1. FINANCIAL SUSTAINABILITY & RESILIENCE OVER THE NEXT 4 DECADES
Presented by:
Mr Andile Dyakala
Chief Financial Officer

2. Table of Contents Government Vision and Strategic Objectives
Tshwane 2055
2012/13 MTREF
Revenue Security and Financial Sustainability
Financial Sustainability Game changers
Financial Ratios Towards 2055
Funding of Capital Infrastructure Plans
Conclusion

3. Government Vision and Strategic Objectives
Key events and policy instruments have shaped and continue to influence local government long-term planning processes such as :
Vision 2055 adopted by Gauteng Province for development of the province;
South African Vision 2025, as published in the Green Paper of National Strategic Planning 2009;
The Medium Term Strategic Framework (MTSF) (2009 – 2014) outlining ten strategic priorities of National Government as introduced in The MTSF has a new growth path outlining the approach to accelerate growth and employment, focusing on inter alia:
Continuing and broadening public investment in infrastructure;
Targeting more labour-absorbing activities.
Promoting innovation through “greening economy” initiatives; and
Supporting rural development and regional integration

4. Government Vision and Strategic Objectives (contd)
In 2010 the Government adopted 12 outcomes as the basis for the country’s programme of action and to facilitate measureable performance and better service delivery .
In terms of the local government outcome – “A responsive, accountable, effective and efficient local government system” - seven outputs have been formulated inter alia: Implement a differentiated approach to municipal financing, planning and support.
Tshwane 2055 is linked to the above Government Vision and Strategic Objectives.

5. Tshwane 2055
The City of Tshwane views its long-term strategy formulation process as a “game changing” intervention that will shape the City’s future growth and development goals. To this end, the Tshwane 2055 Discussion Document presents the City with an opportunity to align its transformation agenda to current realities while building a foundation for the future.
Advantages of long-term planning:
It encourages stakeholders to invest resources toward the development of a common vision that in turn informs the prioritisation of areas and interventions
It fosters the allocation of resources to prioritised areas over a period.
It helps a city anticipate future shocks and rapidly changing contexts (the risk environment) and raises its understanding of how stakeholders would respond under various scenarios
It enables a city to anticipate the rate, type, and physical direction of growth and to develop infrastructure ahead of growth.

6. Tshwane 2055 (contd)
Preliminary game changing conceptual framework (game changing principles)
Tshwane South Africa’s Capital 2055
Diversified and shared economic development
Revenue security and financial sustainability
Participation, collaboration and partnerships
Safe and healthy City for all
Spatial engineering and mobility
Integrated economic, social and environment al strategies
Social cohesion and inclusion
Service delivery excellence and innovation

7. 2012/13 MTREF Summary of Revenue and Expenditure for the 2012/13 MTREF
Budget Year
2012/13
Budget Year 2013/14
Budget Year 2014/15
R’000
Total Operating Revenue
22 
24 
27 
Total Operating Expenditure
21 
22 
24 
Surplus/(Deficit) for the year 1  2  3 

8. 2012/13 MTREF
Capital budget per department

9. 2012/13 MTREF
Summary of tariff increases per main service (1 July 2012):
Revenue category
2012/13
Tariff increase
2013/14
2014/15 %
Property rates
12,0
10,0
Sanitation
Solid Waste
25,0
Water
 10,0
Electricity
13,0

10. Revenue Security and Financial Sustainability
Long-term Financial Sustainability Plan
Capital Investment Framework
Long-term Growth, Employment & Development Plan
Asset Management Strategy
Housing Development Plan
Revenue Enhancement Strategy
Infrastructure Plan and Infrastructure Maintenance Plan
Integrated Development Plan (IDP)
City Development Strategy (CDS)
Infrastructure Investment Strategy (Loans & Investments)

11. Revenue Security and Financial Sustainability (contd)
Pyramid of Sustainability
2055
The CoT wants to move from the bottom to the top by 2055.

12. Revenue Security and Financial Sustainability (contd) Pyramid of Sustainability (contd)
Critical Short Term Sustainability
Long Term Business Viability
Maintain unqualified audit opinion
Clean audit report
Improve working capital
Realistic and accurate cash flow planning
High long term credit rating with a stable outlook
Gilt edged (highest) credit rating which is also maintainable
Adherence to the MFMA and NT Regulations
Maintain adherence to the MFMA and NT Regulations
90% spending on capital budget
95% to100% spending on capital budget
Build cash-backed reserves.
Full cash-backed reserves.
Create operating surplus to fund capital programme
Adequate operating surplus to fund the capital programme, while maintaining a debt to revenue ratio of 40%
Infrastructure backlogs addressed inadequately.
Infrastructure backlogs addressed significantly.
Repairs and maintenance addressed in terms of accepted levels only.
Repairs and maintenance addressed sufficiently.
Asset management in process.
Sound asset management.
Debt levels above prudential guidelines.
Maintain debt levels below prudential guidelines.
Develop revenue enhancement initiatives.
Adequate additional revenue sources.

13. Revenue Security and Financial Sustainability (contd) Fundamental Informants
To ensure long term financial health and sustainability and to enable continuous service delivery over the medium to long term the following fundamental informants are applicable:
Game changers – To frame and guide the city’s approach to growth and development
Financial ratios – Best practice norms
Value for money
Operational efficiencies
Revenue Enhancement – Identification of new revenue streams and maximizing current streams (parking bay tax, business tax).
Cash flow management intervention initiatives and strategies.
Additional funding sources – Business tax, parking bay tax etc.
Review tariffs – Must take cost of providing service into consideration ie CPI, MCI, but also affordability levels.
Collection rate – Credit policy, incentive schemes.
Level of expenditure
– Capital & operating
– Accountability to community

14. Revenue Security and Financial Sustainability (contd) Fundamental Informants (contd)
Cash Backing of surplus and reserves.
Infrastructure Funding Plan to assist with best practice mix.
Surplus funds from own generated revenue
Other funding instruments
Borrowing (i.e. Loans, Bonds and PPP’s) – The NT ratio of Borrowing against Own Capital Funding to be decreased, as the CoT should be less dependant on borrowing and more dependant on surplus funds generated (50/50 ratio).
Long-term debt to total revenue not exceeding 40%.
External funds (ie grants as published in the DoRA) – (mainly increasing by CPI).

15. 2012/13 MTREF
Capital budget per department

16. 2012/13 MTREF
Summary of tariff increases per main service (1 July 2012):
Revenue category
2012/13
Tariff increase
2013/14
2014/15 %
Property rates
12,0
10,0
Sanitation
Solid Waste
25,0
Water
 10,0
Electricity
13,0

17. Financial Sustainability Game Changers
Security of Revenue Project
In the State of the City address the Executive Mayor announced the full roll out of prepaid meters.
Right to Collect on City’s Debtors Book
Trajectory from the current methodology of handing over an account to a third party for collection and pay commission.
Integrated General Valuation Roll of 2013
Currently the City of Tshwane is operating on 3 General Valuation Rolls. A plan is in place to have an integrated General Valuation Roll by 2013.

18. Financial Ratios Towards 2055
Budget Year 2012/13
Year
2022
2032
Target
2055
Current asset ratio
1,11:1
1,9:1
2:1
3:1
Quick asset ratio
1,03:1
1,3:1
1,5:1
1,6:1
Short term loans to operating revenue
1,9%
2,5%
Debt Ratio
2,94:1
2,4:1
2,5:1
Long-term debt to total revenue
37,03%
39%
40%
Cash to Interest Coverage
3,04:1
4,9:1
5:1
Debt to Cash ratio
2,1:1
Borrowings to capital expenditure
0,38:1
0,32:1
0,3:1
Repairs and maintenance to total operating revenue
6,22% 7% 8%
Net debtors to total operating revenue
21%
116 days
30 days
Return on Assets
6,34%
Asset Turnover
0.81 times
0,9 times
1 time
Cost of funding (capital)
7,58% 5%
4,6%
4.3%
Remuneration as % of expenditure
25-28%

19. Funding of Capital Infrastructure Plans
Type of funding instruments:
Loans/Bonds: - Credit Rating
- Diversifying of borrowing portfolio
- Borrowing capacity
- Availability of funds in the market
- Repayment of debt
- Gearing ratio (Gearing of balance sheet)
- Cost of funding
- Optimise funding (match repayment term of funding to life span of asset, eg roads 20 years)
Commercial Paper (Financial Instrument)
PPP’s
Sale and Leaseback / (Leasing)
Debtors book funding (Right to collect on debtor’s book)
Infrastructure Investment Funding (Mix of on and off balance sheet funding)
Off balance sheet funding
Developmental Charges
Development financial institutions (DBSA, World Bank and IDC)

20. Conclusion
In order to obtain the objectives of the Tshwane SA’s capital 2055, the city will have to focus on:
Increase in infrastructure investment
Ensure sustainability
Efficiency gains
Capacitate work force
Costing various interventions and strategies
Invest in revenue generating projects
Partnership with private sector
Customer care
Strategic procurement (better value for money)
Developing a long-term financial plan that will be responding to various challenges and strategies that will come out of consultative processes.

21. Thank You