EXECUTIVE MAYOR REPORT
In delivering his Medium-Term Budget Policy Statement (MTBPS), the Honourable Minister of Finance stated that 'we are at a crossroads'.

This Policy Statement highlights the difficult economic and fiscal choices confronting us over the medium term. We must choose a path that takes us to faster and more inclusive economic growth and strengthens private and public-sector investment. We must choose a path that stabilises and reduces the national debt. We cannot continue to borrow at this rate. We must choose to reduce the structural deficit, especially the consistently high growth in the real public-sector wage bill.” This was an indication of a need to change route and take the road that requires the highest level of economic and fiscal discipline. A detour away from living beyond means through borrowings and deficit but take a route that seek to address structural deficit and persistent high growth in public sector bill. This reality is not just applicable to the National sphere of government but equally applicable to BCMM.

In his budget speech of 20 February 2019, the Honourable Minister stated that, “I said that we were at a crossroads, and that we could go either to heaven, or the other way. Then, we expected economic growth of 0.7 per cent in 2018. This is still our estimate. But, many of the risks that we warned about have materialised. We now expect a slower but still steady recovery after the 2018 technical recession. It is expected that real GDP growth in 2019 will rise to 1.5 per cent, and then strengthen moderately to 2.1 per cent in 2021. South Africa is a small open economy and we are impacted by events in the global economy world growth is now expected to slow, constraining South Africa’s export growth forecast. These macroeconomic conditions have led to a weaker economic outlook”. The Honourable Minister stated this referring to the dependency of our country’s economy on the performance of the global economy and the fact that the world economic growth and that of South Africa remains slow.

In concurrence with the above, the Honourable MEC for Finance in our province, when tabling his provincial budget speech on 05 March 2019 stated that, “our country is part of a global economy and by implication negative developments in the global economy will also affect our national and provincial economy. We must work together to shield our economy from any possible aftershocks from the current geo-political impasse between the US and China, the EU and UK. With these developments in mind, National Treasury projects a GDP growth rate of 1.5 percent in 2019 which will grow to 1.7 percent in 2020 and slightly improve to 2.1 percent in 2021. This slow growth rate means a tighter fiscal envelop for our country and a shrinking equitable share for our province. We must work smart with the limited resources at our disposal all other things being equal for us to Grow the Eastern Cape Province”. The call to work smarter with the limited resources at hand is a call that we must also accept as BCMM. As a City we need to join forces with our brothers and sisters in the National and Provincial government in improving the economic and fiscal outlook of the country by compliance and adherence to the set budgetary prescripts.

The Honourable Minister of Finance stated that the South African budget of 2019 is built on six fundamental prescripts:
i. Achieving a higher rate of economic growth
ii. Increasing tax collection
iii. Reasonable, affordable expenditure
iv. Stabilising and reducing debt
v. Reconfiguring state-owned enterprises
vi. Managing the public-sector wage bill

The Honourable MEC for Finance in our province when presenting his 2019 budget speech stated that, the provincial budget is founded on two principles:
i. Firstly, it directs us to prioritize the poor and the vulnerable, and
ii. Secondly, it sets a new paradigm to grow an all-inclusive economy.

The prescripts and principles set by the Minister and the MEC are equally applicable to our City:
i. The City remains committed in being the engine of economic growth in its jurisdiction through proper planning and infrastructural development. This is evident in this budget by the spreading of funding across social and economic infrastructure. The spread intends to ensure that the poor and the vulnerable remain a priority whilst there is also a focus in stimulating economic growth.
ii. The City continues to be committed in implementing its revenue management responsibility:
a. There is further investment in the billing and indigent management system to strengthen internal controls that ensure completeness and accuracy of billing.
b. This also seeks to improve turnaround time in processing indigent applications and accounts query resolution whilst also improving the credibility of our indigent register.
c. The credit control policy of the municipality must be implemented without fear or favour to achieve and surpass the set revenue collection rate. In the 2019/20 MTREF, a target of 92.5% revenue collection rate has been set.
d. Implement measures to increase the City's stagnant revenue base, inter alia:
1. Relook on the use of the City's investment properties,
2. Introduction of new revenue streams, e.g. ICT tariffs,
3. Centralisation and automation of cash collection measures,
4. Renewable energy,
5. Waste management recycling, etc.
6. Finalisation of investment strategy that will assist in improving the City’s revenue base.
e. The City has developed the broad framework of Investment Strategy. The process of extensive consultation of all Council structure and relevant stakeholders on the investment strategy that will be undertaken shortly. The investment strategy is intended to act as an economic growth stimulus for the city.
iii. The City continues to manage its expenditure budget to keep it at reasonable and affordable level.
a. The decline of the amount appropriated to Capital budget from own funding attests to this.
b. Further, the decrease applied to general expenses is an affirmation of the City’s commitment to cost containment measures.
c. The following cost containment measures are also implemented, inter alia:
1. Review of organogram, governance structure and service
delivery model in line with the City’s objective and funding
affordability to improve efficiency on employee related
costs.
2. Enforce approved measures to reduce overtime.
3. Stringent internal controls to be enforced on subsistence & travel allowance.
4. The exercise of scrutinising cost drivers within our value chain to identify areas for efficiency improvement is still on-going.
iv. The City’s borrowing remains way below the ceiling that is set by National Treasury of 45% (debt as a percentage of revenue). The City’s Debt as a percentage of revenue is projected to be 36% in 2019/20, 37% in 2020/21 and 39% 2021/22.
v. The structural review that is underway seeks to assess whether BCMM is correctly and well configured for the delivery of its mandate.
vi. The resent past trend of the City’s salary bill which is above the average increase is a cause for concern. The structural review process should among other things seek to improve productivity and in the medium to long term contribute in stabilising the salary bill. There needs to be measures put in place to avoid employee demands that are raised outside the normal SALGA / national bargaining forum.

The Buffalo City Metropolitan Municipality comprehends that it is not insusceptible to the slow global economic growth which has directly negatively impacted the economic growth of South Africa and most closely, the province of the Eastern Cape. Therefore, BCMM has taken a more conservative approach in compiling this MTREF budget. This approach includes giving consideration in the budget to the cost containment measures suggested by National Treasury. Further, measures have been put in place to improve the stagnant revenue base of the City. These measures are being implemented to ensure the future viability of the institution and to focus on reducing the negative impact on the residents of BCMM.
Allow me to announce that our total consolidated budget (operating and capital) for the MTREF period is growing from R8.7 billion (2018/19) to R8.9 billion in the 2019/20 and R9.6 billion in the 2020/21 financial year, it further grows to R10.3 billion in the 2021/22 financial year. has been allocated for infrastructure investment.

Our commitment to respond to our people’s legitimate demand for a better life is reflected in a budget in which the key priorities are Water and Sanitation, Roads and Storm water, Human Settlements development, Transport Planning, Electricity and related critical infrastructure and maintenance. In a continued effort to create jobs for the communities of Buffalo City and to encourage private sector investment, the capital budget is being focused on a mix of social and economic infrastructure investments. This is our contribution in trying to turn the corner from the economic hardships

2019-05-30