Strategic Goal 1: Strengthen Financial Sustainability.

STRATEGIC OBJECTIVE 1: BUDGET STRATEGICALLY

INTRODUCTION

The Municipality’s ability to render quality services is inextricably linked to its financial viability. Revenue is derived from three sources, namely: property rates, municipal service charges and government grants and subsidies. Property rates are payable by all property owners within the Municipal Area and service charges are payable by all consumers of services such as water, electricity and refuse removal. This source of revenue funds the bulk of the Municipality’s operational costs and we are thus dependent on the consumer fulfilling their obligations if we are to provide value for money services.

CHALLENGES

1. Indigent households

Poverty is impacting on a municipality’s financial viability and manifests in a high number of indigent households who qualify for indigent support. This is being exacerbated by increased migration into the area as evidenced by the increase in population statistics as well as the effect of the failing state (for example Eskom) on the economic growth in SA and thereby making the poor even poorer.

1. An inadequate and declining revenue base

Existing sources of revenue are no longer adequate to financially sustain the Municipality. The Municipality has a narrow rate base but cannot consider excessive increases on rates and service fees as the ability of many of consumers to pay their accounts is already severally impaired by the declining economy.

1. Unfunded mandates

The Municipality performs several functions that are not core municipal functions for which the municipality are not subsidised or only partially subsidised for example housing, vehicle licencing and libraries. These services place additional pressure on the already inadequate and declining rates base but are essential to the community.

1. Infrastructure and bulk service backlogs

Bulk service and service infrastructure is exceeding design capacity and the inability to provide sufficient bulk capacity makes the municipality unable to respond to development opportunities.

1. The cost of compliance

Compliance, although essential, comes at a substantial cost to the Municipality in terms of man hours and systems. All Municipalities have the same compliance obligations irrespective of the size of the Municipality and this is particularly challenging to smaller Municipalities such as Bergrivier who have limited personnel. Compliance will be addressed under Strategic Objective 3.

1. Municipal Standard Chart of Accounts (mSCOA)

National Treasury introduced the mSCOA project during the past years. This reform is seen as the biggest reform in local government since the implementation of the MFMA since 2004. All municipalities had to be mSCOA compliant from 1 July 2017.

DEVELOPMENT PRIORITIES

1. Sound Financial Management

• The Municipality has sound financial management policies and procedures which it implements judiciously, and high priority is placed on financial compliance. These measures will be continued and include:

  • The annual review of financial policies as required by the MFMA;

  • The annual review of assessment rates and service tariffs;

  • The implementation of stringent credit control measures;

  • Greater emphasis on revenue enhancement; and

  • The implementation of General Recognised Accounting Practices (GRAP).

1. Expenditure/ Supply Chain Management / Assets

• The SCM unit needs to be fully developed and resourced to improve on procurement. Standard operating procedures have been implemented and this has proved to be effective. A centralized order system was put in place from 1 July 2013 and the electronic management of this system is the next step;

• Improved expenditure management, especially expenditure on consultants. An expenditure control and cost saving intervention plan has already been adopted by the Finance Portfolio Committee and this will continue to be implemented over the IDP cycle, and

• The SCM Unit which is also responsible for asset management has been centralised at the Municipality’s main office in Piketberg.

1. Financial sustainability (Income / Debtors / Credit Control / Enquiries)

• The identification and application for alternate revenue sources and continuous efforts will be made to identify alternate revenue sources through IGR structures as well as other avenues;

• Stringent credit control measures and application of the credit control policy;

• Improving debtor management, especially alternative measures to collect overdue accounts. Debtor Management is a risk in terms of the Risk Register;

• Improving the management of water and electricity losses;

• The review of the indigent register to ensure that all indigents qualify for their indigent grant and expansion of the indigent grant programme to qualifying indigents. The increase in population could have a significant effect on the number of indigents;

• Improving debtor management, especially alternative measures to collect overdue accounts; and

• The development of a long-term financial plan.

1. Budget / Reporting / Financial Statements

• Improved financial reporting as required by Legislation and National and Provincial Treasury Guidelines.

1. Systems / Property Valuation and Rates

• Municipal property rates are one of our most important sources of income and it is imperative that the rates be based on credible valuations which are undertaken in terms of the Local Government: Municipal Property Rates Act. A General valuation was done during 2022/23. Two supplementary valuations will be done each year over the remainder of the IDP cycle; and

• Implementation of SCOA.

The full capital program is contained in Chapter 10.

STRATEGIC OBJECTIVE 2: ENTRENCH THE LONG-TERM FINANCIAL PLAN IN THE PLANNING, IMPLEMENTATION AND MANAGEMENT OF THE ORGANISATION.

INTRODUCTION

Long term financial planning is a prerequisite for strategic financial sustainability and has to be the cornerstone of the Municipality’s MTREF. A long-term financial plan over a 10-year horizon provides a strategic road map to Council. The objective of a Long-Term Financial Plan is to recommend strategies and policies that will maximise the probability of the municipality’s financial sustainability into the future. This is achieved by forecasting future cash flows and affordable capital expenditure based on the municipality’s historic performance and the environment in which it operates.

CHALLENGES

The Bergrivier Municipality is consistently being challenged by external factors that may have an impact on the operations and strategic plans. It is therefore critical that the long-term financial plan be updated continuously to incorporate the changes to the IDP, Master Plans, Asset Register and the latest annual financial statements. The impact of loadshedding on the municipality’s revenue raising ability must be assessed and our long-term financial plan must be adjusted to provide for even higher levels of loadshedding and hence lower electricity revenue, while expenditure on items such as security, diesel and overtime will increase.

DEVELOPMENT PRIORITIES

The Municipality must tighten its credit control measures as this could provide liquidity required to cushion against the impact of loadshedding and resultant loss of revenue. It is also imperative that the revenue section utilise technology to improve revenue collection and to complete the revenue enhancement project.

STRATEGIC OBJECTIVE 3: DIVERSIFY REVENUE AND ENSURE VALUE FOR MONEY SERVICES.

INTRODUCTION

Municipal revenue is derived from property rates, service charges, government grants and subsidies. We belief that the current fiscal model is outdated as it has become very clear for many years that the current fiscal model is unsustainable, and Municipalities are becoming less capable of delivering services to its residents. It is therefore critical to continue to, in conjunction with SALGA, CoGTA, Provincial Treasury and National Treasury, explore alternative revenue sources for Municipalities.

CHALLENGES

As already highlighted above, the biggest challenge is the current outdated fiscal model which must be reviewed to keep track with the evolution of the system of local government in South Africa. Elsewhere in this chapter, we have already alluded to the fact that loadshedding will have a detrimental impact and will significantly reduce the municipality’s revenue raising ability. This may hamper the ability of Bergrivier Municipality to deliver quality services and while every effort is being made to ensure sustainable service delivery, it is impossible to guarantee that no service disruptions will occur.

DEVELOPMENT PRIORITIES

The Bergrivier Municipality will continue to lobby the various Inter Governmental Relations structures and advocate for an urgent review of the current fiscal model to prevent a total collapse of service delivery amongst all municipalities in the country. A greater focus and emphasis will be placed on data cleansing and revenue enhancement. In terms of the budget guidelines adopted by the Budget Steering Committee, our aim is to reduce the reliance on surpluses of electricity and to collect more revenue from property rates which provides better predictability and reliability of future revenue streams.

STRATEGIC OBJECTIVE 4: ENSURE SUSTAINABLE FINANCIAL RISK AND ASSET MANAGEMENT.

INTRODUCTION

Asset management supported by good policies and an organisational culture of optimal utilisation of assets and maintenance plans to prevent impairment of our assets and ensuring that assets are productive over the original assessed and intended useful lifespan of the assets, is a function of the entire municipality and in particular asset owners. Our municipality has recently done an asset management project in conjunction with the Development Bank of South Africa. One aspect that still require attention and funding is the management of stores and inventory. The main financial risk management strategies include risk avoidance, risk reduction, risk transfer, and risk retention. Risk management is also an integral part of the municipality’s internal strategy to ensure that its objectives are achieved.

CHALLENGES

The municipality currently does not have a risk manager, and this is one of the critical positions to be considered for funding in the 2023/24 MTREF. The stores are currently under the management and supervision of the technical services while financial services are fulfilling the financial function. The aim is to move the stores function to Financial Services and to operate an electronic store with real time processing of financial information by 1 July 2024.

DEVELOPMENT PRIORITIES

The 6 improvement projects proposed for Bergrivier Municipality are as follows:

1. Finalise the development of a comprehensive Asset Management Framework through the existing Asset Care Programme.

2. Improve long term asset planning and budgeting though the existing Asset Care Programme as driven through the Strategic Asset Management Plan (SAMP).

3. The formalisation of work management will ensure that maintenance is done in a predictable preventive way, rather than reacting to asset failures. For Bergrivier Municipality this should be implemented through an external appointment that includes some basic Asset Management system information management activities.

4. Enabling staff to drive improved asset management through a project to sustainably reduce critical vacancies and improve succession planning.

5. Undertake a revenue improvement project that will identify the challenges to financial sustainability of the Municipality focusing at a minimum on debt management, revenue collection and cost control.

6. Formalise information management through the development of an asset information strategy, development of asset information standards, confirmation of asset data and enabling the asset management systems.

STRATEGIC OBJECTIVE 5: DIVERSIFY BY SOURCING GRANT FUNDING TO SUPPORT PROJECTS, PROGRAMMES AND INITIATIVES OF COUNCIL.

INTRODUCTION

Finance Department:

Municipalities across the country are increasingly struggling to deliver services due to lack of revenue to finance the development of bulk services and infrastructure upgrades and maintenance. The effect of urbanisation further exacerbates the crisis. It is simply impossible to expect the ratepayers and consumers to pay for this backlogs and lack of bulk infrastructure which in turn stifles critical economic development. It is the responsibility of all Directorates to source grant funding to support projects, programmes and initiatives of Council.

CHALLENGES

The global macro-economic conditions are deteriorating, and the Russia-Ukraine war dampens market sentiment resulting in global economic decline, unemployment and increase in poverty levels. Countries across the world are still suffering and trying to recover from the devastating impact of the Covid-19 pandemic. The South African economic outlook has recently been articulated in the Minister’s budget speech appears to worsen over the medium term and hence putting fiscal pressure on Government spending.

DEVELOPMENT PRIORITIES

Since the Municipality’s ability to generate own revenue is becoming increasingly under pressure, it is critical to approach Government (both SA and abroad) as well as public donors to provide financial support in the form of grants to fund our capital expenditure (most critical bulk services capacity and ageing infrastructure). The installation of smart water meters is a revenue generating project and old water meters should be replaced while the conventional type of water meters must be completely phased out. The replacement of water meters will also reduce water losses. We must however ensure that projects are bankable and implementation ready before approaching any external bodies for funding. It is also important to nurture and form partnerships with public bodies and institutions such as the DBSA to support our funding applications.

BUDGET (IF APPLICABLE)

Grant funding of R175 000.00

Office of the Municipal Manager

INTRODUCTION

Strategic Services, in the Office of the Municipal Manager, has been appointed as the champion for the Small-Town Regeneration Programme in which Piketberg was chosen as one of 3 national pilot projects. The core of the STR Programme in Piketberg will be the approved Precinct Plan with 6 focus areas to regenerate the town and to ensure that Piketberg can have a regional impact. This can be achieved through permanent governmental services in the town (such as Department of Home Affairs, SARS, etc) and the establishment of a School of Skills to ensure that young people can have the skills required by the market.

CHALLENGES

Some of the challenges with the implementation of the STR programme will include:

• Lack of capacity;

• Availability of funding; and

• Co-operation by all spheres of government to make the programme a success.

DEVELOPMENT PRIORITIES

As the Precinct Plan for Piketberg is already approved and bankable, it will be important to prioritise the 6 focus areas. These development priorities will include:

• Establishment of office space for Department of Home Affairs, SASSA and SARS;

• Include in the structure a new modern library to further ensure spatial transformation in the town;

• Include in the structure a new tourism office to ensure that Piketberg can develop into the N7-Gateway;

• Establishment of the Pietie Fredericks Youth Centre as a centre of excellence for young people to become leaders, become ready for the requirements of the labour market, etc;

• Establishment of a School of Skills to develop artisan skills for and in the area; and

• Regeneration of roads, pavements, general beautification, etc.

BUDGET (IF APPLICABLE)

An estimated R 250 000 000.00 will have to be sourced to implement the totality of the Precinct Plan. It is accepted that this grant funding may be sourced over the medium- to long term.

STRATEGIC OBJECTIVE 6: ENSURE TRANSPARENCY IN FINANCIAL MANAGEMENT BY ENSURING THAT ALL FINANCIAL RECORDS ARE ACCURATE RELIABLE AND TIMELY.

The basis of good management planning is founded on accurate, reliable and timely financial information. Every municipality is required by law to ensure greater transparency as part of financial reforms and the use of technology is encouraged to satisfy this critical requirement of the Constitution and the Municipal Finance Management Act.

CHALLENGES

The implementation of mSCOA and the integration with various other ICT systems such as central supplier’s database proves to be a challenge to municipalities as our systems is currently still in development phase and many different information systems exists within the Municipality. There is no central point where data is stored and as a result, optimal use of the different data sources hampers the timely availability of reliable and accurate financial information.

DEVELOPMENT PRIORITIES

The development of our core financial management system must be prioritized to include functionality in all the different business processes. The use of third-party systems should be eliminated and/or limited to enable seamless integration and therefore improve the accuracy and the speed with which financial information is provided.