Historical meeting sees budget approval

MOSSEL BAY NEWS - At the Mossel Bay Municipality Council’s first ever virtual meeting today, the 2020/2021 budget, tariffs subsidies and discounts as reflected in the 2020/2021 tariff list, and IDP was approved by a majority of votes.

Read a press release issued by the municipality below:

It is the legislated responsibility of the Executive Mayor to provide direction to the IDP and budget processes.

“The COVID-19 coronavirus dilemma has presented many challenges to the finalisation of the Draft Budget and the Integrated Development Plan. The future strategic planning and budgetary processes move into unfamiliar territory,” Alderman Harry Levendal, Mossel Bay Executive Mayor said as he addressed councillors in the first ever online council meeting held in Mossel Bay on 28 May.

Both the Office of the Executive Mayor and the Municipal Management team take every concern of customers regarding the impact of the COVID-19 national lockdown very seriously.

Salary sacrifice

“I therefore sincerely thank the municipal manager, Adv Thys Giliomee, and many of the municipality's senior management for refusing the salary increases due to them. They have set a worthy example and I applaud them for their sacrifice and leadership.

The COVID-19 effect

Mayor Levendal said there are no trends or baselines to guide or forecast the outcome or effect of the COVID-19 coronavirus on the economy, be it the national or local economy.

“We can be certain of the detrimental effect of the pandemic on our local economy. All the figures are at best estimates, no one can provide accurate estimations of what the effect ultimately will be,” the mayor stressed.

“The South African economy, in general, is on a downward spiral. Mossel Bay’s economy relies largely on the commercial, industrial, and tourism sectors. These sectors are outside municipal control and the actual results of the pandemic on the business community will ultimately be dictated by the strength of liquidity of each business.”

Mossel Bay is home to many retired people and the effect of the financial markets, as well as the bank interest rates, have a major impact on the ability of residents to pay their municipal and other accounts as their pension income has dropped markedly, in some instances by up to 40%.

“The desperate situation, therefore, requires desperate measures.

“We, as Mossel Bay Municipality have been, and will continue to focus diligently on the following mitigating measures:

Forecasting of accurate revenue;
Debt impairment (the old term used for bad debt provisions);
Additional expenditure because of COVID 19;
Infrastructure development to stimulate the economy;
Revisit all other expenditures and limit it to the absolute bare minimum.

“In doing so Mossel Bay Municipality does not want to sacrifice its financial sustainability, nor drop the high standard of service delivery this municipality is renowned for,” Mayor Levendal indicated.

Therefore, it was important to identify and minimise inefficiencies, and disregard any possible form of wastage.

Provisions for COVID-19 coronavirus

As the Municipality, the only way to protect the financial sustainability is to provide for the additional expenditure necessitated by COVID-19 in the form of sanitisers, face masks, gloves, and other protective gear and equipment, as accurately as possible and to adjust for the expected drop in revenue and mitigate the effect of non-payment.

To date, merely R 268 000 of the Billions of Rand in aid promised by National Government to Municipalities to address COVID-19 challenges has reached the Mossel Bay Municipality. In turn, R 650 000 was received from the Provincial Government.

It does appear as if Local Government is burdened with a lot of unfunded mandates, with little or no assistance from any other sphere of government.

It must be mentioned that the cash and investment situation of Mossel Bay Municipality decreased by R 60.3 Million since the declaration of the national disaster and resultant national lockdown that started on the 26 March 2020.

“While we do not foresee major difficulties to bridge to COVID-19 cash flow pressures, with an unfunded Budget as mentioned, the Municipality will reduce its cash reserves by at least 50% in the MTREF,” Mayor Levendal said.

Assumptions

The Municipality confirms that the Office of the Executive Mayor and the Municipal Management team take every concern raised by customers regarding the impact of the COVID-19 national lockdown very seriously.

The following assumptions have been made:

Revenue will drop on the consumption side. Just for April, the electricity purchases dropped 11% compared to the same period as last year. The consumption was adjusted downwards for both water and electricity.
Interest on investments was decreased by R 5.7 million; R 6.1 million; and R 6.4 million because of using the cash reserves to mitigate the effect.
The biggest effect, however, is the expected decline in the payment rate.

Debt impairment calculations based on payment percentages of

2019/2020 - 80%,
2020/2021 – 80%,
2021/2022 – 90%,
2022/2023 – 95%.

The effect is significant. Revenue drop, plus the debt impairment increases for 2020/21 totals R119,6 million.

Operational budget

Much of the total Operational Budget- almost 75% thereof, is made up of employee-related cost, the remuneration of Councillors, the bulk purchases of electricity, the cost of purified water, debt impairment and depreciation charges.

“This leaves the Council with no, or very little room for manoeuvring,” the mayor said.

Major cuts were made to both the Capital and the Operational Budgets, yet the Municipality was unable to cut the budget to such extent that it will be fully funded.

After the implications of the abovementioned were implemented, the budget shortfall before recognition of the capital transfers amount to R153 483 786, This improves slightly, but there remains a shortfall up to 2022 /2023.

In total, the envisaged Budget shortfall for the Medium-Term Revenue Expenditure Framework (MTREF) amounts to R378 757 770.

Tariff increase mitigations

The Municipality could therefore not make any drastic changes to the increases on consumer accounts, otherwise it would lead to serious financial sustainability issues.

The following changes to tariff increases were made:

• The initially proposed electricity tariff increase was adjusted downward and in line with the NERSA tariff guideline to 6.22%.

• It is important to note that the basic charges for commercial customers were not increased, as was the case per the draft budget tabled in March.

• The increase in property rates tariffs were lowered from the proposed 15%, to 7.5%.

• The increase for refuse removal is changed from the proposed 7%, to merely 5%.

• The increase for water provision changes from the proposed 5.8%, to 6.5%. Residents will appreciate that Mossel Bay faces a challenging drought and everyone is urged to continue to use water much more sparingly.

• Emphasis should be given to the application based discount for bona fide agricultural customers of 15%, that was kept unchanged.

The Budget provides for R1 308 555 708 for the operational budget, whilst the capital budget of R 206 579 373 tabled is funded by R106 556 329 of own funding; R 33 030 000 of new borrowings, and R 66 993 044 of grants and donations.

RELIEF MEASURES FOR HOUSEHOLDS

It is important to note that the normal credit control measures to get residential households into the safety net for assistance still exist.

This safety net is in the form of indigent household subsidies and the rebate subsidies to the pensioners.

These measures are not limited only to certain people or groups of the community. It is available to all qualifying residents who are negatively affected by the COVID-19 pandemic.

An additional provision was made for the number of indigent households by increasing the number of households by almost 50%.

An additional provision was also made for the number of pensioners that will be able to apply for pensioner rebates.

INDIGENT BENEFITS

Indigent Households will again receive the benefit of discounts on basic service charges such as Water, Electricity, Refuse Removal, Sanitation, and Property Rates.

The two levels of Indigent Subsidy are specifically developed to provide economic relief to those in the community who really need it. This relief is also extended to households including a person(a) with a disability, should they comply with the necessary, and specified criteria.

The Municipality has not forgotten the plight of our pensioners and has provided for a pensioner discount on both the Property Rates and the Sewage Charges.

Highlights of Indigent Benefits

Just to highlight the criteria and benefits:

Indigent level 1:

Criteria: To qualify as an Indigent Level 1 Household, a household must comply with the following criteria:

For an Indigent subsidy the verified gross monthly income of all occupants of the dwelling over 18 years of age may not exceed the sum of two times the amount of state-funded social pension; and
The registered household must be the full-time occupant of the property concerned and may only own one property

Benefits:

(a) Water - 6 kiloliter and basic charges per month

(b) Electricity - 50 kiloWatt hours and basic charges per month

(d) Sanitation – basic charges per month

(e) Property Rates – property rates on the valuation up to the amount as determined by the Council.

To qualify as an Indigent Level 2 Household, a household must comply with the following criteria:

The verified gross monthly income of all occupants of the dwelling over 18 years of age may not exceed the sum of four times the amount of state-funded social pension; and
The registered household must be the full-time occupant of the property concerned and may only own one property.

Benefits:

(a) Water - 6 kiloliters and 50% of basic charges per month

(b) Electricity - 25 kiloWatt hours and 50% of basic charges per month

(d) Sanitation – 50% of basic charges per month

Households housing a person with a disability:

To qualify as a Household including a person with a disability, a household must comply with the following criteria:

The verified gross monthly income of all occupants of the dwelling over 18 years of age may not exceed the sum of four times the amount of state-funded social pension; and
A person with a disability must be registered as a person with a disability, diagnosed by a medical practitioner, and must be a full-time occupant of the property concerned.

Benefits:

(a) Water - 6 kiloliter and basic charges per month

(b) Electricity - 50 kiloWatt hours and basic charges per month

(d) Sanitation – basic charges per month

(e) Property Rates – property rates on the valuation up to the amount as determined by the Council.

REBATES ON PENSION

Registered owners of Residential Properties who are pensioners qualify for special rebates according to a gross monthly household income of all persons permanently residing on that property. To qualify for the rebate a property owner must be the registered owner of a property that satisfies the requirements of the definition of Residential Property. This property owner must:

(a) occupy the property as his/her Primary Residence, and

(b) be at least 60 years of age, or

(d) be in receipt of a gross monthly household income not exceeding the amount determined by Council during the Municipality's budget process.

Benefit:

Total Gross Income of husband and wife may not exceed R 21 000 per month

(R 252 000 per annum) to qualify for a 30% discount on rates and sewerage charges.

Total Gross Income of husband and wife may not exceed R 15 750 per month

(R 189 000 per annum) to qualify for a 50% discount on rates and sewerage charges.

COMMERCIAL AND INDUSTRIAL CUSTOMERS

Another big concern was commercial and industrial customers.

In this regard, the Municipality will introduce, together with the June 2020 account a backdated discount of 10% on the whole account to all commercial and industrial accounts for the months of April, May, and June 2020.

The latter will not be based on application but will automatically be applied to all commercial and industrial accounts, especially to thank the commercial and industrial clients that have diligently paid their accounts and to those customers that have continued to support their workforce during these trying times.

An amendment was made to the previously announced grace period for the payment of accounts for commercial and industrial accounts. In the past no qualification was proposed, this has changed. To qualify for the grace period business and industrial clients must apply and confirm and prove that their businesses have been affected negatively during the lockdown period. They must also assist by providing information regarding the payment of their employees. This should not be regarded as a disqualifying mechanism but is intended rather to assist the Municipality to determine and consider the possible applications of workers for indigent subsidies as we will then be able to cross-reference the salary cuts.

An administrative challenge in dealing with all the applications surfaced as all offices and service providers were not yet fully functional, as only 30% capacity could operate during the current official lockdown level. The Municipality assures our residents that the officials, together with our two service providers - Business Engineering and R-Data - worked around the clock to provide processes and platforms that make the applications as easy and user-friendly as possible.

This was done also to alleviate the pressure on person-to-person visits to the municipal offices, which in return affects the social distancing challenges.

The electronic platforms will be used by the officials assisting the applicants, whilst it also provides self-help access. This platform will be available for indigent, pensions, commercial and industrial, and payment arrangements for residential customers.

A special awareness campaign will be lodged in this regard.

Enough time will be given for all to access the benefits timeously, yet residents must make every effort to access the benefits before 16 June 2020.

Payment is crucial

It must be emphasized that people who can afford to, should continue to pay their accounts. It is crucial that customers not use a grace period unnecessarily as this will place undue pressure on the customer.

It must also be pointed out that no mercy will follow once the grace period has lapsed and residents have not reacted to the available measures and the account is in arrears.

We believe that, as the sphere of government that is closest to the people, we carry the profound obligation to respond directly, immediately, and positively to the needs and challenges of our stakeholders and communities.

The reviewed IDP captures the issues raised by the various communities, as the issues constitute the key priorities for the current political term of office.

Municipal mandate

Some of the priorities listed are beyond our mandate as the Municipality. To this end, the Provincial Government of the Western Cape provides an opportunity for municipalities to submit such priorities for provincial sector departments to address. It is therefore important for us as the Mossel Bay Municipality to ensure that we maintain a positive and healthy relationship with other spheres of government. We will continue to utilise our IDP as a point of convergence with other spheres of government to ensure that we jointly plan to avoid possible duplication of initiatives and, therefore, maximise the impact with respect to service delivery.

“In presenting this reviewed IDP, I want to commend the people of Mossel Bay for diligently heeding the call to assist the Municipality in revisiting its development and service delivery agenda.

“We could not have achieved this objective was it not for the active and sustained participation of our communities in the processes of setting the direction and pace of our development programmes and projects.

“I want to rededicate the combined efforts of the political leadership and management of Mossel Bay Municipality to the task of fulfilling the local interests of our people within the national priority of improving the quality of lives of all our people,” the Executive Mayor, Alderman Harry Levendal said in his address to the Council on 28 May 2020.

The Speaker, Alderman Petru Terblanche (right) chaired the first virtual council meeting ever held in Mossel Bay. He was assisted by the head of legal services, Niel Prins, and legal advisor Melanie Smit.