By the Chairperson: Budget & Treasury Standing Committee

BUDGET SPEECH

2010/11

BY THE CHAIRPERSON: BUDGET & TREASURY STANDING COMMITTEE,

CLLR A SCHOLTZ

INTRODUCTION

The Honorable Speaker

The Executive Mayor

The Chief Whip

Members of the Mayoral Committee

Councillors of the NMBMM

The Municipal Manager

Officials of the NMBMM

Distinguished Guests and

Citizens of the Metro

The national wealth of our country, the heritage of South Africans, shall be restored to the people ; The mineral wealth beneath the soil , the Banks and monopoly industry shall be transferred to the ownership of the people as a whole; All other industry and trade shall be controlled to assist the wellbeing of the people ; All people shall have equal rights to trade where they choose , to manufacture and to enter all trades, crafts and professions, Freedom Charter, 1955.

It is indeed anhonourand a privilege for me to join our Executive Mayor, CouncillorZanoxolo Wayile, in tabling before you, and all the citizens of our Metro, the budget programme for the 2010/11financial year. It should be noted that after the initial tabling of the Budget in accordance with the legislative requirements, the Budget was subjected to a public participation process. The key service delivery priorities emanating from this process forms the basis of the Budget tabled before you here today.

Why this clause is significant as we table this budget to this Council. ?

This clause contains six (6) key strategic messages such as;

• National wealth- A heritage of all South Africans , not a selected few
• Owners of South African wealth and all South Africans and must be restored to the people
• Mineral resources beneath the soil and productive assets of the economy such as industries, banks, land , monopoly industry must be transferred to the ownership of the people as a whole
• All other industries must be controlled to assist the wellbeing of the people
• All people must be have equal rights to trade where they choose
• Skills development and empowerment in areas such as crafts and professions must be promoted amongst the people. The Freedom Charter specifically refers to South Africans as owners of South African wealth, in this regard; it calls for a human solidarity to share this wealth, our heritage with the people as a whole.

Madam Speaker, it is now 55 years since this clarion call was made and recorded in 1955. Both as a country in general and as a nation in particular, we are far from achieving this reality, but there is a tremendous progress we making in various areas such as electrification of township, transfer of resources to improve the living standards of our people.

Madam Speaker, in tabling this Budget, we must recognize serious constraints facing us and conditions imposed on us by the system of capitalism. These are constraints that make us not achieve fully the ideals of the freedom charter. In this regard, we need to acknowledge that a “state” by its nature, it is a product of class contradictions,and assuch,an organ of class power and class rule.

Taking this point further, Karl Marx, (Capital, vol.1) correctly states that, “The accumulation of wealth at one pole of society involves a simultaneous accumulation of poverty, labour torment, slavery, ignorance,brutalization, and moral degradation, at the opposite pole.”

This Budget is being tabled for adoption against the backdrop of a number of challenges which face SouthAfrica, the world in general and our region in particular, NelsonMandelaBayMetropolitanMunicipality. Among these are the global economic recession which has affected all of us and exacerbated poverty and unemployment.

This global economic crisis exposes serious failures of a capitalist system and its inability to solve the problems facing the global human family of nations in the global, particularly the poorest of the poor.

There is also acknowledgment even by anti-Marxist and anti-democratic forces and various elements constituting enemies of democracy and development , but posing as public opinion makers, independent reactionary analysts, bourgeoisie apologists , that the system of capitalism is losing its grip and is in a deep crisis.

However, this budget is presented today under condition of not of our own choosing , therefore , we should recognize that we are living under a capitalist system whose mode of production and accumulation continue to produce mass poverty, mass hunger , shedding jobs in a massive way as opposed to our agenda of building a strong , active developmental state, ultimately , with our goal of building a non racial , non sexist , democratic , a prosperous, united , cohesive and a caring society.

As a country and as Nelson Mandela Bay Metropolitan Municipality, we recognize we fully all the social ills, service delivery backlog and centuries of colonial legacy and since 1994, the ANC together with its Alliance components, we have made progress to address the apartheid legacy under very difficult conditions with reactionary and right wing forces undermining our efforts, instead, embarking in a cheap political publicity campaign aimed at projecting the ANC’s failure to deliver. But our people remain revolutionary vigilant and will not be misled by anti-democratic and anti-development and reactionary forces. It within our understanding of the plight of our people that led the ANC government to declare this year as the year of service delivery with clear priorities such as education, health, crime, housing , rural development particularly in the peri-urban/rural communities.

Ladies and gentlemen, the impact of the global economic recession has indeed hit NelsonMandelaBay and has started to affect our revenue base. Also the growing unemployment has meant that more of our people have become indigent and now depend on government for greater assistance. The consequences of the economic recession have put increased pressure on this budget.

However, the biggest challenge that remain with us is the lack of a reliable data on massive job losses , a lack of a credible instrument to quantify this impact in monetary terms , but , clearly , scourges of poverty , unemployment rate and the decline of income is observable in our peoples inability to pay for municipal basic services. This budget makes a provision for the poorest of the poor who qualifies for indigent subsidy and this constitute but one element of our commitment as a caring municipality committed to serve the people.

Despite these challenges, we have made significant progress as confirmed and acknowledged by various institutions. Among these are:

(a)For the second consecutive year, the Municipality achieved an unqualified audit opinion.

(b)By December 2008, the Municipality had met the national target for the provision of water within a 200m radius of households within the urban edge.

(c)The receipt of the National Vuna Award for first runner-up as best MetropolitanMunicipality in South Africa.

(d)The NelsonMandelaBayMunicipality’s efforts to keep the City clean were rewarded when it was announced as the winner in the Metropolitan Category of the Cleanest Town Competition in 2008/09 by the Department of Environmental Affairs. It is acknowledged that there is still a problem with the illegal dumping of builders’ rubble and household refuse throughout the NelsonMandelaBay.

(e)The magnificent Nelson Mandela Bay Stadium, which is a world-class facility, was completed in December 2008. The construction period of 22 months represents a world record for the building of a stadium of this size.

(f)In 2008, for the third year running, the Red Location Museum of Struggle bagged another prestigious award – the Diamond Arrow award from the Professional Management Review (PMR) as an Eastern Cape Leadership Achiever.

This confirms our commitment and striving for excellence in governance and service delivery.

The 2008/09 unqualified audit report issued by the Auditor General’s office represents the second year in a row that the Municipality has achieved this status.

Ladies and Gentlemen, the financial status of the Municipality is sound and stable as confirmed by a Moody’s Credit Rating of Aa3.za which translates into our Municipality having a strong financial performance, good liquidity and cash management.

STRATEGIC POLITICAL LEADERSHIP COLLECTIVE

Madam Speaker , allow me to congratulate our Executive Mayor , for being a visionary , dynamic , hard working and selfless revolutionary who , within a very short period of six month undertaken very successful programmes involving our people on the ground. Some of the excellent programmes include but not limited to the following;

• 100 days strategic institutional turn around programme
• Mayoral Outreach Programme
• Mayoral Strategic Retreat
• Stakeholder Engagement and Sector Consultation Programme
• IDP/ Budget Public Consultation Programme
• The Mayoral Cup Challenge Programme
• An institutional Turn Around Working Document
• Performance Management Seminar
• Economic Summit

This budget takes into account all the lessons learnt from these programme, the message we received from stakeholders, civil society, labour private sector and communities.

INTEGRATED DEVELOPMENT PLAN

Madam Speaker, we also table before this house today, the Integrated Development Plan (IDP). The IDP has been developed following extensive and intensive consultations and engagements with all stakeholders and most especially the poorest residents of NelsonMandelaBay. We can therefore proudly proclaim that this IDP is indeed a reflection of the aspirations, needs and priorities of the people of NelsonMandelaBay. Although the 2010/11 Budget gives effect to the implementation of the IDP, it is important to note that, we have inherited from apartheid system and minority white rule , of which DA was part of the apartheid regime and its machinery which created all human miseries , suffering , poverty , hunger and starvation of our people. Some of the realities that this Budget had to take into account are;

• Racial segregation of residential areas,amenities and great disparities in the levels of services provided to different communities.
• Disparities between areas in terms of their economic activities and tax base
• The growth of informal settlement and housing backlogs, mainly affecting poor working class families
• Long traveling distances between work places and residential areas, especially the working class using public transport system
• Development of urban sprawl and decline in central business activities
• Land use and ownership as well as land audit;both land use and land tenure were crucial in shaping and determining the future of South Africa.
• Inadequate infrastructure characterized by leaks, breakages and poor condition, particularly in the working class communities.
• High levels of unemployment.

These are some of the challenges that this Budget takes into consideration and is aligned with the municipal IDP. This Budget is informed by five key strategic principles of IDP Process, namely

(i)Participation and Community involvement

(ii)Strategic Focus

(iii)Integration

(iv)Prioritization

(v)Delivery Orientation

BUDGET 2010/11

Madam Speaker, the budget before this house today proposes combined Capital and Operating expenditure of R7.823 billion for the 2010/11financial year.

Budget Allocation According To IDP Priorities

The following table and graph shows the apportionment of combined Opex and Capex in terms of IDP priorities.

Municipal Transformation and Development / Service Delivery and Infrastructure Development / Local Economic Development / Financial Sustainability and Viability / Good Governance and Public Participation / Total
R '000 / R '000 / R '000 / R '000 / R '000 / R '000
2010/11 Budget
Capital Expenditure / 172,628 / 1,535,768 / 366,834 / 43,158 / 64,735 / 2,183,123
Operating Expenditure / 564,896 / 2.593,916 / 581,849 / 1,082,274 / 817,365 / 5,640,300
Total / 737,524 / 4,129,684 / 948,683 / 1,125,432 / 882,100 / 7,823,423
2011/12 Budget
Capital Expenditure / 80,579 / 2,148,792 / 349,178 / 48,349 / 59,092 / 2,685,990
Operating Expenditure / 567,815 / 2,999,423 / 591,558 / 1,179,914 / 827,525 / 6,166,235
Total / 648,394 / 5,148,215 / 940,736 / 1,228,263 / 886,617 / 8,852,225
2012/13 Budget
Capital Expenditure / 76,982 / 2,077,051 / 328,648 / 49,955 / 96,544 / 2,629,180
Operating Expenditure / 635,202 / 3,337,175 / 661,762 / 1,319,749 / 947,640 / 6,901,528
Total / 712,184 / 5,414,226 / 990,410 / 1,369,704 / 1,044,184 / 9,530,708

It is evident from the above that approximately 53% of total budget of R7,823 billion for the 2010/11 year is spent on Service Delivery and Infrastructural Development. With respect to the Capex of R2.183 billion, just over 74% is spent on this IDP priority. Further analysis of the proposed Capital Budget reveals some 80% is to be spent on Wards in the disadvantaged areas. With respect to those elements of the combined Capex and Opex which can be assigned to specific wards, approximately 87% is to be spent in disadvantaged wards.

Capital expenditure per Directorate 2010/11:

2010/11 – 2012/13 Capital Budget by Directorate

The table below reflects the Capital Expenditure per Directorate as well as the sources of funding that supports this expenditure.

R’ Thousand / Budget / Budget / Budget
2010/11 / 2011/12 / 2012/13
Budget and Treasury / 122,700 / 25,400 / 17,900
Public Health / 59,682 / 85,398 / 121,310
Housing and Land / 3,000 / 3,000 / 3,000
Economic Development and Recreational Services / 92,950 / 87,000 / 48,900
Corporate Services / 38,800 / 45,652 / 34,500
Infrastructure and Engineering / 933,850 / 1,422,190 / 1,536,143
Water Service / 161,044 / 350,538 / 224,636
Sanitation Service / 275,665 / 384,924 / 359,250
Electricity and Energy / 265,396 / 232,287 / 253,891
Executive and Council / 13,860 / 13,000 / 11,100
Safety and Security / 36,070 / 30,300 / 18,550
2010 World Cup Office / 120,000 / 0 / 0
Strategic Programmes Directorate / 60,107 / 6,300 / 0
Total Capital Expenditure / 2,183,123 / 2,685,990 / 2,629,180
Funded by:
National Government / 1,119,477 / 1,506,773 / 1,375,506
Provincial Government / 2,250 / 2,700 / 0
Other transfers and grants / 40,000 / 90,000 / 100,000
Transfers recognised – capital / 1,161,727 / 1,599,473 / 1,475,506
Public contributions & donations / 38,186 / 39,268 / 39,268
Borrowing / 470,000 / 705,686 / 818,887
Internally generated funds / 513,210 / 341,563 / 295,519
Total Capital Funding / 2,183,123 / 2,685,990 / 2,629,180

Growth of Capital Expenditure 2003/04 to 2010/11

Madam Speaker, our Capex (excluding World Cup 2010) has grown from R452 million in 2003/04 to R1.57 billion in the coming year, which is a clear indication of our commitment to deal with the infrastructural needs of our Metro. However, as stated elsewhere in this report, we have to ensure that this increased expenditure results in greater job creation through the use of labour intensive methods wherever possible. In this respect we call upon the Municipal Manager, Chief Operating Officer, Chief Financial Officer and all Executive Directors to prioritise the implementation of the Expanded Public Works Programme so that infrastructure development is coupled with sustainable job creation.

- 1 -

Major Capital Projects – 2010/11 – 2012/13

The table below provides details of the major capital expenditure over the MTEF period.

Project / Budget 2010/2011 / Budget
2011/ 2012 / Budget
2012 /2013
Tarring of Gravel Roads / 150,000,000 / 117,000,000 / 220,000,000
Tarring of Gravel Roads: Major/Collectors / 0 / 20,000,000 / 20,000,000
2010 Work Package: Public Transport Planning / 107,433,900 / 161,434,470 / 335,210,480
HV Network Reinforcement / 97,606,100 / 68,770,860 / 91,285,000
2010 Work Package: Modal Interchanges / 94,108,650 / 154,365,520 / 58,719,780
2010 Work Package: Bus Rapid Transit / 89,618,770 / 166,136,240 / 203,082,650
2010 Work Package: Public Transport Facilities / 85,204,000 / 92,046,000 / 110,285,400
Rudimentary Services: Sanitation / 75,000,000 / 15,000,000 / 15,000,000
2010 Work Package: Road Works / 44,130,670 / 96,944,500 / 110,285,400
Informal Housing Electrification / 32,056,540 / 37,665,510 / 37,775,860
H45 Redhouse - Chelsea Arterial: Walker Drive to N2 / 26,000,000 / 30,000,000 / 30,000,000
Motherwell Thusong Service Centre / 20,000,000
Provision of Sidewalks and Cycle Tracks / 20,000,000 / 30,000,000 / 30,000,000
Resurfacing Tar roads (non-subsidy) / 20,000,000 / 35,000,000 / 36,000,000
Access Road to Chatty Developments / 17,000,000 / 0 / 0
2010 Work Package: TDM and ITS / 16,709,900 / 15,862,100 / 15,000,000
Paapenkuils Main Sewers Augmentation / 15,890,000 / 8,000,000 / 0
Elandsjagt - Upgrade to Restore Capacity / 14,800,000 / 15,000,000 / 16,286,000
New Swimming Pool – Zwide / 14,000,000 / 0
PrivateTownship Development / 12,000,000 / 12,000,000 / 12,000,000
Nooitgedagt/Coega Low Level System / 8,000,000 / 53,000,000 / 15,000,000
Multi-Purpose Recreational Facilities / 8,000,000 / 5,000,000
Swimming Pool Kwanobuhle - Uitenhage / 6,000,000 / 0
Njoli Square Redevelopment / 5,000,000 / 70,000,000 / 40,000,000
Churchill Pipeline Upgrade / 5,000,000 / 30,000,000 / 0
Motherwell NU29 & 30 : Roads & S/w Bulk Infrastructure / 5,000,000 / 20,000,000 / 500,000
Van der Kemp's Reservoir and Approach Main / 5,000,000 / 10,000,000 / 100,000
Replacement of KwaNobuhle Reservoir / 4,000,000 / 0
Motherwell North Bulk Sewerage / 0 / 15,000,000 / 15,000,000

- 12 -

Major Capital Projects – 2010/11 – 2012/13 (continued)

Project / Budget / Budget / Budget
2010/ 2011 / 2011 /2012 / 2012/2013
Coega Reinforcement / 12,000,000 / 12,000,000 / 12,000,000
Zwide Bulk Stormwater / 5,000,000 / 13,000,000 / 13,000,000
Wells Estate: Stormwater Improvements / 0 / 17,000,000 / 18,000,000
Loerie Treatment Works: Rehabilitation / 8,000,000 / 2,000,000 / 0
Remedial works: Pell Street Interchange / 5,591,600 / 13,365,450 / 0
Lower valley RoadBridge / 3,376,180 / 1,000,000 / 0
Resurfacing of Subsidised Roads / 6,000,000 / 6,000,000 / 6,000,000
Miscellaneous Mains and Substations / 10,000,000 / 11,000,000 / 11,000,000
Rehabilitation of William Moffett Expressway / 10,000,000 / 30,000,000 / 30,000,000
Lorraine - Bulk Sewerage Augmentation / 18,050,000 / 11,500,000 / 11,500,000
Construction of Amanzi Reservoir and Pipeline / 5,000,000 / 25,000,000 / 100,000
Motherwell/Coega WWTW and outfall sewer / 32,000,000 / 40,000,000 / 50,000,000
Upgrading Helenvale Resource Centre – Multipurpose Centre / 14,200,000 / 1,300,000 / 0
Glen Hurd drive Upgrading / 6,000,000 / 3,000,000 / 20,000,000
Upgrade of Zwide Stadium / 6,000,000
Construction of Community Health Centre in Kwazakhele Area / 540000 / 10,780,000
Construction of Clinic in St Albans Area / 230,000 / 2,300,000
Construction of Clinic in Amanzi Estate Area / 230,000 / 2,300,000
Construction of Clinic in Peri-urban Area - Colchester / 350,000 / 2,063,050
Construction of KwaNobuhle Clinic / 540,000 / 5,491,700
Construction of Clinic in Zanemvula Area / 4,900,000 / 4,900,000
Construction of Clinic in Motherwell -Ext 29 Area / 3,626,100
Construction of Clinic in KwaNoxolo / Kleinskool Area / 3,626,100
Total / 1,151,278,510 / 1,472,893,700 / 1,604,002,270

OPERATING EXPENDITURE – 2010/11

Revenue and Expenditure components of the 2010/11 Operating Budget:

POVERTY ALLEVIATION

Assistance to the Poor (ATTP)

Fellow Councillors, our Municipality continues to roll out our ATTP programme to qualifying households in NelsonMandelaBay, which includes:

–Free 8kl of water

–Free basic sanitation

–Free 75 kwh electricity

–Free basic refuse removal

–Property rates subsidy

–Free Environmental charges

Out of approximately 275 000 households in the NelsonMandelaBay, some 111 950, effectively 40.71%, are part of the ATTP. The total cost of free basic services currently amounts to R378 million and is anticipated to increase to R582 million in 2012/13, with about 132 950 households benefiting out of approximately 296 000 households.

FINANCIAL TARGETS

The multi-year budget tabled today is premised on the following targets:

2010/11 / 2011/12 / 2012/13
Income / % / % / %
Water Tariff Increase / 12.0 / 12.0 / 12.0
Sanitation Tariff Increase / 11.0 / 11.0 / 11.0
Refuse Tariff Increase / 11.0 / 11.0 / 11.0
Property Rates Increase / 11.0 / 11.0 / 11.0
Electricity Tariff Increase / 22.0 / 22.0 / 22.0
Revenue collection rates / 98 / 98 / 98
Total Expenditure Increase allowed (excluding repairs
and maintenance) / 9.0 / 9.0 / 9.0
Salary increase / 10.0 / 10.5 / 11.0
2010/11 / 2011/12 / 2012/13
Expenditure
Increase in repairs and maintenance / 12.0 / 12.0 / 12.0
Increase in bulk purchase of power costs / 28.9 / 25.8 / 25.9

DIVISION OF REVENUE ACT ALLOCATION 2010/11 – 2012/13

The following allocations have been gazetted for the Metro in terms of the Division of Revenue Act.

2009/10 / 2010/11 / 2011/12 / 2012/13
(R'000) / (R'000) / (R'000) / (R'000)
Specific Purpose Recurrent grant Allocations / 58,350 / 21,500 / 1,250 / 1,250
Financial Management Grant / 750 / 1,000 / 1,250 / 1,250
2010 World Cup Host City Operating grant / 57,600 / 20,500 / - / -
Infrastructure Grant / 423,776 / 771,066 / 934,532 / 1,155,993
Public transport Infrastructure & Systems grant / 147,079 / 408,333 / 600,000 / 800,000
Neighbourhood Development Partnership grant / 9,000 / 75,201 / 65,000 / 69,062
Municipal Infrastructure Grant (MIG) / 162,645 / 182,532 / 219,532 / 266,931
Electricity Demand Side Management grant / 30,000 / 25,000 / 30,000 / -
Integrated National Electrification Programme / - / 20,000 / 20,000 / 20,000
2010 Interest subsidy / 17,500 / 17,500 / - / -
2010 FIFA World Cup Stadium Development grant / 57,552 / 42,500 / - / -
Allocations-in-kind to Municipalities / 2,600 / 3,410 / 120 / 16
Neighbourhood Development Partnership grant / 2,600 / 3,410 / 120 / 16
Expanded Public Works Programme / 837 / 12,404 / - / -
Equitable Share and Total allocation to Municipality / 816,667 / 994,551 / 1,098,540 / 1,184,728
2009/10 / 2010/11 / 2011/12 / 2012/13
(R'000) / (R'000) / (R'000) / (R'000)
Equity Share / 456,625 / 602,883 / 686,623 / 759,738
Fuel Levy / 360,042 / 391,668 / 411,917 / 424,990
Total Allocations / 1,302,230 / 1,802,931 / 2,034,442 / 2,341,987

BORROWINGS AND CAPITAL REPLACEMENT RESERVE (CRR)

In order to fund the higher levels of Capital expenditure, the Municipalityhas borrowed R1,465 billion over the last three years, with borrowing of R470 million being planned for the 2010/11 financial year.