City of Joburg has big dreams but little cash

The City of Johannesburg (CoJ) will need R80.9 billion to deliver services to city residents and cover its own costs for the 2023/24 financial year.

However, its questionable financial standing – characterised by piling debt, poor revenue collection and mismanagement – casts doubt on its ability to deliver.

Member of the Mayoral Committee (MMC) for Finance, Dada Morero of the ANC, presented the medium-term budget to city councillors on Tuesday, after he was delegated to do so by newly-elected executive mayor Kabelo Gwamanda.

According to Morero, the city’s books are in bad shape. He informed council that he was presenting the CoJ budget with approximately R5 billion in city accounts and R9.6 billion worth of debt.

Revenues for the financial year ended June 2022 reportedly came in R3.4 billion below target, while the city is said to have overspent on the purchase of bulk services by R342 million.

The city reportedly had a cash balance of R3.8 billion in June 2022, part of which was R762 million in unspent grants that it was unable to roll over to the next period, due to its failure to appoint a city manager and group financial officer in time.

According to Morero, the CoJ will need at least R4.3 billion a month to deliver services and fund the city’s operations.

“Our operational expenditure sits at R73.3 billion. Meanwhile, our capital expenditure stands at R7.6 billion for 2023/24, with a three-year capital budget of R24.4 billion,” Morero said.

“Alone we will not solve all of societal challenges. We call upon the private sector, especially our investor community, to help us to leverage this budget so that we can make every cent count and do more.”

Read: Joburg City Power: Broke and loss-making, with a grid on the brink

Revenues

Despite its financial position, the city has opted to increase property rates – its second-largest source of revenue – by only 2% for the 2023/24 financial period. This is considerably below the 5.3% rate increase it was eyeing initially.

However, the city hopes to generate 18.5% more revenue from electricity sales to R23.5 billion, as electricity tariff increases are meant to set in and the city looks to generate a further R1.1 billion from electricity sales from Eskom.

One of the revenue-stunting issues the city says it is battling is electricity and water losses, which are said to have peaked at 30% and 32% respectively in June last year, up from 29% and 35% respectively in 2021. However, Morero says reducing electricity losses to 23% this period will go a long way toward boosting revenues.

Read: City of Joburg loses nearly half its water, costing billions

Higher tariffs for other services like water, sanitation and refuse will also aid revenue generation for the city.

The water and sanitation tariffs will both be increased by 9.3%, while the refuse tariff will see an increase of 7% in the 2023/24 period.

“Our tariffs are cost-reflective and mainly informed by the increases implemented by our bulk services suppliers such as Eskom and Rand Water,” Morero said.

Budget allocations

The CoJ plans to direct most of the funds to strengthening core municipal services through the Sustainable Services cluster, which caters to water and energy infrastructure, waste management and human settlement issues.

This cluster will be allocated an operational expenditure budget of R45 billion for the 2023/2024 financial year, while its capital budget over the medium-term is expected at R14.9 billion.

The human and social development cluster, which focuses on community development, health and social development, has been allocated an operating expenditure budget of R10.9 billion for the financial year.

The economic growth cluster will be allocated an operating expenditure budget of R7.7 billion, which includes over R600 million in investment each in Rea Vaya and Metrobus infrastructure and operations, R1.5 billion for the Johannesburg Roads Agency (JRA), as well as R73 million for the re-establishment of the Johannesburg Tourism Company, which is expected to generate greater tourist interest in the city.

Lastly, the good governance cluster – which includes the ombudsman, legislature and the office of the city manager – will be allocated a capital budget of R1.5 billion over a three-year period.

Read: Joburg proposes above-inflation tariff increases

Strained budget

The leader of the ANC caucus in the city told council that the city has taken a “belt-tightening” approach to the upcoming year’s budget, but was confident that it will provide the foundation necessary to position Johannesburg for growth.

“Our track record of running this city in a financially sound manner speaks for itself.

“We will rebuild the finances of this city, by following stringent financial principles and present our city as an investment-attractive destination and partner to our financial institutions and the broader investor base of the country and beyond.”

‘All our efforts and initiatives will come to nothing unless we partner with the residents of this city to achieve our objectives. We invite our residents to support our efforts in protecting our infrastructure so that the limited resources presented in this budget can be deployed in providing further services to our people,” Morero added.

Listen to Suren Naidoo speak to Elaine Jack of the Sandton Central Management District, on the precinct’s post Covid-19 recovery . 

You can also listen to this podcast on iono.fm here.