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I am honoured and privileged to have stood before this Council to table for the third time a draft MTREF (medium term revenue expenditure framework) for Bitou Municipality.  The MTREF gives direction to this municipality on how as a municipality we will realize the imperatives that was defined and articulated at the November 2013 Council Strategic session, which amongst others speak to inclusive economic growth that would provide sustainable jobs, broaden the local tax base and improving our revenue, premised on the successful implementation and execution of the thirteen (13) catalyst projects. A critical consideration of this inclusive economic growth would be to position Bitou as an investment destination of choice, enhance our tourism potential, diversifying the local economy and changing the ownership patterns within the current primary and secondary sectors of the economy in accordance to the national imperatives.

Inclusive Growth

We must all recognize that promoting economic development in the Bitou area necessitates an informed consideration of the global, national, provincial and regional economic environment. The recent global economic downturn and subsequent recovery, thus impacts on the local growth and development direction. By implication any focus on local socio-economic issue will not be adequately contextualized if the open nature of the economy is neglected. The importance of tourism for the Bitou municipality therefore informs the focus on inclusive growth.

In a world bank working paper (Lanchovichina and Lundstrom, 2009) inclusive growth is defined as growth that is sustainable because it is ‘’broad-based across sectors and inclusive of a large part of a country’s labour force’’. The concept captures the importance of structural transformation for economic diversification and competition. Encouraging broad-based and inclusive growth puts emphasis on policies that remove constraints to growth and create a level playing field for investment. Inclusive growth refers to both the pace and pattern of growth, which are considered interlinked. A logical outflow of this understanding of inclusive growth is that, our policies for inclusive growth must be an important component of our IDP for sustainable growth, meaning there must be policies that promote broad-based growth with productivity improvements and the creation of employment opportunities, and not the prioritization of redistribution. Inclusive growth requires a longer term, rather than short term, perspective with the emphasis on improving productive capacity of individual and creating an environment that is conducive for employment.

Economic outlook

The following economic indicators are important to note and have been taken into account in our own financial strategies, preparation of the MTREF for 2014/15 and the two outer years.

• The World Bank has revised South Africa’s economic growth outlook in 2014 to 2.7% from an earlier forecast of 3.2%.
• Although South Africa’s economy has expanded over the past years, the rate of growth has steadily declined, from 2.5% of GDP in 2012 to 1.8% in 2013; it is however projected to increase to 2.7% in 2014, and gradually increase to 3.5% by 2016. This trend reflects a confluence of unfavourable global and domestic circumstances which impact on all spheres of government.
• Inflation and a nominal spending ceiling will put real budgets under pressure over the medium term, requiring all spheres of government to work more efficiently.
• Inflation is projected to be 6.2 in 2014/15 and 5.9 and 5.5 in the 2015/16 and 2016/17 financial years.
• The economy of the Western Cape is expected to have grown marginally higher than the national average.
• Census 2011 has shown that the population of the Western Cape has grown with 29% from 2001; Bitou recorded the 4th highest growth in population in the country placing a huge strain on infrastructure and housing needs.
• Our revenues and cash flows are expected to remain under pressure in 2014/15 hence we adopted a conservative approach when projecting our expected revenues and cash receipts.

Focus of the 2014/2015 budget

The following budget principles and guidelines directly informed the compilation of the 2014/15 MTREF:

• The 2013/14 Adjustments Budget priorities and targets, as well as the base line allocations contained in that Adjustments Budget were adopted as the upper limits for the new baselines for the 2014/15 annual budget; where appropriate a zero base approached has been used.
  • Tariff and property rate increases should be affordable and should generally not exceed inflation as measured by the CPI, except where there are price increases in the inputs of services that are beyond the control of the municipality, for instance the cost of bulk electricity and the continued escalation in the fuel price.  In addition, tariffs need to remain or move towards being cost reflective, and should take into account the need to address infrastructure backlogs;

In view of the aforementioned, the following table is a consolidated overview of the proposed 2014/15 Medium-term Revenue and Expenditure Framework:

Table 1 Consolidated Overview of the 2014/15 MTREF

Growth and the National Development Plan

Both national and provincial governments view infrastructure as an important means of promoting sustainable growth and reducing poverty, with the national government having allocated large portions of its budget for this purpose. Economic infrastructure which is a focus for Bitou municipality must include the following;

• Electricity transmission
• Waste water Pump stations and piped network
• Road building and maintenance
• Water supply

In prioritizing the economic infrastructure we will be improving the social infrastructure which includes education and health.  Ladies and gentlemen, it is crystal clear not only in terms of what I am trying to highlight to you, but also in terms of the state of our infrastructure condition as we all have seen with the electricity blackouts and conditions of our roads that provision of economic infrastructure is the only necessary condition for economic growth in the Bitou municipal area.  It is crucial that this council and its community at large agree on areas in which growth potential lies and ensure that appropriate infrastructure services are properly funded.

Opening the path to stronger economic growth requires that identified barriers to growth be addressed.  The NDP has been implemented to create a framework to accelerate economic growth, eliminate poverty and reduce inequality. The budget policy framework for the next three years reflects greater alignment with the plan, as spending programmes begin to address economic constraints and the need for greater state efficiency.  The NDP identifies a number of microeconomic reforms needed to boost economic growth these include reducing the cost of living for poor households and the costs of doing business, support for small, medium and micro enterprises (SMMEs), entrepreneurs and business start-ups, a greener and more sustainable economy, support for local production as well as employment through government procurement and broadening and strengthening of industrial development.

We have therefore revised our spending plans and reprioritised funds to ensure key objectives are achieved and well-performing programmes are supported. Expenditure plans reflect both the medium-term investment plans and long-term goals identified in the NDP. In this MTREF we have ensured that we eradicate non-priority spending and reprioritise expenditure to focus on core infrastructure and service delivery.

Capital Budget

The capital budget flows from the IDP process and contains information obtained from relevant stakeholders through extensive public participation processes as well as ward committee processes where applicable.

The total funded capital projects for the 2014/2015 financial year amounts to R 42.5 Million, with the main focus being the following:

Water Infrastructure: R 6.6 Million
Electricity: R 11.1 Million
Sanitation: R 4.6 Million
Refuse Removal: R 7.6 Million
Roads Infrastructure: R 0.8 Million

The capital budget is funded by means of grants from National government in the amount of R 24.6 Million, Provincial Grants in the amount of R 1.2 Million, Loan funding in the amount of R 10 Million and other own funding in the amount of R 6.8 Million.

Operating Budget

The operating budget for the 2014/2015 financial year amounts to R 440.7 Million which represents an increase of R 35.6 Million or 8.8% over the budget for 2013/2014.

The cost drivers of the increase in the budget can be summarized as follows:

• 6.79% increase in the wage bill in accordance with the multi-year wage agreement
• 8.06% increase in the purchase of electricity from Eskom.
• Inflationary pressure and the general increase in the price of goods and services
• Continued increase in fuel prices.
• Operational requirements to ensure service delivery standards are complied with, this is specifically in regard to electricity, roads and water and waste water.

Housing allocation for the construction of houses has significantly decreased from R 76.1 Million in the 2013/2014 financial year to R 63.3Million in the 2014/2015 financial year but will still allow the municipality to expedite the delivery of houses.

Revenue sources remains under strain and in an attempt hence a balance of service delivery with affordability proposed tariff increases.

Indigent subsidies

Provision is made in the operating budget for the subsidizing of indigent households in the amount of R 245 per month; this includes a free 6Kl of water, 50 units of electricity, a 100% subsidy for refuse removal and sewerage charges.  A 100% rebate on assessment rates will also be given for Indigent households.  The subsidy allowed, exceeds the National norm and stretches the affordability threshold of the municipality.  The total amount in respect of free services, inclusive of free services given in Eskom distribution areas, and assessment rates rebates exceed R 21 Million in the 2014/2015 financial year.

In conclusion

The draft budget tabled here today is a step closer in attaining the strategic goals of the NDP as well as that of Bitou municipality which includes amongst others, institutional development and transformation, service delivery to all our communities, financial viability and sustainability, excellence in administration, transparency and public participation and I am convinced that it will contribute to our goal “To be the best together”.

My request is the following:

• All members of the ward committees and members of the public as well as all relevant stakeholders at large to ensure that they participate fully and make meaningful and valuable contributions in the budgeting process.

• The schedule of public participation meetings have been advertised in the local newspapers and are also available in all Municipal contact centres.

Once again, it is my privilege to table the 2014/2015 draft budget for consultation and I would like to re-emphasise my request and invitation to all stakeholders to contribute in the public participation process before the budget is submitted to council for final approval.

I thank you.

COUNCILLOR MEMORY BOOYSEN
EXECUTIVE MAYOR