budgets for the 2007 Medium Term Revenue and Expenditure Framework
(MTREF)
3 October 2007
Introduction
1. To compliment the Provincial Budget and Expenditure Review which was
tabled by the Minister of Finance in Parliament on 5 September 2007, the
Minister of Finance has further approved the release of the approved budget
information for all 283 municipalities on the National Treasury's website. This
has now become an annual event.
2. The equivalent of the provincial publication, commonly referred to as the
"Local Government Budget and Expenditure Review", will only be published during
2008. This will allow the National Treasury, with the support of both
provincial treasuries and municipalities, sufficient time during 2007 to obtain
and improve the quality of information to be included in the next
publication.
3. The information released together with this press statement reflects
aggregated municipal budget totals for the 2007/08 financial year and over the
medium term period for all municipalities. The information is summarized 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 / consolidated MTREF information;
* A set of graphs;
* Municipal Operating Budgets for 2007/08 â Annexure A;
* Municipal Capital Budgets for 2007/08 â Annexure B;
* Municipal Operating Budgets for 2008/09 â Annexure C;
* Municipal Capital Budgets for 2008/09 â Annexure D;
* Municipal Operating Budgets for 2009/10 â Annexure E; and
* Municipal Capital Budgets for 2009/10 â Annexure F.
All information is available on the National Treasury's website at http://www.treasury.gov.za.
4. This information will assist policy makers, researchers, sector
specialists, electedrepresentatives, 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 MFMA. The MFMA envisages that regularly published
budget information will enable and empower communities to hold their Municipal
Councils accountable.
Summary
5. Section 24(3) of the Municipal Finance Management Act, 2003 (Act No. 56
of 2003)(MFMA) requires the Accounting Officer (the Municipal Manager) of a
municipality to submit the municipality's 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,
irrespective of whether a formal publication in the form of the Local
Government Budget and Expenditure Review has been produced for that specific
year or not.
6. The information has been extracted from the approved budgets of all 283
municipalities and was subjected to intensive verification and checking
processes by National Treasury and provincial treasury staff to improve on the
quality of the information.
7. In some instances data have been adjusted to include or to eliminate
duplications of transfers between district and local municipalities and
transfers from operating to capital budgets.
8. To further mitigate the problems associated with producing a set of
numbers that are comparable across all municipalities, the National Treasury is
in the process of developing budget format regulations which will soon be made
available for formal consultation. The standardisation of budget formats across
all municipalities will improve the quality and consistency of budget
information submitted by municipalities in future.
Detailed analysis of the 2007/08 MTREF
9. The analysis contained in this press release will be restricted to the
aggregated expenditure by category of municipality, an overview of the budgets
of the six metropolitan councils, the top 21 municipalities and a summary of
municipal budgets per province. The detail supporting tables will provide more
information by type of expenditure item and operational information.
Aggregated Operating and Capital Budget per Municipal Category
10. Table 1 (see National Treasury website) shows budgeted aggregate
expenditure by category of municipality over the MTREF period. In aggregate,
the 2007/08 budget is R157,3 billion, increasing to R160,6 billion in 2008/09,
but decreasing to R156,6 billion in 2009/10, as illustrated in figure 1 (see
National Treasury website). The 2007/08 budget is an increase of 23 percent
over the 2006/07 budget (a 37 percent increase in the capital budget and 20
percent for the operating budget). The capital budget is supported by a 43
percent increase in capital grant funds and a 44 percent increase in loans.
While the 2009/10 budget decrease is mainly attributed to a reduction in grant
funding and loans, it also appears that the outer year estimates are generally
less robust.
11. The combined budget of the six Metros as a share of the total local
government budgets constitutes on average 57,5 percent, whereas local
municipalities represents on average 34,7 percent. District municipalities
represent, on average, 7,8 percent. The shares remain constant over the MTREF
period.
12. Capital Expenditure represents 25,3 percent in 2007/08, 24,4 percent in
2008/09 and 19,4 percent in 2009/10 of the aggregated budgets of
municipalities.
Aggregated Operating and Capital Budget for Metropolitan Municipalities
(Metros)
13. Table 2 (see National Treasury website) shows the aggregated budgeted
expenditure for the six Metros over the MTREF period. Their total budgeted
expenditure for 2007/08 amounts to R90,5 billion, increasing to R94,5 billion
in 2008/09, but decreasing to R92,5 billion in 2009/10, as illustrated in
Figure 2. The Metros' capital budget increases from R13,2 to R19,3 billion, a
46 percent increase over 2006/07 and represents 48,6 percent of the total
municipal capital budget for 2007/08. The size of some Metros capital budgets
over the MTREF are influenced by 2010 projects. The 2009/10 budget decrease is
mainly attributed to a finalization of 2010 projects and a reduction in the
associated grant funding and loans.
14. The City of Johannesburg has the highest total budget over the MTREF,
followed by eThekwini and Cape Town. The operating expenditure on services by
the Metros over the MTREF grows slightly and the focus appears to be on
electricity, followed by water and minimal expenditure on sewerage and
sanitation. The main contributor to the budgeted revenue from services by the
'metros' appears to be electricity which grows significantly over the MTREF. A
breakdown of the various contributors to capital and operating budgets per
municipality is shown in detail in Annexure A to F of this publication.
15. Table 2 also shows the expenditure split for all metropolitan
municipalities over the MTREF period. The City of Johannesburg which is the
biggest Metro has the highest capital budget at 24,6 percent of the total
capital budget, followed by eThekwini and Cape Town at 21,7 percent and 21,1
percent respectively. The metropolitan municipality with the lowest proportion
of capital expenditure budget is Ekurhuleni Metro at 9,6 percent, this shows an
anomaly if we have to consider that it has a higher population and number of
households than the City of Tshwane and Nelson Mandela Bay which have a higher
proportion of capital expenditure budget at 12 percent and 11 percent
respectively. The trend is almost similar on the operating budget where the
City of Johannesburg represents the highest operating budget at 25,7 percent of
the total operating expenditure budget, followed by the Cape Town (23,4
percent) and eThekwini (15,7 percent). It is noted with concern that the total
budget of Nelson Mandela Bay shows a declining trend over the medium term
whilst others are showing a gradual increase in 2008/09 and slight decrease in
2009/10.
Aggregated Operating and Capital Budget for the next Top 21
Municipalities
16. Table 3 (see National Treasury website) shows the aggregated budgeted
expenditure for the next top 21 municipalities over the MTREF period ranked
from the highest to lowest using 2007/08 as the starting point. Their total
expenditure budget for 2007/08 amounts to R25,3 billion, increasing to R25,0
billion in 2008/09, but decreasing to R23,7 billion in 2009/10. Multi-year
budgeting is still a challenge to some of these municipalities, with Emfuleni
not providing capital budgets for the ensuing two years and Newcastle not
providing operating and capital budgets for the two outer years due to capacity
and other problems.
17. Mbombela and Polokwane, as host cities of the 2010 World Cup, have the
highest proportion of capital budget to total capital budget of 15,7 percent
and 14,1 percent respectively, while the same cannot be said about Rustenburg
which is at 5,6 percent. Municipalities with the lowest proportion of capital
budget to total budget are Mogale City, Govan Mbeki, Newcastle and Potchestroom
which are all below 2 percent. However, it should be noted that for 2007/08 the
average percentage capital budget to total budget for top 21 municipalities is
24 percent compared to the metros at 21 percent and national aggregate for all
283 municipalities at 25 percent. Over the medium term both the capital and
operating budgets of the top 21 municipalities show some stability with slight
growth in the 2008/09 year and a gradual decline in 2009/10.
Aggregated Operating and Capital Budgets per Province
18. Table 4 (see National Treasury website) shows the budgeted aggregated
expenditure for all municipalities, analysed by province over the MTREF period
and illustrated in Figure 3 (see National Treasury website). Gauteng which has
the lowest number of municipalities (15 including 3 metropolitan
municipalities) have the highest capital budget at 24,2 percent of the
aggregated capital budget. KwaZulu-Natal, with 61 municipalities including 1
metro and 3 top 21 local municipalities have 19,4 percent and the Western Cape
with 30 municipalities including 1 metro have 15,1 percent of the aggregated
capital budget. It should be noted that the Eastern Cape, which has one of the
highest number of municipalities which are mainly rural and only 1 metro has
the fourth highest capital budget which shows that there is significant
infrastructure development planned in the area.
19. The trend is almost similar on the operating budget where Gauteng
represents the highest operating budget at 36 percent of the aggregated
operating expenditure budget, followed by the Western Cape (19,3 percent) and
KwaZulu-Natal (16,4 per cent). Two provincial aggregates of municipal operating
budgets show a 'reduction' as a percentage of their share of the total
operating budget from 2007/08 to 2008/09 (Eastern Cape and Limpopo). Only the
aggregated operating budgets of Gauteng show a material proportional increase
over the same period. The municipalities in the Northern Cape Province have the
lowest capital and operating budgets over the MTREF.
Conclusion
20. The above summary provides an aggregate view of municipal budgets for
the 2007/08 financial year and over the medium term period.
21. Further information on individual municipalities is contained in the
supporting schedules that form part of this publication and may on request, be
obtained from:
Mr JH Hattingh
Chief Directorate: Local Government Budget Analysis
Private Bag X115
Pretoria
0001
Tel: 012 315-5009
Fax : 012 395-6553
E-mail : jan.hattingh@treasury.gov.za
Website : http://www.treasury.gov.za/mfma
Enquiries: Lungisa Fuzile
Tel: 012 315 5158
E-mail: Lungisa.Fuzile@treasury.gov.za
Issued by: National Treasury
3 October 2007
Source: National Treasury (http://www.treasury.gov.za)
