Drought severely impacts District budget

‘THE prolonged and sustained drought that has characterized our weather patterns over the past three financial years, has severely impacted on our finances.

‘This is to the detriment of our other projects, such as maintenance of infrastructure, as we were forced to prioritise water provision to drought-ravaged areas.

Against this scenario, King Cetshwayo District Mayor Ntombenhle Mkhulisi presented the Mid Year Adjustment Budget to Council on Friday morning

‘After careful consideration and taking cognisance of the fact that our schemes need maintenance in order to ensure uninterrupted service delivery and to balance the need to protect our resources, the cash backing of the accumulated depreciated has been reduced to 18% instead of the original 23%, as provided for in the 2015/16 Annual Financial Statements cash-backed provisions.

‘This releases some funding amounting to R17.8m which has been used, among others, to top up the repairs and maintenance of the District’s aging water infrastructure as well as drought relief interventions..

Mkhulisi said this funding will have to be replenished in the next year to fund future capital expenditure aimed at the renewal of the District’s aging infrastructure.

A further R17m has been made available from the landfill site rehabilitation reserve, as well as R8m from employee related costs to alleviate the shortfall on the water tanker and other drought–related expenses, which were compounded by the severe drought.

‘The effect of the persistent dry season in the district over the recent years has forced us to increase our reliance on water tankers to deliver potable water to areas affected by the drought.

‘This has then pushed the expenditure related to this upwards.’

As at end of December 2016, the drought relief budget was 96% spent.

An additional R28m has been allocated to the drought relief budget, resulting in a total budget of R62m for the 2016/17 financial year.

In other areas departmental heads have been requested to utilise some projected savings within their votes towards spending on other votes.

This has been taken into account and funds have been moved accordingly, with adjustments on the revenue including the following:

Smart meters

The service charges on water has been adjusted downwards by R6.9m due to the drought that has affected the District as there was not enough water available to sell. Also, the rollout of smart meters has motivated consumers to use water sparingly.

Landfills

The revenue from the landfill site has been reduced by R2.7m due to the government initiative on recycling, called REDISA. Tyres are no longer being dumped at landfills, but rather recycled.

Investments

The interest on investments has been adjusted upwards by R4.5m. This is due to a favourable and stable repo rate in the past few months, as well as the cash-backed reserves that the municipality has been able to invest. The insurance reimbursement has been adjusted upwards by R1.2m due to the claims that are being paid out by the insurance company on claims submitted.

Corporate donation

RBM funding of R6m that was included in the 2016/17 budget has been removed as a result of RBM advising that they will not be transferring the funds directly to the municipality, rather they will be appointing a service provider to carry out the project, hence this becomes a grant in kind.

Learnerships

An amount of R200,216 from LG Seta has been included in the adjustment. This is the grant that is used to fund the Civil Engineering, Abet & Fire and Rescue Learnerships.

Shortfall safety net

There is a total of R26.3m that has been identified as additional funding and been added to the revenue budget to fund the impending shortfalls in the budget where identified.

Staff adjustments

A further R12m was identified from savings on Employee related costs up to January 2017, due to either vacant posts, or under utilised staff benefits.

From this, R3.7m was used to augment the overtime budget and the remaining R8m was used to fund other priority expenditure items such as chemicals and bulk electricity purchases.

Some positions have been included in the adjustment budget. These positions have been funded by redirecting funding from other positions.

All these positions were included in the organogram approved by Council in October 2015.

The impact of the above positions on operational budget results in the percentage of employee cost (exclusive of Councilors’ allowances) to the total operational budget for the 2016/17 financial year to be 24%.

There is no additional financial implication as funds have been moved from already funded posts after a reprioritisation exercise by the departments concerned.

Sundries

The total adjustment of R26.4m to the Expenditure budget with a matching Revenue Budget of R26.4m is summarised in the Council agenda.

An amount of R20.7m has been indicated as depreciation and provisions not backed in the above table, due to these being non cash expenditure items.

Summary of major budget adjustments:

• There is a net upward movement of R34.3m on the operational budget, adjusting the budget from the original R562m to R596m.

• An adjustment to the Operational IDP projects budget of R46m increases the budget to R154.5m.

• The capital budget has also been adjusted downwards by R33m, from R497m to R464m, the main adjustments being an adjustment of R3.7m from the Solid waste budget, these funds were for the feasibility study and design for the new cell on the landfill site, this project has not commenced and funds have been moved to fund the operations and maintenance of the landfill site.

• An amount of R22.5 million is mainly due to the reprioritisation of infrastructure projects, mainly those that are grant funded such as MIG, RBIG and WSIG. With MIG being reprioritised for VIP sanitation projects which are operational in nature.

HAVE YOUR SAY

Like our Facebook page and follow us on Twitter.

For news straight to your phone invite us:

WhatsApp – 072 069 4169

Instagram – zululand_observer