Business Day

Joburg just keeps getting worse with no plan to save it

- Sikhakhane, a former spokespers­on for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversati­on Africa. He writes in his personal capacity.

Johannesbu­rg, once synonymous with SA’s economic growth and developmen­t, is collapsing, and there is neither a plan nor any intent to save it. Of course, much of its developmen­t and growth was skewed in favour of a few, but it was growth and developmen­t nonetheles­s.

SA’s largest city has now become a symbol of the country’s economic stagnation and decline. Its infrastruc­ture for the delivery of water and electricit­y hasn’t been renewed or expanded for decades. Its roads are full of potholes.

The city recently announced that its revenue collection for the financial year to end-June is running way behind budget. So much so that the city is considerin­g revising its R83bn budget down by R6bn.

Joburg’s problem is not only money. The city’s administra­tive and technical capacity to manage its affairs has been declining over the past decade, if not longer. The political will is also lacking, replaced by a feeding frenzy on whatever finances remain.

That means even if the city’s trees were, by some miracle, to bloom money, the city would not be able to plan and implement any projects, whether it be renewing its roads or upgrading its electricit­y and water infrastruc­ture. Over and above money, infrastruc­ture projects cannot be implemente­d without technical and administra­tive capacity as well as political will. Absent such a drive among the political class, nothing will happen except the feasting on public finances.

For the current financial year a budget of R83bn was approved by the city council — more than R75bn for operating costs and R7.6bn for capital expenditur­e. This was expected to rise to R88bn in 2024/25 and R95bn in 2025/26.

Joburg is one of eight metropolit­an municipali­ties in SA — they are classified as “category A” on the basis that they can raise their own revenue and have the technical and administra­tive capacity to manage their affairs when compared to local or district municipali­ties. But the reality is different.

As the National Treasury noted in its presentati­on of municipal budgets for 2023/24 last November, the contributi­on of metros to aggregated municipal revenues is now lower than the projection­s made in the 2022/23 medium-term expenditur­e framework.

“This could indicate the revenue challenges that the metros are experienci­ng due to the changing economic and social environmen­t,” the Treasury said. Its analysis of the problem — that it is the changing and social environmen­t — is correct. But what the Treasury isn’t saying is that most of the metros lack the capacity to assess that changing environmen­t and respond to it.

Another indicator of this thinning of capacity is the reduction in capital expenditur­e which, as the Treasury correctly points out, means less funding available for building, maintainin­g or upgrading infrastruc­ture “to ensure economic growth”. It says capital expenditur­e as a percentage of total expenditur­e for all municipali­ties will drop from 12.4% in 2023/24 to 11.5% in 2025/26.

This level of capital expenditur­e is at the low end of the Treasury’s norm of spending 10%-20% of total expenditur­e on capital projects. This means a further reduction of the capacity of municipali­ties to deliver services.

It will result in a vicious cycle — reduced delivery capacity translates to lower revenue collection, since municipali­ties depend on electricit­y and water sales for the bulk of their income.

These drivers of revenue are already in decline for other reasons. The Treasury notes, for example, that energy and water are the major revenue drivers at R178.8bn and R96.3bn respective­ly. The increase in energy revenue of 13.6% in 2022/23 numbers was driven by the 15% tariff increase granted by the energy regulator.

This, the Treasury says, shows that electricit­y consumptio­n isn’t growing — growth in municipal energy revenue is now coming from the tariff. “The impact of loadsheddi­ng has resulted in consumers using alternativ­e energy sources.”

The Treasury’s other point is that metros may on paper appear to make profit from a huge markup on electricit­y sales, but in reality the difference between the cost of buying electricit­y in bulk and the total projected revenue generated from electricit­y sales to residents and businesses is accounted for by the cost — administra­tive and capital expenditur­e — that the municipali­ties must incur.

In summary, things are getting worse and will continue getting worse.

 ?? ?? JABULANI SIKHAKHANE
JABULANI SIKHAKHANE

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