PRESENTATION TO SELECT COMMITTEE ON FINANCE ______________________________ 20 NOVEMBER 2008

CONTENTS 1.Introduction 2.Budget performance 3.Revenue collection 4.Performance of conditional grants 5.Intergovernmental relations 6.Alignment of IDP and PGDP 7.Compliance with MFMA 8.Service delivery 9.Other key projects 10. Assistance to the Poor Scheme 11. Capacity constraints 12. Credit rating outcome 13. Conclusion

1. INTRODUCTION Population-1,1 million Households Area covered-1950 km² Capital Budget-R1.9 billion Operating Budget-R5.2 billion

Ratios as at 30 June 2008 TARGETACTUAL Personnel Costs as a percentage of Total Operating Income30.00%25.3% Repairs and Maintenance as a percentage of Total Operating Income9.00%9.50% Capital Budget Spending95.00%98.67% Net Debtors to Annual Operating Income15% 12.5% Annual Debtors Collection Rate98.00%98.59% Creditors Turnover (from date of receipt of invoice)30 Days27 Days Debt Servicing Costs to Annual Operating Income12%1.3% Loan Debt to Income12%10.4% Current Ratio1.54:11.43:1 Own Revenue Generation88.00%84.8% 2. BUDGET PERFORMANCE

2. BUDGET PERFORMANCE (continued) SOURCES OF REVENUE AS AT 30 JUNE 2008 ORIGINAL BUDGET 2007/08 ACTUAL 2007/08 % Actual/ Budget Property rates607,878,660587,886, Service charges1,777,599,7801,795,795, Interest earned - external investments128,293,700183,781, Interest earned - outstanding debtors62,005,23089,638, Fines32,825,84019,433, Licenses and permits6,762,3907,141, Government grants and subsidies1,143,812,410760,337, Rental of facilities and equipment13,899,73012,952, Income for agency services1,028,2001,092, Other income198,329,670186,484, Gains on the disposal of property, plant and equipment22,020482,2312,190.0 Contributions: Other872, Total Revenue3,973,329,7903,645,027,

2. BUDGET PERFORMANCE (continued)

PLANNED OPERATING EXPENDITURE VERSUS ACTUAL BY ITEM AS AT 30 JUNE 2008 ORIGINAL BUDGET 2007/08 ACTUAL 2007/08 % Actual/ Budget Employee related costs1,162,623,9901,264,406, % Remuneration of Councillors42,118,45037,824, % Bad debts41,314,24060,820, % Collection costs2,885,8802,234, % Contracted services68,888,54078,206, % Depreciation254,222,820283,294, % Repairs and maintenance302,406,110330,013, % Interest paid67,147,15065,070, % Bulk purchases726,478,390719,787, % Grants and subsidies paid45,424,64056,253, % General expenses795,929,510559,924, % Loss on disposal of property, plant and equipment044,881,698 Total expenditure3,509,439,7203,502,721, %

2. BUDGET PERFORMANCE (continued)

2007/08 CAPITAL BUDGET/PROGRAMMES CAPITAL SPENDING COMPARED TO BUDGET - 30 JUNE 2008 AmendedTotal% Spent Directorate BudgetExpenditure2007/08 Budget and Treasury84,586,84084,576, Environment and Health Service59,167,71056,544, Economic Development and Recreation and Culture75,418,82075,729, Housing and Land20,021,84014,079, Electricity and Energy229,038,800227,425, Infrastructure and Engineering560,299,390566,056, Roads, stormwater and transportation345,839,210348,280, Sanitation service100,052,85099,265, Water service114,407,330118,510, Safety and Security35,351,32034,301, World Cup Office (Stadium)790,520,000787,199, Executive Mayor11,555,060304, MURP Projects3,420,0201,434, Corporate Services52,815,59048,892, TOTAL1,922,195,3901,896,544, BUDGET PERFORMANCE (continued)

CAPITAL BUDGET BY SOURCE OF FUNDING /08 AMENDED BUDGET 2007/08ACTUAL 2007/08 Capital Replacement Reserve444,644,979432,304,842 Contributions from Current Income450, ,455 Grants and Subsidies - National893,972,405890,800,248 Public Contributions22,414,80025,783,102 Grants and Subsidies - Province54,725,00049,626,079 Municipal Infrastructure Programme93,592,10095,492,701 Provincial Housing Board Subsidies2,901,750 2,023,876 Department of Minerals & Energy - Subsidy22,477,85024,090,233 Housing Revolving Fund500, ,897 Levies Replacement170,341,444172,625,619 Equitable Share36,083,53624,757,645 External Finance Fund100,000,000100,709,687 Restructuring Grant76,753,56075,712,880 European Union Funding3,336,7741,714,067 1,922,195,3901,896,544, BUDGET PERFORMANCE (continued)

3. REVENUE COLLECTION Accurate account database. Improved monitoring and maintenance of meters. All Assistance to the Poor households on prepaid meters. Improved Customer Care. Prepaid holders in arrears - % of their purchases offset against arrears. Continuous monitoring of water leaks.

CONDITIONAL GRANTS AS AT 30 JUNE 2008 Name of Grants Name of organ of state Total funds received Total expenditure Reasons for delay Did Municipality comply with grant conditions? Financial Management GrantNT500,000758,807N / AYes National Electrification ProgrammeDME15,657,00016,822,253N / AYes Municipal Infrastructure GrantDPLG152,750,230114,556,875N / AYes Restructuring GrantNT100,000,00079,925,096N / AYes Effective disaster managementDPLG1,500,0001,424,760N / AYes MSIG - Project ConsolidateDPLG03,675,756N / AYes FIFA 2010 World Cup (Construction of Stadium)NT730,495,896798,293,056N / AYes FIFA 2010 World Cup (Transport or PTIF)NT132,000,00075,882,975N / AYes Motherwell Urban Renewal ProgrammeDPLG16,768,20510,563,329N / AYes TOTAL 1,149,671,3311,101,902,90796% 4. PERFORMANCE OF CONDITIONAL GRANTS

4. PERFORMANCE OF CONDITIONAL GRANTS (continued) Reasons for over-/underexpenditure Financial Management Grant – increased spending due to training courses attended and improvement of financial systems, covered by the underspending of the grant in the previous financial year. Municipal Infrastructure Grant – Additional allocation received for flood relief (R57 m). On track with spending in 2008/09. Restructuring Grant – has been fully utilised. Grant ceased end of 2007/08. MSIG – Expenditure for 2007/08 financial year relates to grant received in the 2006/07 financial year. Assist in implementing E Learning, Attorney and Query Management systems.

4. PERFORMANCE OF CONDITIONAL GRANTS (continued) World Cup Soccer (Stadium) – Funds received in the 2006/07 financial year, utilised in 2007/08. World Cup Soccer (Transportation) – Delay in the awarding of certain contracts as a result of redesign. Five contracts have now been awarded (G Mbeki, Kempston, Harrower, Heugh, New Brighton and Fettes/Theale Roads) and construction is in progress. Motherwell Urban Renewal Programme – Underspending due to unresolved land ownership issues for the Xhosa Village, land to be acquired for Motherwell Golf Course.

ACHIEVEMENTS Financial Management Grant – Employed five interns, who are being rotated in all sub-directorates within Budget and Treasury. Municipal Infrastructure Grant – Bulk Sewer and Water services installed, water reticulation and sidewalks, all in previously disadvantaged areas. Restructuring Grant – assisted in implementing the General Valuation, new Billing System, fixed asset register. MSIG – Interface with the new billing system, e.g. E Learning and Attorney Management system. Motherwell Urban Renewal Programme – Upliftment of previously disadvantaged areas by providing essential services. 4. PERFORMANCE OF CONDITIONAL GRANTS (continued)

5. INTERGOVERNMENTAL RELATIONS The Municipality participates in intergovernmental relations structures, such as:  Premier’s Co-ordinating Forum  Technical Support Group  Munimecs (close liaison between municipal directorates and their counterparts)  Departmental Forums Sector departments participate in the IDP process. Further interaction is also taking place in the following areas:  2010 FIFA World Cup − Provincial Co-ordinating Committee − Stadium costs − Transportation infrastructure − Operational hosting funding Work with DBSA, especially with regard to MURP Project Management. Possible external funding from DBSA will be pursued.

5. INTERGOVERNMENTAL RELATIONS (continued) Intergovernmental relations challenges:  Unfunded mandates − Libraries − Health − Provincial roads − Housing delivery and lack of multi-year housing budget allocation  Delay in processing of EIA’s.  Delay in receipt of DWAF invoices for bulk water purchases.  Payment of outstanding service charges (Government debt) (current amount due: R53 million).  Electricity tariff increase by ESKOM and threats to investment.

6. ALIGNMENT OF IDP AND PGDP The IDP and PGDP are aligned in terms of key performance and focus areas, as reflected below: Municipal key performance areasProvincial key performance areas Service delivery and infrastructure development Fighting poverty Infrastructure development Municipal transformation and organisational development Public sector transformation Human resources development Local economic developmentManufacturing diversification and tourism Finance financial viability and management Same Public participation and good governanceSame

7. COMPLIANCE WITH MFMA The Council complies fully with the 14 key MFMA priorities set by National Treasury. The Council’s Supply Chain Management Policy was adopted in October The following Bid Committees are in place:  Specifications Committee  Evaluation Committee  Adjudication Committee Annual Financial Statements were submitted by 31 August Audit Steering Committee is in place and operational. The Municipality has a functional Internal Audit Division. Audit fees to the Auditor-General are paid fully and timeously.

7. COMPLIANCE WITH MFMA (continued) Audit qualifications reduced from 17 in 2005/06 to 1 in 2006/ /08 Audit complete and awaiting Auditor-General’s report (no basis for qualification has been identified as yet). Annual reports and the Council’s Oversight reports that comply with legislation are produced annually. Positive feedback was received from National Treasury regarding the Municipality's oversight and annual reports for 2006/07 financial year. Cluster System was adopted by Council to ensure integrated and co-ordinated service delivery. Quarterly financial and non-financial performance reports are produced through SDBIPs. Budget Performance Reports are submitted quarterly to the Council’s Budget Performance Monitoring Forum.

7. COMPLIANCE WITH MFMA (continued) Integrated IDP/Budget Process Plan is annually developed and implemented, taking into account stakeholder involvement and timelines. Section 71 reports are submitted timeously. Budget and Treasury Directorate structured as per the MFMA. Performance agreements are in place for the Municipal Manager and other Section 57 employees. Annual risk audits were performed and risk registers developed in line with annual audit plan.

Type of serviceSept 2008/ 09 target Annual target Sept 2008/ 09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity N/A % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control  Three renewable energy projects are under implementation.  The Municipality is working with Coega to find other alternative sources of energy. 8. SERVICE DELIVERY Type of serviceSept 2008/09 target Annual Target 2008/09 Sept 2008/09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control Total number of households in the Metro – households Electricity provision

Type of serviceSept 2008/ 09 target Annual target Sept 2008/ 09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity N/A % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control SERVICE DELIVERY (continued) Type of serviceSept. 2008/09 target Sept. 2008/09 actual Explanation of variance Km of roads tarred 10 km5 km Locating position of existing underground services and relaying same, on some major contracts, has delayed implementation. This situation will improve in the following quarters. Km of sidewalks tarred 3 km3,7 km Km of roads resurfaced 10 km1 km Delay in the awarding of the annual resurfacing tenders. This situation will improve in the following quarters. Km of roads rehabilitate d/ reconstruct ed 2 km0 km Still awaiting EIA approval. Km of roads graveled 20 km Water and sanitation provision  93% of households have access to a basic level of water.  100% of households in the Metro will have access to water within a 200 m radius through the installation of standpipes in informal areas. - On target to meet December 2008 deadline.  91% of households have access to basic level of sanitation.  Alternative sanitation methods are under investigation for use in the informal settlements, to meet the 2010 target.  December 2007 target met for the eradication of buckets in the formal areas.  100% of formal households have access to sanitation, except in two areas, namely - Kuyga and Kleinskool, where contractors abandoned sites. - Kuyga: Contractor on site due for completion in April Kleinskool: To commence in January 2009 due for completion in October  Currently, buckets are still in circulation in informal settlements as a means of sanitation (will be addressed in conjunction with housing delivery programme).

Type of serviceSept 2008/ 09 target Annual target Sept 2008/ 09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity N/A % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control Refuse removal  Approx. 99% of residents have access to a basic level of refuse removal.  Illegal dumping remains a challenge.  Ward-based cleaning programme has been introduced in 24 wards and will be expanded to cover 30 wards during the current financial year.  8 Co-operatives are also assisting in litter-picking and street sweeping.  Educational programmes are being implemented, as well as identified official dumping sites. 8. SERVICE DELIVERY (continued) Type of serviceSept. 2008/09 target Sept. 2008/09 actual Explanation of variance Km of roads tarred 10 km5 km Locating position of existing underground services and relaying same, on some major contracts, has delayed implementation. This situation will improve in the following quarters. Km of sidewalks tarred 3 km3,7 km Km of roads resurfaced 10 km1 km Delay in the awarding of the annual resurfacing tenders. This situation will improve in the following quarters. Km of roads rehabilitate d/ reconstruct ed 2 km0 km Still awaiting EIA approval. Km of roads graveled 20 km

Type of serviceSept 2008/ 09 target Annual target Sept 2008/ 09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity N/A % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control Roads  Road maintenance backlog (subsidised roads) 8. SERVICE DELIVERY (continued) NODESCRIPTION LENGTH (KM) BACKLOG (M) 1Resurfacing tar roads462R54 2Rehabilitation tar roads57R81 3Rehabilitation concrete roads6.4R18 4Rehabilitation bridge structures95R204 TOTAL525.4 (excl. BDGS)R357

Type of serviceSept 2008/ 09 target Annual target Sept 2008/ 09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity N/A % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control Roads (continued)  Roads maintenance backlog (unsubsidised roads) 8. SERVICE DELIVERY (continued) NODESCRIPTION LENGTH (KM) BACKLOG (M) 1Resurfacing tar roads2112R 131 2Rehabilitation tar roads164R197 3Rehabilitation concrete roads68R 63 4Rehabilitation bridge structures15R 18 5Tarring of gravel roads400R1.0 billion TOTAL2744 (excl. BDGS)R1.4 billion

Type of serviceSept 2008/ 09 target Annual target Sept 2008/ 09 actual % of households with access to electricity 97%98%97% Number of erven connected to electricity N/A % electricity losses in line with NERSA 8%7,1%6,32% Number of people connected to hot water load control Roads (continued) Progress with regard to roads during first quarter of 2008/09 financial year are as follows: Type of serviceSept. 2008/09 target Sept. 2008/09 actual Explanation of variance Km of roads tarred10 km5 km Locating position of existing underground services and relaying same, on some major contracts, has delayed implementation. This situation will improve in the following quarters. Km of sidewalks tarred3 km3,7 km Km of roads resurfaced10 km1 km Annual resurfacing tenders are now awarded and the situation will improve in the next quarter. Km of roads rehabilitated/ reconstructed 2 km0 km EIA delay the process, however, Contracts are now in process of being awarded. Km of roads graveled20 km 8. SERVICE DELIVERY (continued)

Upgrading of various sports facilities:  The Municipality has set aside R120 million over a three-year period to provide and upgrade the following sports facilities: (a)New facilities: - New multipurpose centre, Despatch - R4,5 million - 2 informal sports fields, Despatch – R5 million (2009/10) - Versatile sports ground, KwaNobuhle – R4,5 million - Multipurpose Sports Facility, Northern Areas – R3,5 million - Develop new multi-purpose centre, Northern Areas – R4,5 million - Develop new multi-purpose centre, Missionvale Area – R4 million - New multi-purpose centre, Wells Estate – R4,2 million - New swimming pool, KwaNobuhle – R3,5 million 9. OTHER KEY PROJECTS

(b)Upgrading of facilities: - Jubilee Sports Field – R3 million - Finnis Street Sports Field – R2 million - Gelvandale Playing Fields – R Kleinskool Sports Field – R2 million - Gelvandale Swimming Pool enclosure – R2,5 million - Gelvandale Stadium – R3 million - Reinstatement of Zwide Swimming Pool – R Zwide Stadium – R1,5 million - Veeplaas, upgrading of changerooms and concrete seating – R2 million - KwaDwesi, new changerooms, soccer and cricket fields – R2,5 million 9. OTHER KEY PROJECTS (continued)

Inner-city regeneration and urban renewal. Establishment of municipal Police Service and exploring funding models. The Municipality is on course to meet all 2010 FIFA World Cup requirements. In addition to the stadium, the Municipality is currently implementing other major related projects focusing on roads and transport. Bulk Services to support the Coega IDZ. 9. OTHER KEY PROJECTS (continued)

10. ASSISTANCE TO THE POOR SCHEME The Council adopted an Assistance to the Poor Policy. An Outreach Programme focusing on the unregistered indigent took place from April 2008 to August 2008: − new customers registered for the Assistance to the Poor Scheme Total ATTP: currently out of a total of households ATTP Scheme currently provides the following: − Free 8 kl water (monthly) − Free 75 kwh electricity (monthly) Total budget for Assistance to the Poor Scheme – R365 million 81 unemployed people were trained as plumbers and are repairing water leaks in indigent households throughout the Metro.

11. CAPACITY CONSTRAINTS FINANCIAL  Unfunded mandates; e.g. provision of health services, roads, libraries and housing.  Funds to provide for Coega Bulk Services (Water & Sanitation).  FIFA 2010 World Cup Budget [capital and operations].  Sustain the Capital Replacement Reserve [CRR]. HUMAN RESOURCES  Technical skills shortage (especially civil and electrical engineers).  Balancing staffing requirements with personnel expenditure target. SERVICE DELIVERY  Lack of adequate funding for maintenance backlogs.  Secure and sufficient energy requirements for both domestic users and investors.  Cost of electricity.  Lack of external contractor capacity.  EIA delays in project approvals.

Aa3.za – Long-term issue rating with stable outlook. Issued for both 2007 and Rating based on Municipality’s strong financial performance, good liquidity and cash management. Multi-year budgeting clearly reflects goals for next three years. 12. CREDIT RATING OUTCOME

Issues that require assistance from Government: Government debt to municipalities. Unfunded mandates. Zero rating on agency fees. Hosting Costs for World Cup. Exemption on import duties for World Cup related goods. Housing delivery allocation to be gazetted timeously and on a multi-year basis. Consideration of funding the tarring of gravel roads from housing subsidy programme. 13. CONCLUSION

THANK YOU