Introduction
The Minister of Finance has approved the release of the 2009/10 budget information for all 283 municipalities on the National Treasury’s website. The publication of this information on National Treasury’s website is now an annual event.
The information released together with this press statement reflects aggregated municipal budget totals for the 2009/10 financial year and over the medium term period for all municipalities. The information is summarised in a variety of ways including per category of municipality as well as per province. The information being released includes the following:
* press release, main document
* aggregated or consolidated municipal medium term revenue and expenditure framework (MTREF) information
* a set of graphs
* operating budgets for 2009/10, annexure A
* capital budgets for 2009/10, annexure B
* operating budgets for 2010/11, annexure C
* capital budgets for 2010/11, annexure D
* operating budgets for 2011/12, annexure E
* capital budgets for 2011/12, annexure F
* growth in municipal budgets compared to the section 71 Q4 2008/09 preliminary results, annexure G and
* changes to baseline, annexure H.
All information is available on the National Treasury’s website at http://www.treasury.gov.za.
See http://www.info.gov.za/speeches/docs/mtref_2009.htm for this statement with tables and graphs in PDF format.
This information will assist policy makers, researchers, sector specialists, elected representatives, academics and those responsible for implementation. It will also be used by National Treasury as the basis for the in-year management, monitoring and reporting system for local government (IYM) in terms of section 71 of the Municipal Finance Management Act (NFMA). The MFMA envisages that regularly published budget information will enable and empower communities to hold their municipal councils accountable.
Summary:
Section 24(3) of the Municipal Finance Management Act, 2003 (Act No. 56 of
2003) (MFMA) requires the accounting officer of a municipality submit the municipality’s approved annual budgets to National Treasury and the relevant provincial treasury once approved by their respective councils. The National Treasury has been placing these budgets on the National Treasury’s website on an annual basis since the 2005/06 financial year. Any queries on budget, revenue or expenditure numbers reflected in the statement should therefore be referred to the relevant municipal manager, or the relevant chief financial officer.
5. The municipal budget and reporting regulations with the supporting formats, was promulgated on 17 April 2009. The six metros and 21 secondary cities were required to conform to the new budget format by completing and submitting their 2009 budgets in the prescribed formats (schedules A1). Of the 27 municipalities, 25 complied and 11 other municipalities volunteered to conform to this new legislative requirement early.
This effectively means that over 68 percent of the aggregated municipal budget is already covered in the new budget formats. These budgets are published separately on the website. All municipalities are required to comply with the new formats in their 2010/11 budgets.
National Treasury would like to extend our appreciation to all those municipalities who have sought to comply with the new budget and reporting regulations for the 2009 budget. This reform greatly enhances the transparency of municipal budgets.
Detailed analysis of the 2009/10 MTREF:
The analysis contained in this press release is restricted to the aggregated expenditure by category of municipality, an overview of the budgets of the six metropolitan councils, the secondary cities (next top 21 municipalities) and a summary of municipal budgets per province. The detail in supporting tables will provide more information by type of expenditure item and operational information.
Aggregated Operating and Capital Budget per Municipal Category
Table one (a) shows budgeted aggregated revenue by category of municipality over the MTREF period. In aggregate, the budgeted revenue for 2009/10 is R212,3 billion, increasing to R225,3 billion in 2010/11, and to R239,7 billion in 2011/12. The 2009/10 budgeted revenue shows an increase of 16,6 percent over the 2008/09 original budget (8,4 percent increase in the capital revenue budget and 19,4 percent for the operating revenue budget).
Table one (b) shows budgeted aggregated expenditure by category of municipality over the MTREF period. In aggregate, the 2009/10 budget is R202,9 billion, increasing to R214,2 billion in 2010/11, and to R227,3 billion in 2011/12. The 2009/10 budget is an increase of 15,2 percent over the 2008/09 original budget (8,4 percent increase in the capital budget and 17,6 percent for the operating budget).
The expenditure budget of the six metropolitan municipalities as a share of the total local government budget in the 2009/10 financial year constitutes 54,6 percent, whereas local municipalities represent 37,3 percent. District municipalities represent only 8,1 percent. The configuration of the shares remains largely constant over the MTREF period.
Capital expenditure in aggregate represents 24,6 percent in 2009/10, 21,4 percent in 2010/11 and 18,7 percent in 2011/12 of the overall budget of municipalities.
Aggregated operating and capital budget for metropolitan municipalities
The aggregate budgeted expenditure for all metropolitan municipalities over the MTREF period is shown in table two (a). The total expenditure budget amounts to R110,8 billion in 2009/10, R117,3 billion in 2010/11 and R126,6 billion in 2011/12, reflecting an average annual increase of 6,9 percent. Spending by metros on capital will decline over the MTREF, partly due to the finalisation of 2010 projects and the associated decrease in grant funding and borrowing for these projects.
However, operating expenditure will on average increase by 11 percent per annum. The capital budget of the metros constitutes 46,9 percent of the total municipal capital budget for 2009/10, but this decreases to 44 percent in outer two years of the MTREF.
The table also expresses each metropolitan municipality’s budget as a percentage of the total expenditure budget of all metropolitans. The comparison is intended to reflect the size of each metropolitan relative to others but also indicates if there are any changes over the MTREF. As seen in the table, the size of the budget for most metros remains fairly constant.
Operating expenditure by metropolitans accounts for more than half (57,6 percent) of total municipal operating expenditure over the MTREF.
The amount to be generated by metros through the sale of core municipal services is reflected in table two (b). The major drivers of revenue in 2009/10 are electricity (R30,9 billion), water (R11,2 billion), refuse removal (R2,9 billion) and sanitation (R2 billion). Over the MTREF, large increases are anticipated for electricity. There are also above average increases of 13 percent for refuse removal and 10 percent for water and sanitation.
Tables two (c) provides information on what metros project to spend on bulk purchases for the electricity and water functions over the MTREF. The amount budgeted for electricity in 2009/10 is R19,9 billion and increases by 46,7 percent to R29,2 billion in 2011/12. The difference between revenue from electricity in Table two (b) and expenditure on bulk electricity in table two (c) is almost entirely accounted for by additional expenditure related to personnel, materials and maintenance expenditures related to the delivery of the electricity service.
This means it is incorrect to assume that the difference represents a profit on electricity sales. In reality the profit is quite limited, and has been eroded over time by the need to increase maintenance expenditures and the increased cost of providing free basic electricity.
Expenditure on bulk water amounts to R5,3 billion in 2009/10 and increases by 21,6 percent to R6,5 billion in 2011/12.
Aggregated operating and capital budget for secondary cities
Table three shows the aggregate budgeted expenditure for the secondary cities (top 21 municipalities) over the MTREF period. The total expenditure budget amounts to R34,9 billion in 2009/10, R35,8 billion in 2010/11, and R38,9 billion in 2011/12. Similar to the metropolitan trends, spending on capital by secondary cities over the MTREF is expected to decline, partly due to poor multi-year budgeting practices and insufficient provision for the eradication of backlogs identified. However, operating expenditure is expected to increase by 9,2 percent in 2010/11 and by 11,5 percent in 2011/12.
Mbombela, Rustenburg and Polokwane are all host cities of the 2010 world cup.
Polokwane projects to spend 51,9 percent of its total budget in 2009/10 for capital expenditure, followed by Mbombela with 50,7 percent budgeted expenditure for capital in 2009/10. By contrast Rustenburg has budgeted only 21,1 percent of its total budget in 2009/10 for capital which could be due to the fact that the stadium has already been completed.
Municipalities with the lowest proportion of capital budget to total budget are Sol Plaatje, Msunduzi, Mogale City, Matjhabeng, and Govan Mbeki, all with percentages below 13 percent. It should be noted that for 2009/10 the average percentage capital budget to total budget for secondary cities was 24,7 percent compared to the metropolitans at 21,2 percent. Note that metropolitans tend to deliver a wider range of services with higher levels of operational expenditure for example: health and police.
Over the medium term both the capital and operating budgets of the secondary cities show some stability with slight growths in the operating budgets in the 2010/11 year and 2011/12 years, while the capital budgets decrease.
Aggregated operating and capital budgets per province
Table four shows the budgeted aggregated expenditure for all municipalities, analysed per province over the MTREF period. KwaZulu-Natal with 61 municipalities including 1 metropolitan and three secondary cities has the highest capital budget at 21,5 percent of the total capital budget. Gauteng with 14 municipalities including three metropolitans, contributes 20,9 percent and the Western Cape with 30 municipalities including one metropolitan and three secondary cities, contribute 17 percent of the total capital budget.
It should be noted that the Eastern Cape which has a high number of municipalities which are mainly rural and only one metropolitan, also has the fourth highest capital budget which seems to indicate plans for significant infrastructure development in this area.
Only two provinces have per capita spending above the national average of R4 565 in 2009/10, namely Western Cape at R7 444 per capita and Gauteng at R7 136 per capita. Both these provinces are significantly above the national average, probably due to the fact that both are home to a significant proportion of the country’s economic activity, which tends to increase spending on traded items like electricity and water.
The lowest level of per capita spending is in Limpopo, at just R2 437 per capita in 2009/10. No improvement compared to a similar position last year.
Free State shows the lowest level of per capita spending on capital in 2009/10, though its relative position changes significantly in 2010/11, where Northern Cape shows the lowest level of per capita spending on capital.
Aggregated budgeted repairs and maintenance
Table five shows the aggregated budgeted expenditure for repairs and maintenance by category of municipalities, and for the six metros.
The average share of the funds allocated for repairs and maintenance as a percentage of the total adopted budget, ranges between 4,7 percent and 4,9 percent over the 2009 MTREF period and appears to be very conservative. Of particular concern is the amount allocated by the City of Johannesburg.
In addition, compared to last year’s publication the National Treasury has further introduced five additional sets of information to enrich this publication. They are listed below:
* summary of expenditure per function, annexure I
* summary of large expenditure items, annexure J
* average tariff increases, annexure K
* budgeted wage increases, annexure L
* a set of ratios based on the municipal budgets for 2009/10, annexure M
* audited results for 2007/08, annexure N
* audited results for 2006/07, annexure O and
* schedule A 1 of the municipalities that attempted to comply with the new municipal budget and reporting regulations, annexure P
Conclusion
The above summary provides an aggregate view of municipal budgets for the 2009/10 financial year and over the medium term period. Further information on individual municipalities is contained in the supporting schedules that form part of this publication and are published on the National Treasury website (http://www.treasury.gov.za)
Enquiries:
Mr JH Hattingh
Tel: 012 315 5009
Fax: 012 395 6553
E-mail: jan.hattingh@treasury.gov.za
Issued by: National Treasury
2 November 2009
