Structure of Presentation

1. Briefing to Provincial and Local Government Portfolio Committee on Municipal Services Debt and Municipal Billing Systems June 14, 2005

2. Structure of Presentation • Update on municipal services debt • Structure of municipal services debt • Who owes the debt • For what is the debt owed • Action taken • Key findings • On a way forward: Project Consolidate

3. Municipal Services Debt Affordability Service Levels Effective Administration

4. Update Municipal Services Debt Total as at Dec. 31, 2002: R22.5 billion Total as at Dec. 31, 2003: R27.2 billion Total as at Dec. 31, 2004: R32.1 billion Total Change: R9.6 billion Millions of Rands As at December 31, 2002 As at December 31, 2003 As at December 31, 2004

5. Structure of Municipal Services Debt • Total: R32.1 billion • Amount owed to Metros: R20.8 billion (65%) • Amount owed to next 10 largest: R7.3 billion (23%) • Amount owed to 16 largest: R28 billion (88%) • Amount owed to the rest: R4 billion (11%) • Accumulated since 1994 • Largest 16 municipalities (particularly Metros) have biggest problem

6. Who owes the Debt?

7. For What is the Debt Owed?

8. Why the Focus on Larger Municipalities • Fastest growth rate – ranging from 8% to 24% annual growth rate • Largest impact on largest number of people • Serious ramifications for overall financial and economic viability – locally and nationally • Serious impact on service delivery – particularly with regard to addressing service backlogs • Setting trends in other municipalities and public attitude towards system of local government

9. Action Taken • Rigorous analysis of debtors • Who are they? • Where are they? • For what do they owe? • How long have they owed? • Why do they owe? • What can be done about it? • A centrally managed process was put in place to conduct this analysis in six metros and Buffalo City

10. Action Taken • Share details of these analyses with municipalities in order to obtain a common appreciation of their respective challenges – as they are specific to a municipality, or as they have national impact and implications • Begin to develop specific programmes of action to address unique circumstances in municipalities • Conceptualise a “political programme of action” that will encourage council ownership of the problem and its solution • Determine a role for the private sector in addressing the totality of the problem

11. Key Findings • There are significant challenges with municipal systems. These challenges are not singularly around municipal billing systems as much as they are about the “feeder systems” into the billing system • Significant deficiencies with infrastructure • Significant shortcomings with related processes – meter reading, valuation rolls, zoning etc. • Inadequate attention is given to the differentiation and stratification of customers – those unable to pay are often treated in the same manner as those who are able to pay

12. Key Findings • Inadequate interaction with customers to encourage payment in order to facilitate community-wide development • Inadequate mechanisms to resolve disputes and/or respond to customer queries • Inadequate attention paid to the training and welfare of lower-level workers who are expected to interact with the public • Inadequate strategies to address indigence – both in terms of support and also with regard to changing the status of the indigent

13. On A Way Forward • Under the auspices of Project Consolidate, an initiative has been developed that will enable us to develop working models that consider the full spectrum of the challenge • The working models will be developed in 12 municipalities of ranging size and demographic profile in order to allow replication in other municipalities • The private sector, particularly the major actors in the municipal billing sector, have been enlisted to support this initiative • dplg has undertaken to appoint a senior level official who will work with the municipalities to develop these working models

14. Overview of Project Considerations INFRASTRUCTURE PROCESSES SYSTEM CUSTOMER RELATIONS &DISPUTE MECHANISMS Are there functioning meters? Has the utility of the meters been adequately communicated to communities? FINANCIAL PLANNING & FORECASTING INVESTMENT IN WORKERS (Training, Tools & Incentives) PUBLIC EDUCATION & COMMUNICATION Are the functioning meters being read – accurately and regularly? How are customers handled? Are customers differentiated? Are there adequate payment facilities? [Number of facilities; layout of facilities; staffing at facilities; work hours etc.] How are obviously wrong accounts addressed? Are corrections immediately inputted into the system? Is there sufficient authority on the floor? Is the staff courteous? How is this managed and maintained? Does the municipality have an information management system that can cater for all its process? Does the information management system have the flexibility to organize and produce information and enables political leadership to better serve them? Does the information management system enable effective financial planning and forecasting? Is there adequate and appropriate investment in the workers in order to enhance their performance? Is there constant communication with communities about the use and management of public resources? How are poor households catered by the systems? Is data from the meters regularly and accurately inputted into the billing system? No Dispute= Pay or Not Pay • Intended Outcomes • Infrastructure assessment – particularly with regard to the availability of functioning meters • Economic Profile of households in low-income residential areas. Profile would include information on the household’s level of economic participation, and the skill and skill levels resident in the households Issue Accounts Are households accurately categorized and tariffs correctly charged? Dispute= Pay or Not Pay • Intended Outcomes • Thorough assessment of the effectiveness and efficiency of current processes • Costed recommendations and implementation plans for more effective and efficient processes • Modification to existing billing systems to accommodate new processes and associated management information requirements

15. Project Consolidate Target Municipalities