Lekwa Local Municipality 2013/14 - Co-operative Governance and ...

Owing to the high increase in electricity tariffs, it is clearly not possible to fund these necessary upgrades throughmore increases in the municipal electricity tariffs. The municipality is currently providing electricity on a lossamounting to 24% as a result this service is subsidies directly by water & sewerage which are operating at asubstantial surplus.Sanitation and Impact of Tariff IncreasesA tariff increase of 5.6%for sanitation from 1 July 2013 is proposed. This is based on the input cost assumptionsrelated to water. The following factors also contributed to the proposed tariff increase:• Registered indigent households will enjoy the benefit of free sanitation on basic charges• The proposed move to cost reflective tariffs by 2014.Waste Removal and Impact of Tariff IncreasesIt is widely accepted that the rendering of this service should at least break even, which is currently the case.Lekwa Local Municipality will have to implement a solid waste strategy to ensure that this service can be renderedin a sustainable manner over the medium to long-term. The main contributors to this deficit are repairs andmaintenance on vehicles, increases in general expenditure such as petrol and diesel and the cost of remuneration.Considering the deficit, it is recommended that a comprehensive investigation into the cost structure of thisservice, as well as the other services be undertaken, and that this include investigating alternative service deliverymodels. The outcomes of this investigation will be incorporated into the next planning cycle. The tariff increase of5.6% for waste removal is proposed.Operating Expenditure FrameworkLekwa Local Municipality’s expenditure framework for the 2013/14 budget and MTREF is informed by thefollowing:• Repairs and maintenance backlogs;• Balancing the budget (operating expenditure should not exceed operating revenue unless there areexisting uncommitted cash-backed reserves to fund any deficit);• Funding of the budget over the medium-term as informed by Section 18 and 19 of the MFMA;• The capital programme and backlog eradication; and• Funding the capital budget and other core services by operational gains and efficiencies.The increase in employee related costs for the 2013/14 financial year have been budgeted at a rate of 6.85% forthe 2013/14 financial year.The cost associated with the remuneration of councillors is determined by the Minister of Co-operativeGovernance and Traditional Affairs in accordance with the Remuneration of Public Office Bearers Act, 1998 (Act 20of 1998).In compiling the salary budget for Councillors, a 10 percent increase was provided based on the mostrecent proclamation which came into effect in July 2011.Note that the application of Directive 4 with regard to the phasing in of depreciation (GRAP 17) has resulted in asignificant decrease in depreciation this charge will however increases significantly in the ensuing years, but it willnot have an effect on tariffs as this charge is excluded when determining tariffs. The budgeted amount fordepreciation amount to R134mBulk purchases are directly informed by the purchase of electricity from Eskom. The annual price increases havebeen accounted for in the budget appropriations and directly inform the revenue provisions. The expendituresinclude distribution losses.250 | P a g e