Response to Open Letter from Mr Paul Gering
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16 April 2010
Dear Mr Gering Thank you for your letter dated 6 April. Ordinarily, given the thousands of questions asked around the budget, we do not answer each and every specific question posed to us, but a report is provided to council detailing responses to questions raised. However, I have decided to make an exception to you this once. My responses are as follows: 1. Water Loss Programme: The present high level of Non-Revenue Water is not an acceptable situation for the eThekwini Municipality but there are numerous initiatives underway to address this situation. To put things in perspective however, the average Non-Revenue Water (NRW) percentage in Africa is 58%. A common incorrect perception is that the NRW should be zero but the best-in-class Water Utilities typically achieve NRW figures of approximately 15%. A number of trends are monitored that assist in the analysis and interpretation of the current high levels of NRW, and help in the understanding of the cause of NRW. Two of the primary drivers of NRW are deterioration of existing infrastructure (natural rise in the rate of leakage) and antisocial behaviour of consumers who tamper with the municipal infrastructure and make illegal connections. A target of NRW by Volume of 33% by the end of June 2010 has been established for the programme. In summary, the following key activities are being implemented in order to achieve this target. The long term target is to reduce the NRW to 25%. 1.1 Real Loss Reduction The following targets have been set for the reduction of water losses:
1.2 Billing Improvement The following targets have been set for the improvement of sales to consumers:
The current levels of NRW are not acceptable to the municipality but the Water and Sanitation Unit have identified the causes and are actively implementing corrective measures to ensure that all residents have access to a sustainable supply of water both now and in the future. With the exception of the Amnesty Programme which has only been recently launched, most of the above work under the points 1.1 and 1.2 above will be completed by June 2010. 2. Water & Electricity Bad Debt It is assumed by you that all owners/tenants in arrears will sell their property in order for the Municipality to collect all outstanding debt on the property. This in practice is not the case and some of the debt ends up as bad debts. A further point is that debt accrued prior to the implementation of S118 of the Systems Act mainly ends up as bad debt. There is also the use in informal settlements where the state/Municipality is the owner of the property and we cannot collect due to poor addresses or difficulty to find the actual consumer. There are however programmes in place to cut down on bad debts and in this regard I am referring to the stricter implementation of Section 118 which should theoretically end up in no further bad debt on current accounts and owners. 3. Collections The financial statements clearly indicate the ageing of debt. For a number of years rates were recovered annually and ratepayers had to apply to be rated on a monthly basis. However, when the Municipal Property Rates Act was promulgated the Municipality converted all ratepayers to monthly and only annual on application. The Rates policy clearly indicates that ratepayers with at least 50 properties can apply to pay annually, and Government falls into this category. The due date for annual ratepayers is 31 October and the Municipality is able to invest that money when payments are made early in the financial year. Due to the fact that rates used to be raised annually, the majority of debt will be over a year old. For the record, the current collection rate for all services is in excess of 95% and the provision for bad debts covers at least 60% of debtors. 4. Durban Film Office Since its establishment in 2003, the Durban Film Office has placed a heavy emphasis on attracting international and local productions to our shores with the objective of increasing the currency of production work in the city, increasing opportunities for local industry to engage with industry professionals and promoting the city of Durban as a world-class production destination. The results are self evident, the city has experienced a 27 % increase in production activity since 2003 across all genres of motion picture and stills production. The city has successfully engaged with local and international markets and established credentials on key international platforms in the USA and Europe, and as a result has been host to some of the world's top block buster productions such as Blood Diamond , Man to Man and Bollywood's 'Dhoom2'. A recent study, The Film Industry Review, commissioned by the Durban Film Office, reveals that the Durban film sector generates around R236 million per annum, and contributes around R 348 million to the provincial economy. According to information gleaned from permits issued by the Durban Film Office in 2006, TV Commercials generated R 71 048 530.00, Big Budget Feature Films R111 600 000.00 Low Budget Feature Films R 49 000 000.00 and Stills Productions R 5 966 000.00. The industry's contribution to GGP is 0.19%, its contribution to GDP 0.01% and the number of Person Days of labour per annum is 19 498. The challenges however, are still immense and future growth of our local industry is dependent on strategic interventions to tackle critical constraints to growth which must include embracing dramatic changes in devices, market and consumer behaviour. New technologies will deeply influence both the pace and direction of entertainment and media industry growth over the next few years and as a Smart City, Durban is well positioned to become a market leader in this 'new age' of entertainment and media by exhibiting an influence that drives new business models and revolutionizing how film business is done. Following the outcomes of the Film Industry Review, the Durban Film Office 2009 - 2012 business plan provides for a key focus on skills & enterprise development. Specifically, the strategy acknowledges the difficulties faced by the local sector when trying to function in the global marketplace and as such, seeks to address the need for targeted development programmes that will enable the sector to participate meaningfully in the marketplace. Key Projects 2009 / 2010 In terms of the 2010 / 2011 financial year, the Durban Film Office will implement a number of strategic interventions that will tackle the immediate issues of skills and enterprise development and market access. The Durban FilmMart and Producers Lab are the most significant of these programmes that will be rolled out in 2010 / 11: Durban FilmMart The Durban Film Office has developed a content development programme to run concurrently with the existing Durban International Film Festival programme. The objective is to create a vehicle with the potential to facilitate the development of African content and ultimately create further business and employment opportunities within the sector and provide a platform for these filmmakers to realize available opportunities in the global film industry they would otherwise have difficulty accessing. The Durban FilmMart is an international finance forum that will provide producers with an opportunity to present projects to financiers and sales agents from around the globe but equally important, will in time, establish Durban as one of Africa's most important platforms for financing, sales and distribution of African content. Durban Producers' Lab The Producers' Lab incubator and skills development programme is a Durban Film Office initiative in partnership with the SmartXchange Innovation and Technology Hub, to improve local industry producer and business skills of filmmakers who have yet to bridge the career gap into professional filmmaking. The programme is a three-year incubation programme that introduces producers to direct interaction with industry experts who will facilitate Film business skills workshops such as financing, production and distribution. Focus on Project development will be a key component of The Lab, with each producer given the opportunity to package a project from development with the counsel and expertise of industry professionals. The four core components of The Lab include:
Participants will be exposed to the film, television, documentary and new media industries through a schedule of workshops, business sessions, production and packaging exercises, while forging real creative and business relationships. In closing, we are pleased to report that both projects have already attracted significant support in South Africa and abroad. It is anticipated that the Durban FilmMart and Producers' Lab programme will cultivate the creative, collaborative and business skills of local producer's, significantly increase the number of high quality projects from the city and help build solid business strategies for the local and international marketplace. Producers will be exposed to the film, television, documentary and new media industries through direct interaction with industry experts who share exclusive information on development, financing, production and distribution. Furthermore, the establishment of an international co-production market in association with the Durban International Film Festival in Durban is a unique opportunity for Durban to catapult the local sector into the world of professional content development and establish the city of Durban as a serious player in the global markets - the future benefits for our local citizens' will include increased production activity, export of local content, increased levels of professional skills and business partnerships and tourism. 5. Zimbambele Poverty Alleviation eThekwini's Zibambele road maintenance programe involves the mobilisation, training, management and support of thousands of marginalised women as contractors to maintain a 500m stretch of road in predominantly rural areas for a 12 month period. The programme has targeted poor women-headed households explicitly and women account for almost all of the 6 000 contractors. They receive introductory training and the necessary hand tools for road maintenance, and they are expected to work for eight days a month for which they are paid R470. This amount is to be increased to R540 in the new financial year and the number of contractors to 6 600. 6. Cleaning of Taxi Ranks This relates to all public transport ranks, not only taxi ranks. Yes, public transport operators do pay a rank licence fee to the City but this does not cover all the costs incurred by the City. The R2,7 million is not the total cost to clean all public transport ranks, but is an additional amount given to Durban Solid Waste to cover the ranks that were not previously being cleaned. 7. Durban Transport Lanes The additional cost to make the public transport lanes on the Nkosi Albert Luthuli Freeway red is in the order of R12 million. This has been funded from national grants. In addition, the camera enforcement system cost is the order of R6 million. The intention with the public transport lanes is to give priority to public transport vehicles (and of course the passengers) in keeping with National, Provincial and Local policy. In providing such lanes it is necessary to firstly make it as clear as possible who they are intended for (by use of red asphalt and relevant signage) and secondly to provide necessary enforcement to ensure their correct usage (by way of the cameras). 8. Corporate and Human Resources 8.1 Sick Leave Management The absenteeism rate in the City, due to sickness, has been a cause for concern. In addition to this one of the prominent causal factors for staff turnover, has been a combination of deaths in service and medical boards. Whilst we monitor these on a monthly basis, in addition, we have embarked on a sick leave management strategy, with a multi-pronged approach. A sick leave reporting system per Cluster, Unit and Department was devised which has assisted Management in pinpointing the causal factors of absenteeism, and thereby assisted in addressing the issues through early identification and intervention. In the Clusters and Units in which the strategy has been launched, the sick absenteeism rate has dropped to below the national norm, and it is estimated, based on the reduced absenteeism, that a savings of R16 000 000 has been effected over the last three years. The cost of the system will be further reduced when the HR Management Information System is fully implemented. 8.2 Fully Integrated HR System The eThekwini Municipality is currently using the Unique Payroll and Human Resources software for the remuneration and management of its 20 000 employees. While the Unique Payroll system has served the Municipality well during its transition phase, the Municipality seeks to replace this system with a fully integrated, on-line, human resources management information system which will accommodate all human resources and management information needs of the Municipality. To this end, the Municipality has purchased a fully integrated web enabled HR & Payroll system called Dynamic Resource Link from Business Connexion. The following are some of the key HR & Payroll functions which will be provided by the system :-
Salaries & Allowances Additional advantages of the system
9. Office of the City Manager We are currently evaluating the cost and skills enhancement benefit to the city from all the international meetings and cooperation agreements. This is being done via the MILE process and the performance management and scorecard processes. The R7.5 million allocated is primarily around pursuing our international cooperation agreements. To date the R7.5 million has translated into equivalent benefit to the city in the form of actual cash injection into programmes in the fields of sports, culture and SMME development. The international conferences also provide staff with opportunities to acquire and enhance skills and knowledge that promotes more effective service delivery. In some cases, we attend international conferences to support specific bids made by the ICC to attract future international conferences. In light of the current economic and financial challenges the IGR unit will begin a process of recommending more effective use of technology to participate in international conferences and cut back on travel and other expenses related to international travel. 10. Treasury 10.1 Tractor Workshop The existing Parks department workshop is situated in Botanical Gardens and will be displaced due to the decision taken to expand the Gardens which will result in the closure of the workshop facility. The proposed new workshop will be based at our Springfield Mechanical Workshop site which ties up with our workshop rationalisation plan, and will eliminate the need for duplication of services such as heavy welding, specialised hydraulic facilities, high pressure cleaning bays, underground oil separation tanks and the lowbed truck operation to transport plant items. The existing workshop provides support on all plant items for the Parks department, these amongst others include, drive on lawnmowers, water pumps, brush cutters and tractors. 10.2 Bus Maintenance The municipality is the owner of the buses and the maintenance costs are charged out to the contractor. The maintenance costs are calculated on a cost per kilometre basis. The R75.9m is a contingency provision that is budgeted for major capital repairs such as engine and driveline failures which cannot be recovered on the short term basis as the current contract expires 30 September 2010. Please note that this is only a provision, and not a commitment. If possible, this amount will not be spent. 11. Salaries and Allowances Annual wage increments are negotiated centrally in the SA Local Government Bargaining Council in respect of the entire municipal sector. Accordingly, it is not negotiated at municipality level. A 3-year wage agreement was concluded in June 2009, which included a 13% increase with effect from 1/7/09. (this increase consisted of a 10,5% across the board increase plus a 2,5% non pensionable allowance). The wage increase effective from 1/7/10 is 8,5%. 12. Unfunded Mandates The Housing Department is currently administering 10 hostels in the Ethekwini region and the projected operating deficit is R170m for the 2010/11 financial year. The major cost is electricity and water which amounts to approximately R110m for all the hostels. Meetings are currently taking place with the Department of Human Settlements to deal with the funding of the hostels deficit. We expect the issue to be finalized shortly. There are also cost saving initiatives that are being implemented with a view to reducing the deficit. The hostels are also being upgraded to improve the living condition of the residents and this is being fully funded by the Department of Human Settlements. 13. Ushaka Marine World uShaka was also initiated as a flagship project to boost the local economy and tourism. As with most theme parks an accounting "loss" is expected in the short to medium term with these parks only experiencing a positive return after 25 years. The expected actual result for 2009/10 is expected to be in line with the budget. 14. International Convention Centre This flagship project was initiated not as a profit making entity but rather for its multiplier effect on the economy. While depreciation impacts on the accounting "bottomline", it does not affect cash flow as it is a non cash item. The rates charged to the entity by the municipality is offset during the consolidation of the financial statements of the parent municipality and its entities as per accounting standards. (Thus both these items are not impacting on cash flows). The projected actual result for 2009/10 is expected to be in line with the budget. 15. Free and Subsidized Basic Services The free basic services are provided at the same level as last year with one exception in that the proposed new user charge sanitation has a free basic services component. The increase in the cost is mainly due to the extension of services to new low cost housing and as a result of the tariff increases. The equitable share allocated is based on National Treasury formulae and does not cover the full cost of free basic services. 16. New Stadium The Stadium budget is R3.2bn. The funding sources are as follows (in Rbn): National 2.370 Provincial 0.300 eThekwini 0.500 DBSA 0.030 Total 3.200 There is capex of R110m in 2010/11 mainly for: Level 3:
Level 6:
The Stadium operating costs for 2010/11 are R22.5m whilst the Stadium income is estimated to be R7.5m. I trust that this adequately addresses the issues you raised. All the best and thanks in anticipation. Sincerely, Dr. Michael Sutcliffe City Manager: eThekwini |
