there are no longer surpluses on these trading accounts that can be utilised as an 
internal funding source for the capital programme for asset renewal, refurbishment and the 
development of new asset infrastructure, and are not used to cross-subsidise other municipal 
services. 


Page 47 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Explanatory notes to Table A4 - Budgeted Financial Performance (revenue and expenditure) 

1. Total revenue is R 582,8 million in 2020/21 and escalates to R641,8 miilion by 2022/23. This 
represents a year-on-year increase of 5% for the 2020/21 financial year and 5% for the 2022/23 
financial year. 

2. Revenue to be generated from property rates is R 84,6 million in the 2020/21 financial year and 
increases to R92,9 million by 2022/23 which represents 15% of the operating revenue base of the 
Municipality and therefore remains a significant funding source for the municipality. It remains 
relatively constant over the medium-term and tariff increases have been factored in at 6% for each 
of the respective financial years of the MTREF. 

3. Services charges relating to electricity, water, sanitation and refuse removal constitutes the 
biggest component of the revenue basket of the Municipality totalling R280,4 million for the 
2020/21 financial year and increasing to R307,9 million by 2022/23. A notable trend is the growth 
in the total percentage revenue generated from services charges which remains constant at 6% in 
2021/22 and 2022/23. 

4. Transfers recognised - operating includes the local government eguitable share and other 
operating grants from national and provincial government. It needs to be noted that in real terms 
the grants receipts from national government are growing rapidly over the MTREF by 6% for the 
two outer years. The percentage share of this revenue source increases due to the new formula 
that was implemented for the Equitable Share allocation. 

5. Bulk purchases have significantly increased over the 2020/21 to 2022/23 period escalating from 
R195,8 million to R215 million. These increases can be attributed to the substantial increase in the 
cost of bulk electricity from ESKOM. 

6. Employee related costs and bulk purchases are the main cost drivers within the municipality and 
alternative operational gains and efficiencies will have to be identified to lessen the impact of wage 
and bulk tariff increases in future years. 


Page 48 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Explanatory notes to Table A5 - Budgeted Capital Expenditure by vote, standard classification and 
funding source 


1. Table A5 is a breakdown of the capital programme in relation to capital expenditure by municipal 
vote (multi-year and single-year appropriations); capital expenditure by standard classification; 
and the funding sources necessary to fund the capital budget, including information on capital 
transfers from national and provincial departments. 

2. The MFMA provides that a municipality may approve multi-year or single-year capital budget 
appropriations. In relation to multi-year appropriations, for 2020/21 R 45,3 million has been 
allocated for the capital budgets, which total 100%. This allocation increases to R48,7 million in 
2021/22 and then decreases to R48,6 million in 2022/23 

3. Single-year capital expenditure has been appropriated at R4,5 million for the 2020/21 financial 
year and also over the MTREF of 5% respectively for the two outer years. 

4. Unlike multi-year capital appropriations, single-year appropriations relate to expenditure that will 
be incurred in the specific budget year such as the procurement of vehicles and specialized tools 
and equipment. The budget appropriations for the two outer years are indicative allocations 
based on the departmental business plans as informed by the IDP and will be reviewed on an 
annual basis to assess the relevance of the expenditure in relation to the strategic objectives and 
service delivery imperatives of the Municipality. For the purpose of funding assessment of the 
MTREF, these appropriations have been included but no commitments will be incurred against 
single-year appropriations for the two outer-years. 

5. The capital programme is funded from capital and provincial grants and transfers, public 
contributions and donations and internally generated funds from current year surpluses. For 
2020/21, capital transfers totals R 36,9 million and increases to R42 million by 2022/23. These 
funding sources are further discussed in detail in 2.6 (Overview of Budget Funding) Explanatory 
notes to Table A6 - Budgeted Financial Position 


Description 

2016/17 

2017/18 

2018/19 

2020/21 Medium Term Revenue 
& Expenditure Framework 





R thousand 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

ASSETS 

Current assets 











Cash 

11 709 

(73 657) 

4 470 

(340 332) 

(350 662) 

59 201 

83 446 

86 965 

96 845 

Call investment deposits 

368 

(21 857) 

13 095 

- 

13 095 

8 630 

- 

- 

- 

Consumer debtors 

141 140 

183 002 

118 642 

320 636 

421 365 

111 582 

53 665 

56182 

58 878 

Other debtors 

99 422 

128 241 

181 957 

2142 

163189 

194 005 

(5 612) 

(5 881) 

(6 164) 

Current portion of long-term receivables 

- 

5 502 

5 502 

- 

5 502 

5 502 

- 

- 

- 

Inventory 

- 

(10 254) 

15 551 

(13 621) 

1 930 

10 838 

- 

- 

- 

Total current assets 

252 639 

210 976 

339 218 

(31 175) 

254 419 

389 759 

131 499 

137 266 

149 559 

Non current assets 











Long-term receivables 

- 

(47) 

- 

- 

- 


- 

- 

- 

- 

Investments 

- 

- 

- 

- 

- 


- 

- 

- 

- 

Investment property 

38 901 

424 383 

66 249 

- 

66 249 

66 244 

- 

- 

- 

Investment in Associate 

- 

- 

- 

- 

- 


- 

- 

- 

- 


Page 49 of 157 





















Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Property, plant and equipment 

1 474 614 

3 569 642 

1 478 497 

(32 712) 

1 377 738 

1416148 

2 251 

2 755 

(3 179) 

Biological 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Intangible 

1 222 

226 

666 

(125) 

541 

666 

(125) 

(131) 

(137) 

Other non-current assets 

- 

- 

- 

- 

- 

- 

- 

- 

- 

total non current assets 

1 514 738 

3 994 204 

1 545 412 

(32 836) 

1 444 528 

1 483 058 

2126 

2 624 

(3 316) 

tOTAL ASSETS 

1 767 377 

4 205 181 

1 884 630 

(64 011) 

1 698 948 

1 872 816 

133 624 

139 890 

146 244 

LIABILITIES 

Current liabilities 










Bank overdraft 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Borrowing 

- 

(0) 

- 

- 

- 

- 

- 

- 

- 

Consumer deposits 

15 009 

13 277 

17120 

- 

11 936 

11 946 

- 

- 

- 

Trade and other payables 

260 532 

250 535 

364 383 

(66 310) 

251 580 

403 023 

88 254 

91 110 

97 618 

Provisions 

31 008 

16 629 

19 546 

- 

19 546 

19 526 

- 

- 

- 

Total current liabilities 

306 549 

280 441 

401 049 

(66 310) 

283 062 

434 495 

88 254 

91 110 

97 618 

Non current liabilities 










Borrowing 

- 

(212) 

(212) 

- 

(212) 

(212) 

- 

- 

- 

Provisions 

- 

27142 

23 059 

- 

23 059 

23 059 

- 

- 

- 

Total non current liabilities 

- 

26 930 

22 847 

- 

22 847 

22 847 

- 

- 

- 

TOTAL LIABILITIES 

306 549 

307 371 

423 896 

(66 310) 

305 910 

457 343 

88 254 

91 110 

97 618 

NET ASSETS 

1 460 828 

3 897 809 

1 460 733 

2 299 

1 393 038 

1 415 474 

45 371 

48 779 

48 626 

COMMUNITY WEALTH/EQUITY 










Accumulated Surplus/(Deficit) 

(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

84 319 

45 371 

48 779 

48 626 

Reserves 

- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL COMMUNITY WEALTH/EQUITY 

(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

84 319 

45 371 

48 779 

48 626 


1. Table A6 is consistent with international standards of good financial management practice and 
improves understandability for councilors and management of the impact of the budget on the 
statement of financial position (balance sheet). 

2. This format of presenting the statement of financial position is aligned to GRAP1, which is 
generally aligned to the international version which presents Assets less Liabilities as "accounting" 
Community Wealth. The order of items within each group illustrates items in order of liquidity; 
i.e. assets readily converted to cash, or liabilities immediately required to be met from cash, 
appear first. 

3. Table 66 is supported by an extensive table of notes (SA3 which can be found on page 41) 
providing a detailed analysis of the major components of a number of items, including: 

• Call investments deposits; 

• Consumer debtors; 

• Property, plant and equipment; 

• Trade and other payables; 

• Provisions non-current; 

• Changes in net assets; and 

• Reserves 


Page 50 of 157 


























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


4. The municipal equivalent of equity is Community Wealth/Equity. The justification is that 
ownership and the net assets of the municipality belong to the community. 

5. Any movement on the Budgeted Financial Performance or the Capital Budget will inevitably 
impact on the Budgeted Financial Position. As an example, the collection rate assumption will 
impact on the cash position of the municipality and subsequently inform the level of cash and cash 
equivalents at year end. Similarly, the collection rate assumption should inform the budget 
appropriation for debt impairment which in turn would impact on the provision for bad debt. 
These budget and planning assumptions form a critical link in determining the applicability and 
relevance of the budget as well as the determination of ratios and financial indicators. In addition, 
the funding compliance assessment is informed directly by forecasting the statement of financial 
position. 


Page 51 of 157 


Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 15 KZN263 Table A9 - Asset Management 


KZN263 Abaqulusi - Table A9 Asset anagement 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & 
Expenditure Framework 

R thousand 


Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

CAPITAL EXPENDITURE 

Total New Assets 

1 



7141 

18 569 

18 569 


31 949 

26102 

28 728 

Roads Infrastructure 


- 

- 

- 

13 569 

13 569 

- 

15 463 

9 620 

770 

Storm water Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electrical Infrastructure 


- 

- 

- 

- 

- 

- 

1 000 

- 

1 000 

Water Supply Infrastructure 


- 

- 

- 

- 

- 

- 

1 000 

- 

- 

Sanitation Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Solid Waste Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Rail Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Coastal Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Information and Communication Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Infrastructure 


- 

- 

- 

13 569 

13 569 

- 

17463 

9 620 

1770 

Community Facilities 


- 

- 

2 

5 000 

5 000 

- 

13 486 

16 482 

26 958 

Sport and Recreation Facilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Community Assets 


- 

- 

2 

5 000 

5 000 

- 

13 486 

16 482 

26 958 

Heritage Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Non-revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Investment properties 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Operational Buildings 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Housing 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Biological or Cultivated Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Servitudes 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Licences and Rights 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Intangible Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Computer Equipment 


- 

- 

26 

- 

- 

- 

1 000 

- 

- 

Furniture and Office Equipment 


- 

- 

1 512 

- 

- 

- 

- 

- 

- 

Machinery and Equipment 


- 

- 

5 601 

- 

- 

- 

- 

- 

- 

Transport Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Land 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Zoo's, Marine and Non-biological Animals 


- 

- 

- 

- 

- 

- 

- 

- 

- 













Page 52 of 157 


























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Total Renewal of Existina Assets 

2 

- 

- 

821 

7 429 

7 429 

- 

- 

- 

- 

Roads Infrastructure 


- 

- 

821 

- 

- 

- 

- 

- 

- 

Storm water Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electrical Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Water Supply Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Solid Waste Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Rail Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Coastal Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Information and Communication Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Infrastructure 


- 

- 

821 

- 

- 

- 

- 

- 

- 

Community Facilities 


- 

- 

- 

7 429 

7 429 

- 

- 

- 

- 

Sport and Recreation Facilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Community Assets 


- 

- 

- 

7429 

7429 

- 

- 

- 

- 

Heritage Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Non-revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Investment properties 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Operational Buildings 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Housing 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Biological or Cultivated Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Servitudes 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Licences and Rights 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Intangible Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Computer Equipment 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Furniture and Office Equipment 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Machinery and Equipment 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Transport Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Land 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Zoo's, Marine and Non-biological Animals 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total UDoradina of Existina Assets 

6 

_ 

_ 

601 

9 281 

9 281 

_ 

50 543 

62 449 

19 898 

Roads Infrastructure 


- 

- 

- 

9 281 

9 281 

- 

44 781 

51 569 

11 250 

Storm water Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electrical Infrastructure 


- 

- 

- 

- 

- 

- 

5 762 

10 880 

8 648 

Water Supply Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Solid Waste Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Rail Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Coastal Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Information and Communication Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 53 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Infrastructure 


- 

- 

- 

9281 

9 281 

- 

50 543 

62 449 

19 898 

Community Facilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sport and Recreation Facilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Community Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Heritage Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Non-revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Investment properties 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Operational Buildings 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Housing 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Biological or Cultivated Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Servitudes 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Licences and Rights 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Intangible Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Computer Equipment 


- 

- 

26 

- 

- 

- 

- 

- 

- 

Furniture and Office Equipment 


- 

- 

2 

- 

- 

- 

- 

- 

- 

Machinery and Equipment 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Transport Assets 


- 

- 

574 

- 

- 

- 

- 

- 

- 

Land 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Zoo's, Marine and Non-biological Animals 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Capital Expenditure 

4 

_ 

_ 

8 563 

35 279 

35 279 

_ 

82 492 

88 551 

48 626 

Roads Infrastructure 


- 

- 

821 

22 850 

22 850 

- 

60 244 

61 189 

12 020 

Storm water Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electrical Infrastructure 


- 

- 

- 

- 

- 

- 

6 762 

10 880 

9 648 

Water Supply Infrastructure 


- 

- 

- 

- 

- 

- 

1 000 

- 

- 

Sanitation Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Solid Waste Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Rail Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Coastal Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Information and Communication Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Infrastructure 


- 

- 

821 

22 850 

22 850 

- 

68 006 

72 069 

21668 

Community Facilities 


- 

- 

2 

12 429 

12 429 

- 

13 486 

16 482 

26 958 

Sport and Recreation Facilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Community Assets 


- 

- 

2 

12 429 

12 429 

- 

13 486 

16 482 

26 958 

Heritage Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Non-revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Investment properties 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Operational Buildings 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Housing 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 54 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Other Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Biological or Cultivated Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Servitudes 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Licences and Rights 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Intangible Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Computer Equipment 


- 

- 

52 

- 

- 

- 

1 000 

- 

- 

Furniture and Office Equipment 


- 

- 

1 514 

- 

- 

- 

- 

- 

- 

Machinery and Equipment 


- 

- 

5 601 

- 

- 

- 

- 

- 

- 

Transport Assets 


- 

- 

574 

- 

- 

- 

- 

- 

- 

Land 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Zoo's, Marine and Non-biological Animals 


- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL CAPITAL EXPENDITURE - Asset class 


- 

- 

8 563 

35 279 

35 279 

- 

82 492 

88 551 

48 626 

ASSET REGISTER SUMMARY - PPE (WDV) 

5 










Roads Infrastructure 

Storm water Infrastructure 

Electrical Infrastructure 

Water Supply Infrastructure 

Sanitation Infrastructure 

Solid Waste Infrastructure 

Rail Infrastructure 

Coastal Infrastructure 

Information and Communication Infrastructure 











Infrastructure 


— 

— 

— 

— 

— 

— 

— 

— 

— 

Community Assets 

Heritage Assets 

Investment properties 






















Other Assets 

Biological or Cultivated Assets 






















Intangible Assets 

Computer Equipment 

Furniture and Office Equipment 

Machinery and Equipment 

Transport Assets 

Land 

Zoo's, Marine and Non-biological Animals 











TOTAL ASSET REGISTER SUMMARY - PPE (WDV) 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 













Page 55 of 157 






















Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


EXPENDITURE OTHER ITEMS 


60 656 

71 832 

82 379 

69 566 

81 597 

- 

60 020 

63 757 

68 291 

Depreciation 

7 

60 627 

71 832 

72 648 

57 591 

57 541 

- 

37 541 

40177 

45 677 

Repairs and Maintenance bv Asset Class 

3 

28 

- 

9 730 

11 975 

24 056 

- 

22 479 

23 580 

22 614 

Roads Infrastructure 


- 

- 

12 

550 

1 375 

- 

550 

576 

604 

Storm water Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electrical Infrastructure 


- 

- 

2 985 

2 260 

5 650 

- 

10190 

10 679 

11 192 

Water Supply Infrastructure 


- 

- 

3 533 

4 200 

10 500 

- 

5 000 

5 240 

5 492 

Sanitation Infrastructure 


- 

- 

828 

1 250 

3125 

- 

2 500 

2 620 

2 746 

Solid Waste Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Rail Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Coastal Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Information and Communication Infrastructure 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Infrastructure 


- 

- 

7358 

8260 

20 650 

- 

18240 

19 116 

20 033 

Community Facilities 


- 

- 

63 

565 

398 

- 

605 

641 

- 

Sport and Recreation Facilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Community Assets 


- 

- 

63 

565 

398 

- 

605 

641 

- 

Heritage Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Revenue Generating 


- 

- 

602 

- 

- 

- 

- 

- 

- 

Non-revenue Generating 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Investment properties 


- 

- 

602 

- 

- 

- 

- 

- 

- 

Operational Buildings 


28 

- 

327 

1 700 

(212) 

- 

2 284 

2 409 

1 098 

Housing 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other Assets 


28 

- 

327 

1 700 

(212) 

- 

2284 

2 409 

1098 

Biological or Cultivated Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Servitudes 


- 

- 

- 

~ 

- 

- 

- 

~ 

- 

Licences and Rights 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Intangible Assets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Computer Equipment 


- 

- 

131 

- 

- 

- 

- 

- 

- 

Furniture and Office Equipment 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Machinery and Equipment 


- 

- 

8 

350 

469 

- 

250 

262 

275 

Transport Assets 


- 

- 

1 241 

1 100 

2 750 

- 

1 100 

1 153 

1 208 

Land 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Zoo's, Marine and Non-biological Animals 


- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL EXPENDITURE OTHER ITEMS 


60 656 

71 832 

82 379 

69 566 

81 597 

- 

60 020 

63 757 

68 291 

Renewal and upgrading of Existing Assets as % of total 
capex 


0.0% 

0.0% 

16.6% 

47.4% 

47.4% 

0.0% 

61.3% 

70.5% 

40.9% 

Renewal and upgrading of Existing Assets as % of deprecn 


0.0% 

0.0% 

2.0% 

29.0% 

29.0% 

0.0% 

134.6% 

155.4% 

43.6% 

R&M as a % of PPE 


0.0% 

0.0% 

0.7% 

-36.6% 

1.7% 

0.0% 

998.8% 

855.9% 

-711.5% 

Renewal and upgrading and R&M as a % of PPE 


0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 


Page 56 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Explanatory notes to Table A9 - Asset Management 

1. Table A9 provides an overview of municipal capital allocations to building new assets and the 
renewal of existing assets, as well as spending on repairs and maintenance by asset class. 

2. National Treasury has recommended that municipalities should allocate at least 40 % of their 
capital budget to the renewal of existing assets, and allocations to repairs and maintenance should 
be 8% of PPE. The Municipality is not able to meet both these recommendations. 

3. The following graph provides an analysis between depreciation and operational repairs and 
maintenance over the MTREF. It highlights the Municipality's strategy to address the maintenance 
backlog. 


Page 57 of 157 


Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 16 KZN263 Table A10 - Basic Service Delivery Measurement 


KZN263 Abaqulusi - Table A10 Basic service delivery measurement 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & 
Expenditure Framework 

Outcome 

Outcome 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Household service taraets 

1 










Water: 











Piped water inside dwelling 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Piped water inside yard (but not in dwelling) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using public tap (at least min. service level) 

2 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other water supply (at least min. service level) 

4 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using public tap (< min. service level) 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other water supply (< min. service level) 

4 

- 

- 

- 

- 

- 

- 

- 

- 

- 

No water supply 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation/seweraqe: 











Flush toilet (connected to sewerage) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Flush toilet (with septic tank) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Chemical toilet 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Pit toilet (ventilated) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other toilet provisions (> min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Bucket toilet 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other toilet provisions (< min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

No toilet provisions 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Enerqy: 











Electricity (at least min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity - prepaid (min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity (< min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity - prepaid (< min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other energy sources 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 58 of 157 
































Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse: 











Removed at least once a week 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Removed less frequently than once a week 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using communal refuse dump 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using own refuse dump 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other rubbish disposal 


- 

- 

- 

- 

- 

- 

- 

- 

- 

No rubbish disposal 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Households receivina Free Basic Service 

7 










Water (6 kilolitres per household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (free minimum level service) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (50kwh per household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (removed at least once a week) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Cost of Free Basic Services provided - Formal Settlements (R'000) 

8 










Water (6 kilolitres per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (free sanitation service to indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (50kwh per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (removed once a week for indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Cost of Free Basic Services provided - Informal Formal Settlements (R'000) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total cost of FBS provided 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Hiahest level of free service provided per household 











Property rates (R value threshold) 

Water (kilolitres per household per month) 

Sanitation (kilolitres per household per month) 

Sanitation (Rand per household per month) 

Electricity (kwh per household per month) 

Refuse (average litres per week) 











Revenue cost of subsidised services provided (R'000) 

9 










Property rates (tariff adjustment) (impermissible values per section 17 of MPRA) 











Property rates exemptions, reductions and rebates and impermissible values in excess of 
section 17 of MPRA) 











Water (in excess of 6 kilolitres per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (in excess of free sanitation service to indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (in excess of 50 kwh per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (in excess of one removal a week for indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 59 of 157 




























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Municipal Housing - rental rebates 

Housing - top structure subsidies 

Other 

6 










Total revenue cost of subsidised services provided 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 60 of 157 

















Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Explanatory notes to Table A10 - Basic Service Delivery Measurement 

1. Table A10 provides an overview of service delivery levels, including backlogs (below minimum 
service level), for each of the main services. 

2. The Municipality continues to make good progress with the eradication of backlogs: 

a. Water services - backlog will remain the same in 2020/21 as in 2019/20. These households are 
largely found in 'rural areas' and will need to be moved to formal areas so that they can receive 
services. 

b. Sanitation services - backlog will remain the same over the MTREF 

c. Electricity services - backlogs will be reduced in ESKOM supplied areas 

d. Refuse services - backlog will be reduced in 2020/21, and in the outer two years of the MTREF. 
However, it should be noted that this function is being investigated with a view to realising 
greater efficiencies, which is likely to translate into a more rapid process to address backlogs. 

3. The budget provides for all households applying as indigent in 2020/21 to be registered and on 
approval from EXCO be entitled to receive Free Basic Services. The number is set to increase given 
the rapid rate of in-migration to the Municipality, especially by poor people seeking economic 
opportunities. 

4. It is anticipated that these Free Basic Services will cost the municipality Rll,9 million in 2020/21, 
increasing to R13 million in 2022/23. This is covered by the municipality's eguitable share 
allocation from national government. 

5. In addition to the Free Basic Services, the Municipality also 'gives' households Rll,9 million in free 
services in 2020/21. This "tax expenditure" needs to be seen within the context of the 
municipality's overall revenue management strategy - the more the municipality gives away, the 
less there is available to fund other services. Currently, the "free services" represent 2,08% of total 
operating revenue. 


Page 61 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Part 2 - Supporting Documentation 


Overview of the Annual Budget Process 


Section 53 of the MFMA requires the Mayor of the municipality to provide general political guidance 
in the budget process and the setting of priorities that must guide the preparation of the budget. In 
addition, Chapter 2 of the Municipal Budget and Reporting Regulations states that the Mayor of the 
municipality must establish a Budget Steering Committee to provide technical assistance to the Mayor 
in discharging the responsibilities set out in Section 53 of the Act. 

The Budget Steering Committee consists of EXCO and MAN COM of the municipality meeting under the 
chairpersonship of the Finance Portfolio. 

The primary aim of the Budget Steering Committee is to ensure: 

• that the process followed to compile the budget complies with legislation and good budget 
practices; 

• that there is proper alignment between the policy and service delivery priorities set out in the 
Municipality's IDP and the budget, taking into account the need to protect the financial 
sustainability of municipality; 

• that the municipality's revenue and tariff setting strategies ensure that the cash resources 
needed to deliver services are available; and 

• that the various spending priorities of the different municipal departments are properly 
evaluated and prioritised in the allocation of resources. 


The above process was followed during the preparation of the budget. 

Budget Process Overview 

In terms of Section 21 of the MFMA the Mayor is required to table in Council ten months before the 
start of the new financial year (i.e. in August 2019) a time schedule that sets out the process to revise 
the IDP and prepare the budget. 

The Mayor tabled in Council the required the IDP and budget time schedule on 29 August 2019. Key 
dates applicable to the process were: 

• August 2019: 

• Table IDP Process Plan to EXCO and Council for approval 

• Submit Annual Performance Report to Treasury 


Page 62 of 157 








Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


March 2020 

• Strategic Planning Session 

• 26 March 2020 Draft Budget 

• Submit Draft budget, tariffs, SDBIP's to EXCOfor recommendation to Council Submit Draft I DP 
to EXCO for recommendation to Council 

• 1 April -17 April 2020 - Public consultation; 

• 28 April - 5 May 2020 - Balancing of budget 

• 30 April 2020 - Closing date for written comments; 

• 28 May 2020 - Tabling of the 2020/21 MTREF before Council for consideration and approval. 

j 7 ] IDP and Service Delivery and Budget Implementation Plan 


On the 1 st of July 2017 the Abaqulusi Municipality implemented a new five-year IDP for the period July 
2017 to June 2022 to inform and guide the current elected public representatives in their term of office. 
This document which is for the 3 rd year of the five-year period outlines the Municipality's intent in terms 
of the agreed six strategic focus areas that are required to overcome Abaqulusi challenges, achieve its 
vision, and give effect to its other strategic considerations 

It started in October 2019 after the tabling of the IDP Process Plan and the Budget Time Schedule for 
the 2020/21 MTREF in August. 

The Municipality's IDP is its principal strategic planning instrument, which directly guides and informs 
its planning, budget, management and development actions. This framework is rolled out into 
objectives, key performance indicators and targets for implementation which directly inform the 
Service Delivery and Budget Implementation Plan. 


Page 63 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Registration of community needs; 

• Compilation of departmental business plans including key performance indicators and targets; 

• Financial planning and budgeting process; 

• Public participation process; 

• Compilation oftheSDBIP, and 

• The review of the performance management and monitoring processes. 

The IDP has been taken into a business and financial planning process leading up to the 2020/21 
MTREF, based on the approved 2019/20 MTREF, Mid-year Review and adjustments budget. The 
business planning process has subsequently been refined in the light of current economic 
circumstances and the resulting revenue projections. 

With the compilation of the 2020/21 MTREF, each department/function had to review the business 
planning process, including the setting of priorities and targets after reviewing the mid-year and third 
quarter performance against the 2019/20 Departmental Service Delivery and Budget Implementation 
Plan. Business planning links back to priority needs and master planning, and essentially informed the 
detail operating budget appropriations and three-year capital programme. 

| Financial Modelling and Key Planning Drivers 

Full compliance was done by the municipality during the compilation of the 2020/21 MTREF, extensive 
financial modelling was undertaken to ensure affordability and long-term financial sustainability. The 
following key factors and planning strategies have informed the compilation of the 2020/21 MTREF: 

• Municipality growth 

• Policy priorities and strategic objectives 

• Asset maintenance 

• Economic climate and trends (i.e. inflation, ESKOM increases, household debt, migration 
patterns) 

• Performance trends 

• The approved 2019/20 adjustments budget and performance against the SDBIP 

• Cash Flow Management Strategy 

• Debtor payment levels 

• Loan and investment possibilities 

• The need for tariff increases versus the ability of the community to pay for services; 

• Improved and sustainable service delivery 


In addition to the above, the strategic guidance given in National Treasury's MFMA Circulars 93 has 
been taken into consideration in the planning and prioritisation process. 


Page 64 of 157 






Abaqulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 

H Community Consultation 

The draft 2020/21 MTREF will be tabled before Council on the 26 th of March 2020 for community 
consultation and will be published on the municipality's website, and hard copies made available at 
customer care offices, municipal notice boards and various libraries. The final will be tabled before 
Council on the 28 th of May 2020. 

All documents in the appropriate format (electronic and printed) will be provided to National Treasury, 
and other national and provincial departments in accordance with Section 23 of the MFMA, to provide 
an opportunity for them to make inputs. 

Ward Committees will be utilised to facilitate the community consultation process and include public 
briefing sessions. The applicable date and venue will be published in all the local newspapers and an 
average attendance of 3,000 members of the community will be catered for. Other stakeholders 
involved in the consultation include churches, non-governmental institutions, community-based 
organisations and taxi associations. 

Submissions received during the community consultation process and additional information regarding 
revenue and expenditure and individual capital projects will be addressed, and where relevant 
considered as part of the finalisation of the 2020/21 MTREF. Feedback and responses to the 
submissions received will be available on reguest. The following are some of the issues and concerns 
raised as well as comments received during last year's consultation process: 

• Capital expenditure is not allocated to the areas in the same ratio as the income derived from 
those areas. This is a normal practice in a collective taxation environment. The Municipality is 
responsible for managing the eguitable use of resources to ensure that constitutional 
imperative to progressively improve basic services in undeveloped areas is realized in a 
sustainable manner over a reasonable period of time; 

• Several complaints were received regarding poor service delivery, especially waste removal 
backlogs and the state of road infrastructure; 

• Poor performance of contractors relating to infrastructure development and maintenance 
especially in the areas of road construction and maintenance were raised; 

• Issues were raised regarding the payment of bonuses to senior managers; 

• Remuneration packages of council officials were criticized as being very high, relative their 
private sector counterparts within the Municipality; 

• The affordability of tariff increases, especially electricity, was raised on numerous occasions. 
This concern was also raised by organized business as an obstacle to economic growth; 

• Pensioners cannot afford the tariff increases due to low annual pension increases; and 

• During the community consultation process large Sections of the community made it clear that 
they are not in favour of any further tariff increases to fund additional budget requests. They 
indicated that the municipality must do more to ensure efficiencies and value for money. 


The changes affecting the final 2020/21 MTREF will be compared to the draft 2020/21 MTREF that will 
be tabled for community consultation will be included. 


Page 65 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Overview of alignment of annual budget with I DP 


The Constitution mandates local government with the responsibility to exercise local developmental 
and cooperative governance. The eradication of imbalances in South African society can only be 
realized through a credible integrated developmental planning process. 

Municipalities in South Africa need to utilise integrated development planning as a method to plan 
future development in their areas and so find the best solutions to achieve sound long-term 
development goals. A municipal IDP provides a five-year strategic programme of action aimed at 
setting short, medium and long term strategic and budget priorities to create a development platform, 
which correlates with the term of office of the political incumbents. The plan aligns the resources and 
the capacity of a municipality to its overall development aims and guides the municipal budget. An 
IDP is therefore a key instrument which municipalities use to provide vision, leadership and direction 
to all those that have a role to play in the development of a municipal area. The IDP enables 
municipalities to make the best use of scarce resources and speed up service delivery. 

Integrated developmental planning in the South African context is amongst others, an approach to 
planning aimed at involving the municipality and the community to jointly find the best solutions 
towards sustainable development. Furthermore, integrated development planning provides a 
strategic environment for managing and guiding all planning, development and decision making in the 
municipality. 

It is important that the IDP developed by municipalities correlate with National and Provincial intent. 
It must aim to co-ordinate the work of local and other spheres of government in a coherent plan to 
improve the guality of life for all the people living in that area. Applied to the Municipality, issues of 
national and provincial importance should be reflected in the IDP of the municipality. A dear 
understanding of such intent is therefore imperative to ensure that the Municipality strategically 
complies with the key national and provincial priorities. 

The aim of this cycle is to develop and coordinate a coherent plan to improve the guality of life for all 
the people living in the area, also reflecting issues of national and provincial importance. One of the 
key objectives is therefore to ensure that there exists alignment between national and provincial 
priorities, policies and strategies and the Municipality's response to these requirements. 

The Constitution requires local government to relate its management, budgeting and planning 
functions to its objectives. This gives a clear indication of the intended purposes of municipal 
integrated development planning. Legislation stipulates clearly that a municipality must not only give 
effect to its IDP but must also conduct its affairs in a manner which is consistent with its IDP. The 
following table highlights the IDP's five strategic objectives for the 2020/21 MTREF and further 
planning refinements that have directly informed the compilation of the budget: 


Page 66 of 157 






Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 17 I DP Strategic Objectives 


Key Performance Area: Basic Service Delivery and Infrastructure Development 


Goal: To reduce levels of infrastructure backlogs by providing Basic Services, Facilities and maintaining 
existing infrastructure. 


Key Focus 

Area 

IDP 

Ref. 

No. 

Development Objectives 

Development Strategies 

1. Roads 

1 

Expand accessibility in various wards by 

2022. 

• Constructing New Gravel Roads 

• Constructing new tarred and paved 
roads 

• Constructing new cause ways 

• Spatially capture roads infrastructure 

2 

Maintain existing Roads in rural & 
urban areas by 2022. 

• Upgrading of gravel roads to tar 

• Re-gravelling of roads 

• Resealing of Roads 

• Rehabilitation of existing tar roads 

• Blading of roads 

• Spatially capture road infrastructure 

2. Storm 

Water 

3 

Building and maintaining Storm Water 
Infrastructure by 2022. 

• Construction of new storm water 
drains 

• Cleaning of storm water drains 

• Spatially capture storm water 
infrastructure 

3. Sanitation 

4 

Expand Sanitation accessibility in 
various wards by 2022. 

• Establishment of new sewer lines 

• Provision of VIP in rural areas 

• Constructing Public Ablutions 

• Spatially capture sanitation 

infrastructure 

5 

Maintain and replace existing 
Sanitation Infrastructure by 2022. 

• Replace old sanitation pipes 

• Upgrading of sewer main lines 

• Upgrade of the WWTW 

4. Water 

6 

Expand water accessibility in various 
wards by 2022. 

• Installation of new water connections 

• Upgrade of water main lines 

• Spatially capture water infrastructure 

7 

Maintain and replace existing Water 
Infrastructure by 2022. 

• Replace old water Pipes 

• Repairs to water lines 

• Repairs to existing water pumps 

• Maintain purification treatment plants 


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Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


5. Electricity 

8 

Expand electrical accessibility in 
various wards by 2022. 

• Installation of New electrical 
connections 

9 

Expand and Maintain existing network 
electricity in urban and rural areas by 

2022. 

Provide alternative energy 

• Installation of Electrical Meters 

• Installation and repairs of High Mast 
Lights 

• General Infrastructure- maintenance 
on mini and major substations 

• Upgrade existing transformers 

• Repairs to Robots 

• Provision of solar geysers and street 
lights 

• Provision of solar panels in urban and 
rural areas 

• Spatially capture electricity 

infrastructure 

• Master sector plans to be in place 

6. Sport 
fields & 

Parks 

10 

Expand accessibility and maintenance 
of Sports fields and Parks in various 
wards by 2022. 

• Construction and maintenance of new 
Sports fields and Parks in various wards 

• Upgrade and revamp existing Sports 
fields and Parks 

7. 

Community 

Halls 

11 

Expand accessibility and maintenance 
of Community Halls in various wards by 

2022. 

• Construction and maintenance of New 
Community Halls 

• Upgrade and revamp existing 
Community Halls 

8. 

Cemeteries 

12 

Expand accessibility and maintenance 
of Community Cemeteries in various 
wards by 2022. 

• Construction and maintenance of 
Cemeteries 

• Upgrade and revamp existing 
Cemeteries 

• Fencing of all unused cemeteries 

• Identify and establish new cemeteries 

9.Community 

Services 

Centres 

13 

Expand accessibility and maintenance 
of Community Services Centres in 
various wards by 2022. 

• Upgrade and revamp existing 
Community Services Centres 

• Construction of New CSCs 

10. Libraries 

14 

Expand accessibility and maintenance 
of Libraries in various wards by 2022. 

• Construction of new Libraries 

• Upgrade and Maintain existing 
Libraries 

11. Refuse 

Removal 

15 

Expand accessibility of Refuse Services 
in various wards by 2022. 

• Identify new areas and settlements to 
offer Refuse Services 

• Integrated waste management plan 

12. Human 

Settlements 

16 

To provide sustainable human 
settlements to the people of AbaQuiusi 
by 2022 

• Identify and Secure land prior to project 
approval 

• Ensure appointment of experienced 
and qualified implementing agents 

• Land disposal policy for public use 


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Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


• Strengthen Intergovernmental 

Relations 

• Land identification and release 

• facilitation of bulk service provision 

• Facilitate Land Release 

• Approval and implementation of the 
Housing Sector Plan 

• Set up housing consumer education 
programme 

• Linking of the HSP to SDF, IDP and 
Comprehensive CIF 

• Middle income housing development 


ALIGNMENT WITH NATIONAL, PROVINCIAL AND DISTRICT STRATEGIC DOCUMENTS 

This KPA is aligned with the following national, provincial and district strategies to ensure 
integrated and sustainable provision of infrastructure that will lead to better living conditions 
for all our people. 

National Development Plan identified the following primary challenges pertaining to this 

KPA : 

> Infrastructure is poorly located, inadequate, and under- maintained; 

> Public services are uneven and often of poor quality; 

> Corruption levels are high; and 

Cabinet Outcomes: 

6. An efficient, competitive and responsive economic infrastructure network 

7. Vibrant, equitable and sustainable rural communities with food security for all 

8. Sustainable human settlements and improved quality of households' life 

KZN Provincial Growth and Development Plan/Strateqy 

3. Human and Community Development 

4. Strategic Infrastructure 

Back to Basics Program: 

1. Basic Services: Creating decent living conditions 

Zululand District Growth and Development Plan 

4. Strategic Infrastructure 
Batho Pele Principles: 

2 . Service Standards 

3. Access 
7 . Redress 

1. Value for money 


Page 69 of 157 















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


AbaQuIusi municipality 

The goal, focus areas, Action plans and eventual projects of the municipality is all directly 
aligned with the broader governmental strategic documents to ensure the strategic use of 
scarce resources to provide new and maintain existing services in the municipality. The 
compilation of a maintenance Plan as well as an infrastructure delivery plan will ensure 
transparency and the curbing of unrealistic expectations while striving towards reaching the 
Municipality's vision and giving effect to the national and provincial strategies. 

The implementation of the Strategies for the 11 identified Focus Areas will ensure that the 
community of AbaQuIusi Municipality enjoys an improved quality of life with the concomitant 
opportunities and that our places where we live, work and play are situated in an environment 
conducive to an ever-increasing quality of live. 


Key Performance Area: Municipal Transformation and Institutional Development 

Goal: Empower and capacitate institutional structures and promotion of transparent cooperative 

governance. 

Key Focus 

Area 

IDP 

Ref. 

No. 

Development Objective 

Development Strategies 

1. Fluman 

Resources 

Management 

17 

To ensure that the municipality 
practice sound Fluman Resources 
management by 2022. 

• Conduct Workshops on labour relations 

• Ensure functionality of Local Labour 

Forum 

• Formulate, review and adopt new and 
existing FIR Policies. 

• Review and adopt Employment Equity 
plan 

• Review and adopt recruitment Plan and 
strategy 

• Review and adopt Retention strategy 

• Review and adopt organizational 

structure 

• Review Job descriptions 

• Fast track filling of critical vacant posts 

2. Fluman 

Resource 

Development 

18 

To ensure that the new and 

existing staff are capacitated to 
fulfil their functions and promote 
career development and comply 
with safety measures by June 

2022. 

• Develop/Review Workplace Skills Plan. 

• Develop/Review Induction Plan. 

• Ensure functionality of OFIS Committee 

and other FIRD related committees. 

• Develop/Review training policy 

• Develop/Review Wellness Programme. 


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Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 





• Facilitate skills audit for municipal 
employees. 

• Facilitate skills audit for councillors 

• Facilitate Female councillors' 

empowerment 

• Continued professional development 
(CPD) for all professionals serving in the 
municipality 

• MFMP training for Staff and Councillors 

3. Council 

Support 

19 

To ensure that Council and its 

committee fulfil their executive 
and legislative functions and play 
an effective oversight role over 
administration by 2022 

• Develop and adopt Council Annual 
Programme 

• Monitoring and implementation of the 
Council Annual Programme 

• Monitoring the execution of Council 

resolutions 

• Provision of Administrative Support to 

Council and its Committees 

4. Records 

Management 

20 

To ensure effective management 
of all internal and external 
records by 2022 

• Implementation of Records Management 
Policy 

5. Fleet 

Management 

21 

To ensure effective management 
of fleet by 2022 

• Implementation of Fleet Management 
Policy 

6. 

Information 

Technology 

22 

To provide a secure ICT 
infrastructure which delivers 
appropriate levels of 

Confidentiality, integrity, 

availability, stability and growth 
by 2022. 

• Development and monitoring of ICT 
infrastructure and relevant security 
mechanisms with provision of reports. 

• Workshop of ICT Policies and Procedures 
to staff. 

• Development of Intranet to provide basic 
information on Email and Internet security 
standards for users. 

• Ensure ICT secure procedures are 
followed. 

• Ensure security mechanisms are in place 
to ensure confidentiality and integrity of 

data. 

• Upgrade, and maintain relevant 
equipment and infrastructure to ensure 
stability of ICT infrastructure 

• Providing ICT Tools of trade. 

• Upgrading to new technologies. 


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Abaqulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 





• Updating/Upgrading to new software as 
part of the new technology drive forward. 

• Renewal and expansion of DR and Data 
Backup Systems 

• Develop compliance/intranet calendar for 
staff on the Intranet as reference model to 
assist in providing staff with deadline 
dates for ALL reports. 

• Develop backup and replicate information 
for future reference 

• Procure CAD software for engineering 
drawings 


ALIGNMENT WITH NATIONAL, PROVINCIAL AND DISTRICT STRATEGIC DOCUMENTS 

This KPA is aligned with the following national, provincial and district strategies to ensure that 
the internal institution is structured and operating in a way that ensure optimal service 
provision. 

National Development Plan identified the following primary challenges pertaining to this 

KPA: 

> Public services are uneven and often of poor quality; 

> Corruption levels are high; and 

> South Africa remains a divided society. 

Cabinet Outcomes: 

5. A skilled and capable workforce to support an inclusive growth path 

9. A responsive, accountable, effective and efficient local government system and 
inclusive citizenship 

6. An efficient, effective and development orientated public service and an empowered, 
fair 

KZN Provincial Growth and Development Plan/Strateqy 

2. Human Resource Development 

Back to Basics Program: 

2. Good Governance 

3. Public Participation 

5. Institutional Capacity 

Zululand District Growth and Development Plan 

2. Human Resource Development 

3. Human and Community Development 


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Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


6. Governance and Policy 

Batho Pete Principles: 

1: Consultation 

2: Service Standards 

3: Access 

4: Courtesy 

5: Information 

8: Value for money 

6: Openness and transparency 


AbaQuIusi municipality 

The goal, focus areas, development strategies and eventual projects of the municipality are 
all directly aligned with the broader governmental strategic documents to ensure that the 
internal structure of the Municipality is established in such a way that the organization has 
the capacity to warrant optimised service delivery to the people in its area. 

The focus of this KPA is to be a service provider to the organisation itself. The mandate of this 
KPA provides the responsible officials with the task to ensure effective, efficient, capable and 
qualified human and administrative resources that will see to it that the institution can 
effectively do its service delivery. The contribution of this KPA can make or break the 
organisation it therefore needs to be strong, capable and virtuous. 


Key Performance Area: Financial Viability & Management 

Goal: Ensure sound financial management and accountability 

Key Focus 

Area 

IDP 

Ref. 

No. 

Development Objective 

Development Strategies 

1. Revenue 

23 

Ensure the Municipal Revenue 
Streams are optimised 

• Conducting Daily control check and 
balances of cashiers and banking of cash 

• Conducting Monthly updating of 
valuation roll and financial system to 
secure correct billing of rates 

• Monitor Billing vs Payment system 

• Update Indigent Register 


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Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 





• Visiting satellite offices regularly to verify 
and secure financial procedures and 

income 

• Implement Revenue enhancement 

committee resolutions 

• Amendment to the credit control policy 

• Timeous and accurate reading of meters 

• Handing over of long outstanding/selling 
of debtors 

• Ensure reconciliations are performed 
daily, weekly and monthly respectively 

2. 

Expenditure 

24 

To ensure effective expenditure 

control 

• Ensure payment of service providers within 
30 days 

• Ensure reconciliations are performed daily, 
weekly and monthly respectively 

• Verification of all orders and invoices 
correctness before payment is done using 
check list and financial system and 
procedures 

• Timeous payment of salaries and third 
parties 

• Timeous submission of VAT and PA YE to SARS 

• Verification of correct allocation of orders 

3. SCM 

25 

To strengthen the Supply Chain 

Unit and Processes 

• Develop Municipal Procurement Plan 

• Implement supplier's database in line with 
National Treasury's Central Suppliers 

Database 

• Review SCM Policy 

• Submission of Irregular expenditure report to 
COGTA on a monthly basis 

• Provide training and skills development to 
officials involved in procurement processes 

• Verification of Service Providers 

4. Assets 

26 

To Maintain Fixed Assets of the 
Municipality 

• Maintain fixed assets register on a 
monthly basis 

• Updating of all purchases and spot check 
visits to offices 

• Maintaining the Fixed Assets Register in 
terms of the Fixed Assets Policy and GRAP 
17 monthly 


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Abaqulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 





• Quarterly verification of inventory 

• Ensure reconciliations are performed 
daily, weekly and monthly respectively 

• 

5. Financial 

Reporting 

27 

Ensure that financial reporting 
conforms to all legal and 
institutional reguirements 

• Develop Draft Budget annually 

• Develop and Adopt Final Budget annually 

• Develop and adopt Final Budget Process 
Plan annually 

• Submission of Monthly Section 71, 
Quarterly Section 52 & Half Year Section 
72 Report 

• Develop Adjustment budget in line with 
section 72 reports 

• Annual adoption of policies and 
procedures 

• Ensure reconciliations are performed 
daily, weekly and monthly respectively 


ALIGNMENT WITH NATIONAL, PROVINCIAL AND DISTRICT STRATEGIC DOCUMENTS 

This KPA is aligned with the following national, provincial and district strategies to ensure that 
the institution provides services to its personnel, consumers and suppliers. 

National Development Plan identified the following primary challenges pertaining to this 

KPA: 

> Public services are uneven and often of poor guality; 

> Corruption levels are high; and 

Cabinet Outcomes: 

6. An efficient, effective and development orientated public service and an empowered, 
fair and inclusive citizenship 

9. A responsive, accountable, effective and efficient local government system 

KZN Provincial Growth and Development Plan/Strategy 

6. Governance and Policy 

Back to Basics Program: 

2. Good Governance 

4. Financial Management 

5. Institutional Capacity 


Page 75 of 157 













Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Zululand District Growth and Development Plan 

6. Governance and Policy 

Batho Pete Principles: 

1: Consultation 

2: Service Standards 

3: Access 

4: Courtesy 

5: Information 

8: Value for money 

6: Openness and transparency 


AbaQuIusi municipality 

The goal, focus areas, development strategies and eventual projects of the municipality are 
all directly aligned with the broader governmental strategic documents to ensure that the 
financial affairs of the municipality confirms to legal requirements, strife towards an approved 
audit report and do all payment timeously. 

The focus of this KPA is to be a service provider to the organisation itself as well as it's 
consumers and suppliers. The mandate of this KPA provides the responsible officials with the 
task to ensure the responsible, honest management of tax payers' money. This KPA is mainly 
targeted on legal compliance and need to be implemented with absolute accountability, skill 
and without any prejudice. 


Key Performance Area: Good Governance and Community Participation 

Goal: To be a Responsible, accountable, effective and efficient developmental Municipality 

Key Focus Area 

IDP 

Ref. 

No. 

Development Objective 

Development Strategies 

1. Communication 

and customer 

satisfaction 

28 

To revive and strengthen 
Communications by 2022 

• Develop/adopt communication 

strategy 

• Review the Communication Strategy 

29 

To engage and improve 
customer satisfaction by 2022 

• Develop a customer care centre 

• Appoint a customer care committee 

• Conduct customer service satisfaction 
surveys on regular basis 


Page 76 of 157 














Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 





• Establish "suggestion boxes' at all 
municipal offices 

• Utilisation of the municipal "hotline" 

system 

• Establish additional municipal satellite 
offices 

2. Internal Audit 

30 

To provide an assurance on the 
effectiveness of governance, risk 
management and internal 
control by 2022 

• Develop and implement the annual 
internal audit coverage plan 

• Develop and implement quality 
assurance programmes to assess the 
effectiveness of internal audit unit 

• Discuss and submit internal audit 

reports to Management, Audit 

Committee and MPAC 

• Appoint audit steering committee 

• Develop and implement the audit 
committee annual plan 

• Develop and implement the audit 

committee assessment tool 

3. Audit Committee 

31 

To ensure the effectiveness of 
the Audit Committee by 2022 

• Develop and implement the audit 
committee annual plan 

• Develop and implement the audit 

committee assessment tool 

• Submission of audit committee reports 
to Council on a quarterly basis 

• Evaluate and track the 

implementation of audit committee 

resolutions 

4. Risk 

Management 

32 

To improve the effectiveness of 
risk management within the 
organisation by 2022 

• Conduct the risk assessment and 

develop the risk register 

• Appoint risk management committee 
and assess the functionality thereof 

• Incorporate risk action plans into 
departmental SDBIP 

• Monitor the implementation of risks 
mitigation plans by Department 

• Identify and assess new emerging risks 
throughout the period 


Page 77 of 157 





Abaqulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 


5. Integrated 
Development 
Planning 

33 

To ensure effective decision¬ 
making, budgeting and 

management of resources 

• Develop and implement the 

IDP/Budget process plan 

• Engage in Community Consultation 
Process (IDP Rep Forums, Road-shows, 
Izimbizos) 

• Develop, review and adopt IDP 
annually 

6. Performance 
Management 

34 

To promote a system of 
transparency and accountability 
within the municipality 

• Review and adopt the PMS Framework 

• Cascading of PMS to all levels 

7. Back to Basics 

35 

To Create an all-inclusive 

participatory developmental 

municipality by 2022 

• Regular reporting on the status of the 
municipality to National and Provincial 

CoGTA 

8. Batho Pele 

36 

To enhance service delivery 
through the improvement of 
public consultation and 
communications by 2022 

• Develop and adopt Batho Pele Policy, 

procedural Manuel, Service Delivery 
Charter and Service Delivery 

Improvement Plan 

• Hosting of Batho Pele Campaigns 


ALIGNMENT WITH NATIONAL, PROVINCIAL AND DISTRICT STRATEGIC DOCUMENTS 


This KPA is aligned with the following national, provincial and district strategies to ensure that 
the governance of the institution is legal complaint, corruption free and accountable. 

National Development Plan identified the following primary challenges pertaining to this 

KPA: 

1. Public services are uneven and often of poor guality; 

2. Corruption levels are high; and 

Cabinet Outcomes: 

1. An efficient, effective and development orientated public service and an empowered, 
fair and inclusive citizenship 

2. A responsive, accountable, effective and efficient local government system 

KZN Provincial Growth and Development Plan/Strategy 

1. Governance and Policy 
Back to Basics Program: 


1. Good Governance 

2. Financial Management 

3. Institutional Capacity 


Page 78 of 157 















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Zululand District Growth and Development Plan 

1. Governance and Policy 

Batho Pete Principles: 

1: Consultation 

2: Service Standards 

3: Access 

4: Courtesy 

5: Information 

8: Value for money 

6: Openness and transparency 

AbaQuIusi municipality 

The goal, focus areas, development strategies and eventual projects of the municipality are 
all directly aligned with the broader governmental strategic documents to ensure the 
municipality functions optimum with the ambit of its developmental mandate. The 
municipality must ensure the promoting of an active citizenry to strengthen development, 
democracy, and accountability and to be servants to the community. 

Communities must actively partake in the local sphere of government through information 
sharing workshops, capacitation of ward structures and dissemination of important issues 
through various media platforms. 


The mandate of this KPA as reflected in the Strategic plan is to make sure that the citizens are 
involved in governance and the organisation is accountable to them. 


Key Performance Area: Local Economic Development and Social Development 

Goal: To promote socio-economic growth and job opportunities. 

Key Focus Area 

IDP 

Ref 

No 

Development Objective 

Development Strategies 

1. Agriculture 

37 

Unleashing agricultural potential 
in Abagulusi by 2022 

• Coordinate the establishment of agri¬ 
business forums, farmers associations 

• Provide support to the agricultural 
production 

• Coordinate agricultural activities 

• Establish cooperatives in all areas 


Page 79 of 157 













Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 





• Assist in Developing Agri-processing 

Hub 

• Develop Agriculture Sector Plan 

2. SMME's and 

Job Creation 

38 

Continuous assistance of 

entrepreneurship and job 

creation by 2022 

• Train SMME's according to their needs 

to meet the standard 

• Coordinate intergovernmental 

programmes to create job opportunities 

3. Poverty 

alleviation 

39 

Reduce poverty in all wards by 

2022 

• Train the vulnerable community on 
income generating project 

• Deliver poverty alleviation project in all 
wards to create business opportunities 

4. Tourism 

40 

Promote and identify tourism 
opportunities by 2022 

• Co-ordinate tourism events and 

awareness campaigns in the 

municipality 

• Organise workshops and Road shows 

• Establish tourism industry and project 
focusing on tourism 

• Develop Tourism Sector Plan and 
Promote heritage route 

• Introduce historically disadvantaged 
people into tourism 

• Assisting Accommodation 

Establishments with their Tourism 

Grading 

5. Economic 

growth 

41 

Promote economic development 
by 2022 

• Develop commercial centres In the 
Municipality 

• Review, adopt and implement the LED 
strategy 

• Community empowerment on small 
business start-ups 

• To assist with business retention for 
existing businesses and provide 
incentives for new businesses 

6. Real estate 

and Business 

Management 

42 

Proper Acguisition and disposal 
of real estate according to 
municipality by-laws by 2022 

• Develop and Implement Land disposal 
Policy 

• Develop real estate by-laws 

• To enhance real estate capacity 

• Effective management of outdoor 
advertising 

• Business Licence Compliance 


Page 80 of 157 





Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


7. Sport and 

Recreation 

43 

Promote Sports and Recreation 
in Abaqulusi by 2022 

• Establish Sport and recreation 
Committee (Sport Council) 

• Conduct sport talent promotion and 
competitions 

• Provide DSR with a platform to support 
federations and players in different 
sport codes 

8. Youth 

programmes 

44 

Establish and promote youth 
development programmes by 

2022 

• Establish Youth Committee (Youth 
Council) 

• Conduct youth empowerment sessions 

• Provide government departments and 
private sector with a platform to 
support the youth in their different 
developmental needs. 

9. Arts and 

culture 

45 

Establish and promote cultural 
programmes by 2022 

• Establish Art & Culture Committee (art 
& Culture Council) 

• Conduct artist' talent promotion and 
competitions 

• Provide department of arts and culture 
with a platform to support artists in 
their different art codes. 

10. Social 

welfare 

46 

Ensure availability of social 
services programmes to the 
community ofAbaQuIusi by 2022 

• Establish Social services stakeholder 

Committee 

• Support DSD in out rolling social 
development programmes. 

11. Health 

HIV/AIDS 

47 

Establish and promote healthy 
living and HIV/AIDS awareness 
programmes BY2022 

• Establish health and HIV/AID 

Committee (AIDS Council) 

• Conduct awareness programmes 

• Provide department of health with a 
platform to support the community in 
their different health needs. 

12. Special 

Programmes 

48 

Establish and promote 

community empowerment 

programmes for children, aged, 
disabled and vulnerable groups 
by 2022 

• Establish Special programmes 

Committee (Children, Gender, elderly 
and Disability Councils) 

• Conduct empowerment sessions and 
awareness campaigns 

• Support NGO'S by sourcing assistance 
from potential sponsors and funders 

13. Safety and 
Security 

49 

Enhancing safety and security by 

2022 

• Participate in the CPF and 

Neighbourhood watch meetings 


Page 81 of 157 







Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 





• Conduct crime-awareness programmes 

in communities 

• Review of Safety and Security Plan 

• Installation of CCTV Cameras 


ALIGNMENT WITH NATIONAL, PROVINCIAL AND DISTRICT STRATEGIC DOCUMENTS 

This KPA is aligned with the following national, provincial and district strategies to ensure that 
the institution complies with its mandate to promote an enabling environment for the 
economy to grow and to ensure social upliftment by providing facilities and support. 

National Development Plan identified the following primary challenges pertaining to this 

KPA: 

> Bringing about faster economic growth, higher investment, and greater labour 
absorption; Focussing on key capabilities of people and the state; 

> Building a capable and developmental state; and 

Cabinet Outcomes: 

4. Decent employment through inclusive economic growth 

5. A skilled and capable workforce to support an inclusive growth path 

6. An efficient, competitive and responsive economic infrastructure network 

7. Vibrant, equitable and sustainable rural communities with food security for all 

8. Sustainable human settlements and improved quality of household's life 

10. Environmental assets and natural resources that is well protected and continually 
enhanced 

KZN Provincial Growth and Development Plan/Strateqy 

1. Job Creation 

Back to Basics Program: 

1. Creating decent living conditions 

Zululand District Growth and Development Plan 

1. Job Creation 
Batho Pete Principles: 

1: Consultation 
2: Service Standards 
3: Access 


Page 82 of 157 














Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


4: Courtesy 
5: Information 
8: Value for money 
6: Openness and transparency 


AbaQuIusi municipality 

The goal, focus areas, development strategies and eventual projects of the municipality are 
all directly aligned with the broader governmental strategic documents to ensure the 
municipality provides an enabling environment for its citizens that will lead to economic 
opportunities and social upliftment. The municipality's action plans focus on equipping our 
community with the necessary skills and facilities to become actively involved in the socio¬ 
economic enhancement of individuals and groups. 


Key Performance Area: Cross Cutting (Spatial, Environment and Disaster Management) 

Goal: To redress the spatial imbalances and promote sustainable environmental planning. 

Key Focus 

Area 

IDP 

Ref. 

No. 

Development Objective 

Development Strategies 

1. Town 

Planning 

50 

To ensure effective management 
of current and desirable land 
uses by 2022 

• Review and implementation of the 
Spatial Development Framework 

• Implementation ofSPLUMA and SPLUMA 
By-Law 

• Implementation of Precinct Plans 

• Preparation of the AbaQuIusi wall-to-wall 
scheme and Land Audit in compliance 
with the Spatial Planning and land Use 
Management Act 2013 

• Co-ordination of the Municipal Planning 

Tribunal 

• Facilitation of Township Establishment 

• Identification of developmental land 

• Conduct Information Workshops 

• Set up enforcement procedures 

2. GIS 

51 

To have an effective and efficient 
GIS System by 2022 

• Ensure GIS system is updated regularly 

• Integrate GIS System with other 
municipal departments 

3. Building 
Inspectorate 

52 

To ensure the sustainability of 
the built environment by 2022 

• Timeous Assessment of building plans 


Page 83 of 157 













Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 





• Workshop Built environment 

professionals 

• Training to current staff and peace 
officers 

• Deal effectively and efficiently with all 

contraventions 

4. Fire & 

Disaster 

Management 

53 

Ensure Effective & Efficient 
response to community 

emergencies by 2022 

• Strengthen stakeholder relations 

• Decentralisation of services by 

establishing disaster satellite offices 

• Establishment of Disaster Management 

Unit 

• Acquiring relevant and sufficient Disaster 
Equipment regularly 

5. 

Environmental 

health 

54 

Establish and promote a healthy 
environment in Abaqulusi by 

2022 

• Establish Environmental issues 

committee (Enviro Council) 

• Conduct awareness programmes 

• Provide department of environmental 
affairs with a platform to support the 
municipality and the community in their 
different art environmental needs 


ALIGNMENT WITH NATIONAL, PROVINCIAL AND DISTRICT STRATEGIC DOCUMENTS 

This KPA is aligned with the following national, provincial and district strategies to ensure that 
the municipality works in a way that is sustainable and provide a safe environment for its 
citizens. 

National Development Plan identified the following primary challenges pertaining to this 

KPA: 

> Spatial divides hobble inclusive development; 

> Corruption levels are high 

Cabinet Outcomes: 


3. All people in South Africa are and feel safe 

7. Vibrant, eguitable and sustainable rural communities with food security for all 

8. Sustainable human settlements and improved quality of household's life enhanced 
10. Environmental assets and natural resources that are well protected and continually 

KZN Provincial Growth and Development Plan/Strategy 


Page 84 of 157 














Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


3. Human and Community Development 

4. Strategic Infrastructure 

5. Response to Climate Change 

7. Spatial Equity 

Back to Basics Program: 

1. Creating decent living conditions 

Zululand District Growth and Development Plan 

5. Environmental Sustainability 

7. Spatial Equity 

Batho Pete Principles: 

1: Consultation 

2: Service Standards 

3: Access 

4: Courtesy 

5: Information 

8: Value for money 

6: Openness and transparency 

AbaQuIusi municipality 

The goal, focus areas, development strategies and eventual projects of the municipality are 
all directly aligned with the broader governmental strategic documents to ensure the 
municipality strive to safeguard a sustainable, safe and well-preserved environment for its 
current citizens and future generations. 

The municipality's integrated approach to provide an enabling and conductive environment 
where people enjoy better living conditions and a safe life are reflected in the action plans t 


Page 85 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Measurable performance objectives and indicators 


Performance Management is a system intended to manage and monitor service delivery progress 
against the identified strategic objectives and priorities. In accordance with legislative requirements 
and good business practices as informed by the National Framework for Managing Programme 
Performance Information, the Municipality has developed and implemented a performance 
management system of which system is constantly refined as the integrated planning process unfolds. 
The Municipality targets, monitors, assess and reviews organisational performance which in turn is 
directly linked to individual performance. 

At any given time within government, information from multiple years is being considered; plans and 
budgets for next year; implementation for the current year; and reporting on last year's performance. 
Although performance information is reported publicly during the last stage, the performance 
information process begins when policies are being developed, and continues through each of the 
planning, budgeting, implementation and reporting stages. The planning, budgeting and reporting 
cycle can be graphically illustrated as follows: 



Page 86 of 157 




























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Figure 1 Planning, budgeting and reporting cycle 


The performance of the Municipality relates directly to the extent to which it has achieved success in 
realising its goals and objectives, complied with legislative requirements and meeting stakeholder 
expectations. The Municipality therefore has adopted one integrated performance management 
system which encompasses: 

• Planning (setting goals, objectives, targets and benchmarks); 

• Monitoring (regular monitoring and checking on the progress against plan); 

• Measurement (indicators of success); 

• Review (identifying areas requiring change and improvement); 

• Reporting (what information, to whom, from whom, how often and for what purpose); and 

• Improvement (making changes where necessary). 

The performance information concepts used by the Municipality in its integrated performance 
management system are aligned to the Framework of Managing Programme Performance 
Information issued by the National Treasury: 


The developmental results of achieving 
specific outcomes 


What we aim to change? 

The medium-term results for specific 
beneficianes that are the consequence of 
achieving specific outputs 

What we wish to achieve? 

The final products, or goods and 
services produced for delivery 


What we produce or deliver? 



Manage towards 
achievingthese 
results 


OUTPUTS 


The processes or actions that use a 
range of inputs to produce the desired 

outputs and ultimately outcomes ACTIVITIES 

What we do? 

The resources that contnbute to 
the production and delivery of 

outputs INPUTS 

What we use to do the work? 

Figure 2 Definition of performance information concepts 


Plan, budget, 
implementand 
monitor 


The following table provides the main measurable performance objectives the municipality 
undertakes to achieve this financial year 


Page 87 of 157 









Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 18 KZN263 Table SA7 - Measurable performance objectives 


KZN263 Abaqulusi - Supporting Table SA7 Measureable performance objectives 


Description 


Unit of measurement 


2016/17 


Audited 

Outcome 


2017/18 


Audited 

Outcome 


2018/19 


Audited 

Outcome 


Current Year 2019/20 


Original 

Budget 


Adjusted 

Budget 


Full Year 
Forecast 


2020/21 Medium Term Revenue & 
Expenditure Framework 


Budget Year 
2020/21 


Budget Year 
+1 2021/22 


Budget Year 
+2 2022/23 


Vote 1 - vote name 


Function 1 - (name) 


Sub-function 1 - (name) 


Insert measure/s description 


Sub-function 2 - (name) 


Insert measure/s description 


Sub-function 3 - (name) 


Insert measure/s description 


Function 2 - (name) 


Sub-function 1 - (name) 


Insert measure/s description 


Sub-function 2 - (name) 


Insert measure/s description 


Sub-function 3 - (name) 


Insert measure/s description 


Vote 2 - vote name 


Function 1 - (name) 


Sub-function 1 - (name) 


Insert measure/s description 


Sub-function 2 - (name) 


Insert measure/s description 


Sub-function 3 - (name) 


Insert measure/s description 


Page 88 of 157 


















































Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Function 2 - (name) 
Sub-function 1 - (name) 

Insert measure/s description 


Sub-function 2 - (name) 

Insert measure/s description 


Sub-function 3 - (name) 

Insert measure/s description 


Vote 3 - vote name 
Function 1 - (name) 
Sub-function 1 - (name) 

Insert measure/s description 


Sub-function 2 - (name) 

Insert measure/s description 


Sub-function 3 - (name) 

Insert measure/s description 


Function 2 - (name) 
Sub-function 1 - (name) 

Insert measure/s description 


Sub-function 2 - (name) 

Insert measure/s description 


Sub-function 3 - (name) 

Insert measure/s description 


And so on for the rest of the Votes 


Page 89 of 157 
















































Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


The following table sets out the municipality's main performance objectives and benchmarks for the 2020/21 MTREF. 

Table 19 KZN263 Table SA8 - Performance Indicators and Benchmarks 


KZN263 Abaqulusi - Supporting Table SA8 Performance indicators and benchmarks 




2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & 
Expenditure Framework 

Description of financial indicator 

Basis of calculation 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Pre-audit 

outcome 

Budget 

Year 

2020/21 

Budget 
Year +1 
2021/22 

Budget 
Year +2 
2022/23 

Borrowinq Manaqement 












Credit Rating 












Capital Charges to Operating Expenditure 

interest & Principal Paid /Operating 
Expenditure 

0.0% 

3.1% 

0.1% 

0.0% 

0.0% 

0.0% 

0.3% 

0.0% 

0.0% 

0.0% 

Capital Charges to Own Revenue 

Finance charges & Repayment of 
borrowing /Own Revenue 

0.0% 

4.9% 

0.1% 

0.0% 

0.0% 

0.0% 

0.3% 

0.0% 

0.0% 

0.0% 

Borrowed funding of 'own' capital 
expenditure 

Borrowing/Capital expenditure excl. 
transfers and grants and contributions 

0.0% 

109.3% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

Safety of Capital 

Gearing 

Long Term Borrowing/ Funds & Reserves 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

0.0% 

Liquidity 

Current Ratio 

Current assets/current liabilities 

0.8 

0.8 

0.8 

0.5 

0.9 


0.9 

1.5 

1.5 

1.5 

Current Ratio adjusted for aged debtors 

Current assets less debtors > 90 
days/current liabilities 

0.8 

0.8 

0.8 

0.5 

0.9 

- 

0.9 

1.5 

1.5 

1.5 

Liquidity Ratio 

Monetary Assets/Current Liabilities 

0.0 

(0.3) 

0.0 

5.1 

(1.2) 

- 

0.2 

0.9 

1.0 

1.0 

Revenue Manaqement 

Annual Debtors Collection Rate (Payment 
Level %) 

Last 12 Mths Receipts/Last 12 Mths 

Billing 


111.9% 

461.9% 

101.4% 

-3.9% 

-1.8% 

0.0% 

94.4% 

85.3% 

85.3% 

Current Debtors Collection Rate (Cash 
receipts % of Ratepayer & Other revenue) 


111.9% 

461.9% 

101.4% 

-3.9% 

-1.8% 

0.0% 

94.4% 

85.3% 

85.3% 

85.3% 

Outstanding Debtors to Revenue 

Total Outstanding Debtors to Annual 
Revenue 

57.4% 

63.9% 

59.0% 

62.1% 

109.1% 

0.0% 

77.8% 

8.2% 

8.2% 

8.2% 

Longstanding Debtors Recovered 

Debtors > 12 Mths Recovered/Total 

Debtors > 12 Months Old 











Creditors Manaqement 













Page 90 of 157 
























Aba a ulus i Municipality 


Draft 2020/21 Annual Budget and MTREF 


Creditors System Efficiency 

% of Creditors Paid Within Terms 
(within'MFMA's 65(e)) 



Creditors to Cash and Investments 


-207.7% 

14.3% 





Other Indicators 




Electricity Distribution Losses (2) 

Total Volume Losses (kW) 

Total Cost of Losses (Rand '000) 

% Volume (units purchased and 
generated less units sold)/units 
purchased and generated 



Water Distribution Losses (2) 

Total Volume Losses (kf) 

Total Cost of Losses (Rand '000) 

% Volume (units purchased and 
generated less units sold)/units 
purchased and generated 



Employee costs 

Employee costs/(Total Revenue - capital 
revenue) 

34.1% 

30.6% 

Remuneration 

Total remuneration/(Total Revenue - 
capital revenue) 

0.0% 

0.0% 

Repairs & Maintenance 

R&M/(Total Revenue excluding capital 
revenue) 

0.0% 

0.0% 

Finance charges & Depreciation 

IDP regulation financial viability indicators 

FC&D/(Total Revenue - capital revenue) 

14.3% 

32.0% 

i. Debt coverage 

(Total Operating Revenue - Operating 
Grants)/Debt service payments due 
within financial year) 

8.8 

23.1 

ii.O/S Service Debtors to Revenue 

Total outstanding service debtors/annual 
revenue received for services 

103.4% 

106.4% 

iii. Cost coverage 

(Available cash + lnvestments)/monthly 
fixed operational expenditure 

(3.5) 

44.7 


-228.5% 


25.2% 

0 . 0 % 

1.9% 

14.1% 

381.1 

95.1% 

(4.0) 


19.1% 


-58.0% 


0 . 0 % 


681.6% 


-144.9% 


-72.8% 


-52.2% 


29.4% 

0 . 0 % 

2.3% 

11 . 6 % 


28.7% 

0 . 0 % 

4.4% 

11 . 1 % 


0 . 0 % 

0 . 0 % 

0 . 0 % 

0 . 0 % 


25.5% 


0 . 2 % 


28.0% 

0 . 0 % 

3.9% 

6.9% 


27.9% 

0 . 0 % 

3.9% 

7.0% 


27.9% 

0 . 0 % 

3.5% 

7.6% 


199.8 


104.1% 


(9.2) 


199.E 


185.1% 


(9.1) 


199.8 


0 . 0 % 


149.5 


124.5% 


1.9 


303.1 


13.1% 


(1.5) 


300.7 


13.1% 


(2.9) 


315.1 


13.1% 


(4.2) 


Page 91 of 157 






















Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Performance indicators and benchmarks 


Borrowing Management 


Capital expenditure in local government can be funded by capital grants, own-source revenue and long-term 
borrowing. The ability of a municipality to raise long term borrowing is largely dependent on its creditworthiness 
and financial position. As with all other municipalities, Abagulusi Municipality's borrowing strategy is primarily 
informed by the affordability of debt repayments. The following financial performance indicators have formed part 
of the compilation of the 2020/21 MTREF: 

• Borrowing to asset ratio is a measure of the long-term borrowing as a percentage of the total asset base of 
the municipality. This ratio is 0% and must not be considered a measure on borrowing capacity in isolation 
of other ratios and measures. 

• Capital charges to operating expenditure are a measure of the cost of borrowing in relation to the operating 
expenditure. It can be seen that the cost of borrowing is steady, from 0% in 2015/16 to 0% by 2019/20. It is 
estimated that the cost of borrowing as a percentage of the operating expenditure will be at 0% in 2020/21 
and will then remain at 0 % at the end of the MTREF. While borrowing is considered a prudent financial 
instrument in financing capital infrastructure development, this indicator will have to be carefully monitored 
going forward as the Municipality has reached its prudential borrowing limits. 

• Borrowing funding of own capital expenditure measures the degree to which own capital expenditure 
(excluding grants and contributions) has been funded by way of borrowing. The average over MTREF is 0 % 
which substantiates the above-mentioned statement that the Municipality has reached its prudential 
borrowing limits. 

In summary, various financial risks could have a negative impact on the future borrowing capacity of the 
municipality. In particular, the continued ability of the Municipality to meet its revenue targets and ensure its 
forecasted cash flow targets are achieved will be critical in meeting the repayments of the debt service costs. As 
part of the compilation of the 2020/21 MTREF the potential of smoothing out the debt profile over the longer term 
will be investigated. 

Safety of Capital 


The debt-to-equity ratio is a financial ratio indicating the relative proportion of equity and debt used in 
financing the municipality's assets. The indicator is based on the total of loans, creditors, and overdraft and 
tax provisions as a percentage of funds and reserves. /As part of the planning guidelines that informed the 
compilation of the 2020/21 MTREF ensuring proper cash-backing of reserves and funds has been considered 
a prudent financial sustainability objective, hence the ration remains at 0%. 

The gearing ratio is a measure of the total long-term borrowings overfunds and reserves. The ratio remains 
atO%. 

Liquidity 


Current ratio is a measure of the current assets divided by the current liabilities and as a benchmark the 
Municipality has set a limit of 1, hence at no point in time should this ratio be less than 1. For the 2019/20 
MTREF the current ratio is 0,9 and in the 2020/21 financial year and remains at 1,5 for the two outer years 
of the MTREF. 


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Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


The liquidity ratio is a measure of the ability of the municipality to utilize cash and cash equivalents to 
extinguish or retire its current liabilities immediately. Ideally the municipality should have the equivalent 
cash and cash equivalents on hand to meet at least the current liabilities, which should translate into a 
liquidity ratio of 1. Anything below 1 indicates a shortage in cash to meet creditor obligations. For the 
2019/20 financial year the ratio was 0.9 and as part of the financial planning strategy it has improved to 
1,5 in the 2020/21 financial year. This needs to be considered a pertinent risk for the municipality as any 
under collection of revenue will translate into serious financial challenges for the Municipality. /As part of 
the longer-term financial planning objectives this ratio will have to be set at a minimum of 1. 


Revenue Management 


As part of the financial sustainability strategy, an aggressive revenue management framework has been 
implemented to increase cash inflow, not only from current billings but also from debtors that are in arrears 
in excess of 90 days. The intention of the strategy is to streamline the revenue value chain by ensuring 
accurate billing, customer service, and credit control and debt collection. 

Creditors Management 


The Municipality has not managed to ensure that creditors are settled within the legislated 30 days of 
invoice. While the liquidity ratio is of concern, by applying daily cash flow management the municipality 
will manage to ensure a 100% compliance rate to this legislative obligation. This is required to have a 
favourable impact on suppliers' perceptions of risk of doing business with the Municipality, which is expected 
to benefit the Municipality in the form of more competitive pricing offenders, as suppliers compete for the 
Municipality's business. 

Other Indicators 


The electricity distribution losses have decreased from 27,8% in 2016/17 to 22% in 2017/18 and for 2018/19 
decreased to 19%. The initiatives to ensure these targets are controlled and lowered during the 2020/21 
financial year include managing illegal connections and theft of electricity by auditing all systems, including 
prepaid meters. 

The water distribution losses continue to decrease from 71% in 2016/17 to 48% in 2017/18, however 
increased to 60% in 2018/19. The municipality will have to introduce a water leakage report and action 
centre. Also, areas currently not metered will have to have meters installed to ensure residents pay for 
water consumed. It is planned to further try and reduce distribution losses from 50% in 2020/21 to 20% by 
2021/22. 

Employee costs as a percentage of operating revenue continues to increase over the MTREF. This is primarily 
owing to the high increase in bulk purchases which directly increase revenue levels, as well as increased 
allocation relating to operating grants and transfers. 

Similar to that of employee costs, repairs and maintenance as percentage of operating revenue is also 
decreasing owing directly to cost drivers such as bulk purchases increasing far above inflation. In real terms, 
repairs and maintenance has increased as part of the Municipality's strategy to ensure the management of 
its asset base. 


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Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Free Basic Services: basic social services package forjndigent households 


The social package assists residents that have difficulty paying for services and are registered as indigent households 
in terms of the Indigent Policy of the Municipality. Only registered indigents qualify for the free basic services and 
all indigents must apply annually and these applications will be scrutinized to ensure they are genuine. 

For the 2020/21 financial year registered indigents have been provided for in the budget with this figured increasing 
by 2021/22. In terms of the Municipality's indigent policy registered households are entitled to 6kl free water, 50 
kwh of electricity, 6 kl sanitation and free waste removal equivalent to 85£ once a week, as well as a discount on 
their property rates. 

Further detail relating to the number of households receiving free basic services, the cost of free basic services, 
highest level of free basic services as well as the revenue cost associated with the free basic services is contained in 
Table 27 A10 (Basic Service Delivery Measurement) on page 75 

Note that the number of households in informal areas that receive free services and the cost of these services (e.g. 
the provision of water through stand pipes, water tankers, etc) are not taken into account in the table noted above. 

Providing clean water and managing waste water 


The Municipality is in the process of applying to the Department of Water Affairs to become the Water Services 

Authority for the entire municipality in terms of the Water Services Act, 1997 and acts as water services provider. 

The water is generated from the Municipality's own water sources, such as boreholes and small dams. 

The waste water plants will require renewals/upgrading to meet the minimum Green Drop certification standards. 

This has been prioritised as part of the 2020/21 medium term capital budget. 

The following is briefly the main challenges facing the Municipality in this regard: 

• The infrastructure at most of the waste water treatment works is old and insufficient to treat the increased 
volumes of waste water to the necessary compliance standard; 

• Shortage of skilled personnel makes proper operations and maintenance difficult; 

• There is a lack of proper regional catchment management, resulting in storm water entering the sewerage 
system. 

The following are some of the steps that need to be undertaken to address these challenges: 

• Infrastructure shortcomings will be addressed through the capital budget in terms of a 5-year upgrade plan; 

• The filling of vacancies has commenced and the Waste Water Section will embark on an in-house training 
programme, especially for operational personnel; 

• The Section is working in consultation with the Department of Water Affairs to address catchment 
management. 


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Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Overview of budget related-policies 


The Municipality's budgeting process is guided and governed by relevant legislation, frameworks, strategies and 
related policies. 

Review of credit control and debt collection procedures/policies 


The policy adopted last year is credible, sustainable, manageable and informed by affordability and value for money. 
During the 2020/21 financial year there will be a need to review certain components to achieve a higher collection 
rate. Some of the possible revisions will include the lowering of the credit periods for the down payment of debt. In 
addition, emphasis will be placed on speeding up the indigent registration process to ensure that credit control and 
debt collection efforts are not fruitlessly wasted on these debtors. 

As most of the indigents within the municipal area are unable to pay for municipal services because they are 
unemployed, an Integrated Indigent Exit Programme will have to be developed to link the registered indigent 
households to development, skills and job opportunities. The programme will further seek to ensure that all 
departments as well as external role players are actively involved in the reduction of the number of registered 
indigent households. 

The 2020/21 MTREF has been prepared on the basis of achieving an average debtors' collection rate of 92% on 
current billings. In addition, the collection of debt in excess of 90 days has been prioritised as a pertinent strategy 
in increasing the Municipality's cash levels. In addition, the potential of a payment incentive scheme is being 
investigated and if found to be viable will be incorporated into the policy. 

Asset Management, Infrastructure Investment and Funding Policy 


A proxy for asset consumption can be considered the level of depreciation each asset incurs on an annual basis. 
Preserving the investment in existing infrastructure needs to be considered a significant strategy in ensuring the 
future sustainability of infrastructure and the Municipality's revenue base. Within the framework, the need for asset 
renewal was considered a priority and hence the capital programme was determined based on renewal of current 
assets versus new asset construction. 

Further, continued improvements in technology generally allows many assets to be renewed at a lesser 'real' cost 
than the original construction cost. Therefore, it is considered prudent to allow for a slightly lesser continual level 
of annual renewal than the average annual depreciation. An Asset Management, Infrastructure and Funding Policy 
is therefore considered a strategic guide in ensuring a sustainable approach to asset renewal, repairs and 
maintenance and utilised as a guide to the selection and prioritisation of individual capital projects. In addition, the 
policy will prescribe the accounting and administrative policies and procedures relating to property, plant and 
equipment (fixed assets). 

Budget Adjustment Policy 


The adjustments budget process is governed by various provisions in the MFMA and is aimed at instilling and 
establishing an increased level of discipline, responsibility and accountability in the financial management practices 
of municipalities. To ensure that the Municipality continues to deliver on its core mandate and achieves its 
developmental goals, the mid-year review and adjustment budget process will be utilised to ensure that 
underperforming functions are identified and funds redirected to performing functions. 

| Supply Chain Management Policy 


The amended Supply Chain Management Policy must be adopted by Council in May 2019. The amendments must 
be extensively consulted on before the adoption in May 2019. 


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Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Budget and Virements Policy 


The Budget and Virements Policy aims to empower senior managers with an efficient financial and budgetary 
amendment and control system to ensure optimum service delivery within the legislative framework of the MFMA 
and the Municipality's system of delegations. The Budget and Virements Policy was amended to ensure it is mSCOA 
compliant and needs to be approved by Council in May 2019 in respect of both Operating and Capital Budget Fund 
Transfers. 

| Cash Management and Investment Policy 


The Municipality's Cash Management and Investment Policy needs to be approved by Council in May 2019. The aim 
of the policy is to ensure that the Municipality's surplus cash and investments are adequately managed, especially 
the funds set aside for the cash backing of certain reserves. The policy details the minimum cash and a cash 
eguivalent reguired at any point in time and introduces timeframes to achieve certain benchmarks. The amendment 
is to ensure the policy is GRAP compliant. 

Tariff Policies 


The Municipality's tariff policies provide a broad framework within which the Council can determine fair, transparent 
and affordable charges that also promote sustainable service delivery. The policies have been approved on various 
dates and a consolidated tariff policy is envisaged to be compiled for ease of administration and implementation of 
the next two years. 

| Financial Modelling and Scenario Planning Policy 


The Financial Modelling and Scenario Planning Policy will be compiled during the 2020/21 MTREF with the emphasis 
on affordability and long-term sustainability. The policy will dictate the approach to longer term financial modelling. 
The outcomes will then be filtered into the budget process. The model and scenario planning outcomes will be taken 
to Council every November and then translate into recommendations for the budget guidelines that inform the 
compilation of the next MTREF. One of the salient features of the policy will be the emphasis on financial 
sustainability. Amongst others, the following will be modelled as part of the financial modelling and scenario 
planning process: 

• Approved 2019/20 Adjustments Budget; 

• Cash Flow Management Interventions, Initiatives and Strategies (including the cash backing of reserves); 

• Economic climate and trends (i.e. Inflation, household debt levels, indigent factors, growth, recessionary 
implications); 

• Loan and investment possibilities; 

• Performance trends; 

• Tariff Increases; 

• The ability of the community to pay for services (affordability); 

• Policy priorities; 

• Improved and sustainable service delivery; and 

• Debtor payment levels. 

All the above existing policies are available on the Municipality's website, and all new policies will be placed on the 
website once adopted by Council. These include the following budget related policies: 

• Property Rates Policy; 

• Funding and Reserves Policy; 

• Borrowing Policy; 

• Budget Policy; and 

• Basic Social Services Package (Indigent Policy). 


Page 96 of 157 









Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Overview of budget assumptions 


J External factors 


Owing to the economic slowdown, financial resources are limited due to reduced payment levels by consumers. This 
has resulted in declining cash inflows, which has necessitated restrained expenditure to ensure that cash outflows 
remain within the affordability parameters of the Municipality's finances. 

| General inflation outlook and its impact on the municipal activities 


There are five key factors that have been taken into consideration in the compilation of the 2020/21 MTREF: 

• National Government macro-economic targets; 

• The general inflationary outlook and the impact on Municipality's residents and businesses; 

• The impact of municipal cost drivers; 

• The increase in prices for bulk electricity; and 

• The increase in the cost of remuneration. Employee related costs comprise 31% of total operating 
expenditure in the 2020/21 MTREF and therefore this increase above inflation places a disproportionate 
upward pressure on the expenditure budget 

I Interest rates for borrowing and investment of funds 

The MFMA specifies that borrowing can only be utilised to fund capital or refinancing of borrowing in certain 
conditions. 

| Collection rate for revenue services 


The base assumption is that tariff and rating increases will increase at a rate slightly higher that CPI over the long 
term. It is also assumed that current economic conditions, and relatively controlled inflationary conditions, will 
continue for the forecasted term. 

The rate of revenue collection is currently expressed as a percentage (90%) of annual billings. Cashflow is assumed 
to be 90% of billings, plus an increased collection ofarrear debt from the revised collection and credit control policy. 
The performance ofarrear collections will however only be considered a source of additional cash in-flow once the 
performance has been carefully monitored. 

jj Growth or decline in tax base of the municipality 


Debtors' revenue is assumed to increase at a rate that is influenced by the consumer debtors' collection rate, 
tariff/rate pricing, real growth rate of the Municipality, household formation growth rate and the poor household 
change rate. 

Household formation is the key factor in measuring municipal revenue and expenditure growth, as servicing 
'households' is a greater municipal service factor than servicing individuals. Household formation rates are 
assumed to convert to household dwellings. In addition, the change in the number of poor households influences 
the net revenue benefit derived from household formation growth, as it assumes that the same costs incurred for 
servicing the household exist, but that no consumer revenue is derived as the 'poor household' limits consumption 
to the level of free basic services. 


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Abapulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Salary increases 

The multi-year Salary and Wage Collective Agreement from SALGBC has expired and consultations are still ongoing 
until National Treasury advise the outcome, the municipality has budget for an annual increase of 7% for the 
2020/21 financial year and for the two outer years 6%. 

Impact of national, provincial and local policies 


Integration of service delivery between national, provincial and local government is critical to ensure focussed 
service delivery and, in this regard, various measures were implemented to align IDPs, provincial and national 
strategies around priority spatial interventions. In this regard, the following national priorities form the basis of all 
integration initiatives: 

• Creating jobs; 

• Enhancing education and skill development; 

• Improving Health services; 

• Rural development and agriculture; and 

• Fighting crime and corruption. 

To achieve these priorities integration mechanisms are in place to ensure integrated planning and execution of 
various development programs. The focus will be to strengthen the link between policy priorities and expenditure 
thereby ensuring the achievement of the national, provincial and local objectives. 

Ability of the municipality to spend and deliver on the programmes 


It is estimated that a spending rate of at least 97 % is achieved on operating expenditure and 98% on the capital 
programme for the 2020/21 MTREF of which performance has been factored into the cashflow budget. 


Overview of budget funding 


Medium-term outlook: operating revenue 


Tariff setting plays a major role in ensuring desired levels of revenue. Getting tariffs right assists in the compilation 
of a credible and funded budget. The Municipality derives most of its operational revenue from the provision of 
goods and services such as water, electricity, sanitation and solid waste removal. Property rates, operating and 
capital grants from organs of state and other minor charges (such as building plan fees, licenses and permits etc). 

The revenue strategy is a function of key components such as: 

• Growth in the municipality and economic development; 

• Revenue management and enhancement; 

• Achievement of a 90 % annual collection rate for consumer revenue; 

• National Treasury guidelines; 

• Electricity tariff increases within the National Electricity Regulator of South Africa (NERSA) approval; 

• Achievement of full cost recovery of specific user charges; 

• Determining tariff escalation rate by establishing/calculating revenue reguirements; 

• The Property Rates Policy in terms of the Municipal Property Rates Act, 2004 (Act 6 of 2004) (MPRA), and 

• And the ability to extend new services and obtain cost recovery levels. 


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Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


The above principles guide the annual increase in the tariffs charged to the consumers and the ratepayers aligned 
to the economic forecasts. 

The proposed tariff increases for the 2020/21 MTREF on the different revenue categories are: 

Revenue to be generated from property rates is R84,6 million in the 2020/21 financial year and increases to R92,9 
million by 2022/23 which represents 15% of the operating revenue base of the Municipality. It remains relatively 
constant over the medium-term. With the implementation of the Municipal Property Rates Act the basis of rating 
significantly changed. 

The Municipality is still in a process of further data verification and validation relating to the valuation roll. As the 
levying of property rates is considered strategic revenue source further supplementary valuation processes will be 
undertaken during the 2020/21 financial year. The outcome of this initiative will be closely monitored and reported on 
a regular basis as part of the quarterly performance reporting. 

Services charges relating to electricity, water, sanitation and refuse removal constitutes the biggest component of the 
revenue basket of the Municipality totalling R 280,4 million for the 2020/21 financial year and increasing to R307,9 
million by 2022/23. For the 2020/21 financial year services charges amount to 48% of the total revenue base and 
remains constant over the medium-term. 

Operational grants and subsidies amount to R 176,1 million, R 190,1 million and R 200,2 million for each of the 
respective financial years of the MTREF, or 32% of operating revenue. It needs to be noted that in real terms the grants 
receipts from national government are growing rapidly over the MTREF. The percentage of the total operational grants 
and transfers in relation to the total operating revenue is distorted owing to the high increases in revenue relating to 
services charges. 

Investment revenue contributes marginally to the revenue base of the Municipality with a budget allocation of Rl,7 
million, Rl,3 million for the respective three financial years of the 2020/21 MTREF. It needs to be noted that these 
allocations have been conservatively estimated and as part of the cash backing of reserves and provisions. The actual 
performance against budget will be carefully monitored. Any variances in this regard will be addressed as part of the 
mid-year review and adjustments budget. 

The tables below provide detail investment information and investment particulars by maturity. 


Page 99 of 157 



Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 20 KZN263 SA15 - Detail Investment Particulars by type 


KZN263 Abaqulusi - Supporting Table SA15 Investment particulars by type 


Investment type 

R thousand 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & 
Expenditure Framework 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Parent municioalitv 











Securities - National Government 

Listed Corporate Bonds 

Deposits - Bank 

Deposits - Public Investment Commissioners 

Deposits - Corporation for Public Deposits 

Bankers’ Acceptance Certificates 

Negotiable Certificates of Deposit - Banks 

Guaranteed Endowment Policies (sinking) 
Repurchase Agreements - Banks 

Municipal Bonds 











Municipality sub-total 

Entities 

1 



















Securities - National Government 

Listed Corporate Bonds 

Deposits - Bank 

Deposits - Public Investment Commissioners 

Deposits - Corporation for Public Deposits 

Bankers’ Acceptance Certificates 

Negotiable Certificates of Deposit - Banks 

Guaranteed Endowment Policies (sinking) 
Repurchase Agreements - Banks 










Entities sub-total 











- 

- 

- 

- 

- 

- 

- 

- 

- 

Consolidated total: 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 100 of 157 





















Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 21 KZN263 SA16 - Investment Particulars by Maturity 
KZN263 Abaqulusi - Supporting Table SA16 Investment particulars by maturity 


Investments by Maturity 

Name of institution & investment ID 

Ref 

1 

Period of 
Investment 

Type of 
Investment 

Capital 
Guarantee 
(Yes / No) 

Variable or Fixed 
interest rate 

Interest 
Rate 3 

Commission Paid 
(Rands) 

Commission 

Recipient 

Expiry date of 
investment 

Yrs/Months 

Parent municipality 




















Municipality sub-total 

Entities 










1 









Entities sub-total 

TOTAL INVESTMENTS AND INTEREST 










Page 101 of 157 



















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


For the medium-term, the funding strategy has been informed directly by ensuring financial sustainability and 
continuity. The draft MTREF therefore provides for a zero balance in each of the financial years. The municipality is 
seriously busy with an exercise of auditing of meters for electricity in the 2020/21 financial year. 

Medium-term outlook: capital revenue 

The following table is a breakdown of the funding composition of the 2020/21 medium-term capital programme: 

Table 22 Sources of Capital Revenue over the MTREF - Medium Term Revenue & Expenditure Framework A5 
Capital 


Funded bv 





National Government 


40 821 

48 779 

48 626 

Provincial Government 


- 

- 

- 

District Municipality 


- 

- 

- 

Other transfers and grants 


- 

- 

- 

Transfers recognised - capital 

4 

40 821 

48 779 

48 626 

Public contributions and donations 

5 




Borrowing 

6 

- 

- 

- 

Internally generated funds 


4 550 

- 

- 

Total Capital Funding 

7 

45 371 

48 779 

48 626 


Page 102 of 157 



















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Figure 3 Sources of capital revenue for the 2020/21 financial year 

Capital grants and receipts represents R 4,5 million from own funding and R40 million from grant funding for the 
2020/21 financial year. 

The following table is a detailed analysis of the Municipality's borrowing liability. (SA 17) 


Page 103 of 157 



Aba a ulus i Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 23 KZN263 Table SA 17 - Detail of Borrowings Categorised by Type 


KZN263 Abaqulusi - Supporting Table SA17 Borrowing 


Borrowing - Categorised by type 

R thousand 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & 
Expenditure Framework 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Parent municipality 











Annuity and Bullet Loans 

Long-Term Loans (non-annuity) 

Local registered stock 

Instalment Credit 

Financial Leases 

PPP liabilities 

Finance Granted by Cap Equipment Supplier 

Marketable Bonds 

Non-Marketable Bonds 

Bankers Acceptances 

Financial derivatives 

Other Securities 

Municipality sub-total 

Entities 

1 



















Annuity and Bullet Loans 

Long-Term Loans (non-annuity) 

Local registered stock 

Instalment Credit 

Financial Leases 

PPP liabilities 

Finance Granted by Cap Equipment Supplier 

Marketable Bonds 

Non-Marketable Bonds 

Bankers Acceptances 











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Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Financial derivatives 

Other Securities 

Entities sub-total 

1 










- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Borrowing 

1 

- 

- 

- 

- 

- 

- 

- 

- 

- 




Unspent Borrowing - Categorised by type 

Parent municipality 











Long-Term Loans (annuity/reducing balance) 
Long-Term Loans (non-annuity) 

Local registered stock 

Instalment Credit 

Financial Leases 

PPP liabilities 

Finance Granted by Cap Equipment Supplier 
Marketable Bonds 

Non-Marketable Bonds 

Bankers Acceptances 

Financial derivatives 

Other Securities 

Municipality sub-total 

Entities 

1 



















Long-Term Loans (annuity/reducing balance) 
Long-Term Loans (non-annuity) 

Local registered stock 

Instalment Credit 

Financial Leases 

PPP liabilities 

Finance Granted by Cap Equipment Supplier 
Marketable Bonds 

Non-Marketable Bonds 

Bankers Acceptances 

Financial derivatives 

Other Securities 

Entities sub-total 

1 










- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Unspent Borrowing 

1 

- 

- 

- 

- 

- 

- 

- 

- 

- 


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Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Figure 4 Growth in outstanding borrowing (long-term liabilities) 

Internally generated funds consist of a mixture between surpluses generated on the operating 
statement of financial performance and cash backed reserves. In determining the credibility of this 
funding source, it becomes necessary to review the cash flow budget as well as the cash backed 
reserves and accumulated funds reconciliation, as discussed below. 


Page 106 of 157 



Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 24 KZN263 Table SA 18 - Capital transfers and Grant Receipts 


KZN263 Abaqulusi - Supporting Table SA18 Transfers and grant receipts 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure 
Framework 

R thousand 


Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year+1 
2021/22 

Budget Year +2 
2022/23 

RECEIPTS: 

1,2 










Operatina Transfers and Grants 











National Government: 


129 913 

135 462 

150 041 

172 970 

172 970 

172 970 

176191 

190168 

200 206 

Local Government Equitable Share 


106 890 

117 257 

130 276 

148 281 

148 281 

148 281 

160 312 

173 368 

185 006 

Finance Management 


1 625 

1 700 

1 770 

2 235 

2 235 

2 235 

2 600 

2 800 

3 200 

Municipal Systems Improvement 


- 

- 

1 700 

1 800 

1 800 

1 800 

- 

- 

- 

Integrated National Electrification Programme 


20 000 

15 000 

15 000 

19 000 

19 000 

19 000 

11448 

14 000 

12 000 

EPWP Incentive 


1 398 

1 505 

1 295 

1 654 

1 654 

1 654 

1 831 

- 

- 

Other transfers/grants [insert description] 











Provincial Government: 


4 068 

4 052 

4111 

5 503 

5 503 

5 503 

_ 

. 

. 

Sport and Recreation 




50 







Arts & Culture - Museum 


175 

183 


202 

202 

202 




Arts & Culture - Library - Provincial 


3 714 

2 963 

3111 

4 284 

4 284 

4 284 




Arts & Culture - Library - Community Centre 


179 

906 

950 

1 017 

1 017 

1 017 




District Municipality: 











[insert description] 











Other grant providers: 











[insert description] 











Total Operating Transfers and Grants 

5 

133 981 

139 514 

154152 

178 473 

178 473 

178 473 

176191 

190168 

200 206 

Capital Transfers and Grants 











National Government: 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 

Municipal Infrastructure Grant (MIG) 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 


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Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Other capital transfers/grants [insert desc] 











Provincial Government: 


. 

. 

. 

. 

. 

_ 

. 

_ 

. 

Other capital transfers/grants [insert 
description] 











District Municipality: 











[insert description] 











Other grant providers: 











[insert description] 











Total Capital Transfers and Grants 

5 

30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 

TOTAL RECEIPTS OF TRANSFERS & GRANTS 


164136 

177 254 

190 586 

215 608 

215 608 

215 608 

213 095 

230 062 

242 288 


Page 108 of 157 
























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


KZN263 Abaqulusi - Supporting Table SA22 Summary councillor and staff benefits 


Summary of Employee and Councillor 
remuneration 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure 
Framework 

R thousand 


Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year +1 
2021/22 

Budget Year +2 
2022/23 


1 

A 

B 

C 

D 

E 

F 

G 

H 

1 

Councillors (Political Office Bearers olus Other) 











Basic Salaries and Wages 


- 

- 

821 

- 

- 

- 

- 

- 

- 

Pension and UIF Contributions 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Medical Aid Contributions 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Motor Vehicle Allowance 


- 

10 

- 

- 

- 

- 

- 

- 

- 

Cellphone Allowance 


- 

14 994 

15 207 

18 300 

18 300 

- 

19 490 

20 425 

21 406 

Housing Allowances 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other benefits and allowances 


16145 

- 

- 

- 

- 

- 

- 

- 

- 

Sub Total-Councillors 


16145 

15 005 

16 029 

18 300 

18 300 

- 

19 490 

20 425 

21 406 

% increase 

4 


(7.1%) 

6.8% 

14.2% 

- 

(100.0%) 

- 

4.8% 

4.8% 

Senior Manaqers of the Municipality 

2 










Basic Salaries and Wages 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Pension and UIF Contributions 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Medical Aid Contributions 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Overtime 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Performance Bonus 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Motor Vehicle Allowance 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Cellphone Allowance 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Housing Allowances 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other benefits and allowances 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Payments in lieu of leave 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Long service awards 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Post-retirement benefit obligations 

6 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Sub Total - Senior Managers of Municipality 


- 

- 

- 

- 

- 

- 

- 

- 

- 

% increase 

4 


- 

- 

- 

- 

- 

- 


- 

Other Municipal Staff 











Basic Salaries and Wages 


104 787 

120111 

98 240 

112 692 

115 784 

- 

120 894 

126 570 

132 860 

Pension and UIF Contributions 


5 855 

(2 863) 

685 

3 672 

3 667 

- 

3 858 

4 043 

4 237 

Medical Aid Contributions 


6 274 

7 672 

6 974 

8 444 

8 444 

- 

8 993 

9 424 

9 877 

Overtime 


15 932 

17 450 

10 538 

8 700 

8 320 

- 

8 861 

9 286 

9 732 

Performance Bonus 


4 896 

5 807 

6 320 

6 735 

6 735 

- 

7216 

7 562 

7 925 

Motor Vehicle Allowance 

3 

3 062 

459 

8 278 

8160 

8 080 

- 

8 572 

8 983 

9415 


Page 109 of 157 























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Cellphone Allowance 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Housing Allowances 

3 

427 

781 

978 

975 

999 

- 

1 063 

1 115 

1 168 

Other benefits and allowances 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Payments in lieu of leave 


- 

1 525 

- 

- 

- 

- 

- 

- 

- 

Long service awards 


150 

(117) 

- 

2 000 

2 000 

- 

2 098 

2199 

2 304 

Post-retirement benefit obligations 

6 

1 682 

781 

(1 071) 

1 350 

1 350 

- 

1 416 

1 484 

1 555 

Sub Total - Other Municipal Staff 


143 064 

151 607 

130 942 

152 728 

155 379 

- 

162 971 

170 666 

179 073 

% increase 

4 


6.0% 

(13.6%) 

16.6% 

1.7% 

(100.0%) 

- 

4.7% 

4.9% 

Total Parent Municipality 


159 208 

166 612 

146 971 

171 029 

173 679 

- 

182 460 

191 091 

200 479 




4.7% 

(11.8%) 

16.4% 

1.5% 

(100.0%) 

- 

4.7% 

4.9% 

Board Members of Entities 











Basic Salaries and Wages 

Pension and UIF Contributions 

Medical Aid Contributions 

Overtime 

Performance Bonus 

Motor Vehicle Allowance 

3 










Cellphone Allowance 

3 










Housing Allowances 

3 










Other benefits and allowances 

3 










Board Fees 

Payments in lieu of leave 

Long service awards 

Post-retirement benefit obligations 

6 










Sub Total - Board Members of Entities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

% increase 

4 


- 

- 

- 

- 

- 

- 


- 

Senior Manaaers of Entities 











Basic Salaries and Wages 

Pension and UIF Contributions 

Medical Aid Contributions 

Overtime 

Performance Bonus 

Motor Vehicle Allowance 

3 










Cellphone Allowance 

3 










Housing Allowances 

3 










Other benefits and allowances 

Payments in lieu of leave 

Long service awards 

3 











Page 110 of 157 





















Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Post-retirement benefit obligations 

6 










Sub Total - Senior Managers of Entities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

% increase 

4 


- 

- 

- 

- 

- 

- 

- 

- 

Other Staff of Entities 











Basic Salaries and Wages 

Pension and UIF Contributions 

Medical Aid Contributions 

Overtime 

Performance Bonus 

Motor Vehicle Allowance 

3 










Cellphone Allowance 

3 










Housing Allowances 

3 










Other benefits and allowances 

3 










Payments in lieu of leave 

Long service awards 

Post-retirement benefit obligations 

6 










Sub Total - Other Staff of Entities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

% increase 

4 







- 



Total Municipal Entities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL SALARY, ALLOWANCES & BENEFITS 


159 208 

166 612 

146 971 

171 029 

173 679 


182 460 

191 091 

200 479 

% increase 

4 


4.7% 

(11.8%) 

16.4% 

1.5% 

(100.0%) 

- 

4.7% 

4.9% 

TOTAL MANAGERS AND STAFF 

5,7 

143 064 

151 607 

130 942 

152 728 

155 379 

- 

162 971 

170 666 

179 073 


Pagelll of 157 























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Monthly Targets for Revenue, Expenditure and Cash Flow 


Description 

Budget Year 2020/21 

Medium Term Revenue and 
Framework 

Expenditure 

R thousand 

July 

August 

Sept. 

October 

November 

December 

January 

February 

March 

April 

May 

June 

Budget Year 
2020/21 

Budget Year +1 
2021/22 

Budget Year +2 
2022/23 

Revenue bv Vote 
















Vote 1-VOTE 1 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 2: Finance & Administration 

75 643 

8 427 

8 427 

8 427 

8 427 

75 643 

8 427 

8 427 

75 643 

8 427 

8 427 

8427 

302 775 

319 877 

339 086 

Vote 3: Community & Social Services 

93 

93 

93 

93 

93 

4 753 

93 

93 

93 

93 

93 

93 

5 777 

5 979 

6 273 

Vote 4: Energy Sources 

19 581 

15 765 

15 765 

15 765 

15 765 

19 581 

15 765 

15 765 

19 581 

15 765 

15 765 

15 765 

200 630 

212 201 

219 714 

Vote 5: Housing 

- 

- 

- 

- 

- 

316 

- 

- 

- 

- 

- 

- 

316 

- 

- 

Vote 6: Internal Audit 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 7: Other 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 8: Planning and Development 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

44 

530 

303 

317 

Vote 9: Public Safety 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

1 164 

13 967 

14 638 

15 340 

Vote 10: Road Transport 

197 

197 

197 

197 

197 

197 

197 

197 

197 

197 

197 

197 

2 363 

190 

199 

Vote 11: Sport and Recreation 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Vote 12: Waste Management 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

1 743 

20 916 

21 920 

22 972 

Vote 13: Waste Water Management 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

30 010 

31 450 

32 960 

Vote 14: Water Management 

3414 

3414 

3 414 

3414 

3414 

3414 

3414 

3414 

3 414 

3 414 

3414 

3 414 

40 971 

42 879 

44 937 

Total Revenue by Vote 

104 380 

33 349 

33 349 

33 349 

33 349 

109 356 

33 349 

33 349 

104 380 

33 349 

33 349 

33 349 

618 256 

649 436 

681 799 

Expenditure bv Vote to be appropriated 
















Vote 1-VOTE 1 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

2 964 

35 566 

37 206 

38 924 

Vote 2: Finance & Administration 

6 230 

6 230 

6 230 

6 230 

6 230 

6 230 

6 230 

6 230 

6 230 

6 230 

6 230 

6 229 

74 755 

78 316 

82 048 

Vote 3: Community & Social Services 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

1 949 

23 392 

24 394 

25 787 

Vote 4: Energy Sources 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

20 779 

249 349 

262 152 

278 307 

Vote 5: Housing 

109 

109 

109 

109 

109 

425 

109 

109 

109 

109 

109 

109 

1 624 

1 371 

1 437 

Vote 6: Internal Audit 

670 

670 

670 

670 

670 

670 

670 

670 

670 

670 

670 

670 

8 040 

8 426 

8 830 

Vote 7: Other 

52 

52 

52 

52 

52 

52 

52 

52 

52 

52 

52 

52 

626 

656 

687 

Vote 8: Planning and Development 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

1 294 

15 523 

16 269 

17 049 

Vote 9: Public Safety 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

2 991 

35 891 

37 614 

39 419 

Vote 10: Road Transport 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

2 732 

32 788 

34 362 

36 011 

Vote 11: Sport and Recreation 

775 

775 

775 

775 

775 

775 

775 

775 

775 

775 

775 

775 

9 301 

9 748 

10216 

Vote 12: Waste Management 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

1 934 

23 206 

24 313 

25 474 

Vote 13: Waste Water Management 

2178 

2178 

2178 

2178 

2178 

2178 

2178 

2178 

2178 

2178 

2178 

2178 

26134 

27 386 

28 698 

Vote 14: Water Management 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

3 057 

36 689 

38 445 

40 284 


Page 112 of 157 



























Abagulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 


Total Expenditure by Vote 

47 714 

47 714 

47 714 

47 714 

47 714 

48 030 

47 714 

47 714 

47 714 

47 714 

47 714 

47 714 

572 885 

600 657 

633 173 

Surpius/(Deficit) before assoc. 

56 666 

(14 365) 

(14 365) 

(14 365) 

(14 365) 

61 326 

(14 365) 

(14 365) 

56 666 

(14 365) 

(14 365) 

(14 365) 

45 371 

48 779 

48 626 

Taxation 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Attributable to minorities 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Share of surplus/ (deficit) of associate 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) 

56 666 

(14 365) 

(14 365) 

(14 365) 

(14 365) 

61 326 

(14 365) 

(14 365) 

56 666 

(14 365) 

(14 365) 

(14 365) 

45 371 

48 779 

48 626 


Page 113 of 157 
























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


KZN263 Abaqulusi - Supporting Table SA25 Budgeted monthly revenue and expenditure 


Description 

R thousand 

Ref 

Budget Year 2020/21 

July 

August 

Sept. 

October 

November 

December 

January 

February 

March 

April 

May 

June 

Revenue Bv Source 














Property rates 


7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

7 053 

Service charges - electricity revenue 


15712 

15712 

15712 

15712 

15712 

15712 

15712 

15712 

15712 

15712 

15712 

15712 

Service charges - water revenue 


3 414 

3 414 

3 414 

3 414 

3 414 

3 414 

3 414 

3 414 

3414 

3414 

3 414 

3 414 

Service charges - sanitation revenue 


2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

2 501 

Service charges - refuse revenue 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

20 916 















Rental of facilities and equipment 


88 

88 

88 

88 

88 

88 

88 

88 

88 

88 

88 

88 

Interest earned - external investments 


149 

149 

149 

149 

149 

149 

149 

149 

149 

149 

149 

149 

Interest earned - outstanding debtors 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Dividends received 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Fines, penalties and forfeits 


2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

2 021 

Licences and permits 


429 

429 

429 

429 

429 

429 

429 

429 

429 

429 

429 

429 

Agency services 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Transfers and subsidies 


59 462 

117 

117 

117 

117 

64122 

117 

117 

59462 

117 

117 

117 

Other revenue 


123 

123 

123 

123 

123 

123 

123 

123 

123 

123 

123 

123 

Gains 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Revenue (excluding capital transfers and contributions) 


90 951 

31 606 

31 606 

31 606 

31 606 

95 611 

31 606 

31 606 

90 951 

31 606 

31 606 

52 522 

Expenditure Bv Type 














Employee related costs 


13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

13 581 

Remuneration of councillors 


1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

1 624 

Debt impairment 


468 

468 

468 

468 

468 

468 

468 

468 

468 

468 

468 

468 

Depreciation & asset impairment 


3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

3 346 

Finance charges 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Bulk purchases 


16318 

16318 

16318 

16318 

16318 

16318 

16318 

16318 

16318 

16318 

16 318 

16318 

Other materials 


2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

2 249 

Contracted services 


5 772 

5 772 

5 772 

5 772 

5 772 

6 088 

5 772 

5 772 

5 772 

5 772 

5 772 

5 772 

Transfers and subsidies 


993 

993 

993 

993 

993 

993 

993 

993 

993 

993 

993 

993 

Other expenditure 


3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

3 363 

Losses 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Expenditure 


47 714 

47 714 

47 714 

47 714 

47 714 

48 030 

47 714 

47 714 

47 714 

47 714 

47 714 

47 714 

Surplus/(Deficit) 


43 237 

(16108) 

(16108) 

(16108) 

(16 108) 

47 581 

(16108) 

(16108) 

43 237 

(16108) 

(16108) 

4 808 


Page 114 of 157 


























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Transfers and subsidies - capital (monetary allocations) 

(National / Provincial and District) 


11 686 

- 

- 

- 

- 

12 002 

- 

- 

11 686 

- 

- 

(0) 

Transfers and subsidies - capital (monetary allocations) 

(National / Provincial Departmental Agencies, Households, Non¬ 
profit Institutions, Private Enterprises, Public Corporatons, Higher 
Educational Institutions) 














Transfers and subsidies - capital (in-kind - all) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) after capital transfers & contributions 


54 923 

(16108) 

(16108) 

(16 108) 

(16 108) 

59 583 

(16108) 

(16108) 

54 923 

(16108) 

(16108) 

4 808 

Taxation 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Attributable to minorities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Share of surplus/ (deficit) of associate 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/(Deficit) 

1 

54 923 

(16108) 

(16108) 

(16 108) 

(16 108) 

59 583 

(16108) 

(16108) 

54 923 

(16108) 

(16108) 

4 808 


Page 115 of 157 





















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


|| Cash Flow Management 


Cash flow management and forecasting is a critical step in determining if the budget is funded over 
the medium-term. The table below is consistent with international standards of good financial 
management practice and also improves understand ability for councillors and management. Some 
specific features include: 

• Clear separation of receipts and payments within each cash flow category; 

• Clear separation of capital and operating receipts from government, which also enables cash 
from "Ratepayers and other" to be provide for as cash inflow based on actual performance. In 
other words, the actual collection rate of billed revenue., and 

• Separation of borrowing and loan repayments (no set-off), to assist with MFMA compliance 
assessment regarding the use of long-term borrowing (debt). 


Table A7 Budgeted Cash Flows 


Description 

Ref 

2020/21 Financial 
period 

2021/22 Financial period 

2022/23 Financial period 

R thousands 


Munsoft Budget Data 
2020/21 

Munsoft Budget Data 
2021/22 

Munsoft Budget Data 
2022/23 

CASH FLOW FROM OPERATING ACTIVITIES 





Receipts 


687 154 

759 872 

794 826 

Property rates 


176 950 

226 366 

236 779 

Service charges 


250 295 

255 493 

267 246 

Other revenue 


32 011 

34 034 

35 600 

Government - operating 

1 

189 707 

203 072 

212414 

Government - capital 

1 

37121 

39 772 

41 601 

Interest 

Dividends 


1 070 

1 134 

1 186 

Payments 


(630 419) 

(659 569) 

(761 204) 

Suppliers and employees 

Finance charges 


(619 632) 

(648 135) 

(749 244) 

Transfers and Grants 

1 

(10 787) 

(11 434) 

(11 960) 

NET CASH FROM/(USED) OPERATING ACTIVITIES 


56 735 

100 303 

33 622 

CASH FLOWS FROM INVESTING ACTIVITIES 





Receipts 


- 

- 

- 

Proceeds on disposal of PPE 


- 

- 

- 

Decrease (increase) other non-current receivables 


- 

- 

- 

Decrease (increase) in non-current investments 


- 

- 

- 

Payments 


(45 371) 

(48 779) 

(48 626) 

Capital assets 


(45 371) 

(48 779) 

(48 626) 

NET CASH FROM/(USED) INVESTING ACTIVITIES 


(45 371) 

(48 779) 

(48 626) 

CASH FLOWS FROM FINANCING ACTIVITIES 





Receipts 


- 

- 

- 

Short term loans 


- 

- 

- 

Borrowing long term/refinancing 


- 

- 

- 

Increase (decrease) in consumer deposits 


- 

- 

- 

Payments 


- 

- 

- 

Repayment of borrowing 


- 

- 

- 


Page 116 of 157 

















Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


NET CASH FROM/(USED) FINANCING ACTIVITIES 


- 

- 

- 

NET INCREASE/ (DECREASE) IN CASH HELD 


11 364 

51 524 

(15 004) 

Cash/cash equivalents at the year begin: 

2 

4 809 

16173 

67 697 

Cash/cash equivalents at the yearend: 

2 

16173 

67 697 

52 693 


The above table shows that cash and cash equivalents of the Municipality were largely depleted 
between the 2015/16 and 2019/20 financial year moving from a positive cash balance of R36 million 
to a balance of R16,9 million with the approved 2019/20 MTREF. With the 2019/20 adjustments 
budget various cost efficiencies and savings had to be realised to ensure the Municipality could meet 
its operational expenditure commitments. In addition, the Municipality will have to undertake an 
extensive debt collection process to boost cash levels in the 2020/21 financial year. These initiatives 
and interventions still translate into a negative cash position for the Municipality and it is projected 
that cash and cash equivalents on hand will decrease by the financial year end. For the 2020/21 MTREF 
the budget has been prepared to ensure high levels of cash and cash equivalents over the medium- 
term with cash levels anticipated to increase in 2020/21 and steadily increase by 2022/23. This 
schedule will be revisited before the final draft is presented in May 2020. 

| Cash Backed Reserves/Accumulated Surplus Reconciliation 

This following table meets the requirements of MFMA Circular 42 which deals with the funding of a 
municipal budget in accordance with Sections 18 and 19 of the MFMA. The table seeks to answer three 
key questions regarding the use and availability of cash: 

• What are the predicted cash and investments that are available at the end of the budget year? 

• How are those funds used? 

• What is the net funds available or funding shortfall? 

A surplus would indicate the cash-backed accumulated surplus that was/is available. A shortfall 
(applications > cash and investments) is indicative of non-compliance with Section 18 of the MFMA 
requirement that the municipality's budget must be "funded". Non-compliance with Section 18 is 
assumed because a shortfall would indirectly indicate that the annual budget is not appropriately 
funded (budgeted spending is greater than funds available or to be collected). It is also important to 
analyse trends to understand the consequences, e.g. the budget year might indicate a small surplus 
situation, which in itself is an appropriate outcome, but if in prior years there were much larger 
surpluses then this negative trend may be a concern that requires closer examination. 


Page 117 of 157 










Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


From the above table it can be seen that the cash and investments available total R16,l million in the 
2020/21 financial year and remains constant to 2021/22, including the projected cash and cash 
equivalents as determined in the cash flow forecast. The following is a breakdown of the application 
of this funding: 

• Unspent conditional transfers (grants) are automatically assumed to be an obligation as the 
municipality has received government transfers in advance of meeting the conditions. 
Ordinarily, unless there are special circumstances, the municipality is obligated to return 
unspent conditional grant funds to the national revenue fund at the end of the financial year. 
In the past these have been allowed to 'roll-over' and be spent in the ordinary course of 
business, but this practice has been discontinued. During the 2019/20 financial year the 
municipality was required to supply National Treasury with a detailed analysis of the unspent 
grants as well as an action plan of spending the grants. For the 2020/21 financial year no 
provision has been made for this liability as the total unspent conditional grant liability has 
been factored into the 2020/21 capital programme of the Municipality. The Municipality will 
apply for the necessary roll-over approval from the National Treasury as the funding 
appropriation relating to the unspent conditional grants needs to be motivated as part of 
existing projects. 

• There is no unspent borrowing from the previous financial years. In terms of the municipality's 
Borrowing and Investments Policy, borrowings are only drawn down once the expenditure has 
been incurred against the particular project. 

• Provisions for statutory requirements include VAT owing to timing differences resulting from 
year- end obligations. The municipality will not have a liability as VAT is normally claimed from 
SARS. 

• The main purpose of other working capital is to ensure that sufficient funds are available to 
meet obligations as they fall due. A key challenge is often the mismatch between the timing 
of receipts of funds from debtors and payments due to employees and creditors. Fiigh levels 
of debtor non-payment and receipt delays will have a greater requirement for working capital, 
as was experienced by the Municipality in 2019/20 resulting in cash flow challenges. For the 
purpose of the cash backed reserves and accumulated surplus reconciliation a provision 
equivalent to one month's operational expenditure has been provided for. It needs to be noted 
that although this can be considered prudent, the desired cash levels should be 60 days to 
ensure continued liquidity of the municipality. Any underperformance in relation to collections 
could place upward pressure on the ability of the Municipality to meet its creditor obligations. 

The 2020/21 MTREF has been informed by ensuring the financial plan meets the minimum 
requirements of the MFMA. Nevertheless, from a pure cash flow perspective (cash out flow versus 
cash inflow) the budget is not funded as expenditure is more than the anticipated revenue. The 
challenge for the Municipality will be to ensure that the underlying planning and cashflow assumptions 
are meticulously managed, especially the performance against the collection rate. 


Page 118 of 157 



Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Funding compliance measurement 


National Treasury requires that the municipality assess its financial sustainability against fourteen 
different measures that look at various aspects of the financial health of the municipality. These 
measures are contained in the following table. All the information comes directly from the annual 
budgeted statements of financial performance, financial position and cash flows. The funding 
compliance measurement table essentially measures the degree to which the proposed budget 
complies with the funding requirements of the MFMA. Each of the measures is discussed below. 


Cash/cash equivalent position 


The Municipality's forecast cash position was discussed as part of the budgeted cash flow statement. 
A "positive" cash position, for each year of the MTREF would generally be a minimum requirement, 
subject to the planned application of these funds such as cash-backing of reserves and working capital 
requirements. 

If the municipality's forecast cash position is negative, for any year of the medium-term budget, the 
budget is very unlikely to meet MFMA requirements or be sustainable and could indicate a risk of non- 
compliance with Section 45 of the MFMA which deals with the repayment of short-term debt at the 
end of the financial year. The forecasted cash and cash equivalents for the 2020/21 MTREF shows a 
surplus of R16,l million increasing to R67,6 million in 2021/22 and R52,6 million in 2022/23. 

Cash plus investments less application of funds 


The purpose of this measure is to understand how the municipality has applied the available cash and 
investments as identified in the budgeted cash flow statement. The reconciliation is intended to be a 
relatively simple methodology for understanding the budgeted amount of cash and investments 
available with any planned or required applications to be made. This has been extensively discussed 
above. 


Monthly average payments covered by cash or cash equivalents 


The purpose of this measure is to understand the level of financial risk should the municipality be under 
stress from a collection and cash in-flow perspective. Regardless of the annual cash position an 
evaluation should be made of the ability of the Municipality to meet monthly payments as and when 
they fall due. It is especially important to consider the position should the municipality be faced with 
an unexpected disaster that threatens revenue collection such as rate boycotts. As indicated above 
the Municipality aims to achieve at least one month's cash coverage in the medium term, and then 
gradually move towards two months coverage. This measure will have to be carefully monitored going 
forward. 


Surplus/deficit excluding depreciation offsets 


The main purpose of this measure is to understand if the revenue levels are sufficient to conclude that 
the community is making a sufficient contribution for the municipal resources consumed each year. An 


Page 119 of 157 











Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


'adjusted' surplus/deficit is achieved by offsetting the amount of depreciation related to externally 
funded assets. Municipalities need to assess the result of this calculation taking into consideration its 
own circumstances and levels of backlogs. If the outcome is a deficit, it may indicate that rates and 
service charges are insufficient to ensure that the community is making a sufficient contribution toward 
the economic benefits they are consuming over the medium term. 

It needs to be noted that a surplus does not necessarily mean that the budget is funded from a cash 
flow perspective and the first two measures in the table are therefore critical. 


Property Rates/service charge revenue as a percentage increase less macro inflation target 


The purpose of this measure is to understand whether the municipality is contributing appropriately to 
the achievement of national inflation targets. This measure is based on the increase in 'revenue', which 
will include both the change in the tariff as well as any assumption about real growth such as new 
property development, services consumption growth etc. 

The factor is calculated by deducting the maximum macro-economic inflation target increase (which 
is currently 5%). The result is intended to be an approximation of the real increase in revenue. However, 
the outcome is lower than it might be due to the slowdown in the economy and a reduction in 
consumption patterns. This trend will have to be carefully monitored and managed with the 
implementation of the budget. 


Cash receipts as a percentage of ratepayer and other revenue 


This factor is a macro measure of the rate at which funds are "collected". This measure is intended to 
analyse the underlying assumed collection rate for the MTREF to determine the relevance and 
credibility of the budget assumptions contained in the budget. It can be seen that the outcome is at 
100% for each of the respective financial years. Given that the assumed collection rate was based on 
a 85% performance target, the cash flow statement has been conservatively determined. This measure 
and performance objective will have to be meticulously managed. Should performance with the mid¬ 
year review and adjustments be positive in relation to actual collections of billed revenue, the 
adjustments budget will be amended accordingly. 


Debt impairment expense as a percentage of billable revenue 


This factor measures whether the provision for debt impairment is being adequately funded and is 
based on the underlying assumption that the provision for debt impairment (doubtful and bad debts) 
has to be increased to offset under-collection of billed revenues. The provision has been appropriated 
at 0% over the MTREF. Considering the debt incentive scheme and the municipality's revenue 
management strategy's objective to collect outstanding debtors of 90 days, the provision is well within 
the accepted leading practice. 


Page 120 of 157 









Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Capital payments percentage of capital expenditure 


The purpose of this measure is to determine whether the timing of payments has been taken into 
consideration when forecasting the cash position. The municipality aims to keep this as low as possible 
through strict compliance with the legislative requirement that debtors be paid within 30 days. 


Borrowing as a percentage of capital expenditure (excluding transfers, grants and contributions) 


The purpose of this measurement is to determine the proportion of a municipality's 'own-funded' 
capital expenditure budget that is being funded from borrowed funds to confirm MFMA compliance. 
Externally funded expenditure (by transfers/grants and contributions) has been be excluded. It can be 
seen that borrowing equates to 0% of own funded capital. Further details relating to the borrowing 
strategy of the Municipality can be found on page 104. 


Transfers/grants revenue as a percentage of Government transfers/grants available 


The purpose of this measurement is mainly to ensure that all available transfers from national and 
provincial government have been budgeted for. A percentage less than 100 % could indicate that not 
all grants as contained in the Division of Revenue Act (DoRA) have been budgeted for. The Municipality 
has budgeted for all transfers. 


Consumer debtors change (Current and Non-current) 


The purpose of these measures is to ascertain whether budgeted reductions in outstanding debtors are 
realistic. There are 2 measures shown for this factor; the change in current debtors and the change in 
long term receivables, both from the Budgeted Financial Position. Both measures show a relatively 
stable trend in line with the Municipality's policy of settling debtors' accounts within 30 days. 


Repairs and maintenance expenditure level 


This measure must be considered important within the context of the funding measures criteria 
because a trend that indicates insufficient funds are being committed to asset repair could also indicate 
that the overall budget is not credible and/or sustainable in the medium to long term because the 
revenue budget is not being protected. 


Asset renewal/rehabilitation expenditure level 


This measure has a similar objective to aforementioned objective relating to repairs and maintenance. 
A requirement of the detailed capital budget (since MFMA Circular 28 which was issued in December 
2005) is to categorise each capital project as a new asset or a renewal/rehabilitation project. The 
objective is to summarise and understand the proportion of budgets being provided for new assets and 
also asset sustainability. A declining or low level of renewal funding may indicate that a budget is not 
credible and/or sustainable and future revenue is not being protected, similar to the justification for 
'repairs and maintenance' budgets. 


Page 121 of 157 















Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Expenditure on grants and reconciliations of unspent funds 


Table 45 KZN263 SA19 - Expenditure on Transfers and Grant Programmes 


KZN263 Abaqulusi - Supporting Table SA19 Expenditure on transfers and grant programme 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure Framework 

R thousand 


Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year +1 
2021/22 

Budget Year +2 
2022/23 

EXPENDITURE: 

1 










Oneratinq expenditure of Transfers and Grants 











National Government: 


129 913 

135 462 

150 041 

172 970 

172 970 

172 970 

176191 

190168 

200 206 

Local Government Equitable Share 


106 890 

117 257 

130 276 

148 281 

148 281 

148 281 

160 312 

173 368 

185 006 

Finance Management 


1 625 

1 700 

1 770 

2 235 

2 235 

2 235 

2 600 

2 800 

3 200 

Municipal Systems Improvement 


- 

- 

1 700 

1 800 

1 800 

1 800 

- 

- 

- 

Integrated National Electrification Programme 


20 000 

15 000 

15 000 

19 000 

19 000 

19 000 

11 448 

14 000 

12 000 

EPWP Incentive 


1 398 

1 505 

1 295 

1 654 

1 654 

1 654 

1 831 

- 

- 

Other transfers/grants [insert description] 











Provincial Government: 


4 068 

4 052 

4111 

5 503 

5 503 

5 503 

. 

_ 

_ 

Sport and Recreation 




50 







Arts & Culture - Museum 


175 

183 


202 

202 

202 




Arts & Culture - Library - Provincial 


3 714 

2 963 

3111 

4 284 

4 284 

4 284 




Arts & Culture - Library - Community Centre 


179 

906 

950 

1 017 

1 017 

1 017 




District Municipality: 











[insert description] 











Other grant providers: 


. 

. 

_ 

. 

. 

_ 

_ 

. 

_ 

[insert description] 











Total operating expenditure of Transfers and Grants: 


133 981 

139 514 

154152 

178 473 

178473 

178 473 

176191 

190168 

200 206 

Capital expenditure of Transfers and Grants 











National Government: 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 


Page 122 of 157 
































Aba a ul us i Municipality _ Draft 2020/21 Annual Budget and MTREF 


Municipal Infrastructure Grant (MIG) 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 

Other capital transfers/grants [insert desc] 











Provincial Government: 


. 

. 

. 

. 

. 

_ 

. 

_ 

_ 

Other capital transfers/grants [insert description] 











District Municipality: 


. 

_ 

_ 

_ 

_ 

_ 

. 

. 

_ 

[insert description] 











Other grant providers: 


. 

. 

_ 

_ 

_ 

. 

. 

_ 

_ 

[insert description] 











Total capital expenditure of Transfers and Grants 


30155 

37 740 

36 434 

37135 

37135 

37135 

36 904 

39 894 

42 082 

TOTAL EXPENDITURE OF TRANSFERS AND GRANTS 


164136 

177 254 

190 586 

215 608 

215 608 

215 608 

213 095 

230 062 

242 288 


Page 123 of 157 

























Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 25 KZN263 SA 20 - Reconciliation between of transfers, grant receipts and unspent funds 
KZN263 Abaqulusi - Supporting Table SA20 Reconciliation of transfers, grant receipts and unspent funds 


Description 

R thousand 

Ref 

2015/16 

2016/17 

2017/18 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure Framework 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year +1 
2020/21 

Budget Year +2 
2021/22 

Ooeratina transfers and qrants: 

National Government: 

1,3 










Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 


129193 

129 913 

135 598 

135 056 

157 541 

157 541 

172 970 

183 021 

195 969 

129193 

129 913 

135 598 

135 056 

157 541 

157 541 

172 970 

183 021 

195 969 










Provincial Government: 











Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 


5 522 

4 068 

4 052 

4 253 

4 303 

4111 

4 986 

4 732 

5 010 

5 522 

4 068 

4 052 

4 253 

4 303 

4111 

4 986 

4 732 

5 010 










District Municipality: 











Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 











- 

- 

- 

- 

- 

- 

- 

- 

- 










Other grant providers: 











Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 











- 

- 

- 

- 

- 

- 

- 

- 

- 










Total operating transfers and grants revenue 


134 715 

133 981 

139 650 

139 309 

161 844 

161 652 

177 956 

187 753 

200 979 

Total operating transfers and grants - CTBM 

2 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Capital transfers and qrants: 

National Government: 

1,3 










Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 


39 566 

30155 

37 740 

36 434 

36 434 

36 434 

37135 

39 075 

41 865 

39 566 

30155 

37 740 

36 434 

36 434 

36 434 

37135 

39 075 

41 865 










Provincial Government: 











Balance unspent at beginning of the year 

Current year receipts 












Page 124 of 157 

































Aba a ulus i Municipality 


Draft 2020/21 Annual Budget and MTREF 


Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 










District Municipality: 











Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 











- 

- 

- 

- 

- 

- 

- 

- 

- 










Other grant providers: 











Balance unspent at beginning of the year 

Current year receipts 

Conditions met - transferred to revenue 

Conditions still to be met - transferred to liabilities 











- 

- 

- 

- 

- 

- 

- 

- 

- 










Total capital transfers and grants revenue 


39 566 

30155 

37 740 

36 434 

36 434 

36 434 

37135 

39 075 

41 865 

Total capital transfers and grants - CTBM 

2 

- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL TRANSFERS AND GRANTS REVENUE 


174 281 

164136 

177 390 

175 743 

198278 

198 086 

215 091 

226 828 

242 844 

TOTAL TRANSFERS AND GRANTS ■ CTBM 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Page 125 of 157 


























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


| Contracts having future budgetary implications 


In terms of the Municipality's Supply Chain Management Policy, no contracts are awarded beyond the 
medium-term revenue and expenditure framework (three years). In ensuring adherence to this contractual 
timeframe limitation, all reports submitted to either the Bid Evaluation and Adjudication Committees must 
obtain formal financial comments from the Financial Management Division of the Treasury Department. 

| Capital expenditure details 


The following three tables present details of the Municipality's capital expenditure programme, firstly on 
new assets, then the renewal of assets and finally on the repair and maintenance of assets. 


Page 126 of 1S7 










Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Legislation compliance status 


Compliance with the MFMA implementation requirements have been substantially adhered to through the 
following activities: 

1. In year reporting 

Reporting to National Treasury in electronic format was fully complied with on a monthly basis. 
Section 71 reporting to the Mayor (within 10 working days) has progressively improved and includes 
monthly published financial performance on the Municipality's website. 

2. Internship programme 

The Municipality is participating in the Municipal Financial Management Internship programme and 
has employed four interns undergoing training in various divisions of the Financial Services 
Department. Since the introduction of the Internship programme the Municipality has successfully 
employed and trained interns through this programme and a majority of them were appointed either 
in the Municipality or other municipalities. 

3. Budget and Treasury Office 

The Budget and Treasury Office has been established in accordance with the MFMA. 

4. Audit Committee 

An Audit Committee has been established and is fully functional. 

5. Service Delivery and Implementation Plan 

The detail SDBIP document is at a draft stage and will be finalised after approval of the 2020/21 
MTREF in June 2020 directly aligned and informed by the 2020/21 MTREF. 

6. Annual Report 

Annual report is compiled in terms of the MFMA and National Treasury requirements. 

7. MFMA Training 

The MFMA training module in electronic format is presented for the Municipality's internal employees 
and training is on-going. 

Policies 

An amendment of the Municipal Property Rates Regulations as published in Government Notice 363 
of 27 March 2009 was announced in Government Gazette 33016 on 12 March 2010. The ratios as 
prescribed in the Regulations have been complied with. 


Page 127 of 1S7 







Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 26 KZN263 Table SA3 - Supporting detail to Statement of Financial Position 


KZN263 Abaqulusi - Supporting Table SA3 Supportinging detail to 'Budgeted Financial Position' 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & Expenditure Framework 

Audited 

Outcome 

Audited 

Outcome 

Audited 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Pre-audit 

outcome 

Budget Year 
2020/21 

Budget Year +1 
2021/22 

Budget Year +2 
2022/23 

R thousand 












ASSETS 












Consumer debtors 












Consumer debtors 


154 844 

183 002 

118 642 

320 636 

421 365 

- 

111 582 

53 665 

56182 

58 878 

Less: Provision for debt impairment 


(13 704) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Consumer debtors 

2 

141 140 

183 002 

118642 

320 636 

421 365 

- 

Ill 582 

53 665 

56182 

58 878 

Debt impairment provision 












Balance at the beginning of the year 
Contributions to the provision 

Bad debts written off 


(13 704) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Balance at end of year 


(13 704) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Property, plant and eauipment (PPE) 












PPE at cost/valuation (excl. finance leases) 


3 196 472 

4 486 281 

2 244 088 

35 279 

2212131 

- 

2199100 

45 371 

48 779 

48 626 

Leases recognised as PPE 

3 

6 010 

6 010 

- 

- 

- 

- 

- 

- 

- 

- 

Less: Accumulated depreciation 


1 727 867 

922 649 

765 591 

67 990 

834 392 

- 

782 952 

43120 

46 024 

51 804 

Total Property, plant and equipment (PPE) 

2 

1 474 614 

3 569 642 

1 478 497 

(32 712) 

1 377 738 

- 

1 416148 

2 251 

2 755 

(3 179) 

LIABILITIES 

Current liabilities - Borrowinq 












Short term loans (other than bank overdraft) 


- 

(0) 

- 

- 

- 

- 

- 

- 

- 

- 

Current portion of long-term liabilities 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Current liabilities - Borrowing 


- 

(0) 

- 

- 

- 

- 

- 

- 

- 

- 

Trade and other pavables 












Trade Payables 

5 

245 555 

205 988 

356 077 

(66 310) 

212 295 

- 

337 999 

88 254 

91 110 

97618 

Other creditors 


- 

- 

557 

- 

- 

- 

- 

- 

- 

- 

Unspent conditional transfers 


10 475 

- 

- 

- 

- 

- 

- 

- 

- 

- 

VAT 


4 502 

44 547 

7 749 

- 

39 285 

- 

65 024 

- 

- 

- 

Total Trade and other payables 

2 

260 532 

250 535 

364 383 

(66 310) 

251 580 

- 

403 023 

88 254 

91 110 

97 618 


Page 128 of 157 

































Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Non current liabilities - Borrowinq 












Borrowing 

4 

- 

(197) 

(197) 

- 

(197) 

- 

(197) 

- 

- 

- 

Finance leases (including PPP asset element) 


- 

(14) 

(14) 

- 

(14) 

- 

(14) 

- 

- 

- 

Total Non current liabilities - Borrowing 


- 

(212) 

(212) 

- 

(212) 

- 

(212) 

- 

- 

- 

Provisions - non-current 












Retirement benefits 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 













Refuse landfill site rehabilitation 


- 

27142 

- 

- 

- 

- 

- 

- 

- 

- 

Other 


- 

- 

23 059 

- 

23 059 

- 

23 059 

- 

- 

- 

Total Provisions - non-current 


- 

27142 

23 059 

- 

23 059 

- 

23 059 

- 

- 

- 

CHANGES IN NET ASSETS 

Accumulated Surolus/fDeficit) 












Accumulated Surplus/fDeficit) - opening balance 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

GRAP adjustments 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Restated balance 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Surplus/fDeficit) 


(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Transfers to/from Reserves 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Depreciation offsets 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other adjustments 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Accumulated Surplus/fDeficit) 

Reserves 

1 

(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 

Housing Development Fund 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Capital replacement 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Self-insurance 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other reserves 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Revaluation 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Total Reserves 

2 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

TOTAL COMMUNITY WEALTH/EQUITY 

2 

(86 856) 

(28 626) 

(14 348) 

2 299 

8 686 

- 

84 319 

45 371 

48 779 

48 626 


Page 129 of 157 




























Aba a ulus i Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 27 KZN263 Table SA9 - Social, Economic and Demographic Statistics and Assumptions 


KZN263 Abaqulusi - Supporting Table SA9 Social, economic and demographic statistics and assumptions 


Description of economic indicator 

Ref. 

Basis of calculation 

2001 Census 

2007 

Survey 

2011 

Census 

2015/16 

2016/17 

2017/18 

Current Year 
2019/20 

2020/21 Medium Term Revenue & Expenditure 
Framework 

Outcome 

Outcome 

Outcome 

Original Budget 

Outcome 

Outcome 

Outcome 

Demoqraphics 













Population 

Females aged 5-14 

Males aged 5-14 

Females aged 15-34 

Males aged 15-34 

Unemployment 












Monthly household income (no. of households) 

1,12 












No income 

R1 - R1 600 

R1 601 - R3 200 

R3 201 - R6 400 

R6 401 -R12 800 

R12 801 -R25 600 

R25 601 - R51 200 

R52 201 -R102 400 

R102 401 -R204 800 

R204 801 - R409 600 

R409 601 -R819 200 

> R819 200 












Poverty profiles (no. of households) 

13 

2 












< R2 060 per household per month 

Insert description 

























Household/demoaraohics (000) 













Number of people in municipal area 

Number of poor people in municipal area 













Page 130 of 157 




























Abagulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Number of households in municipal area 

Number of poor households in municipal area 

Definition of poor household (R per month) 













Housina statistics 

3 












Formal 

Informal 












Total number of households 

- 

- 






- 

- 

- 

Dwellings provided by municipality 

Dwellings provided by province/s 

Dwellings provided by private sector 

4 

5 












Total new housing dwellings 

- 

- 









Economic 

6 












Inflation/inflation outlook (CPIX) 

Interest rate - borrowing 

Interest rate - investment 

Remuneration increases 

Consumption growth (electricity) 

Consumption growth (water) 











Collection rates 

7 












Property tax/service charges 

Rental of facilities & equipment 

Interest - external investments 

Interest - debtors 

Revenue from agency services 

























Page 131 of 157 


























Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


KZN263 Abaqulusi - Table A10 Basic service delivery measurement 


Description 

Ref 

2016/17 

2017/18 

2018/19 

Current Year 2019/20 

2020/21 Medium Term Revenue & 
Expenditure Framework 

Outcome 

Outcome 

Outcome 

Original 

Budget 

Adjusted 

Budget 

Full Year 
Forecast 

Budget Year 
2020/21 

Budget Year 
+1 2021/22 

Budget Year 
+2 2022/23 

Household service taraets 

1 










Water: 











Piped water inside dwelling 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Piped water inside yard (but not in dwelling) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using public tap (at least min. service level) 

2 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other water supply (at least min. service level) 

4 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using public tap (< min. service level) 

3 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Other water supply (< min. service level) 

4 

- 

- 

- 

- 

- 

- 

- 

- 

- 

No water supply 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation/seweracte: 











Flush toilet (connected to sewerage) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Flush toilet (with septic tank) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Chemical toilet 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Pit toilet (ventilated) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other toilet provisions (> min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Bucket toilet 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other toilet provisions (< min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

No toilet provisions 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Enerav: 











Electricity (at least min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity - prepaid (min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity (< min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity - prepaid (< min. service level) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other energy sources 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse: 












Page 132 of 157 



Aba a ulus i Municipality 


Draft 2020/21 Annual Budget and MTREF 


Removed at least once a week 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Minimum Service Level and Above sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Removed less frequently than once a week 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using communal refuse dump 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Using own refuse dump 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Other rubbish disposal 


- 

- 

- 

- 

- 

- 

- 

- 

- 

No rubbish disposal 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Below Minimum Service Level sub-total 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total number of households 

5 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Households receivinq Free Basic Service 

7 










Water (6 kilolitres per household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (free minimum level service) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (50kwh per household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (removed at least once a week) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Cost of Free Basic Services provided - Formal Settlements (R'000) 

8 










Water (6 kilolitres per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (free sanitation service to indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (50kwh per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (removed once a week for indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Cost of Free Basic Services provided - Informal Formal Settlements (R'000) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Total cost of FBS provided 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Hiqhest level of free service provided per household 











Property rates (R value threshold) 

Water (kilolitres per household per month) 

Sanitation (kilolitres per household per month) 

Sanitation (Rand per household per month) 

Electricity (kwh per household per month) 

Refuse (average litres per week) 











Revenue cost of subsidised services provided (R'000) 

9 










Property rates (tariff adjustment) (impermissible values per section 17 of MPRA) 











Property rates exemptions, reductions and rebates and impermissible values in excess of 
section 17 of MPRA) 











Water (in excess of 6 kilolitres per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (in excess of free sanitation service to indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (in excess of 50 kwh per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (in excess of one removal a week for indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Municipal Housing - rental rebates 












Page 133 of 157 




























Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Housing - top structure subsidies 

Other 

6 










Total revenue cost of subsidised services provided 


- 

- 

- 

- 

- 

- 

- 

- 

- 


Hiqhest level of free service provided per household 











Property rates (R value threshold) 


15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

Water (kilolitres per household per month) 

Sanitation (kilolitres per household per month) 

Sanitation (Rand per household per month) 


6 

6 

6 

6 

6 

6 

6 

6 

6 

Electricity (kwh per household per month) 

Refuse (average litres per week) 


50 

50 

50 

50 

50 

50 

50 

50 

50 

Revenue cost of subsidised services provided (R'000) 

9 










Property rates (tariff adjustment) (impermissible values per section 17 of MPRA) 


15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

Property rates exemptions, reductions and rebates and impermissible values in excess of 
section 17 of MPRA) 











Water (in excess of 6 kilolitres per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Sanitation (in excess of free sanitation service to indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Electricity/other energy (in excess of 50 kwh per indigent household per month) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Refuse (in excess of one removal a week for indigent households) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

Municipal Housing - rental rebates 

Housing - top structure subsidies 

Other 

6 










Total revenue cost of subsidised services provided 


15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 

15 000 


Page 134 of 157 



































Abciciulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Table 28 KZN263 SA32 - List of External Mechanisms 


KZN263 Abaqulusi - Supporting Table SA32 List of external mechanisms 


External mechanism 

Name of organisation 

Yrs / 
Mths 

Period of 
agreement 1. 

Service provided 

Expiry date of 
service delivery 
agreement or 
contract 

Monetary 
value of 
agreement 

2. 

Number 

R thousand 

Magnacorp 



Refuse Removal 


6198 

Uhaqane Ml 



Refuse Removal 


4 788 

PWC 



Preparation of AFS 


1 200 

Qomkufa Trading 

Mths 


Security 


11 561 

Ekaya Promotions 

Mths 


Protective Clothing 


250 

RIS Motors 



Car Rental 


2 485 

Valuation Roll 



Valuation Roll 


1 500 

Quantum Leap Investments 



Grass cutting & cleaning 


6 700 

EOH 



Caretakers at dam 


89 

ITEC 



Office Machine Rental 


540 

Daisy Communications 



Office Machine Rental 


350 

Nashua 



Office Machine Rental 


30 

Protea Coin 



Cash Collection 


308 

Munsoft 



IT Rental 


2 000 

Payday 



Payroll Support 


100 

Trafman 



Traffic Summons System 


100 

Nashua 



Office Machine Rental 


63 

Otis 



Office Machine Rental 


15 

Link Up Security 



After Hours Monitoring 


600 

Mazn Pty Ltd 



Meter Reading 


1 342 

Siwella Funerals 



Indigent Burials 


600 

Garlicke & Bousfield 



Lawyers 


1 000 

Vehicle leases 



Leasing of Graders 


10 000 

Vehicle leases 



Leasing of vehicles 


10 000 

Steiner Hygiene 



Hygiene suppliers 


134 

Brandfin 



Speed Fine Machine Rental 


145 

Matsiya Construction Engineering 



Testing, fault location 


219 

Inside Data South Pty Ltd 



Printing, Posting accounts 


136 

Contour 



Commission on vendor 


1 200 

Schindler Lifts SA 



Servicing of lift 


30 


Page 135 of 157 















Aba a ulus i Municipality 


Draft 2020/21 Annual Budget and MTREF 


KEV 



Connections/Disconnections 


1 333 

ADO Research 



Vending machines 


318 

Bigen Africa 



Debt Collection 


3 600 

Louwsburg Spar 



Rental Agreement 


20 

Mweb 



Internet 


80 

C Vermaak 



Louwsburg Services 


400 

Windeed 



Clearance Certificates 


36 

Muncomp 



Records System 


180 

Telkom 



Telephone 


1 200 

Auditor-General 



Audit 


2 500 

Rheochem 



Chemicals 


5 000 

Netstar 



Tracker for own vehicles 


150 

Marsh 



Insurance 


2 000 

SALGA 



Membership 


2 000 


Page 136 of 157 












Draft 2020/21 Annual Budget and MTREF 


Abaqulusi Municipality 


Our Ref.: 

Your Ref. 

Enquiries: 
Dept.: Finance 



b M A S If A I- V 
** O N i c 1 P A L IT* 

^vnisipalitxi* 


S3 VRYHEID 3100 
c/o, Mark & High Street 



(034) 982-2133 



: (034) 982-1939 


E-mail: finance@abaqulusi. gov.ze 


QUALITY CERTIFICATE 


I, BE NTANZI, Municipal Manager of ABAQULUSI MUNICIPALITY, hereby certify that: (mark as 
appropriate) 


□ 

□ 

□ 


The monthly budget statement 

Quarterly report on the implementation of the budget and financial state of 
affairs to the municipality 

Mid-year budget and performance assessment 

Draft Medium Term Budget 


The Draft Medium Term Budget for 2020/21 has been prepared in accordance with the 
Municipal Finance Management Act and regulations made under the Act. 


BE NTANZI 

MUNICIPAL MANAGER 
ABAQULUSI MUNICIPALITY 

KZN263 


SIGNATURE: 


Page 137 of 157 


DATE: 
































Abagulusi Municipality _ Draft 2020/21 Annual Budget and MTREF 

Certification that the adopted budget for 2020/21 is correctly captured 
and locked on the municipality's financial management system 

(as requested by National Treasury in terms of section 74 of the MFMA, with reference to paragraph 6.3 of 

MFMA Budget Circular 59 dated 16 March 2012) 


I, BE NTANZI, in my capacity as accounting officer of the municipality, hereby certify that: 

• The adopted annual budget has been captured on the municipality's financial system; 

• There is 100 per cent reconciliation between the budget on the system and the budget adopted by council; 

• The adopted annual budget on the municipality's financial system is locked and will not be changed as it serves 
as the baseline against which to monitor and measure performance; and 

• The relevant budget return forms have been submitted to the local government database. 

I, further certify theat the municipality has in place controls to ensure that any changes to the adopted 
budget will be captured separately and only in accordance with: 

• a virement authorised by the municipal manager, or duly delegate official, in terms of a council approved 
virements policy; and 

• an adjustments budget approved by council. 

Print Name _ 


Municipal manager of _ 

(name and demarcation code of municipality) 

Signature _ 

Date _ 

This certificate must be submitted to National Treasury by close of business 1 April 2020 at the following 
email address: ladocuments@treasury.qov.za . 

Also send copies to the Auditor General and the relevant provincial treasury 


Page 142 of 157 












Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Province: Municipality (KZN263) - Schedule of Service Delivery Standards Table 

Description 

Standard Service Level 

Solid Waste Removal 


Premise based removal (Residential Frequency) 

Weekly 

Premise based removal (Business Frequency) 

Daily 

Bulk Removal (Frequency) 

Weekly 

Removal Bags provided (Yes/No) 

No 

Garden refuse removal Included (Yes/No) 

No 

Street Cleaning Frequency in CBD 

Daily 

Street Cleaning Frequency in areas excluding CBD 

No 

How soon are public areas cleaned after events (24hours/48hours/longer) 

48 hours 

Clearing of illegal dumping (24hours/48hours/longer) 

Longer 

Recycling or environmentally friendly practices (Yes/No) 

No 

Licenced landfill site (Yes/No) 

Yes 



Water Service 


Water Quality rating (Blue/Green/Brown/NO drop) 

No drop 

Is free water available to all? (All/only to the indigent consumers) 

Only to indigent consumers and consumers in ZDM areas who are not metered 

Frequency of meter reading? (per month, per year) 

Monthly 

Are estimated consumption calculated on actual consumption over (two month's/three months’/longer period) 

Read on a monthly basis 

On average for how long does the municipality use estimates before reverting back to actual readings? 

(months) 

N/A 

Duration (hours) before availability of water is restored in cases of service interruption (complete the 
sub questions) 


One service connection affected (number of hours) 

4 hours 

Up to 5 service connection affected (number of hours) 

4 hours 

Up to 20 service connection affected (number of hours) 

16 hours 

Feeder pipe larger than 800mm (number of hours) 

24 hours 

What is the average minimum water flow in your municipality? 

240 mg It/month 

Do you practice any environmental or scarce resource protection activities as part of your operations? 

(Yes/No) 

No 

How long does it take to replace faulty water meters? (days) 

1 hour 

Do you have a cathodic protection system in place that is operational at this stage? (Yes/No) 

No 


Page 144 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Province: Municipality (KZN263) - Schedule of Service Delivery Standards Table 

Description 

Standard Service Level 



Electricity Service 


What is your electricity availability percentage on average per month? 

100% 

Do your municipality have a ripple control in place that is operational? (Yes/No) 

Yes 

How much do you estimate is the cost saving in utilizing the ripple control system? 

Via load control 

What is the frequency of meters being read? (per month, per year) 

Monthly 

Are estimated consumption calculated at consumption over (two month's/three months’/longer period) 

Read on a monthly basis 

On average for how long does the municipality use estimates before reverting back to actual readings? 

(months) 

N/A 

Duration before availability of electricity is restored in cases of breakages (immediately/one day/two 
days/longer) 

Immediately where possible 

Are accounts normally calculated on actual readings? (Yes/no) 

Yes 

Do you practice any environmental or scarce resource protection activities as part of your operations? 

(Yes/No) 

No 

How long does it take to replace faulty meters? (days) 

Within 30 days 

Do you have a plan to prevent illegal connections and prevention of electricity theft? (Yes/No) 

Yes, tender has been drawn up 

How effective is the action plan in curbing line losses? (Good/Bad) 

Not in use at the moment 

How soon does the municipality provide a quotation to a customer upon a written request? (days) 

Within 7 days 

How long does the municipality takes to provide electricity service where existing infrastructure can be used? 
(working days) 

Within 10 days 

How long does the municipality takes to provide electricity service for low voltage users where network 
extension is not required? (working days) 

Within 10 days 

How long does the municipality takes to provide electricity service for high voltage users where network 
extension is not required? (working days) 

Within 30 days 



Sewerage Service 


Are your purification system effective enough to put water back in to the system after purification? 

Yes 

To what extend do you subsidize your indigent consumers? 

Indigent consumers get subsidized 100% 

How Iona does it take to restore sewerage breakages on average 


Severe overflow? (hours) 

24 hours 

Sewer blocked pipes: Large pipes? (Hours) 

4 hours 

Sewer blocked pipes: Small pipes? (Hours) 

1 hour 

Spillage clean-up? (hours) 

1 hour 


Page 145 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Province: Municipality (KZN263) - Schedule of Service Delivery Standards Table 

Description 

Standard Service Level 

Replacement of manhole covers? (Hours) 

1 hour 



Road Infrastructure Services 


Time taken to repair a single pothole on a major road? (Hours) 

2 hours 

Time taken to repair a single pothole on a minor road? (Hours) 

1 hour 

Time taken to repair a road following an open trench service crossing? (Hours) 

8 hours 

Time taken to repair walkways? (Hours) 

4 hours 



Property valuations 


How long does it take on average from completion to the first account being issued? (one month/three months 
or longer) 

One month 

Do you have any special rating properties? (Yes/No) 

No 



Financial Management 


Is there any change in the situation of unauthorised and wasteful expenditure over time? (Decrease/Increase) 

Yes, it is decreasing 

Are the financial statement outsources? (Yes/No) 

AFS are compiled in conjunction with PWC 

Are there Council adopted business process structuring the flow and management of documentation feeding 
to Trial Balance? 

Yes 

How long does it take for a Tax/Invoice to be paid from the date it has been received? 

30 days 

Is there advance planning from SCM unit linking all departmental plans quarterly and annually including for 
the next two to three years procurement plans? 

No 



Administration 


Reaction time on enquiries and requests? 

7 working days 

Time to respond to a verbal customer enquiry or request? (working days) 

7 working days 

Time to respond to a written customer enquiry or request? (working days) 

7 working days 

Time to resolve a customer enquiry or request? (working days) 

7 working days 

What percentage of calls are not answered? (5%,10% or more) 

5% 

How long does it take to respond to voice mails? (hours) 

N/A 

Does the municipality have control over locked enquiries? (Yes/No) 

No 


Page 146 of 157 




Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Province: Municipality (KZN263) - Schedule of Service Delivery Standards Table 

Description 

Standard Service Level 

Is there a reduction in the number of complaints or not? (Yes/No) 

Yes 

How long does it take to open an account to a new customer? (1 day/ 2 days/ a week or longer) 

1 day 

How many times does SCM Unit, CFO's Unit and Technical unit sit to review and resolve SCM process delays 
other than normal monthly management meetings? 

Not often 



Community safety and licensing services 


How long does it take to register a vehicle? (minutes) 

60 minutes 

How long does it take to renew a vehicle license? (minutes) 

60 minutes 

How long does it take to issue a duplicate registration certificate vehicle? (minutes) 

60 minutes 

How long does it take to de-register a vehicle? (minutes) 

60 minutes 

How long does it take to renew a driver's license? (minutes) 

60 minutes 

What is the average reaction time of the fire service to an incident? (minutes) 

60 minutes 

What is the average reaction time of the ambulance service to an incident in the urban area? (minutes) 

N/A 

What is the average reaction time of the ambulance service to an incident in the rural area? (minutes) 

N/A 



Economic development 


How many economic development projects does the municipality drive? 

3 

How many economic development programmes are deemed to be catalytic in creating an enabling 
environment to unlock key economic growth projects? 

5 

What percentage of the projects have created sustainable job security? 

5% 


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Abaqulusi Municipality 


Draft 2020/21 Annual Budget and MTREF 


Province: Municipality (KZN263) - Schedule of Service Delivery Standards Table 

Description 

Standard Service Level 

Does the municipality have any incentive plans in place to create a conducive environment for economic 
development? (Yes/No) 

No 



Other Service delivery and communication 


Is an information package handed to the new customer? (Yes/No) 

No 

Does the municipality have training or information sessions to inform the community? (Yes/No) 

No 

Are customers treated in a professional and humanly manner? (Yes/No) 

Yes 


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