City’s adjustment budget tabled at Council
29 January 2020
Statement by the City's Executive Deputy Mayor, Alderman Ian Neilson
Speech delivered by the City’s Executive Deputy Mayor, Alderman Ian Neilson, today, 29 January 2020 during a full sitting of Council. This adjustment budget was approved by Council.
Mr Speaker, the purpose of an adjustment budget is to align the budget with any changes that have become evident during the first half of the financial year. It flows from the analysis that was conducted for the Mid-year budget review. Therefore, projections of income are adjusted taking into account the actual experience over the past six months and amending projections for the remaining period of the budget. Expenditure estimates are also realigned to take account of any changes that may have arisen since the budget was adopted. The purpose is not to budget for any major change, but primarily to align it to revised and up-to-date information.
Rates and tariffs are not changed at the time of an adjustment budget. These are only dealt with during the main budget.
Overall, income for the first six months is 3.5% higher than budget and expenditure 2.5% below budget, perhaps one of the closest performances to budget that we have seen in many years.
The directorate with the largest operating expenditure budget is the Energy and Climate Change Directorate, at R12,1 billion. This is the largest simply due to the amount of electricity that is sold. Income for the first six months is 6.7% above budget and projections for the full year are being adjusted upwards by R745 m.
The directorate with the second largest expenditure budget is Water and Waste, at R8,5 billion expenditure. This directorate includes water supply, sanitation and refuse collection. Water demand and sales have not recovered since the drought to the extent that was anticipated, at the time of drafting the budget and income for the first six months is 8.4% lower than budget. The projected revenue for the year is being reduced in this adjustment budget by R85 million.
A significant addition to the budget is the funding for the Law Enforcement Advancement Plan (LEAP) project, with grant funding of R110 m from the provincial government for this financial year. There is also an additional provision of R66 m for overtime in the Safety and Security Directorate, from City sources.
Overall, there is a net projected increase of R981 million in City revenue and a net expenditure increase of R137 million, bringing the total operating expenditure budget to R42,03 billion.
Capital spending, so far this financial year, is higher than for any previous year. At R2,47 billion, it is ahead of budget by 14%. Good spending results are anticipated for the full financial year.
While capacity to spend is improving, ongoing further steps are being taken within the administration to bolster project management capacity, and improve supply chain outcomes, so as to accelerate delivery further.
There are a number of grant roll-overs from the previous financial year, that have been approved by the national and provincial governments since the previous adjustment budget, which are now included in the City budget.
The main contributor to the revision in the capital budget is the Water and Waste Department, which results from a major review of its entire capital programme post the period of drought budgeting. A reduction of R939 million is proposed for this financial year, with increased expenditure in subsequent years as projects have been rephased to lessen the burden on tariffs in the coming years.
As a result, it is proposed to reduce the overall capital budget by R1 billion to R7,879 billion, primarily reducing funding via the External Financing Fund. No external borrowing is anticipated this year.
Mr Speaker, I move the recommendation for adoption of this adjustment budget.
End
Published by:
City of Cape Town, Media Office
