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Today, I tabled the City’s Integrated Annual Report, including the findings from the Auditor General (AG), for the 2016/17 financial year.

The findings of the report are a reflection of how the City effectively used its R56 billion budget for the 2016/17 financial year to bring public services to the more than 4.9 million people in the City, whilst adhering to government regulations.

Financial Position of the City

The year under review, is characterised by the peculiar dynamic where a new administration, brought about through the August 2016 elections, is audited off a budget, business plans and SDBIP approved by the previous administration just weeks before we took over.

From the beginning of our term, my administration the embarked on a project to cut wasteful expenditure that resulted in a saving of approximately R500 million through the introduction of austerity measures focused on reducing self-promoting advertising; marketing; domestic and international travel; consulting and professional fees; and conferences and seminars.​

Budget Line Items

2015/16

2016/17

Austerity Achieved

Advertising

R 252 279 000

R 44 966 000

R 207 313 000

Consulting & Professional Fees

R 458 113 000

R 341 775 000

R 166 338 000

Marketing

R 127 067 000

R 57 907 000

R 69 160 000

International Travel

R 28 285 000

3 594 000

R 24 691 000

Conferences & Seminars

R 32 496 000

R 21 413 000

R 11 083 000

Domestic Travel

20 545 000

R 11 460 000

R 9 085 000

Summary

R 918 785 000

R 481 115 000

R 487 670 000


These savings continued into the 2017/18 financial year and will be redirected into critical service delivery areas such as maintenance of traffic lights and street lights, repairing potholes, informal settlement upgrading, and the capacitation of key City departments such as development planning and the valuations unit.

This has put to an end the ANC’s culture of spending limit resources on luxuries while only 38% of residents in informal settlements in the City had access to basic sanitation services.

I am pleased with progress and improvements made by the City in the implementation of the budget, as recognised by the AG in many respects, noting the serious challenges we inherited.

Irrespective of these challenges, our role is to accept the unequivocal responsibility to get the City on track. In spite of misinformation and fearing mongering peddled by members of the former administration, the AG has found that the City remains in a stable financial position, achieving a surplus of R2.1 billion and closing the year with cash and cash equivalents of R3.1 billion.

5 of the City’s entities received clean audits, this is an increase from the previous financial year and the first time where Johannesburg City Parks and Zoo has achieved this feat in its 15 years of existence. As a City, we also maintained our unqualified audit opinion.

Despite being an area were improvements are still underway, as at the financial year end, total revenue collection had increased by 4% and the City had maintained its credit rating with Moodys at Aa1.za/P-1.za.

Though the budget, business plans and SDBIP under review were those inherited from the previous administration, I am heartened to report that the City achieved 52% of its Key Performance Indicators as compared to 38% in the previous year, whilst also achieving a 2% increase in customer satisfaction.

In the 2017/18 financial year our focus will remain on maintaining adequate cash reserves to fund service delivery programs through the generation of sustainable cash backed surpluses.

Adding to this, milestones achieved during the year under review include:
• The induction of an additional 1,500 JMPD recruits, a process initiated through the 2016/17 adjustment budget;
• The launch of the Inner City Revitalisation Programme aimed at rehabilitating bad buildings through their release to the private sector for conversion into low-cost housing and SMME opportunities;
• The Revenue Enhance Program that will see the City improving its revenue collections from residents and business owners who are able to pay;
• 1.6% increase in the City's GDP growth target was achieved;
• R4.451 billion investment was attracted within the City;
• 11619 SMMEs were supported City-wide through our SMME Hubs;
• 97.89% of households in informal settlements have access to water;
• 4850 new houses electrified city-wide;
• 1172 social housing units were developed;
• 520,09 lane km lane road were resurfaced; and
• 51 389 Rea Vaya and 42 775 of Metrobus passenger trips per working day are undertaken.

Challenges faced by the City

Looking to the coming financial year, the City will look to enhance its use of our capital expenditure (capex) budget for the benefit of residents.

During the year under review, the City spent 78% of its R9.9 billion capex budget. Capex is a key tool for improving service delivery and the transformation of the urban environment. We have already implemented steps to improve the planning, implementation and monitoring of capital projects, and to maximise spend and the quality of delivery through the use of a capex monitoring tool in the 2017/18 financial year.

Of particular within the City’s Integrated Annual Report, were the AG’s findings pertaining to Unauthorised, Irregular, Fruitless and Wasteful expenditure. The City achieved a decrease in unauthorized expenditure from R692 million in 2015/16 to R502 million in 2016/17. In addressing the increases in Irregular, Fruitless and Wasteful expenditure, the AG recognized the fact that the City’s efforts to investigate corruption and maladministration, had played a key role in the increases recorded.

This is substantiated by the increases noted in these issues being reported to the AG, as opposed to the historical trend of the AG identifying these matters during the audit. 
Our administration has demonstrated the political will to address wrongdoing, and ensure consequences are meted out to those responsible. As these investigations are completed, we will ensure that Council receives these reports to make determinations around taking the necessary actions to regularize these matters.

As we have stated on numerous occasions, there is no denying that the 2016/17 financial year saw the City facing a number of financial challenges as well as the legacy of a dysfunctional billing system inherited from the previous administration.

City Power particular suffered cash flow problems as a result of a number of issues outside of its control, including:
• The disputed seizure of VAT refunds to the value of R314.5 million by the South African Revenue Service (SARS) due to an income tax issue which has remained unresolved for years; 
• ESKOM’s termination of the subsidy to City Power for the purchase of power from the Kelvin Power Station at a loss of R268 million to the city entity; and
• The failure of the Department of Energy to honour a grant allocation of R2.4 billion to City Power for the electrification of housing developments in the city, despite the City having incurred R288 million in expenditure against the allocation during the 2016/17 financial year.

We have yet to receive any reasons as to why these matters, which have existed for a considerable time, became the subject of these dramatic steps so soon after the new political term of office.

Other chronic challenges faced by the city include:
• The City’s infrastructure requires an unfunded investment of R170 billion over 10 years to address the backlog created by decades of under-investment and neglect;
• A housing backlog, conservatively estimated to exceed 300 000, and a high level of inequality with many of the residents of the City’s residing in more than 180 informal settlements many of which lack access to basic services;
• Institutionalised levels of corruption, and a failure to ensure consequence management have resulted in vital service delivery grinding to a halt; and
• Cash misalignments created by the previous administration’s campaign to deliver on R100 Billion in Capex expenditure over 10 years launched in 2011. When revenue did not materialise, borrowings against the future revenue have produced significant debt to be serviced and paid off.

In the face of this, we will continue to drive our efforts into reversing these challenges by implementing sound governance practices and effective use and prioritization of our existing, and in many ways, limited resources.

Key to this approach will be continued efforts to rid the City of deep rooted corruption. Under the capable leadership of General Shadrack Sibiya, our Group Forensic and Investigation Services (GFIS) has already uncovered over R17 billion in corruption and maladministration, precipitating the arrest of over 450 people. The establishment of GFIS has gone a long way in establishing a culture of accountability given our still troubled internal controls. Through this unit, the City is now better equipped to investigate cases of mismanagement of resources and institute consequence management where appropriate.

In order to create a professional public service that serves our residents with pride, the City has already initiated a skills audit of top management, which upon completion, will assist in the drive for improved service delivery in every corner of the City by creating and maximizing on efficiencies.

We will continue in our efforts to reclaim the inner city through additional cleaning shifts and law enforcement capabilities, whilst GFIS will continue targeting unscrupulous property hijackers and restore dignity of those with no option but to reside in hijacked buildings.

In closing, though I am hearted by the Auditor General when he states, “The tone of the political and administrative leadership is a positive one that can drive good governance and clean administration,” I too recognise that much work needs to be done to address root deficiencies within our existing systems and improving on our audit outcomes.

However, this report, as approved by the Auditor-General, is indicative that the City is on the road to delivering the change so desperately wanted by our residents – a competent, trustworthy, and professional civil service that puts the interests of our residents first.

Cllr Herman Mashaba
Executive Mayor
City of Joburg

For further information, please contact:

Luyanda Mfeka
Director of Communications
Office of the Executive Mayor
Cell: 076 171 5978
Email: luyandam@joburg.org.za​