Underspending on repairs, maintenance impacting on Joburg infrastructure – JoburgCAN

9th May 2024

By: Sabrina Jardim

Creamer Media Online Writer


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Following a decade of underspending on repairs and maintenance on infrastructure, JoburgCAN, an initiative of civil society body Organisation Undoing Tax Abuse (Outa), says it is “gravely concerned” over the budget allocations for the maintenance of fixed assets in the City of Johannesburg’s draft budget for 2024/25.

“The City of Johannesburg again plans to spend less than the national norm on maintaining its ageing infrastructure,” says JoburgCAN manager Julia Fish.

Ahead of the planned adoption of the budget at the special council sitting on May 16, JoburgCAN says it is pushing the city to clarify its spending and budget allocations and make urgent amendments to the Integrated Development Plan (IDP) 2024/25 to avoid a failed budget.

“We found two key problems. Firstly, the city has consistently underbudgeted for repairs and maintenance and continues to do so. Secondly, the city’s financial reporting is haphazard and contains discrepancies such as numbers changing significantly year-on-year with no explanation,” says Fish.

In January 2014, the organisation says, the National Treasury issued Municipal Finance Management Act Circular no 71, which stated that a municipality’s total repairs and maintenance spending should be the equivalent of 8% of the carrying value of property, plant and equipment and investment property.

JoburgCAN says it looked at the city’s reported spending on repairs and maintenance from 2014/15 to 2023/24 – ten years since Treasury set the 8% standard – and the projected spending for 2024/25.

“The city did not meet the 8% target in a single one of those years. In three years, spending was at 2% and in another two it was 3%. Basically, the city is not managing to repair in five years what it should in one,” Fish says.

JoburgCAN points out that the highest spending is for the current year, 2023/24, as the draft budget 2024/25 indicates the city expects to have achieved 7.4% by the end of June.

It notes, however, that a key concern over that decade is the value of the spending. In 2014/15, the city spent R3.44-billion on repairs and maintenance – 6.3% of the value of property, plant  and equipment.

The organisation posits that spending for each of the next seven years never matched this and was, in some years, significantly lower, noting that spending recovered in 2022/23 to R5.32-billion, the first year of higher spending than 2014/15, and is projected as R6.24-billion in 2023/24.

The projections for 2024/25 are R6.09-billion or 7.2% of property, plant and equipment value.

JoburgCAN says the level of repairs and maintenance is, therefore, considered inadequate to prevent breakdowns and interruptions to service delivery. It may also indicate that the municipality is experiencing cash flow problems and is therefore unable to spend on its repairs and maintenance to existing assets or purchase new assets, it adds.

“It is unclear whether the city used the carrying values of property, plant and equipment and investment property consistently for calculating the ratios during the period of assessment given that clarity was not provided.”

Moreover, the organisation says the difference between the ratios indicated for budgeting purposes and actual performance are “concerning.” For example, for the year 2022/23 the ratio in the adjustments budget is depicted as 6.4%, while a ratio of 5% is reported in the integrated annual report 2022/23.

Contrary to legislative requirements as set out in the Municipal Budget and Reporting Regulations, the organisation says the city’s budgets do not always include comparative information of the audit outcomes of the three years prior to the current year, as well as the budget and the full forecast of the current year.

Without this information, JoburgCAN says the budgets are unlawful. For example, the budget for the upcoming 2024/25 financial year should include the updated spending estimates for the current year (2023/24), comparative data of the audited outcomes for the three previous years (2020/21, 2021/22 and 2022/23) and the projections for 2024/25, 2025/26 and 2026/27. This means there is inadequate reporting of actual spending, particularly on capital projects, it says.

The organisation warns that systemic collapse of services such as power and water is having a “devastating” effect on the total function of the city, adding that much of this can be attributed to the city’s failure to prioritise repairs and maintenance.

Moreover, it notes that reservoir failure is causing major pipe bursts, needing constant repair, causing backlogs and shortages in road repair and impacting on the Johannesburg Roads Agency budget and service delivery.

JoburgCAN says residents are being subjected to regular water cuts, while the fire department in some cases does not having access to water in hydrants to extinguish house fires.

“The city has to ringfence water and electricity revenue to tackle maintenance needs.

“The losses at City Power are directly due to loadshedding as transformers are blown during surges and substations are looted when the power is off. Stabilising the water and electricity grid should be the number one aim of the IDP and budget which will have a stabilising effect to deliver the rest of the objectives of the IDP,” says JoburgCAN.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online




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