Introduction

The MFMA, implemented on 1 July 2004, has brought about a very new paradigm shift towards the budget process at local government level.

Medium Municipalities were required to comply with the new process with effect from the 2006/2007 financial year.

The Moses Kotane Local Municipality’s 2008/2009 budget and MTREF have therefore again been developed to comply to the fullest extend with section 17 of the mentioned Act

The budget is linked to the draft revised IDP while performance agreements of the accounting officer and senior management will be linked as soon as the final budget is approved by Council on 30 May 2008.

The draft budget document also includes the revised budget for 2007/2008.

The 2007/2008 revised budget could fortunately be finalized with a minimum effect. The estimated expenditure will not exceed to the total amount budgeted for
while revenue is expected to meet the budgeted target.

Medium Term Revenue and Expenditure Framework (MTREF)

The budget document consists of high-level VOTES and the various GFS functions and sub-functions. Votes are generally described as the highest level of administrative functions for appropriate service delivery, policy setting and performance measurement. For example: The Budget and Treasury Office; Corporate Services; Engineering Services etc.

GFS Functions are for example Electricity while GFS Sub-functions relates to street lighting.

Delivery Analysis at Local Government Level

1. Top Challenges

• To provide access to basic services to all;
• To provide sound, effective and efficient service delivery
• To provide an improved a diversified local economy that will reduce unemployment, poverty and bring a better live to all in the municipality;
• To promote a safe and healthy environment;
• To develop a community that commits itself to support development and service delivery through the Botho-Pele principal with regular payment for services;
• To provide a responsible and accountable leadership;

Internal Focus

1. Top Challenges

• To further establish the water services delivery structure in the MKLM administration;
• To ensure the provision of services to communities in a sustainable manner;
• To extend the municipality’s tax and revenue base;
• To implement the MTREF in a transparent and effective manner;
• To further develop and maintain a sound and effective administration;
• To develop further capacity with in the administration;
• To implement the newly developed total IT solution and database;
• To extend service delivery and excess to information and pay points to all wards in the municipality;
• To implement the traffic management system;
• To encourage the involvement of communities in the matters of local government

Budget Process Overview

1. Political Oversight on the MTREF Budget Process

The budget preparation process commenced in July 2007 with the adoption of the Budget Process Plan by the Council and the establishment of the Budget Steering Committee.

he process further unfolded with various meeting, workshops attended by, and officials.

2. Integration and Review of the IDP

The IDP revision process and the budget process were fully integrated to obtain the best possible results. Various workshops and meetings were held with community members, ward committees, Councillors and other interest parties.

3. Prioritization of Resource Allocations

The Council is committed to allocate scares financial resources to functional service delivery goals determined in the IDP and policy of National Government such as free basic services like water and electricity, Refuse removal etc. The transfer of water services to the municipality requires additional funding to integrate the existing fragmented structure and to develop and refurbish the assets to be transferred.

Alignment of the MTREF Budget with the IDP

The previous budgets of MKLM have been aligned with the IDP while this budget and MTREF is IDP driven. Only projects included in the revised IDP have been budgeted for.
Full details with regard to the above are indicated in the Budget and IDP reconciliation template.

Budget related Policies, By-Laws and Overview and Amendments

The following Budget related policies have been revised and are included in the budget documentation:

1. Tariff policy and Rates Policy

The tariff policy have been revised to provide for a increase of service charges to sustain service delivery at least at existing levels. With the implementation of the new valuation roll property rates will provide and additional income of R2, 9m.

2. Financial Policies, Credit Control, Debt Collection and Indigent Policy

A new set of policies has been developed and consolidated in one document that will be known as the MKLM financial policies.

3. The Free Basic Services policy provides for free basic water to all households and will cost the municipality R 13 million for the new financial year. Free basic electricity is provided for all households with an income less than R 1100 pm. The cost will be R 4.0 million for the financial year under discussion. Property owners with a income les that R 1 100 pm will receive a rebate of 30%

4. Investment of Funds are done in terms in terms of the regulation promulgated by the Minister of Finance in government Gazette 27431.

5. The Supply Chain Management Policy have been adopted by Council on 14 December 2005. Implementation has been done from 1 January 2006. The system fully complies with the MFMA and Regulations promulgated in terms of the Act.

6. Virement, Adjustment Budgets and Unforeseen and Unavoidable Expenditure is being dealt with in terms of the MFMA.

7. Infrastructure is financed with MIG funding while larger projects are funded with external loans and the Councils own revenue resources. External borrowing is controlled not to exceed GRAP guidelines. The cost of servicing loans is maintained below 15% of the operating budget.

8. The Water and Sanitation By-laws as well as Property Rates By Laws are hereby submitted for final approval.

9. The new valuation roll will be implemented on 1 July 2008. Property values has increased as a results of market tendencies and will affect the property rates of certain properties. Rates has set to yield an income of 10% above the previous financial year.

Budget Assumptions

As stated in the foreword to the budget certain assumption can be made
About external and internal factors that could and do influence the budget.

The following are of interest:

Population Migration Employment and Poverty

A tendency exists that the population is increasing in areas surrounding the Pilanesberg National Park. Ledig and the Saulspoort area is a good example.

Unemployment levels remains at a very high level in the MKLM area of jurisdiction. Approximately 60% of all households are earning less than R 800 per month. This situation influence cost recovery to such a extend that the extension of the Municipality’s revenue base is extremely difficult.

Development of Local Economy

The operating budget of R222 million will contribute further to LED while the Capital Budget will largely contribute to local employment.

Collection of Property Rates

The non-payment of service charges remains a problem and strict credit control will have to be applied.

Macro Economic Factors

The inflation rate increase to over 9% in January 2008 while price of crude oil is at an all time high of 106 US dollar. This will seriously affect service delivery as construction prices will increase rapidly.

Funding the Budget

Financial Performance

Taking in consideration that MKLM is only seven years old financial performance has been excellent with the implementation of the first valuation roll on 1 July 2002. The local revenue base increased from a mere R 200 000 in 2001 to R 219 million in 2008/2009. The accumulated surplus, provisions and reserves increased from R 4.0 million in 2000/2001 to R 15 million on 30 June 2007.

Long Term Financial Outlook

Taking in consideration the high level of unemployment and the predominately-rural nature of MKLM, rapid local economic development will be the only solution to generate additional revenue for the financing of infrastructure projects in future. The council has therefore established the MKLM development Agency to focus on economic development in the short and long term.

Sources of Funding

The 2008/2009 Budget and MTREF will be financed as follows:

Operating Budget

Capital Budget

Disclosure on Allocations made by the Municipality

No allocation is provided to other municipalities or organizations in the 2008/2009 MTREF Budget year.

Disclosure on the Implementation of the MFMA and other relevant Legislation

The Moses Kotane Local Municipality has comply to a large extend with the
MFMA. This budget endeavor to comply with chapter 4 of the Act; Chapter 11 has been implemented from 1 January 2006; Chapter 9 will be fully complied with from 1 July 2006 while the Council and Accounting officer strive to comply with all other provisions of the said Act. The financial statements for 2006/2007 has been completed in time and the Audit finalized by 30 November 2007 and the annual report submitted to Council on 31 January 2008. The Audit report was unqualified.