Joburg called upon to rewrite budget

Unrealistic budgeting, an overpaid mayor, unexplained additional positions, expensive new prepaid power charges and inadequate spending on essential infrastructure add up to a failed budget

The City of Johannesburg draft budget and draft Integrated Development Plan (IDP) for 2024/25 are not in line with the law, do not adequately address the needs of a city where services are collapsing, and should be amended, says the Joburg Community Action Network (JoburgCAN).

“Stabilising the water and electricity grid should be the Number 1 aim of the IDP and budget, which would have a stabilising effect enabling the delivery of the rest of the objectives,” says Julia Fish, JoburgCAN Manager.

“Instead, we have unexplained increases to the staff numbers and in board members at municipal-owned entities, an executive that are exceeding their remuneration limits and the additional unbudgeted expense of private security for all the top brass.

“JoburgCAN rejects the budget as unaffordable, unacceptable and unlawful.”

JoburgCAN, an initiative of OUTA, has made a formal submission on the budget and IDP to the City, as part of the public participation process.

The public participation process itself was a key problem. JoburgCAN was alerted to public concerns about the inaccessibility and inadequacy of the City’s public meetings on the documents, the inclusion of a new rates bylaw which should have its own process, missing documents, and a too-short comment period of only 21 working days. On 19 April, JoburgCAN formally asked the City for an extension to the comment deadline (there has been no response), and repeated this in the submission.

Despite our objection to the short process, JoburgCAN has submitted as detailed a response as we could provide in the limited time allocated.

Issues raised in the JoburgCAN submission:

• Missing budget documents: Some of the documents were missing from the bundle provided for comment: the detailed tariff documents and the comprehensive A1 schedule of tables.
• Undercollecting revenue: The City is under-collecting on revenue, with the budget based on a collection rate of only 85% while even that target is not being met.
• Risks to grants: The City is underspending on national grants at only 45%, resulting in the potential loss of these funds.
• Overpaid mayor and executive: The remuneration for the executive is too high and does not reflect the capacity of the City’s finances. The salaries for political executives have a maximum level set annually nationally. The maximum salary for an executive mayor at the metros (set in August 2023) is R1 544 551 including all allowances, but the budget plans for Joburg’s mayor to be paid R1 570 093. There is insufficient information in the budget to analyse the planned salaries for the members of the mayoral council (MMCs). The budget also records the number of political office bearers (councillors) as 292, while the City has a legally set limit of 270 councillors.
• Unexplained staff expansion: The City’s number of personnel positions is confusing, showing inexplicable increases from 2022/23 to 2024/25. These include the increase of board members for municipal entities from 14 to 75, an increase in municipal manager positions from 162 to 233, other managers from 561 to 3 591 and professionals from 9 472 to 20 364.
• Bodyguards for the elite: We reject the City’s recently announced plan to provide 61 bodyguards to specified politicians and executives, and assign 40 vehicles to them from the metro police fleet, without the required recommendation from the SAPS. This is not in the budget and JoburgCAN regards it as unaffordable and unacceptable.
• Investment flight and semigration: The City continues to rely on paying residents while delivering limited services in highest paying regions. The City risks losing more businesses and ratepayers to better-performing municipalities. Paying residents and businesses across the City are penalised by having service charges and rates increased, to cover for the City’s inability to collect. The City appears to be ignoring the opportunities for revenue collection through its public advertisement revenue, property portfolio rentals, public space rentals, the application or collection of fines, and the application or collection of penalty tariffs. An increase in these items would place the City in better financial standing than pricing the budget out of affordable margins for residents and ratepayers.
• Unpaid and unaffordable rents: The City owns considerable rental stock including low-income housing and retirement home facilities. The rental collection rate is 4% but this is ignored and rentals are increased without justification.
• Water and power entities: The budget does not reflect the ongoing losses at the City’s entities Johannesburg Water and City Power. The public understanding of these entities is a monthly loss of R1bn and R300m respectively. What portion of these losses are capitalised, such as cable replacement? There is little contingency in the budget and IDP for these problems.
• Joburg Water: In 2022/23, the City recorded water losses worth R2.9 billion against sales of R8.5 billion. Joburg Water’s business plan reveals that R64 billion is needed to replace and refurbish failing infrastructure and there is a water and sanitation infrastructure backlog of R24 billion. It is therefore crucial that the City ensures the sufficient ringfencing of water revenue to its intended purpose of providing water services to ensure sufficient funds for infrastructure development and maintenance. The fact that R700 million in grants was not spent in the last financial year is of concern.
• Impaired debt: The ongoing problem of outstanding debt across services is not addressed. Instead, the budget increases the allowance for impaired debt to R43.4 billion, meaning that 82.4% of the debtors’ book is impaired. With this reality in mind, it is critical for the City to ensure a funded budget that is realistic and aligned with its revenue projections to render sustainable services.
• Technology: There is limited accountability for the lack of integration, collaboration and technology take-up in the City.
• Inadequate repairs and maintenance: The City has underspent for years on repairs and maintenance, consistently missing the National Treasury’s norm of spending each year 8% of the value of the assets. The deterioration of infrastructure poses a severe risk to the sustainability of service delivery.
• Inadequate capital spending records and auditing of projects: The City’s spending, particularly project-by-project capital expenditure, is not adequately recorded. The past three years of audited expenditure for each project should be included, but there is no record of past spending. There is also no auditing of contractors’ performance and project progress. These must be urgently addressed.
• Unrealistic tariffs: The budget and tariffs of the City are becoming unaffordable for residents. Rising interest rates, a declining economic sector, high unemployment and double taxation in the form of having to pay for additional private services like security and health services are severely affecting the city’s residents and they cannot absorb these increases easily. The City needs to add value and keep increases within CPI.
• Unreasonable and confusing prepaid electricity tariffs: Households that attempt to limit consumption of services to save costs are prejudiced. The proposed fixed charges for the new prepaid high-usage electricity tariff (an new additional monthly charge of R553.73 including VAT regardless of power consumption) are punitive for residents who made lifestyle changes to afford services and were led to believe these did not have fixed charges. The budget indicates that these fixed charges will increase in future years to match the high charges on conventional billing, although prepaid ensures that the full revenue is collected. The power charge on higher prepaid bands is higher than on conventional metering. The City is splitting the prepaid electricity tariff into the high-usage tariff (with fixed charges) and the low-usage tariff (without fixed charges, for usage up to 500kWh a month) to help indigents, but fails to explain who qualifies for the low-usage tariff and what happens if usage is exceeded.
• Discriminatory tariffs: The sanitation tariffs discriminate against multi-dwellings (complexes) with low-water usage, by charging them punitively high fixed tariffs and blocking them from tariffs linked to water usage.
• Sanitation tariffs: All sanitation tariffs should be linked to water usage, as required by the National Treasury’s Standard Tariff Setting Methodology, but the City uses tariffs linked to property size which has no bearing on the use of the service.
• Indigent register: The City has about 130 000 households on the indigent register (and thus eligible for free basic services), but the City’s own statistics on household access to services indicate much wider poverty. Failing to run an accurate indigent register leaves genuinely poor households indebted, and allows the City to use elsewhere more of the national equitable share grant intended to subsidise these services. Where are the tariffs enabling fair billing for poor residents living in overcrowded situations, such as in backyard shacks and overcrowded households?
• Double rates for schools: Rates double this year for public and independent schools, as the City continues its policy of applying unaffordable rates. This does not take reality into account.
• Discriminatory refuse charges: The City charges businesses a flat rate for refuse removal rather than a rate linked to the number of bins used, calling this a city cleansing charge.
• Scrap the rates increase: The City has yet to finalise the objections from property owners following last year’s general valuation roll increases. While the rates increase is low, given the size of the valuation increases and the failure to finalise the complaints, this increase should be removed.
• Rates policy overhaul: This policy was not adequately presented and should be a separate process.
• Household bills estimates: The City’s table on household bills, intended to give residents an understanding of their expected expenditure, is inaccurate so meaningless.