Speech by Adv. Gesie van Deventer, Executive Mayor: Drakenstein, Tabling of 2011/12 Adjusted Budget for Drakenstein Municipality, Council chambers, Paarl, February 22 2012
The 2011/12 Adjusted Budget that I am tabling today, is the product of the immense work the new DA-led council has put in over the short period of just over eight months since we took office in mid-2011.
Allow me to use this opportunity to thank my colleagues on the Mayoral Committee as well as the hard-working and dedicated officials who have been instrumental in this process.
After a thorough analysis of Drakenstein Municipality's financial position, we are today presenting a budget aimed at achieving two things:
- financial stability, and
- improved delivery of services over time.
The proposed Expenditure Adjustment Budget is R1, 199, 885, 534
The proposed Operational Revenue Adjustment Budget is R1, 254, 105, 965
Capital Budget per IDP Strategic Objective Adjustment Budget is R320, 261, 231
Therefore, the Capital Adjustment Budget and Operational Adjustment Budget for the 2011/12 Adjusted Budget totals R1, 520, 146, 765
The Mayco member for Finance will outline the details of the budget shortly in his presentation.
Drakenstein under the ANC-led Council
Colleagues, I would like to use this opportunity to set out a few home truths about what has happened in this Municipality over the past few years.
The fact of the matter is that we inherited an administration in financial meltdown. And don't just take my word for it. Since 2007, the financial stability rating of the Municipality had steadily declined on all indicators according to municipal ratings agency, Ratings Afrika.
By 2011, ratings for the Municipality's financial position, operating performance and liabilities management had all dropped, in some cases by as much as half.
Of particular concern was the Municipality's liquidity, which declined to the extent that Ratings Afrika identified this as the single "biggest threat to the financial stability of the Municipality".
It is clear from this downward trend that if the ANC had remained in charge of Drakenstein for another five years, the Municipality would almost certainly have fell into serious financial trouble.
Since taking office, our own analysis has revealed that -- between 2008 and 2011 -- outstanding debt owed to the Municipality escalated from R209 million to R298 million.
We found that money that should have been spent on service delivery was instead being spent on paying salaries and benefits. By 2011, the Municipality's staff costs had risen to nearly 30% of the operational cost.
In fact, by the time the ANC's 5-year term in charge had come to an end, the Municipality had become experts in what can only be called "creative accounting" to hide the financial decline in Drakenstein.
Since 2009, the money the Municipality had in the bank had dropped from R181.8 million to just R166.2 while total creditors for the same period increased from R160.5 million to R220 million.
Not surprisingly, by the end of the 2010/11 financial year, Drakenstein was facing a R53.8 million actual shortfall on its commitments.
The Municipality's worsening financial position was beginning to have an acute effect on its ability to deliver for residents.
According to the Auditor-General's latest report, senior officials began manipulating information on the Municipality's performance in an attempt to keep the inability to deliver away from public scrutiny.
Housing projects had practically come to a standstill, with some planned developments being delayed since as far back as 2004. Only 120 houses were delivered during the last financial year.
Money which should have been spent on maintaining and developing infrastructure was instead used to pay the operating expenses of the Municipality.
This is evident in the original 2011/12 budget, which the ANC approved before it lost power and which the DA had inherited.
Our analysis of the budget revealed that capital expenditure grants worth R53.371 million were instead budgeted to pay for the operational expenses of the Municipality.
Further discrepancies were evident in the budgeting for bulk electricity. We identified a R12.4 million shortfall due to the CFO using the previous budgeted figure on electricity and not the expected actual figure.
Provision was also not made for R34 million in loans the Municipality had not redeemed, nor was the R2.7 million in interest budgeted for.
Drakenstein under the ANC had become what you might call a "shell" municipality - it looked normal from the outside, but when you looked closer it had no substance. Therefore it did not actually deliver the services that people need. It did not actually function as a municipality should.
Progress despite a uncooperative environment
When the DA dispensation assumed office, we began to uncover the extent of the ANC-dominated Council's inadequate planning and budgeting. It became clear that we would have to make adjustments to the Municipality's budget in order to stabilize the Municipality's financial position.
Without a healthy financial situation, a municipality's ability to deliver services over time will erode. In the seven and a half months the DA has been in charge, major steps have been taken to get Drakenstein back on track.
When we took office last year, we were met with hostility from certain sectors of the administration.
In some cases, officials actively refused to cooperate or communicate with us.
Let me give you just one example of this. On the very first morning we arrived at work, we were faced with a situation where the municipality's filing records were dumped in a mess in the middle of the Mayco office floor.
For the first few months, vital information requested by us on the Municipality's finances was not forthcoming. From day one we did not have sufficient telephone lines or computer equipment. It took quite some time to establish a functional work environment.
We forged ahead with business nevertheless, at times bringing our own equipment and stationary from home so that we could get on with work.
Concerns for personal safety were also a major factor. Our offices were unlawfully entered into a number of times and documents were removed.
Despite being forced to contend with this initial uncooperative working environment, we've managed to get many things right.
We started by getting the right people to fix the financial management system, so that we could get quality information and reports on the status of the Municipality.
We were able to use this information to conduct a thorough analysis of the financial position of the Municipality.
On the Auditor General's recommendation, we reinstated the forensic investigation into the Municipal Manager and Executive Director: Corporate Services.
Both had been implicated in an irregular tender for the procurement of flags for the 2010 World Cup.
Once the investigations had been finalized, we acted in terms of municipal law by beginning disciplinary hearings into the conduct of these two officials as well as the CFO.
All the mentioned officials have since resigned, before the disciplinary proceedings commenced.
My commitment to Drakenstein is that all these vacant positions thus created, shall be filled with people who are fit for purpose and who are committed to service delivery in Drakenstein.
The adjusted budget that I am tabling today is the product of all the careful analysis and work we have put in over a short period of time in order to turn the situation at Drakenstein around.
Under the DA dispensation
I am proud to announce today, that we have taken control of the inherited adverse financial situation and we have been able to ensure through this adjusted budget that:
- There will be no increase in rates and taxes for the 2011/12 financial year;
- Basic service delivery and housing delivery will continue unaffected;
- Poorer residents will continue to receive 10 kilolitres of water per household, higher than the national guidelines of 6 kilolitres; they will also receive 100 kilowatt hours of electricity per household, which is higher than the national guideline of 50 kilowatt hours;
- All essential vacancies will be filled;
- All capital expenditure projects already committed to will continue;
- All projects that are required to comply with legislation will continue;
- The council will be in a better position to continue capital expenditure projects in the coming financial years.
We have managed to achieve all this under tough financial circumstances.
Through careful financial planning, we were able to save R97.1 million on the Municipality's operational expenditure.
We did this primarily by cutting all the "nice-to-have" expenditure that the previous administration had budgeted for. The Municipality will use what is essential to keep its operations going and all luxuries will be cut.
Savings on the capital budget to the value of R35.5 million were also made.
Capital projects to which the municipality has not yet committed, will be incorporated into the 2012/13 budget. In many instances we were able to make savings on these projects by identifying poor planning and budgeting on the part of the previous administration.
To keep capital projects going, we will seek a loan of R70 million that will be paid back over time and in a responsible manner. We will also ensure that under the DA-led council, the Municipality will now register for all grants and subsidies due to it for infrastructure development.
On top of ensuring financial stability, we have also been able to unlock housing delivery in a way that the previous ANC-led council had failed to do for years.
The Drommedaris Housing Project, blocked since 2004 due to tender problems and poor budgeting, was finally initiated in December 2011. This project is set to deliver 1 500 low-cost homes for poorer residents.
In addition, we are also in the process of unblocking four other housing projects that have been delayed for so many years under the ANC.
The first few months of our term of office have been challenging to say the least. But, as we table this budget today, we are more determined than ever to realise our vision for Drakenstein Municipality.
I commit to the Council and Community today, that by the end of the DA's term of office, this will be among the best-governed municipalities in the country. This will be a municipality that delivers services for all and enables the local economy to create jobs through growth.
We are committed to creating an environment that encourages investment in our local economy. Through the rolling out of infrastructure and the aggressive canvassing of people and businesses to invest in our towns, we will make life better for residents.
I would like to thank my team, and the Acting CFO and his team, once again for the immense work that was put into creating an adjusted budget that will put the Municipality in a strong position to realise our vision in the coming years.
What is required now is for all of us to get behind the Council and its vision to ensure that we deliver for all residents in Drakenstein.
I wish to thank all the officials who bought into the new responsible financial direction we have taken in order to ensure the turnaround in the Drakenstein Municipality.
I want to stress to my Community that they can trust we shall overcome any adversary resulting from the inherited financial or administrative position.
I, as Mayor and leader of my team, am confident that we have embarked on a sound strategy to ensure clean, effective and good governance to all.
I thank you.
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