Joburg’s budget cuts capital spending amid cost saving by Treasury

The MMC for Finance in Johannesburg Funzela Ngobeni tabled a R59bn budget on Thursday, which will see an increase in the operating budget to R51bn but a cut of just under R1bn in capital expenditure to R7.8bn.

The country’s economic hub is under financial pressure with National Treasury cutting municipal grants for 2018/2019 as part of the February budget’s plan to reduce the fiscal deficit.

“The task of balancing tough economic times, felt most by our poorest residents, against the enormous backlogs in our City is a daunting one,” said Ngobeni, member of the mayoral committee.

Ngobeni told the council sitting that Treasury and the Department of Human Settlements ended the Joburg Urban Settlements Grant of R363m, despite a need for 300 000 city housing opportunities.

The capital budget allocated to Joburg to maintain and build infrastructure in 2017/2018 was R8.6bn. According to an adjustment note in February, this was reduced by R1.2bn in that financial year “in the interest of financial sustainability and necessitated, inter alia, by the need to suspend projects linked to grant funding where the disbursement of the grant is no longer guaranteed”.

Upgrades to informal settlements and hostels

The City’s Housing Department was allocated a capital budget of R3.4bn over the next three years and an operational budget of R1bn for 2018/2019. R14m of the capital budget in housing will go towards formalising some of the 190 informal settlements that dot Johannesburg, while R60m has been allocated towards refurbishing hostels such as Diepkloof and Madala.

Johannesburg Mayor Herman Mashaba is forging ahead with his plan to develop low cost housing.

Ngobeni detailed that 12 City owned properties have already been released for this purpose and another 71 will be bought by the end of the financial year. R46m has been allocated to buy buildings in the inner city for this purpose and the City will hold discussions with private owners of derelict buildings to this effect.

Tariff hikes

Seventy-four-percent of the City’s budget comes from revenue it collects from rates and services provided. Electricity prices will rise by 7.3% for Johannesburg residents in 2018/2019 (higher than inflation of the estimated 5.2% in 2018).

Water, sewerage and sanitation tariffs will see a steep increase of 14% and there will be a reduction on the costs of sanitation services for smaller homes (erf size up to 300 square metres) from R250 to R196.

Ngobeni said the higher electricity and water tariffs are required to refurbish ageing infrastructure and electrify informal settlements.

Property rate tariffs

Ngobeni addressed the thorny issue of property valuations which has seen some Johannesburg residents seeing an increase of between 60% and 500% in their property values, which in turn lead to a hike in rates.

Ngobeni bemoaned the process taking place every 4 years admitting the impact of a 5-year increase on residents is difficult.

The new property rate tariffs will come into effect in July.

All ratepayers who have objected to their valuation will continue paying what they have paid historically until the objection process is completed.

According to Ngobeni, the City has received 50 000 objections online, less than half that were lodged during the 2013 Valuations Roll and the number of complaints constitute only 4% of the properties in Johannesburg.

Capital spending

Johannesburg’s budget in 2018/2019 of R59bn represents a 7% increase from the previous year but much of this figure is allocated towards operational expenses and will see cuts to the capital budget.

However, the country’s economic hub has ambitious plans for infrastructure in two key areas, water and electricity.

City Power and Johannesburg Water are allocated R6bn in capital expenditure, collectively over the next three years. The City Power budget to extend electrification and upgrade infrastructure represents a massive 25% increase from the previous year.

Mashaba in his State of The City Address earlier in May blamed the previous administration under the ANC for allowing infrastructure to deteriorate.

His administration faces the difficult juggling act of being in a multi-party coalition with the Economic Freedom Fighters backing the DA.

Ngobeni referred to the other parties several times during his speech and acknowledged that some of the budget items come from the EFF, such as extended operating hours for clinics and mobile health services.

Johannesburg will insource some of the trainees within the Jozi@Work and waste removal agency Pikitup will hire 1 400 new employees from their ranks.

The City plans to pilot a project which will allow pensioners to use Metrobus services for free, outside peak hours.

The ANC has blamed Mashaba for the cash flow issues in the City, calling it a crisis.

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