MUNICIPAL FINANCIAL VIABILITY AND MANAGEMENT ANALYSIS

FINANCIAL VIABILITY AND MANAGEMENT ANALYSIS

UMzimkhulu Municipality is viable and will continue to be viable. The municipality strives to be realistic in budgeting given its revenue streams. The municipal current ratio is always 4:1, meaning that the municipal current assets are 4 times higher than its current liabilities. This is indicative that, should the municipal liabilities be due, the municipality will be able to pay them off.

CAPABILITY OF THE MUNICIPALITY TO EXECUTE CAPITAL PROJECTS

UMzimkhulu municipality has enough capacity to execute all its capital projects, and is currently looking for other revenue streams that might fund additional capital projects.

INDIGENT POLICY / SUPPORT (INCLUDING FREE BASIC SERVICES)

The municipality has an adopted indigent policy that is reviewed every second quarter of the financial year. To ensure that the municipality provides free basic services to needy citizens, the municipality reviews its indigent register on a quarterly basis. This helps the municipality to determine the financial needs and use this information for Financial Plan and Budget provision to cater for the cost of providing Free Basic Services to registered Indigents. To date, the municipality is successfully implementing the Indigent Policy. The table below reflects the financial plan and budget provision for the cost of providing Free Basic Services to the registered indigent.

Table 40: Budget for Free Basic Services

The municipality will continue on performing data cleansing, to assist in updating the register as the client status of living changes.

REVENUE ENHANCEMENT AND PROTECTION STRATEGIES

The municipality has the Revenue Enhancement Strategy that is reviewed annually. The municipality has strategies that are being implemented. The strategies are of short term and in the long term.

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The municipality will seek funding for some strategies, as the municipality will not be able to fund all of them. The strategy has proposed reforms in the following:

Reforms in respect to rates and refuse;
Sundry income: potential introduction of new revenue lines and an enhancement of existing revenue categories;
The PPP (Public Private Partnership) Concept;
To consider providing water and sewerage services on behalf of Harry Gwala Municipality

The enhancement and protection strategy have benefitted the municipality. It is anticipated that all the new revenue streams will improve the municipal revenue base.

MUNICIPAL CONSUMER DEBT POSITION & STRATEGIES TO REDUCE THE DEBT

The municipal consumer debt position is currently standing at R6.8 million there was a slight growth from previous years. As an interventional measure, the municipality is currently implementing the debt collection, credit control and indigent policies to ensure that consumer debt is drastically reduced. This intervention is reaping positive results as the municipal debt position has decreased by almost 50% since the financial year 2012/2013. The table below reflects the municipal debt position in the last three (3) years.

Table 41: uMzimkhulu LM Debt Position in the last three (3) years

Meanwhile, the municipality will continue doing awareness campaign to the community and provide incentives to encourage consumers that are paying well.

GRANTS & SUBSIDIES

The following table presents a stream of grants that the municipality will receive from national treasury between 2014/2015 – 2016/2017 financial years.

Table 42: Municipal Grant and Subsidies

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MUNICIPAL INFRASTRUCTURE ASSETS & MAINTENANCE (Q&M)

The municipality developed an Infrastructure Assets Sector Plan that formulates a rational basis upon which infrastructure assets can be repaired and maintained planned. This plan also guides the municipality in the roll out of its assets to the greater population of UMzimkhulu Local Municipality and offers avenues that the municipality can utilize in exploring various funding streams. UMzimkhulu municipality has also purchased its own plant machinery that is helping in the maintenance of the gravel roads, as they constitute more than 70% of municipal infrastructure assets. The percentage of repairs and maintenance against the total non-current assets is currently 3.5%. The table below illustrates.

Table 43: % of Repairs & Maintenance / Non-current Assets

CURRENT & PLANNED BORROWINGS

The municipality does not have any current or planned borrowings. However, it can be considered in the future should a need arise.

MUNICIPAL CREDIT RATING

The municipality is still waiting for FNB to provide us with the municipal credit rating

EMPLOYEE RELATED COSTS (INCLUDING COUNCILOR ALLOWANCES)

Employee related costs are determined by the approved organogram of the municipality. However, the municipality prepares the budget estimates for the next three years and the estimate might change due to new post proposed by the municipal council.

The proposed budget estimates for employee related costs (including councillors’ allowance) are as follows:

2014/2015 - R 57 052 849 which was 41.5% of Total Expenditure

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2015/2016 - R 60 133 702, which is 35.2% of Total Expenditure 2016/2017 - R 63 380 922, which is 36.3% of Total Expenditure

It can be deduced that uMzimkhulu ERC does not exceed the benchmark of between 25 to 40%.

IMPACT ON THE FILLING OF THE CRITICAL VACANT POSTS

All critical positions in the municipality are currently filled. It is essential to fill the critical posts because they have major impact on service delivery.

EXPENDITURE ON CONTRACTED SERVICES

The municipal expenditure on professional services has declined since the 2012/13 financial year, apart from the 2013/2014. The table that follows elaborates how much the municipality has spent on contracted services in the last 3 years.

Table 44: Contract Fees against Total Operating Expenditure

SKILLS TRANSFER

The Supply Chain Management has put mechanisms in place all relevant SCM framework, regulations, legislations and treasury circulars that encourage the transfer of skills from the service providers to the municipal staff or community. The municipality introduced clauses in the contracts that require the service provider to c articulate how they will transfer skills to the municipal staff. Through this section, the municipality ensures that service providers implement this aspect as provided for in the approved proposal.

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FINANCIAL VIABILITY & MANAGEMENT: SWOT ANALYSIS

Table 45: Financial Viability & Financial Management SWOT Analysis