2010-03-03: The City’s finances are under no threat
ACCORDING to the National Treasury Press Release of the 25th of February 2010, on the performance of Local Government, Johannesburg’s performance was rated the highest in comparison to the other Metros with consistent revenue collection.
This being said, it must also be reiterated that the City of Johannesburg developed a Financial Strategy aimed at providing a strategic response to the impact of the global economic recession.
This financial strategy is underpinned by the following strategic pillars:
• Rigorous analysis enabling a response to key challenges
• Demonstration that the City is able to effectively collaborate internally and proactively address identified shortcomings.
• Ensuring that the City sustains a path to long-term financial health.
• The strategy needs to be sensitive to the poor, ensure affordability to all classes of households and remain attractive to business
• Lastly the strategy needs to ensure service delivery and development agenda of the City remains intact.
It should also be noted that the City has in the past engaged in the rollout of organisational strategies such as the Igoli 2002 responding to challenges that were faced at that particular period.
It is important to understand the context of which the Financial Strategy is introduced and implemented, namely it is a financial period that is characterised by:
• Depressed worldwide economy
• Tight liquidity, high liquidations in businesses & reduced ability to pay municipal accounts. The analysis by the chief economist of the City shows the direct correlation between the above.
The above has thus impacted the City’s ability to collect from the residents of the City. However the collection rate should be understood within the context of looking at the annualised billing against the annualised collections which as at December 2009 was at 92%.
The City would like to reiterate that the key financial indicators used to measure its financial performance were anticipated to be stretched in the current year in light of flagship projects that were due for completion. This information has previously been communicated to all stakeholders. However the situation was further exacerbated by the global recession which put further pressure on the key indicators.
In terms of the City’s Medium Term Budget Framework (MTBF), informed by the Financial Strategy, the City anticipates to gradually reduce the debt to revenue ratio to 46% over the medium term. The strategy prescribes that additional cash leveraged from assets be utilised for additional capex spending and injecting liquidity which will improve both the prudent ratios and working capital.
Through implementation of the Financial Strategy, the City anticipates to correct the current ratio over a three year term by way of proposed cash injections into the system of R1billion per year. This will further be supported by improvements in the City’s levels of collections whilst managing the levels of expenditure incurred by implementation of the recommendations made in the Expenditure review process.
The City would also like to correct some of the factual misconceptions that have been reported regarding the state of its finances. For example, the BRT project is fully funded by National Government but bridging finance has been obtained where the timing of the roll out was not fully matched with the receipt of grant funding. The bridging finance was however on the back of enforceable allocations from National Government.
Comments on the City's position on corruption are baseless and scandalous. The DA cannot produce a single instance where the City or the Executive Mayor tolerated corruption or failed to act on allegations. Every case brought to the attention of the City is investigated and the recommendations implemented.
Issued on behalf of: Councillor Parks Tau
Member of the Mayoral Committee for Finance.
By: Virgil James
Communications Specialist
City of Joburg
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082 467 9415