To compliment the 2008 Local Government Budgets and Expenditure Review tabled in Parliament on 26 August 2008, the Minister of Finance has approved the release of the final 2008/09 budget information for all 283 municipalities on the National Treasury's website. The publication of this information on the National Treasury's website is now an annual event.
The information released together with this press statement reflects aggregated municipal budget totals for the 2008/09 financial year and over the medium term period for all municipalities. The information is summarised in a variety of ways including per category of municipality as well as per province.
Changes to baseline - Annexure H.
All information is available on the National Treasury's website at www.treasury.gov.
This information will assist policy makers, researchers, sector specialists, elected representatives, academics and those responsible for implementation. It will also be used by the National Treasury as the basis for the In-year Management, Monitoring and Reporting System for Local Government (IYM) in terms of Section 71 of the MFMA. The MFMA envisages that regularly published budget information will enable and empower communities to hold their Municipal Councils accountable.
Section 24(3) of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003)(MFMA) requires the Accounting Officer of a municipality to submit the municipality's approved annual budgets to the National Treasury and the relevant provincial treasury once approved by their respective Councils. The National Treasury has been placing these budgets on its website on an annual basis since the 2005/06 financial year.
It should be noted that the 2008 Local Government Budget and Expenditure Review has been produced based on the 2007 Municipal Budget Cycle (MTREF) and was released in August 2008. The numbers being published with this press release cover the 2008 Municipal Budget Cycle (MTREF) as approved by the Councils.
The information is based on the adopted budgets of all 283 municipalities and was subjected to intensive verification and checking processes by the National Treasury, provincial treasuries, and municipal staff to improve on its quality. In certain instances, adjustments have been made to eliminate the duplication of transfers between district and local municipalities and transfers from operating to capital budgets.
It should also be noted that these numbers are as adopted by the Councils prior to the National Electricity Regulator's (NERSA) increase in electricity costs. A second analysis of the budgets will be conducted once the adjustment budgets which municipalities finalised by 30 September 2008, incorporating the electricity increases, are adopted by the respective Municipal Councils. It was further observed that a few municipalities had already incorporated increased electricity tariffs into their main adopted budgets in anticipation of the NERSA's tariff increase. This may distort figures to a certain degree.
To further mitigate the problems associated with producing a set of numbers that are comparable across all municipalities, the National Treasury has developed "Municipal Budget and Reporting Regulations". The budget format section has already been issued on 27 June 2008 in preparation for the 2009 Budget. The Regulations, once approved by the Minister of Finance, will soon be made available for formal consultation. The standardisation of budget formats across all municipalities will improve the quality and consistency of budget information submitted by municipalities in future.
The analysis contained in this press release will be restricted to the aggregated expenditure by category of municipality, an overview of the budgets of the six metropolitan councils, the secondary cities (next top 21 municipalities) and a summary of municipal budgets per province. The detail in supporting tables will provide more information by type of expenditure item and operational information.
Table 1 shows budgeted aggregated expenditure by category of municipality over the MTREF period. In aggregate, the 2008/09 budget is R176,2 billion, increasing to R180,6 billion in 2009/10, and to R186.2 billion in 2010/11. The 2008/09 budget is an increase of 12 per cent over the 2007/08 original budget (a 16 per cent increase in the capital budget and 10.7 per cent for the operating budget).
Category A 48.8% 59.3% 56.5% 49.6% 60.1% 57.7% 50.5% 60.0% 58.
Category B 37.0% 34.8% 35.4% 38.0% 34.3% 35.2% 36.0% 34.4% 34.
Category C 14.2% 6.0% 8.1% 12.3% 5.6% 7.1% 13.5% 5.6% 7.
The budget of the six Metros as a share of the total local government budget in the 2008/09 financial year constitutes 56.
35.4 per cent. District municipalities represent only 8.1 per cent. The configuration of the shares remains constant over the MTREF period.
Capital expenditure in aggregate represents 26.2 per cent in 2008/09, 22.8 per cent in 2009/10 and 19.3 per cent in 2010/11 of the overall budget of municipalities.
Table 2 shows the budgeted aggregated expenditure for all Metros over the MTREF period. Their total expenditure budget for 2008/09 amounts to R99.6 billion, increasing to R104.2 billion in 2009/10, and further increasing to R108.3 billion in 2010/11. The Metros capital budget represents 48.8 per cent of the total municipal capital budget for 2008/09. The size of the capital budgets over the MTREF for some Metros have been influenced by 2010 projects. The 2009/10 budgeted decrease is mainly attributed to the finalization of 2010 projects and a resultant reduction in grant funding and loans.
The operating expenditure for services by the Metros over the MTREF grows slightly and the focus appears to be on electricity, followed by water and minimal expenditure on sewerage and sanitation. The main contributor to the budgeted revenue from services by the Metros appears to be electricity which grows significantly over the MTREF. A breakdown of the various contributors to capital and operating budgets per municipality is shown in detail in Appendix A to F of this publication.
Cape Town 17.4% 20.4% 19.7% 19.2% 20.1% 19.9% 16.0% 19.5% 18.
Figure 2: Aggregated budgeted expenditure for metros, 2008/09 - 2010/11 15. The above table also shows the relative size of the individual Metro's budgets expressed as a percentage of the total Metro's budget. This comparison shows how the size of the Metro budgets are changing relative to each other. Notable is the consistent growth in the relative size of Ekurhuleni, while Nelson Mandela Bay is declining in relative size.
Table 3 shows the budgeted aggregated expenditure for the secondary cities (next top 21 municipalities) over the MTREF period. Their total expenditure budget for 2008/09 amounts to R29 billion, increasing to R29.7 billion in 2009/10, and further increasing to R30.7 billion in 2010/11. Multi-year budgeting is still a challenge to some of these local municipalities, with Newcastle not providing capital budgets for the ensuing two years due to capacity and other problems at the municipality, similar to the previous budget cycle.
Mbombela, Rustenburg and Polokwane are all host cities of the 2010 World Cup. Polokwane has budgeted 61.4 per cent of its total budget in 2008/09 for capital expenditure. Mbombela has budgeted 55.3 per cent for capital in 2008/09. By contrast Rustenburg has budgeted only 23.2 per cent of its total budget in 2008/09 for capital. Indeed there are a number of cities that are not 2010 host cities that have allocated more to capital than Rustenburg.
Municipalities with the lowest proportion of capital budget to total budget are Newcastle, Msunduzi, Mogale City, Matjhabeng, and Govan Mbeki - all with percentages below 13 per cent. It should be noted that for 2008/09 the average percentage capital budget to total budget for secondary cities was 26.2 per cent compared to the Metros at 22.6 per cent and national at 26.1 per cent. Note that Metros tend to deliver a wider range of services with higher levels of operational expenditure e.g. health and police. Over the medium term both the capital and operating budgets of the secondary cities show some stability with slight growths in the operating budgets in the 2009/10 year and 2010/11 years, while the capital budgets decrease.
Table 4 shows the budgeted aggregated expenditure for all municipalities, analysed by province over the MTREF period. Gauteng with only 14 municipalities including 3 metropolitan municipalities, has the highest capital budget at 25.1 per cent of the total capital budget. KwaZulu-Natal with 61 municipalities including 1 metro and 3 secondary cities has 22.4 per cent and the Western Cape with 30 municipalities including 1 metro, has 13.1 per cent of the total capital budget. It should be noted that the Eastern Cape which has one of the highest number of municipalities which are mainly rural and only 1 metro, also has the fourth highest capital budget which shows that there should be significant infrastructure development in this area.
It is notable that only two provinces' have per capita spending above the national average of R3 964 in 2008/09, namely Western Cape at R6 399 per capita and Gauteng at R6 454 per capita. Both these provinces are significantly above the national average - probably due to the fact that both are home to a significant proportion of the country's economic activity - which tends to increase spending on traded items like electricity and water.
The lowest level of per capita spending is in Limpopo, at just R2 047 per capita in 2008/09.
Figure 3: Total operating and capital expenditure per province, 2008/09 - 2010/11 22. Free State shows the lowest level of per capita spending on capital in 2008/09, though its relative position changes significantly in 2009/10 - when Mpumalanga shows the lowest level of per capita spending on capital.
Table 5 shows the aggregated budgeted expenditure for repairs and maintenance by category of municipalities, and for the six metros.
The share of the funds allocated for repairs and maintenance as a percentage of the total adopted budget, ranges between 5.8 per cent to 6.5 per cent over the 2008 MTREF period and appears to be very conservative. Of particular concern is the amount allocated by the City of Johannesburg.
Category A (Metro) Category B (Local) Category C (District) 99 584 281 62 309 180 14 323 150 6 547 026 3 060 155 680 137 6.6% 4.9% 4.7% 104 237 758 63 501 453 12 914 575 6 961 937 3 476 250 714 856 6.7% 5.5% 5.5% 108 352 524 64 604 140 13 247 530 7 498 910 3 872 075 768 658 6.9% 6.0% 5.
Total 176 216 611 10 287 318 5.8% 180 653 786 11 153 043 6.2% 186 204 194 12 139 643 6.
Total 99 584 281 6 547 026 6.6% 104 237 758 6 961 937 6.7% 108 352 524 7 498 910 6.
In addition, compared to last year's publication the National Treasury has further introduced two additional sets of information to enrich this publication. The first is referred to as the Growth in municipal budgets compared to current year's full year forecast - Annexure G; and the second is Changes to baseline - Annexure H.
The above summary provides an aggregate view of municipal budgets for the 2008/09 financial year and over the medium term period.
Further information on individual municipalities is contained in the supporting schedules that form part of this publication and are published on the National Treasury website.