1. Optimising Revenue to Support a Sustainable and Credible Budget IMFO Conference 3- 5 October 2016

2. EOH at a Glance Listed in 1998. Best share performance on the JSE in 2014 Over 13 000 staff End-to-end offerings B-BBEE Large Enterprise Level 2 A force for good in society Over 2 000 clients 138 locations in SA, active in 38 African countries and Internationally Leader in technology and knowledge services; Over R20 billion market cap Best People Partner for Life Right 1st Time To ensure professional planning and execution and have pride in all we do To nurture lifelong partnerships with our customers and business partners To attract, develop and retain the best people led by great leaders Sustainable Transformation To transform and celebrate diversity Lead & Grow Strive to be #1 in every domain we operate in whilst remaining entrepreneurial

3. Balanced Budget vs. Credible and Sustainable Budget A “balanced budget” may not be financially sustainable A budget that is balanced by the inclusion of non-recurring resources such as the sale of assets or transfers from reserves is not in structural balance A structurally balanced budget supports financial sustainability for multiple years into the future A credible budget must satisfy the following criteria: Meet the constitutional requirements to prioritise basic services Must be funded Rates and tariff increases must be fair and sustainable; Cash flow projections must be realistic Must provide adequately for maintenance and renewal of existing infrastructure

4. Current state of Local Government Finance Global Economic downturn impacted sharply on the country’s economic growth rate, higher inflation and increase in unemployment levels Above-inflation wage increases and sharp increases in the bulk price of electricity from Eskom Higher unemployment levels directly affect ability to pay municipal bills Migration to the major cities have placed significant strain on the demand for housing and basic services No significant impact on the current backlog for housing and basic services

5. Increasing reliance on transfers from national government Sharp escalation in outstanding debtors Increase in expenditure far exceed the inflation rate Low levels of expenditure on repairs and maintenance Under-pricing of municipal services relative to their true cost of delivery High ratio of salaries relative to total operating costs Current state of Local Government Finance

6. Inadequate and overstretched infrastructure Inadequate revenue vs. unlimited expenditure needs Limited opportunities to raise own revenues Limited administrative, technical and managerial capacity and skills within the municipalities Poor governance systems and structures, corruption and political meddling Reasons for poor service delivery

7. Main Sources of Municipal Revenue Source: National Treasury, Section 71 Report, Q4 - 2015/2016

8. Outstanding consumer debt Source: National Treasury, Section 71 Report, Q4 - 2015/2016

9. Revenue Optimisation Strategies & Programmes Optimise existing revenue sources Identify additional sources of revenue Streamline expenditure Improve efficiencies Data cleansing Debt management Credit control strategies

10. Limited success of Revenue Optimisation initiatives

11. Requirements for effective Revenue Management Serious administrative reform and requisite administrative practices Effective revenue administration comprising revenue management and implementation strategies Comprehensive procedures covering revenue value chain: – Tax base identification – Customer database management – Liabilities assessment – Invoicing – Enforcement – Cash management – Customer services – Data on customers, indigents, cadastral, finances and socio-economic circumstances Collect information, record & manage within respective revenue base Accurate and timeous billing Credit control Capacity enhanced through training, technical assistance and information programs Integrated Systems essential for effective revenue management

12. Revenue Optimisation Citizen Centric Road Map The Municipal citizen PRIMARY FOCUS R SECONDARY FOCUS The Municipal citizen

13. Punitive Revenue Enforcement Revenue Economic Revenue Facilitating economic stimulation Obligatory Revenue Services Revenue Revenue Optimisation Types of Revenue Innovative Revenue Optimal usage of assets

14. Revenue Optimisation Overview Revenue Optimization comprises : Income Optimization and Cost Optimization, Debt Management. Innovative Revenue and Economic Spatial Development; managed from a Command and Control Centre. It is a convergence of MIS to support Management SMART city Obligatory Innovative Punitive Economic Optimisation Spatial Economic Development Innovative Debt Management Expenditure Optimisation Income Optimisation

15. Revenue Optimisation Base up Approach Confirm Collections Debt Management Income Optimisation Cost Optimisation Economic Spatial Optimisation Optimise Secondary Revenue GIS, SG Deeds Office Diagnose Policies and Procedures Verify Customer and Tariffs Cleanse Installed Services Investigate Delivery Process Assess Billing/Invoicing

16. 16 8. Economic Spacial Development 7. Debt management 6. Cost optimisation 5. Income optimisation 4. Command & Control centre Revenue Optimisation 3. Infrastructure validation 2. Data Cleansing analysis Key Elements 1. Baseline diagnostics

17. 17 Revenue Optimisation FOCUS AREAS

18. 18 Revenue Optimisation Income optimisation Complete Billable Service Delivery is only possible when Infrastructure Data = Client Data Services delivered Billing Invoicing Accurate, complete payable invoice CLIENT DATA INFRASTRUCTURE DATA

19. Critical Success Factors People Processes Technology

20. Acknowledgements National Treasury MFMA Circular 64 Municipal Finance Management Act, Act 56 of 2003 Municipal Systems Act, Act 32 of 2000 Municipal Property Rates Act, Act 6 of 2004 FFC - Division of Revenue-Technical Report University of Pretoria - Fiscal Performance and Sustainability of Local Government in South Africa

21. Thank you Technology makes it possible… People make it happen