A decade of underspending on repairs and maintenance has left Johannesburg’s infrastructure in a mess

In 2014, National Treasury told municipalities to spend 8% of the value of property, plant and equipment on repairs and maintenance, but Joburg has not managed that once since then and for five years spent only 2% or 3%.

JoburgCAN, an initiative of OUTA, is gravely concerned over the budget allocations for the maintenance of fixed assets in the City of Johannesburg’s draft budget for 2024/25.

“The City of Johannesburg again plans to spend less than the national norm on maintaining its ageing infrastructure,” according to JoburgCAN manager Julia Fish.

Ahead of the planned budget adoption at the special council sitting on 16 May 2024, JoburgCAN is pushing the City to clarify its spending and budget allocations and make urgent amendments to the IDP 2024/25 to avoid a failed budget.

“We found two key problems. Firstly, the City has consistently underbudgeted for repairs and maintenance and continues to do so. Secondly, the City’s financial reporting is haphazard and contains discrepancies such as numbers changing significantly year-on-year with no explanation,” says Fish.

In January 2014, the National Treasury issued MFMA Circular no 71, which stated that a municipality’s total repairs and maintenance spending should be the equivalent of 8% of the carrying value of “property, plants and equipment and investment property”. “The norm is 8%,” said the circular.

JoburgCAN looked at the City’s reported spending on repairs and maintenance from 2014/15 to 2023/24 (the 10 years since Treasury set the 8% standard) and the projected spending for 2024/25.

“The City did not meet the 8% target in a single one of those years. In three years, spending was at 2% and in another two it was 3%,” Fish reiterated, “basically the City is not managing to repair in five years, what it should in one”

The highest spending is for the current year, 2023/24, as the draft budget 2024/25 indicates the City expects to have achieved 7.4% by the end of June 2024.

A key concern over that decade is the value of the spending. In 2014/15, the City spent R3.441 billion on repairs and maintenance (6.3% of the value of PPE). Spending for each of the next seven years never matched this and was in some years significantly lower. Spending recovered in 2022/3 to R5.315bn, the first year of higher spending than 2014/15, and is projected as R6.243bn in 2023/24.

The projections for 2024/25 are R6.085bn or 7.2% of PPE value.

The level of repairs and maintenance are therefore considered inadequate to prevent breakdowns and interruptions to service delivery. It may also indicate that the municipality is experiencing cash flow problems and is therefore unable to spend on its repairs and maintenance to existing assets or purchase new assets.

It is unclear whether the City used the carrying values of property, plant and equipment and investment property consistently for calculating the ratios during the period of assessment given that clarity was not provided.

The difference between the ratios indicated for budgeting purposes and actual performance are concerning. For example, for the year 2022/23 the ratio in the adjustments budget is depicted as 6.4% whilst a ratio of 5% is reported in the integrated annual report 2022/23.

Contrary to legislative requirements as set out in the Municipal Budget and Reporting Regulations, the City of Johannesburg’s budgets do not always include comparative information of the audit outcomes of the three years prior to the current year as well as the budget and the full forecast of the current year. Without this information the budgets are unlawful. For example, the budget for the upcoming 2024/25 financial year should include the updated spending estimates for the current year (2023/24), comparative data of the audited outcomes for the three previous years (2020/21, 2021/22, 2022/23) and the projections for 2024/25, 2025/26 and 2026/27. This means there is inadequate reporting of actual spending, particularly on capital projects.

For consistency, when assessing the repairs and maintenance totals, and those totals as a percentage of the value of the assets, we used numbers from table A9 (Consolidated Asset Management) in the annual budgets. These figures do not always correspond with figures cited in the main section of the budget book or other tables. Some budgets did not provide the completed A1 schedules (for example, the final budget for 2023/24). Some tables provided historical information for the current year and three previous years, but most failed to provide this. Some provided only the current year and the forward years.

Such conflicts and problems indicate a lack of professionalism in the budgeting process and make it difficult to understand what the City is actually spending.

As noted previously by JoburgCAN, the city is over-allocating the budget to remuneration and allowances for City officials, while underspending on maintenance and infrastructure and failing to meet legally set targets. In the absence of tightening its belt on events and perks, the City is hiking rates to residents to cover the budget gaps.

The systemic collapse of services like power and water is having a devastating effect on the total function of the city.

We believe that much of this is due to the City’s routine failure to prioritise repairs and maintenance.
Reservoir failure is causing major pipe bursts, needing constant repair, causing backlogs and shortages in road repair and an impact on the Johannesburg Roads Agency (JRA) budget and service delivery. Residents are being subjected to water shedding with reservoirs shut nightly, causing emergency services to have to sit by and watch house fires as there is no water in the hydrants to help.

The city has to ring fence water and electricity revenue to tackle maintenance needs.

The losses at City Power are directly due to loadshedding as transformers are blown during surges and substations are looted when the power is off.

Stabilising the water and electricity grid should be the number one aim of the IDP and budget which will have a stabilising effect to deliver the rest of the objectives of the IDP.