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Objectives of this Presentation

CITY OF CAPE TOWN AND SELECT COMMITTEE ON FINANCE Presented by: Clr I Neilson (Executive Committee Member Finance) Date: November 2008. Objectives of this Presentation. Provide a context to the Current Status of the City of Cape Town

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Objectives of this Presentation

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  1. CITY OF CAPE TOWNAND SELECT COMMITTEE ON FINANCEPresented by: Clr I Neilson (Executive Committee Member Finance)Date: November 2008

  2. Objectives of this Presentation • Provide a context to the Current Status of the City of Cape Town • Indicate the Summary Future Plans and Current Actions for the City of Cape Town • Highlight the Keys to Service Delivery through: • A closer and direct relationship with key national departments and the City of Cape Town ensuring joint planning and co-ordination • Ensuring that legislation is service delivery focused (eg MFMA) • Ensuring the national policies and funding programmes meet the real service delivery needs of the City of Cape Town • Ensuring that grant funds are appropriate to the IDP and service menu’s of the City of Cape Town • Ensuring that the flow of funds is directly aligned, through interaction with national departments, to the City’s long term delivery programmes

  3. The City is Moving From ……….

  4. The City is Moving Beyond ……….. The City is Moving To …..

  5. Content • City of Cape Town: Long term vision • Institutional context of the City of Cape Town • Regional context of the City of Cape Town • Key factors the influencing the City of Cape Town • Geographic growth corridors • Relationship with State Owned Enterprises • City alignment with Provincial strategies • Current City of Cape Town initiatives • City of Cape Town: budget review • Division of Revenue Act: performance • Financial imperatives and strategies • Service delivery: key statistics • Utility services review • What can government do to support the growth of the City of Cape Town?

  6. Goal: a) A prosperous City. b) Effective and equitable service delivery. c) A well governed and efficiently run administration The City of Cape Town: Long Term Vision 1.Shared Economic Growth 2. Sustainable Urban Infrastructure and Services 3. Energy Efficiency for a Sustainable Future 4. Public Transport Systems 5. Integrated Human Settlements 6. Safety and Security 7. Health, Social and Human Capital Development 8 Good Governance and Regulatory reform Institutional Effectiveness Urban Efficiency

  7. Institutional context of the City of Cape Town Background: • Major political changes • Senior management changes • Amalgamation of 5 major local authorities • Skills exodus • Financial challenges • Service delivery backlogs Outcomes: • Stable management team • Amalgamation now complete (systems; financial; policy; operational) • Attracting skilled and appropriate staff • City has the capacity to deliver • Financially strong • Strategies to address backlogs and growth are in place and being improved.

  8. The Context of the City of Cape Town • Population (3,5 million) • Demographics (includes African 35%; Coloured 44%; White 20%) • Cape Town has the highest net in-migration in South Africa resulting in pressure on services and infrastructure • Migration to Cape Town reflects broad spectrum of high to low income levels • Geographic context: limited room for expansion (ocean/mountains) • Primary industrial/business growth area –tourism and emerging informal market flowing from in-migration • International and national tourist destination • Infrastructure status • backlogs in major maintenance and • mass expansion of bulk infrastructure and transport required • Financial status • Clean audit; • Bond issue; • Healthy financial status; • Systems (IT)

  9. The City’s Place in South Africa · How and why is the City important to SA? • Cape Town is an acknowledged world-class city. • Cape Town is one of the most strikingly beautiful places in the world as noted by National Geographic in its recent survey which identified Cape Town, only place in Africa, as one of the 50 places to visit • Cape Town: Major international brand recognition • Foreign direct investment in Cape Town is increasing • Investment levels in the central business district grew with approximately R 30 billion of direct investment in real estate projects (Cape Town Partnership 2008). • Cape Town has numerous other competitive advantages including value for money real estate, high educational standards and technical skills, first-class medical facilities as well as extensive (and improving) infrastructure • Cape Town retained the title “Best City in Africa & Middle East” (Annual awards) • Contribution to GDP = 16%

  10. Key factors influencing the City Growth Drivers • In-migration (upper and middle income) • In-migration (<R3500 per month income) growth: 16 000 families per annum • Upward economic mobility of population – more infrastructure (roads, waste water, public transport, water reticulation) required for newly established suburbs • Demand for new housing delivery (all income groups) • Informal settlement upgrade and development imperatives in the form of: • Rudimentary services strategy • Informal Settlement Upgrade Strategy • Infrastructure requirements flowing from maintenance backlogs (industrial/household) • Economic development (including industrial development) in the formal and informal sectors • Growth of the tourist and other key City growth markets

  11. HOW HAS CAPE TOWN CHANGED?CAPE TOWN GROWTH: 1977 - 2006

  12. Geographic Growth Strategy • The City has adopted a variable growth strategy • The growth strategy combines both the densification of the existing City footprint and the targeted expansion of the City footprint • Key requirements for the targeted expansion strategy include development into high growth areas supported by investment nodes (job opportunities); public transport and social infrastructure (municipal services; education etc) • Primary Growth Areas: • Immediate (1/2): • AECI Precinct; Delft;Voortrekker Rd.;Darwin Corridor;Parklands;Atlantis;Fisantrekraal • Medium/Long Term (3/4/5)

  13. Relationship with State Owned Enterprises • Ports Authority • Role: Expanded trade and industry • Expansion strategy of the harbour to be addressed • Cape Town International Airport • Role: Tourism expansion • Expansion strategy of the airport (parking) • Impact of the airport: Noise corridors and the effect of planning policy on development • Railways • Role: commuter travel and replacement for road transport of goods/services • The railways have a key link to City expansion • Role regarding trade and industry (impact of fuel prices on demand) • ESKOM • Impact on industry and housing delivery (all income) • Koeberg Nuclear Facility: Impact on land availability • No linkage to City IDP Note:None of the above are under City/local control but all have a major impact on City development strategies. Joint planning/co-ordination is essential!!

  14. City alignment with Provincial Growth and Development Strategy • The City’s IDP is fully aligned to the Provincial Growth and Development Strategy • Alignment includes: • Infrastructure development focus • Growing the local economy • Regional growth • Annual discussions address the alignment of strategic focus areas during MTEC 1, 2 and 3 engagements • The Provincial Isidima (Housing) document is aligned to the City’s 5 Year Housing Plan and Housing IDP

  15. Current City of Cape Town Initiatives (Projects) • Transport: Public Rapid Transport Strategy (incorporating the Bus Rapid Transport Plan) • Transport: Hospital Bend Interchange (Koeberg interchange) • Soccer World Cup: 2010 Stadium and related infrastructure • All Services: Asset Management Strategy • Convention centre upgrade • Housing: Affordable/GAP Housing Contracts (Partnership with Banks) • Housing: Innovative Housing Solutions (eg Scottsdene Show Village) • Housing/All Services: Informal Settlements Upgrade Programme • Housing: Delivery 10 000 opportunities per annum (DORA limited) • Housing: Development Programmes comprise • Integrated housing projects • New rental housing • Hostels upgrade/refurbishment programmes • Comprehensive upgrade of City rental properties • Land restitution • Development partnership with Private Sector

  16. Current City of Cape Town Initiatives (Other) Supply Chain Management • Supply Chain Management is a key catalyst to delivery at all levels within the organisation • The City has made great strides in addressing its procurement processes whilst ensuring BEE support and the expansion of the Expanded Public Works Programme. • City is ISO 9001 Accredited ( First in South Africa) Housing Collections • The City has appointed a community based group (1 July 2008) to assist with ensuring housing contract administration, debt collection and debt management. • Payments to the organisation will be based on collection successes (ie increased collections for the City will result in increased payments to the community organisation)

  17. Current City of Cape Town Initiatives (Other) Housing Accreditation • City of Cape Town has noted its readiness for full housing accreditation in the interests of service delivery • City has received conditional level 1 accreditation – process very slow • Funds flows must be aligned (housing subsidies, MIG, INEP etc) in order to ensure delivery at scale • Funding must be allocated on a multi year programme basis linked to specific projects and the City’s IDP (currently funds allocations have no reference to the City IDP or delivery programme or the allocations from the different national sector departments)

  18. City Asset Management Plan • The City is developing a comprehensive asset management plan • The asset management plan will standardise the current City asset maintenance/new infrastructure delivery programmes • The asset management plan is linked to all City infrastructure (roads, water, electricity, stormwater, solid waste etc) • Objectives: • Provide comprehensive detail of the City’s current infrastructure • Provide comprehensive detail regarding the maintenance status of the existing City infrastructure • Provide an upgrade and maintenance programme for the City’s existing infrastructure • Provide funding requirements (and cash flows) for the maintenance programme • Project the infrastructure requirements for new City developments

  19. Mobility Strategy - Year 2020

  20. Total Budget 2008/2009: R22,5 billion

  21. City of Cape Town Budget Summary: Capital Budget Note: Impact of 2010 funding in 2010/2011 year

  22. Capex funding sources – 2008/09

  23. Capital Grant Dependency Capital Grant Dependency Note: Impact of 2010 Soccer World Cup

  24. Current Directorate Split (Original Budget Capex)

  25. City Finance: Key Imperatives • Balancing of non-revenue generating and revenue generating growth areas is essential. • Internal City funds are limited. The City can only sustainably operate within its mandate. • Funding for major national imperatives must include national funding allocations (2010 stadium and infrastructure, bus rapid transport, housing) • Long term structuring of capital and operating resources must align to IDP driven growth strategies • State funds (DORA) flows must align to the City’s real need as opposed to the current DORA processes (especially w.r.t. infrastructure development) which are not linked to the IDP. • Impact of unrestricted infrastructure installation must be managed to ensure sustainability • City/State must take a long term view w.r.t. asset (land) acquisition for housing and related development • City must manage the cost of money (as opposed to availability of money)

  26. City Finance: Key Imperatives (cont.) • City income recovery is the key to sustainable growth and service provision. • Debtor management strategies must reflect the approach of appropriate rebates/grants for families unable to pay as opposed to stronger measures for families unwilling to pay. • The installation of, inter alia, water flow control meters has resulted in improved collection rates for water allowing the City to keep its tariff increases at a reasonable level whilst improving payment levels (2006=67%; 2008=91%). • Raising capital funds (Bond Issue) to further enhance delivery is linked to ensuring value for money expenditure programmes as well as income generation programmes. • Grant funding (viz housing subsidy, MIG etc) must be used as a mechanism to ensure a long term and sustainable gearing ratio (loans v grants) • Bias towards revenue generating (and cross subsidising) ventures (industrial/commercial/environmental/housing) • Restructuring of City operations to effect cost reductions Summary: Once the basics are in place, expanded delivery will follow.

  27. Specific Capex growth items funded from Council funds • Utility services • Water - Development of Additional Infrastructure (R518 m), Cape Flats Collector Sewer (R140m), Fisantekraal (R85 m) • Electricity - Electricity System Infrastructure (R213m), Connection Infrastructure (R138m), Roggebaai Upgrade (R72m) • Solid Waste - Development of Landfill Infrastructure (R387m), New Specialised Area Cleaning Vehicles (R104m), Purchase of Fleet (R41m) • Rate-funded services • Electricity - Street lighting (R62 m) • New Settlements - Land Acquisition (R184 m) • Roads & Stormwater - Hospital Bend (R78 m), Strandfontein Road Upgrade (R53 m) • Sport & Recreation - Athlone Stadium (R34 m), Khayelitsha Athletics stand (R16 m) • Econ & Human dev - Business Support/SMME Facilities (R29 m) • Parks - Khayelitsha Wetlands Park Upgrade (R4 m) • City Spatial - Grand Parade Revitalisation (R27 m), 2010 World Cup Public Spaces (R26m) • 2010 Soccer WC - Green Point Promenade (R30 m) • IT - Optic Fibre Broadband (R114m)

  28. Operating Budget Summary • Total Operating budget - 11.3% increase to R15.8 billion • Overall staff costs increase of 19% • Repairs & maintenance increase of 10%; R1,2 billion spend represents a 57% increase over 2 years • Traffic Police: from R169m to R254m • Law Enforcement: from R77m to R95m • Emergency services: from R297m to R381m • Roads & storm water: from R423m to R466m • Electricity: from R2 840 to R3 490m Focus on service delivery departments.

  29. Revenue Collection – Rates and Debtors Key reasons for payment challenges: Rates valuation; Rates objections; Socio economic factors (fuel and food)

  30. Salaries percentage in Operating Budget

  31. Repairs and Maintenance expenditure

  32. Division of Revenue Act: Performance

  33. Key statistics: Poverty Relief Rates Rebate (Senior Citizens/Disabled Persons) 2008/2009 Rebate based on monthly income between R2 880 – R7 000 = 23 768 registered persons for 2008/2009 (17 195 person registered for the rebate in 2007/2008 when the rebate was limited to an income of R1 880 – R5 000 per month) Indigent Grants (Housing/Services/Rates) 100% Rates rebate based on monthly income < R2 880 (mainly pensioners) = 2 992 (incl child headed households) 100% Rates rebate based on property value < R88 000 = 68 422 Housing rental and selling scheme indigent grant (income <R2 880) = 3 432 All properties valued <R199 000 receive a R30 indigent grant (used towards water and sanitation) Various other poverty relief grants are available.

  34. Informal Settlement Upgrades 2007/2008 Water • 422 new standpipes, • 5 482 standpipes repaired and upgraded • All informal settlements have access to sanitation and water. • Informal Settlements Plan provides to expanding this provision Sanitation • 2 458 new toilets (2006/2007 – 633 toilets), • 4 303 toilets repaired and upgraded Refuse removal • All Informal Settlements have refuse removal service Electricity and Area Lighting • City Area of Supply: all eligible informal settlements provided with electricity and area lighting • Eskom Area of Supply: 1 area lighting complete, 2 underway • R6,0 million repair and upgrade

  35. Utility (Trading) Services Water • Cape Town is a water scarce area • Continued in-migration stresses water supply • Berg river water project – short/medium term intervention • Major long term strategies (national) required with targeted funding for secured water supply • Impact on industrial growth/business confidence • City allows 6kl of free water (10,5kl free water if house value <R199 000) Solid Waste • Limited landfill sites • Landfill sites expensive (environmental factors and court challenges) • Cost of transporting waste to outlying landfill sites is high • Key intervention - recycling

  36. Utility (Trading) Services (cont.) Electricity • City and Eskom supply electricity in Cape Town • Creates a challenge regarding: • Infrastructure development and maintenance • Funding for infrastructure development (particularly subsidy housing where the Eskom timelines do not align to City IDP and housing development strategy) • Split role of Eskom and City viz electricity supply creates consumer confusion • Restructuring of electricity distribution is underway (RED’s) • The financial effect on local authorities of the RED must be addressed. • Current Eskom generating capacity is a major economic development inhibiting factor • Urgent need to upgrade facilities for distribution of electricity • Impact of tariff increases has not been addressed in terms of the impact on the City budget and City cash flows (debtor ability to pay the increased tariffs, affordability) • City allows 50kWh of free electricity (consumption below 400 kWh/month)

  37. Utility (Trading) Services (cont.) Wastewater treatment • Cape Town’s sewerage infrastructure has not been expanded despite the tremendous growth of the City over the past 20 years. • The City’s wastewater treatment works are under stress.  • A sum of R285 million over three years has been budgeted to upgrade six of the City’s sewerage works.  

  38. Services Infrastructure Backlogs: Funding *10% benchmark: maintenance average (national level) The City’s intention is to meet the 10% benchmark. Major movement in this direction already underway.

  39. What can Government do to Support Growth of the City of Cape Town? Discussion Points: • Legislation/policy must be amended to allow for flexibility and a service delivery focus by ensuring: • Financial flows for State funds that meet the needs of the City • Policy development and implementation that are specifically aligned to the IDP • Regional differences ito policy/funding must be acknowledged (No “one size fits all”) • Project specific funding (similar to 2010) for key City projects (public transport/landfill) • Reduce bureaucracy (direct funds flows to Metro’s) – Housing Accreditation • Reduce variability of funding/policy principles from the various sector departments to ensure that projects operate in a co-ordinated manner

  40. What can Government do to Support Growth of the City of Cape Town? (cont) Discussion Points: • Integrated strategic planning must be enhanced– City and National Government must interact in defining long term (>3 year) funding and infrastructural programmes • Regional in-migration must be recognised in defining funds flows • Local tax sources and opportunities to be investigated that will enhance the funding of infrastructure expansion • The position of the City of Cape Town requires direct State intervention in developing and funding tax incentive schemes (economic development) • Targeted funding is required for a comprehensive infrastructure maintenance/refurbishment programme as this will allow for expanded City growth (industry)

  41. Thank you Enkosi

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