The City of Cape Town’s Council has approved the 2020/21 Budget, which kicks in from 1 July 2020. Materially changed since the draft two months ago, it shows a total COVID-19 Budget impact of R3,8 billion, including more than R900 million of additional COVID-19 expenditure and a funding requirement of R2,1 billion largely due to the crisis. Much focus is on helping residents and businesses while making sure the City is able to continue to deliver services and boosting the local economy with more than R900 million to aid in Cape Town’s recovery.
Changes to the Draft Budget which was tabled on 26 March 2020 among others stem from the impact of the COVID-19 pandemic, the outcome of public comments received during the online public participation process, administrative amendments and a review of the loan take-up position of the City, from no loans envisaged to be taken up in the Draft Budget to loan funding of R2,5 billion that will be taken up over the medium term.
The total budget is now R54,4 billion up from the R52,7 billion Draft Budget.
‘Importantly, the City has not received additional national funding to cover the costs of the COVID-19 crisis and most of the City’s income comes from rates and service charges. It has therefore worked hard to ensure that residents and ratepayers do not face massive increases over the medium-term emanating from the financial impact of COVID-19 on the City.
‘Most of the City’s income is from rates and tariffs and this money is used to provide basic services. We have already lost R860 million in income over the last two months, with R386 million in additional expenditure over the same time. We are preparing for an additional debt impairment of R1,4 billion in the new financial year as debtors struggle to pay. We are doing our absolute best to assist with rates and services relief, payment arrangements and boosting our local economy. The City has made available more than R3 billion in the new year for rates and service relief but we ask those who can still afford to pay, to please continue to do so. This is how we will get through this as one city, together,’ said the City’s Executive Deputy Mayor and Mayoral Committee Member for Finance, Alderman Ian Neilson.
The City has cut expenditure in many areas that are not urgent, so as to ensure continued service delivery without undue rates and tariff increases. Internal funding sources from previous years have been fully employed in this budget to help reduce the impact of the pandemic on residents and ratepayers.
Rates and tariffs
- The South African funding model for municipalities is based on income from rates and tariffs to fund services
- More than 70% of the monthly costs of basic service provision comes from rates and tariff income
- The City covers the shortfall (about a third of what is required) with other funding sources
- The City’s rates and tariffs remain some of the lowest for a metro in the country
- No profit is made from rates and services. The City already does not receive enough income from rates and services to cover service provision completely
- The City continues to focus on helping businesses and residents with relief and payment arrangements
- Those who can afford to pay should continue to please pay as the City relies on this income for the provision of services
Anyone who has lost their income and whose household income is now below R7 000 per month, can now apply for relief after only one month of losing their income.
Many NGOs will now also benefit from new rating categories that will reduce or eliminate rates charges.
Adjustment to current budget to cover COVID-19 impact
To date, all additional COVID-19 expenditure has been covered by the City’s current Budget, ending on 30 June. Council also today approved the adjustment to the current budget to help cover the R386 million ongoing additional expenditure due to the COVID-19 crisis and to respond to the fall in City income of approximately R860 million since the national lockdown commenced at Level 5. This loss includes income from rates and tariffs, MyCiTi public transport fares, the suspension of events by the Cape Town Stadium and Cape Town International Convention Centre, and parking and development fee decreases, among others.
The Adjustments Budget (2019/20) clearly shows the COVID-19 crisis is not a once-off disruptive event. It will have long-term impacts on the City’s operations and programmes, it’s income sources for service delivery and on the general socio-economic welfare of its residents and ratepayers.
‘The City is currently using some internal funding sources, originally committed to other programmes and projects, to cover shortfalls. The City will not be able to cover shortfalls indefinitely before it starts to affect basic service delivery. We have worked hard over the past decade to ensure we are a strong and well-run municipality and this is helping us weather the storm for the time being,’ said Alderman Neilson.