Annual State of the Town address
11:29 (GMT+2), Thu, 31 May 2012
KNYSNA NEWS - Herewith the official State of the Town address by Knysna Executive Mayor, Georlene Wolmarans:
'EFFICIENCY FIRST AND FOREMOST'
Speaker, Provincial Minister for Finance, Economic Development & Tourism, Mr Alan Winde, Deputy Executive Mayor, members of the Mayoral Committee, Councillors, Political leaders, Municipal Manager, Directors and officials, distinguished guests and members of the media.
In our midst is a very special man - I want to extend a special welcome to Mr & Mrs Neil Sharrocks.
I think the past year will always be remembered for the Rheenendal school bus accident and the loss that some of our residents have suffered. It is said that a parent never recovers from the death of a child, and our thoughts are with the families and the children that survived the tragedy.
President Jacob Zuma awarded Mr Sharrocks a silver Order of Mendi for bravery for rescuing 44 children in August last year at this accident scene. A person's true worth often is only displayed under immense pressure. Neil risked his life, numerous times, to save those kids. A truly heroic effort well worth his recommendation and award from the President. Mr Sharrocks, on behalf of the Municipality and our community I would like to give you a small token of our gratitude for the service you did for this community – can you please come forward to accept it?
A calamity of a different kind was the effluent spill into the estuary. Knysna’s wonderful natural resources are the town’s biggest assets and it is imperative that we look after it. The Waste Water Treatment Plant is in the process of being upgraded and every care is being taken to make sure something similar will not re-occur.
It was nearly a year ago to the date that I gave my acceptance speech in the Council Chambers. I said that it was a new start for Knysna, and today, and the way we did our planning for today, is a continuation of that process that started a year ago.
This has been a challenging year. We inherited an approved budget and had to balance expectations from our electorate with what we could do within the restrictions of that budget. Despite that I think we have done exceptionally well.
We published a 100 day Action plan in October last year, and I am happy to report that we have made progress on most of the items included, some of which I will touch on today. Some of our progress has been reported on publically, but we will be communicating a summary of this in the media shortly.
I think a highlight of the past year is the appointment of Lauren Waring as the new Municipal Manager. Previously the Director: Planning and Development, Mrs Waring has been and will be instrumental in bringing about the changes that we expect. On accepting the position she said that, amongst other things, she wants to establish an ethos of service delivery in the municipality. This is in line with my vision for the municipality, which one, is to return to doing that which is our core function, service delivery, and two, doing that efficiently.
In order to do this we have and will constantly refer back to the five year Integrated Development Plan, or IDP, whilst doing our medium and long term planning, making sure that our focus stay where it should be.
And now let’s talk about service delivery. As we only have one event today my feedback report is combined with the presentation of the new budget, so please bear with me. I will keep my feedback report short and to the point. If I report on all we have achieved I may keep you here for the rest of the day!
We acquired a new Fire Cruiser for the Town station and a new sub- fire station in Concordia. All stations are operating 24hours.
The speed camera tender has been awarded and all cameras are in operation. Law enforcement is functioning well but the shortage of permanent staff will have to be addressed in the year ahead.
To improve our recycling figures, bags will be delivered directly to households rather than the public having to collect them at our offices. We are also launching a recycling program/initiative for the Northern Areas, with pilot projects in Sedgefield and Hornlee to further promote recycling.
As literacy is key to building a sustainable future for our town and area, we are running a busy programme to entice old and young to read. Library orientation plays were performed at the schools, we added a library service to Fairview and the extension to the town library has been approved by the Provincial Government and Heritage Western Cape. The ABET and family literacy classes will continue and we are planning a rural outreach strategy.
Maintenance and the funding of our museums and heritage sites remain a big challenge. We are fortunate to have a very active Heritage Society in Knysna, and through their hard work the official unveiling of the new George Jnr. and Jessie Rex grave stone took place earlier this month - the old stone had become illegible so a new stone was added.
I am happy to announce that, with a planned fertilizing and maintenance program, the grass at Loerie Park will soon be back to a good standard. Trained staff is used to maintain and mark the fields here for the various sporting codes. Providing improved sporting facilities remains a huge challenge, but we hope to upgrade a number of sports facilities in the upcoming year.
Alien eradication, especially in the Hornlee area, is an ongoing project. There are requests from the public for vegetation removal which we hope to facilitate by replacing it with grass, which is easy to maintain, will lower crime statistics and have recreational value for communities.
A play park has been established in Smutsville, creating a safe area for the children to play and have fun in. We will continue with the roll-out of these important recreational facilities for our youngest community members.
The ELECTROTECHNICAL Directorate
The second phase of the upgrading of the electrical network in the CBD has been completed. A second storey for the 11kV switching room was added to the Demar Substation. Four 11kV circuit breakers have been installed in this substation, which was also linked to the Nelson Street Substation with a 300mm² Aluminium 11kV cable.
A new substation in the Clyde Street area is planned which will be linked to the Demar substation, completing the third phase of the upgrading of the CBD.
We are currently upgrading the existing building at the Industrial Intake substation. The old 11kV switchgear in the lower building will be replaced by new 11kV switchgear, and the first four new 11kV circuit breakers will be installed as part of this contract.
The new second 10MVA 66/11kV transformer has arrived and is on site in Sedgefield. The 66kV and 11kV circuit breakers and equipment will be installed shortly and we are hopeful to have the transformer operational by end June 2012.
A 300mm² 11kV aluminium cable is to be installed between Sedge Intake and Sedge East substations. In the previous financial year 1400m of the required 2000m was installed resulting in the cable being 600m short from the substation. An additional 300m was installed this financial year and the last 300meters will be installed in the next financial year.
The electrical infrastructure in the Northern Areas is severely strained due to the housing programmes in the area – we receive funds from Provincial Government to build the houses, but nothing to upgrade the backbone bulk infrastructure. After numerous requests for financial assistance the Department of Energy has agreed to make R3 million available for the upgrading of this infrastructure.
They indicated that a further R3 million in their 2012/13 financial year will be made available to be used for additional upgrades in this area, and a new line to the Bongani area will be build. This line can act as a ring supply to the area which will alleviate the loading problem, as a second supply line to the area will be created. This will assist in ensuring a more secure supply.
An amount of R2 million will also be received from the Department in the same financial year for electrification in the Happy Rest, Concordia East and Edameni.
The Ethembeni electrification project has been completed, and was switched on in November 2011. This infrastructure will provide electricity to over 170 households who previously had no access to electricity at all.
The Technical Services Directorate was in the hot seat this year, having to manage the effluent spill into the estuary, along with upgrading the Waste Water Treatment Works. This upgrade is progressing well and the plant will run in compliance with special standards set by the Department of Water Affairs who have been closely involved in this project. The municipality had a recent unannounced visit from DWA and they were satisfied that the plant was operating in keeping with all required standards.
The sludge handling at the Knysna Waste Water Treatment Plant is problematic, but Council has approved additional funding which will be used to enable us to dry the sludge without the process being affected by weather conditions and prevent spillage to the lagoon.
One of this Directorate’s biggest challenges is the stormwater ingress to the sewer system. We have established an Estuary Pollution Task Team, consisting of representatives from the Knysna Municipality, Eden District Municipality, SANParks and a professional environmental specialist, to test critical areas and monitor the situation of historical pollution of and within the estuary. We have appointed a service provider to investigate the causes and possible pollution sources and will develop additional mitigating mechanisms.
Funding for a stormwater master plan for the Greater Knysna area was requested in the next financial year. Council needs to investigate, plan and budget for the replacement, rehabilitation and upgrade of its ageing infrastructure - roads, stormwater, water and sewerage – as this has a huge impact on future development and the attraction and retention of tourists and businesses.
The Eastford raw water pump station was upgraded, allowing us to meet demand and provide a stable raw water supply to the water works.
The refurbishment of the Thesen Island- and Sparrebosch pump stations is underway. The same tender for the Yacht Club- and Under Milkwood pump stations will be advertised shortly. The Tsitsitsi station no longer needs to be upgraded, as the system will change with the operation of the new Dam-se-bos reservoir.
Our multi-skilled teams who conduct both road- and storm water maintenance have been divided into zones – allowing us to deliver these services more frequently per ward. We have created employment by contracting local casual workers to increase our capacity and ability to deliver services, while SMME local contractors were employed to increase output. An example of this is Sisulu Street which was upgraded using the labour intensive construction principle.
Welbedacht Road was upgraded in our first public private partnership initiative.
Projects that will be launched in the next year include the Rheenendal water augmentation project, the Karatara River weir upgrade, the Sedgefield Public Transport facility and nine small projects, funded by MIG funding, for sidewalks in the Greater Knysna area.
Congratulations to this Directorate on receiving the Karatara Blue Drop Award. I trust that we will congratulate them on more of those next year this time. Ladies and Gentlemen, I would like to take this opportunity to formally handover the award to the Karatara team. The team may be small but they do great work. Can Mr van Jaarsveld and his team please come up to the podium?
I also want to make use of this opportunity to bid farewell to the Director: Technical Services Mr Emmanuel Myalato – Mr Myalato was appointed as the Director: Technical Services at the Macada Municipality in Grahamstown.
Turning to Planning and Development:
This Directorate has an excellent track record and I want to congratulate them on the 2nd place received in the Govan Mbeki Human Settlements Awards 2012 in the category “Upgrading of Informal Settlements Project”. We were also nominated for the “Best enhanced people’s housing process project.”
In terms of delivery, during the past year 623 houses were built, 52 houses were dealt with in the rectification project in Hornlee, Sedgefield and Rheenendal, 320 erven were serviced, 800 direct jobs were created over a period of 8 months and 22 small contractors were appointed.
This year the focus will be on servicing 250 erven in Ou Pad and the building of 250 slabs and platforms. This will formalize the south-eastern side of town, along the National Road and contribute to the aesthetics of Knysna as a tourist town.
Rectifying houses with structural damage has been prioritised for the upcoming year and we will install more than 750 toilets and 88 water points in the informal areas within the Greater Knysna area. This programme will be instrumental in Council’s compliance with the National and Provincial Strategic objective to provide all its citizens access to basic services by 2014.
Access to available land for housing, as well as the provision of bulk infrastructure to address the housing needs remains a big challenge and the lengthy and very complex negotiations on accessing national state land continue.
In the Economic Development Department the Rheenendal Co-op was established and developed with the help of the National Development Agency and 13 individuals were assisted to become self sustainable. The Nedbank incubator project helped an additional 27 entrepreneurs and created job opportunities for at least 56 unemployed people. In the year ahead the Incubator will undertake its third roll-out and the mentoring programme will continue by enlisting retired businessmen and artisans.
We facilitated various workshops for entrepreneurs and issued 35 trading permits allowing unemployed individuals to sell products in the informal sector, putting food on the table for them and their families.
A more structured approach has been implemented regarding trading at the central taxi rank. Trading is now more organised and lawful and those selling edibles have been encouraged to register with the Eden Environmental Office, where they can receive training in the handling of food.
Regular meetings have been set up with members of the business sector to discuss the economic challenges that Knysna is facing and to brainstorm strategies for building a brighter future.
The strategic planning of the town faces many challenges. The 30 year strategic and regeneration plan as part of the Neighbourhood Development Programme is progressing and the final report on the first phase of this planning is due to be completed by the end of this month.
I will elaborate more in the budget section of my speech, but the Economic Development Department will play a much stronger and more strategic role going forward as it needs to be instrumental in facilitating broader economic growth in Knysna and the positioning of Knysna within the region and province.
The highlight of the Town Planning and Building Control Department’s year has been the successful implementation of the electronic building control management system through the Collaborator process. We now have a system that enables accurate tracking of plans and accurate reporting on progress. The average time taken to process all building plans has been reduced to an average of 15 days over the past 9 months and to 7 days over the past month. This is a significant improvement and the fast-tracking of plans facilitates development in our town. We have been commended for this initiative by the MEC for Tourism and Economic Development.
The Department has functioned very close to full staff capacity for the first time in many years, and this has clearly contributed to the effectively complete elimination of backlogs in all forms of planning and building control application.
Our Town Planning team has been integral to the drafting of the new Land Use Planning Act for the Western Cape, working closely with the Department of Environmental Affairs and Development Planning. We believe this document, which has been published for comment, to be a very robust and practical piece of legislation in a very difficult context.
A highlight has been in the enforcement area where, against great odds in terms of time, cost and the shortcomings of the legal system, significant in-roads have been made in ensuring compliance.
A challenge is delivery of effective and equitable service to the northern areas of Knysna in particular, as well as to Hornlee, and Smutsville/Sizamile. The enforcement of rigid norms in these areas is neither practically possible, nor appropriate, but there is a need to protect public space and public assets, and increasingly, to provide the protection of property values and amenity normally associated with effective town planning and building control. We are working on a project to gain a deeper understanding of the areas involved and are involved in initiatives to resolve the problem, such as the preparation of a policy on house/spaza shops.
A second major challenge for the Department is the conservation of the centres of Knysna and Sedgefield. Difficult economic times encourage business people to ensure the survival of their individual businesses, which tends to undermine the process of retaining a unique, historic, natural character of the town that is important for business as a whole, as well as for the amenity of our people and the reputation of the town. We are looking for new and creative ways of ensuring compliance with advertising and by-law controls and with mechanisms to preserve the character of the town.
A final challenge is to follow up the success of the Collaborator system in the Building Control process with a similar system in Town Planning. This process is much more complex and extended and well underway. We hope it will be fully implemented by the end of the year.
In line with the above, the out of date Spatial Development Framework will be redrafted. One of the key aspects of this plan will be strategies to include the “informal” areas within the formal management processes over time, as well as strategies to support the regeneration of the economy of the town. Closely linked to this will be the advertising and, hopefully, adoption of the Integrated Zoning Scheme, the draft of which will be before Council by the end of 2012.
A new By-Law controlling outdoor advertising, signage and other aesthetic and heritage related aspects of the management of the town will be introduced and enacted during the year as well.
Our environmental department is working closely with the Estuary Pollution Task team to find ways of minimising the pollution of the estuary and other water sources in our area. We hosted a one day global warming conference with valuable input from knowledgeable speakers. All environmental queries are attended to and reported on by the department.
In line with Knysna’s vision for a sustainable and resilient town, Knysna Municipality will be commencing with the roll-out of solar geysers to all low-cost, state built houses in the next month. This is an exciting project which will improve the quality of life for all beneficiaries.
One of the biggest challenges this Directorate faces is land availability for community and churches. Applications to make Council land available for community projects and churches are received on an almost daily basis. The other challenge is budget for property management which will have to be addressed.
Corporate Services performs the important duty of managing our Grant-in-Aid scheme. With the recent efficiency measures that we are applying, I wanted to make sure that we do not neglect the social issues. The rise of crime, alcohol and other substance abuse and physical abuse is, in my opinion, a clear indication of the wellbeing of a community. Even if it is not our core business, this is where we have to veer off from our core business, and we have increased our total Grant-in-aid contributions to R5,416 million.
The mammoth task of reviewing our staff establishment and organogram is almost complete. This will inform the changes on the current staffing structure to make the organisation efficient in every way. This is always a difficult process as it has the potential to create uncertainties within the organisation as it directly affects people’s livelihoods.
Our complaints system will be up and running - at no additional cost as we are already using the system for document collaboration - before the end of 2012. We are in the process of introducing e-newsletters to inform residents of disruption of services, communicate meeting dates, and more.
The design work for the new website has been done and approved. It will have a much cleaner, simpler look and a more user-friendly feel. The website is expected to go live in July 2012, after all necessary procedures have been followed.
A draft Supply Chain Management Policy was tabled in March. This draft policy is currently available for public comment. This document will include targets on the use of local business as well as the use of businesses defined as historically disadvantaged. These targets will be included in the directors’ performance grids which will come into effect on 1 July 2012.
A workshop on the draft risk strategy and policy with all councillors was held in March. We are now setting up risk workshops to identify main risk factors which will go into the risk register for the next financial year. This process will be finalised by the end of June 2012.
We are undertaking an audit of all our investment and other properties. This is proving a lot more complex than anticipated. Once completed, a series of recommendations will be made regarding their future best possible uses.
THE 2012/2013 BUDGET
It is my pleasure now to submit to you the budget for the 2012/2013 period.
This Medium Term Revenue and Expenditure Framework (MTREF) for 2014/15 is linked to a brand new IDP for the period up to 2017. The budget fully reflects the direction we as a Council is moving towards, even though accepting that changes in policy and direction cannot simply happen overnight.
This budget also reflects the continuing state that South Africa, and in particularly a Garden Route municipality such as Knysna, finds itself in as a result of the global economy. This is an efficiency budget aimed specifically at ensuring basic service delivery and in doing so, is specifically following the dictates spelt out in the National Treasury Budget Circulars Nos. 58 and 59 regarding the elimination of waste and frills. At the same time this budget also attempts to create a social safety net and has a total Grant-in–Aid allocation of R5,461 million.
The new budget for the Knysna Municipality amounts to R561 million, R71 million for capital and R490 million for operating expenditure. In the forthcoming financial year we have not included any anticipated Neighbourhood Development Partnership Grant (NDPG) drawdowns which will accrue as that process quickens, however they are included in the outer MTREF years.
We are now a half a billion rand operating budget organisation. Residents often regard the municipality simply as running a number of small towns and providing simple services. The fact is that a municipality, even a relatively small one, is actually a highly complex machine affecting each and every person that it is in contact with.
Knysna, from a financial perspective, is a municipality that is heavily geared and heavily dependent upon its domestic sector. This means it has to rely heavily on loans and grants from elsewhere.
Knysna was, is and shall be for the foreseeable future, a domestic town. Approximately 80% of our own generated revenue, excluding governmental grants, comes from Knysna’s own households, thus about 20% is generated from the business sector. There is little scope for cross-subsidisation from the business sector as happens in neighbouring towns such as George and Mossel Bay, and therefore increases in rates and tariffs impact directly upon domestic consumers and hence almost immediately upon the municipality’s cash flow. Increased taxation invariably will mean increased non-payment.
Coupled to this is the reality that Knysna is also a holiday destination town. Many Knysna property owners are not based here, they holiday here or just rent out their properties. It has been estimated that over 50% of residential properties in Knysna are not primary residences. This in turn means that Knysna must fund itself and provide services as if it was a twelve month town, but it is only operating on at best six month revenues. There is an obvious mismatch between revenues and service demands, then we are not even taking into consideration backlogs in our previously disadvantaged areas.
For a number of years Knysna Municipality has been raising concerns about the financing of local government in general, and the amount of our Equitable Share in particular. It is very gratifying to note that the Financial and Fiscal Commission have begun to express its own concerns regarding the Equitable Share. The very worrying element from our perspective however, is that the Fiscal Commission’s studies are showing that this municipality is not only under-funded, but in fact it is grossly under-funded. At the time of the data used by the Commission, Knysna had a shortfall of some R39 million in total operating grants. The 2012/13 equivalent is R54 million.
Unfortunately whilst we are under-funded, the Western Cape in totality is actually over-funded and our Provincial Government does not have the ability or authority to alter or equalise the transfers. The Head of the Province Treasury has suggested we petition SALGA, who are responsible for grant requests in the first instance, and then National Treasury itself. We will follow this approach, but one has to keep in mind that a change in grant formulas does not happen overnight – it may take years – but we need to have our case heard.
The funding gap left by the lower than adequate grants has to be filled from rates, service charges or expenditure reductions. In recent years the gap has been predominantly filled from cutting unnecessary departmental expenditure at budget time or freezing staff appointments. This is simply because the ESKOM impact on an individual consumer has been so large that the municipality has, by necessity, already minimised rate and other tariff increases as far as is practically possible.
In Knysna, the economy, which is a predominantly service economy based on tourism, has been under severe pressure. Increasing charges and cutting budgets at the municipal level as a mitigator can no longer suffice. We have to consider the far more radical approach whereby Council looks at divesting itself of a number of activities. This includes cutting back on the unfunded mandates we perform and spend money on. We must also ask ourselves as to why we even perform some functions such as managing caravan parks or even more basic services such as cutting residential grass verges. Surely there are enough SMMEs in the area able to take on some basic contracts?
We must also look at our service standards. I was very struck by a recent programme on television about parking in Johannesburg. What struck me was the fact that our road maintenance is magnificent in comparison to Johannesburg’s and yet this is a topic which our residents severely criticize us for. We need to develop proper, measurable and affordable standard levels and communicate and workshop these with all our residents. This would allow Council the opportunity to either reduce rate and tariff increases, or shift expenditures back to those functions which are set out in the Constitution and onto the primarily basic services as requested by National Treasury in their annual budget circulars.
The list of unfunded mandates performed by this and most other municipality’s for that matter, is long and varied and ranges from libraries and museums to vehicle licensing and the main expense in our case, human settlements. The Human Settlements department currently runs at a deficit of over R11 million in the current year. The sole reason for this is that we do not receive enough money to undertake the National Government’s mandate of providing housing. The actual deficit would be much larger, but all the attendant infrastructure assets and their depreciation and interest costs and so forth, sit in other departments masking the true cost of low income housing. It is not and never has been our intention to stop housing projects.
That would be ridiculous and unacceptable to me as the Executive Mayor of this town. However we do need to find a better housing product and a better housing mix to maximize the grants we receive and minimize our own internal contributions. Increased housing development may look and sound good, but the reality is that the hidden add-on cost of housing by means of “free services”, and the additional pressure on infrastructure, is a time bomb that is rapidly becoming unaffordable to the rest of the community who fund all the various services involved.
This is highlighted by the fact that our latest IDP indicates an estimated need for low-income or subsidized accommodation of over 14 000 units. There are currently 18 400 registered domestic electricity units of which 8 000 form part of the original electrification schemes. There are 6 600 registered indigent households. The number of domestic units will double and the indigent households will almost certainly more than triple. This in a municipality that is already under-funded in terms of its equitable share - so the economy of the municipality comprising a dwindling and ageing population will be expect to pay for the houses, the additional infrastructure capacity required of it and the unfunded social rebates. If we believe this is a sustainable situation we are living in a fool’s paradise.
Let me make it very clear. It is not the intention of this Council to stop building houses nor is it our intention to stop housing administration. It is however, our intention to ensure that the houses we need to build are fully funded by the relevant government sphere. We will not shrink from our housing responsibilities but we require Province and National to fully come to the party and therefore it is our intention to reduce the current unfunded mandate to zero over the remaining period of this administration, and undertake the roll out of housing only within the annual grant amount.
The capital expenditure emphasis remains on water and sewerage infrastructure, especially after the recent problems which developed at our waste water treatment works next to the estuary. Expenditure on these “heavy” infrastructures is to the detriment of our social and community backlogs. We would dearly like to change this approach as water and sewerage capital expenditures in this area are extremely expensive to fund and more importantly maintain each year, however the continued growth in population is rapidly proving to be beyond our affordability. New areas not previously within our IDP horizons are mushrooming and it is impossible for a local authority such as Knysna, with all our added financial constraints, to even contemplate providing additional basic services.
The capital budget will amount to nearly R200 million. This includes the first income from the NDPG. Approximately R75 million will be for water, sewer and electricity of which R32 million is for water alone. In recent years we have put in a desalination plant in Sedgefield and more recently the reverse osmosis plant in Knysna, and yet there still are projects in line at huge expense to the municipality.
Over the 5 year IDP period we are anticipating to spend approximately R94 million on water, sewerage and electricity bulk services alone, which will include services to nearly 1 200 newly constructed low cost houses in the northern areas.
I have said that Knysna is a town that is domestic in its tax base. The fact is that the majority of people that relocate here are retirees or poorer people seeking a better quality of life and livelihood. Neither of these groupings offer much in the way of disposable income for inward investment purposes, nor do they engender much in the way of economic growth. The downturn in the national economy has meant that development has virtually ceased and this in turn has led to a position whereby, unless development starts again, Knysna will be in terminal decline. For this reason Council has taken the decision to fast-track local economic development.
A number of measures are being examined which include the possibility of introducing incentives aimed at subsidising, delaying or even waiving development contributions depending upon the type and locality of the development. We are looking at “planned infrastructure expenditure interventions” which are targeted infrastructure upgrades that will have long term economic and social benefits, most particularly job opportunities.
We will also be introducing a new business rebate to attract, as its name suggests, new business by means of a rates holiday. A 100% rates rebate for a period not exceeding three years will be offered to businesses that qualify. The businesses will be re-assessed every six months to ensure they are still functioning in the manner originally envisaged when the rebate was first awarded.
To boost the local economy we are targeting local contractors for Council business and paying an acceptable premium to use them. Council currently spends approximately R200 million on procuring goods and services. The local portion of this spend has already risen to R73 million (41% of total spend) in the first 10 months of the current financial year. If we increase that to R90 million for the whole year it will result in an increase of some 40% in local spend in just one year. A very positive achievement. It is the intention to increase the local spend to 60%, or to in excess of R120 million next year. The historically disadvantaged will be a minimum of 30% of the total spend as opposed to the current 18%. To ensure the targets are met we will be introducing management processes into our supply chain management at the evaluation phase, a system requiring that Directors chair their own evaluation committees and sign off on bids prior to the bid reaching the Adjudication committee for final award.
Only local businesses that offer us realistic, affordable prices and whose standards and quality match our requirements will be supported. We will publish these figures early in the new financial year outlining how much, to whom and on what Council has spent its money over the last twelve months and by doing so we hope that other local businesses are encouraged to compete for Council work.
The recent success of the ward project system in conjunction with Councillors and ward committees has prompted Council to repeat the exercise and expand it slightly. Next year the moneys available for projects in the wards programme will be increased from R200 000 to R300 000 per ward and Council is considering extending it to R400 000 by the end of 2014. National Treasury insists that all the projects must be identified and specified in the budget, especially if they are of a capital nature. This means that proper ward planning and meaningful communication must be developed within each ward to ensure the success of this programme. Furthermore the earlier identification of the exact projects to be implemented will ensure that the projects are completed within the financial year for which they were approved. It is unacceptable if ward projects are not completed on time.
Three years ago Knysna was awarded some R120 million from the NDPG administered by National Treasury. During the course of the last twelve calendar months various investigations have been undertaken by an international consulting firm (ARUP). These will culminate in the publication of a first draft report that will be the first step in defining what Knysna will utilise this grant for, as well as the way forward to proper 2030 scenario planning and the identification of roadmap projects.
All council strategic planning, most especially for capital projects, must be aligned with the NDPG process for maximum economic benefit going forward. During the current financial year the first project, a new taxi holding bay in Hornlee, was commenced and is now nearing completion at a cost of some R7 million.
The NDPG planning programme will be finalised for release in the 2012/13 financial year and major projects will be developed with timeframes commencing in 2013/14. The importance of this programme for Knysna Municipality in the short to medium term cannot be over-emphasised as it will form the directional focal point for Council going forward. It is also anticipated that further funding requests will be made to National Treasury based on the success of the initial roll-out of the plans and associated projects.
The Economic Development Department will be utilized more effectively going forward. The fact is that Economic Development is not solely about small businesses, single entrepreneurs, homestays, business chambers or tourism. It is about the future direction of this municipality and must be at the heart of all Council development to make sure we get the required results.
RATES AND TARIFFS
The budget before us occurs at the same time as the new General valuation roll. That immediately places the emphasis of the budget firmly on the income side of the budget equation.
The new general valuation roll will be introduced from 1 July 2012. The legal objection process is currently underway and the new Appeal board will begin its operations shortly.
This is the second valuation under the market related value system. Under the first valuation the middle to higher valued properties were affected most as they tended to be under-valued. In this valuation it is abundantly clear that the lower and the higher valued properties are most affected. This is the repeat of a trend that has been reported throughout the country. Two years ago the highest property value increases in the country were reported in Khayelitsha in Cape Town and more recently the same trend is being reported in Soweto. The reason is simply the growth in asset value being generated from property ownership. An example of this is my own property where my rates payable will be increasing well above the norm! However, the process must be fully supported and because we realize the financial implications and possible financial burdens rates increases can bring, Council has greatly increased the rebate system, most especially for pensioners, to mitigate the potential burden.
In Knysna the new General Valuation shows its main cause and effects in the property value bands below R750 000 and above R3 million. Between these amounts there is little change in values except in specific areas. In the seaside areas of Buffels Bay, Noetzie and also in the rural areas throughout the municipality, there are quite significant value shifts upwards. The reason is that the national economic recession has prompted a sale in second properties. These properties are in huge demand and therefore overall values have risen. Where values have fallen there can be a number of reasons but nationally the main reason is crime related and it appears that Knysna is no different in this regard. This is an issue that we need to be aware of as it is does bring its own consequences such as requests for gated suburbs. Council will keep a close eye on the trends going forward.
The actual rate in the Rand remains exactly the same for domestic property owners. The business rate will increase by 15.4% and the ratio between domestic and business will be stabilized at 1 to 2 as is the case with most municipalities in the country. The increase of 15% in the business rate is regrettable but it has been on the financial planning horizon for some years now and it was considered that to introduce it now, especially when the industrial values have fallen, mitigates the effect somewhat. Obviously there are incidence shifts depending on location and on sales and Council has endeavoured to cater for this as far as it can.
For domestic properties the national government determined threshold of the first R15 000 of value is discounted from the overall property value. In addition, Council has increased its own discretionary reduction of value from R15 000 to R50 000. This now means that the first R65 000 of domestic property value is exempted from any tax. This is a significant amount.
The domestic rebate of 20% remains in place. Consideration was given to removing it but doing this in the midst of a new tax roll would have been very problematic. However the domestic rebate will have to be phased out in future years or we are likely to experience the withholding of our Equitable Share from national treasury.
Other rebates include:
A green rebate of 20% aimed at encouraging property owners to maintain the unique environment and natural beauty of Knysna. Properties located outside the ‘urban edge’, as defined in the Knysna Spatial Development Framework, qualify. The rebate is granted after the submission of an auditable alien eradication plan. Properties will be inspected annually and if the plan is not adhered to, the rebate will be removed.
The heritage rebate is in design to ensure that Knysna’s cultural heritage is maintained and will be granted to the owner of a property of cultural or heritage significance that is maintained in the appropriate manner and style.
The domestic tariff will increase by an average 11.4% for those on prepaid meters and 9.3% for those on credit meters. Credit meter users pay a premium for the same electricity consumed, hence the difference in increase.
Council has again budgeted for consumers to convert from conventional to prepaid at a once-off cost of R500 including VAT. This cost actually pays for itself within twelve months and it is recommended that all domestic consumers take advantage of this offer. The daily rates will be held at current levels.
The increase in the non-domestic tariff is approximately 13.3% on average for commercial consumers on prepaid meters, 10.2% for commercial credit meter consumers and 10.9% for bulk supply consumers. All of these increases are considerably below the bulk increase from ESKOM of 16%.
The water tariff increase for all consumers will be 6% on both the basic charge and the consumption charge.
A recent survey undertaken on behalf of the Provincial Treasury has indicated that the domestic water tariffs of Knysna municipality are the highest of any category B municipality in the Western Cape. There are two very simple reasons for this. Firstly Knysna was the first municipality to experience water shortages in the Province and the first to put in the high technology systems of desalination and reverse osmosis. The future tariff increases in our neighbouring municipalities will soon begin to reflect ours. Secondly, and of far greater concern in the long run, is the fact that Knysna is topographically inefficient. We have six different water systems to manage. The systems have no economies of scale and contain over 100 pump stations. The current system is simply unsustainable for a geographically dispersed municipality such as ours—with lots of hills and forests.
2% of the increased tariff will be immediately allocated to the Capital Replacement Reserve (CRR) for water. National Treasury has decreed that all CRRs must be cash-backed and the anticipated costs associated with the water service, most specifically the need to expand the treatment works in Knysna, means that monies must be set aside now to mitigate future costs.
The sewerage tariffs will increase by the same 6% as the basic water tariffs and the same principle of 2% of the increased revenue will be immediately channelled to the capital replacement reserve.
Sewerage is a major concern for the municipality going forward and this is before major new expenditures will be required on a new treatment works. The recent leakages into the estuary have necessitated emergency remedial repairs which will be incorporated into a minor upgrade to enable the works to extend its current lifespan until 2019. Beyond that a major upgrade will be required. The cost of this interim phase is some R47 million of which we funded approximately R10 million on our own. We are legally obligated to maintain this operation at a level that prevents pollution of one of the world’s great estuaries and we will not shirk our responsibilities in this regard. However, the technical infrastructure systems such as the one required are financially beyond what this local authority can in reality afford. This is a classic dilemma where in Knysna we are spending R47 million on a sophisticated sewerage system when the majority of the population only have very basic living conditions in the first instance.
The refuse tariff will be increased by 3% for both domestic and business consumers.
A new innovation will be introduced later in the financial year in regard to business refuse. The refuse department will begin piloting a system whereby pictures will be taken of the amount of refuse picked up at businesses. The picture will be automatically attached to an account and immediately handed to the respective business owner as notice of an account to be rendered, hopefully reducing the amounts of disputes with regards to the quantity of refuse collected at businesses. The actual account will be billed as per normal.
Under normal circumstances this is not an area that is usually highlighted in a budget speech however I am firmly of the opinion that it is an area that needs more control and better management, a viewpoint supported in the various Budget Circulars from National Treasury. During the course of the last year Council introduced a new Grants-In-Aid policy which first requires a committee of senior Directors including the Director: Corporate Services and the Chief Financial Officer, and chaired by the Municipal Manager, to vet all applications according to approved criteria. This has immediately begun to cut out random applications or awards which have limited merit and potentially limited impact and going forward further criteria will be developed to ensure the process becomes relevant to the whole community.
The main Grant-In-Aid allocation given by this Council is to Knysna Tourism which is budgeted to receive only R4 million in 2012/13 as opposed to the amount of R4,7 million for the current year. There seems to have been a lot of local speculation and comment regarding Knysna Tourism and its relationship with Council, and I want to reiterate our support for the tourism industry.
Knysna Tourism is an independent Section 21 company tasked with marketing the municipality as a destination centre. For much of the last decade this marketing has been highly successful and Knysna has become a premier holiday centre for domestic and international visitors. The recent economic downturn hit the national and most specifically the Southern Cape tourist market very hard and ultimately it has impacted very negatively upon the Knysna economy. The result is that Council has decided to review the contribution made to Knysna Tourism, as we are preparing an efficiency budget and that all elements of the Knysna economy need to be critically re-examined at this time.
This should not be interpreted that Council has “fallen out” with Knysna Tourism or that Council wants to close it down, it is simply that an expenditure of the scale currently being given needs to be reviewed. By the same token I would expect Knysna Tourism or indeed any other institution to be reviewing its activities in the present circumstances.
Earlier in this speech I made mention of the fact that Economic Development is about the future direction of this municipality. Tourism is a major part of this future direction and therefore any discussion on the future must include tourism and in this instance Knysna Tourism. Council is not opposed to Knysna Tourism, we will always act keeping in mind “what is best for Knysna”, but no one can dispute that in the current economic climate we have to diversify more.
I conclude. I said at the start of this speech that this was the first full budget of the DA for 12 years. Throughout this budget I have referred to it as being an efficiency budget. It is only the start of the process and what we have begun with this budget will be carried forward in the years to come. The budget encompasses the financial effects of the new general valuation roll and by minimising new capital expenditures and new borrowings it will allow Council to align the new IDP with the NDPG process to ensure all capital planning is focused seamlessly on the 2030 long term future of the municipality. This in turn is the catalyst to allow Council better access to even more funding going forward.
Putting a budget and an IDP together is not an easy task. Thank you to Director of Finance Grant Easton and his team for making this possible and drawing up a budget which may not make everybody happy, but a budget that will keep Knysna financially sound.
My heartfelt thanks to the Municipal Manager, Ms. Lauren Waring, who I believe has done an excellent job in marshalling and leading the administration in the direction we both wish to move in and to the Directors and staff for their continued hard work in delivering services in line with the municipality vision of working for all.
My thanks to my Deputy Mayor and the members of my Executive Mayoral Committee, to you Mr. Speaker and my DA comrades in Council and indeed to all Councillors for your active and at times very lively inputs in Council. This is what democracy is about.
Speaker, I now present the 2012/2013 Budget for adoption.
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