City of Johannesburg · Sustainable human settlements Good Governance Building and growing an...

FOR THE YEAR ENDED 30 JUNE 2013

City of JohannesburgANNUAL FINANCIAL STATEMENTS

PRESENTATION TO INVESTORS

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Agenda

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Strategic Overview

Financial Analysis

Treasury Management

Political Overview

Questions

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Political Overview

Mr. Geoffrey MakhuboMMC Finance - City of Joburg

Presentation to

Investors

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GDS 2040

Eradicate poverty

Building Sustainable

human settlements

Good Governance

Building and growing an inclusive

economy

Social inclusion through

support and enablement

Ensuring resource

security and environmental sustainability

Our Promise this Term of Office and Beyond …….

During this term of office we have outlined the policy that was translated into GDS 2040

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High quality of life & development-driven resilience: poverty eradication;

food security; health, literacy/skills, safe & secure City

Resilience, liveable, sustainable urban environment: eco-mobility; Sustainable Communities, climate

change resilience, environmental protection

Labour-absorbing, resilient & competitive economy: job intensive economic growth;

SMMEs; increased competitiveness; smart city

Leading metropolitan government: efficient, responsible, accountable metro;financial sustainable & resilience; citizen

participation; customer & citizen care

• Resilience

• Sustainability

• Liveable

What do we intend to achieve through GDS2040

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• Safe neighbourhoods

• Safe complete streets that accommodate pedestrians, bicycles and joggers which will also reduce green house gas emission

• A City where everybody can live, play and work together.

• Reduced CBD congestion and parking

• Bustling economic nodes with convenient stops and stations

Towards Joburg 2040

7Mindful of the Operating Environment

• Growth in emerging markets remain fairly pedestrian

• Consumers continue to be under pressure as reflected by lowdisposable income

• Labour tensions

• Unemployment levels continue to be high, especially youthunemployment

• Fragile five affected by US’s decision of postponing tapering ofquantitative easing programme

• Inflation continues to reflect upside risks due to the depreciation ofthe Rand

• Wage settlements continue to surpass CPI

• Service Delivery protests

• Accelerated population growth in Cities

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Achievements

We continue to make significant achievements despitenumerous challenges:

• Turned around City Finances

• Significant strides in service delivery

• Unqualified Audit

• Leading City in implementing EPWP

• Implemented Community Based Planning

• Ten year R100 billion capital program beenimplemented

• Implementation of 30 year Growth & DevelopmentStrategy

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“The City is financially in good shape”

10Conclusion

“WE DELIVERED ON OUR PROMISES”

STRATEGIC OVERVIEWPRESENTATION TO INVESTORS

CITY MANAGERTREVOR FOWLER

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We are committed to a promising future

Joburg – a world class African city of the future - a vibrant, equitable

African city, strengthened through its diversity; a city that provides real

quality of life; a city that provides sustainability for all its citizens; a

resilient and adaptive society

What we said

13And this is what we did Operating Context

•Every year, the City commits significant resources to support service delivery.

•Johannesburg became the first municipality in South Africa to pass a multi-year

capital budget of R30.1 billion.

•The magnitude of these figures indicates Johannesburg’s commitment to high

quality service delivery and confidence in its future as a leading metropolitan

municipality.

2012/2013 2013/2014 2014/2015 2015/2016

Operational and Capital Budget Rmillion

Oprational Budget

Capital Budget

14Operating Context

• We are mindful of developmental challenges (poverty, unemployment,

spatial and income inequality) and opportunities that lies ahead - remain

committed to tackle and further enhance service delivery to our residents

• Johannesburg’s post apartheid spatial patterns reinforce the Apartheid Development

Trajectory, we still have excluded townships with poor people (Orange Farm,

Zandspruit, etc.)

• The unemployment rate is at approximately 25% and the youth unemployment at

approximately 32% which is atypical of a city that attracts youth looking for

employment opportunities.

• Food Security (and the linked question of food resilience) is a citywide challenge; with

estimates of the proportion of food insecure residents as high as 42 % of the City’s poor

• Given the strong link between the City’s economy and that of South Africa, the impact of

a struggling global economy resulting in a slowdown of the GDP to 2.7% during 2012 is

also felt locally. Within Johannesburg, the slow-down of the economy was evident in the

moderate rate of economic growth at 2.5% in 2012, down from 3.5% in 2011.

15Recap: Joburg 2040 Strategy

• Joburg 2040: A roadmap for a resilient, sustainable and liveable city - ourlong-term response to emerging challenges and opportunities

• It does not only provides a vision for the future, but importantly, it defines clear outcomes against

which to measure our progress.

• Through the four pillars of economic growth, sustainable services, human and social development

and good governance we strive toward minimal resource reliance and increased preservation of our

natural resources.

• This entails reducing pollution, improved waste management, efficient land use through appropriate

urban spatial development, all supported by consistent stakeholder engagement practices.

• 2012/13 was our first year of implementing the ‘Joburg 2040’ GDS.

• To give tangible expression to the commitments we have made in the GDS, we are spending over a

R100 billion toward infrastructure development over ten years, thereby enabling Johannesburg to

make a decisive break with apartheid era spatial planning.

• Further, our targeted flagship programmes are designed to address short and medium-term

challenges whilst maintaining focus firmly on our long-term vision of ‘Joburg 2040’.

162012/13 Key Focus Areas: Flagship Programmes

Priority programme Programme enablers

Financial sustainability and resilience

Enhancing revenue.

Optimising customer service centres and channels to enhance customer care.

Creating sound financial management environment.

Shift to low carbon infrastructure

Promoting ‘Demand Side Management’.

Smart metering.

Energy generation and sales (energy mix)

Gas to landfill.

Timing of use management at household level.

Integrated waste management

Separating waste at source.

Composting of organic waste.

Recycling initiatives.

Greenways and mobility

Quality service delivery of Rea Vaya BRT.

Restoring pedestrian bridges and dams to protect lives and livelihoods.

Re-sealing of roads and promoting road safety and public transport usage.

Upgrading gravel roads.

Introducing managed lanes, walking, cycling and other recreational activities.

Integrating different modes of public transport – especially with rail.

Sustainable human settlements

Providing basic services to vulnerable households.

Upgrading marginalised areas/ areas of high deprivation.

Formalisation and security of tenure.

Enabling housing typologies (e.g. social housing, revitalisation of rental stock) that support Transit Orientated Development.

Urban water management

Reducing water losses.

Introducing stormwater management programmes.

Implementing water demand management strategies.

Diversifying sources of water (e.g. rain water harvesting) to address water scarcity and to increase revenue.

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Priority programme Programme enablers

Citizen participation and empowerment

Promoting community-based planning and budgeting.

Reviving 1-stop Centres targeted at citizen partnerships and engagements and citizen empowerment.

Strategic communications and marketing

Devising an integrated communication and marketing strategy to support the City Strategy.

Promoting the ‘Buy, Sell, Invest and Visit’ initiative.

Entrenching and positioning Johannesburg as an ideal destination.

Human capital development and management

Introducing efficiency and productivity benchmarks, assessment and monitoring instruments.

Creating labour stability.

Integrating the COJ Group Human Capital Governance Framework and strategy.

Aligning talent management in support of the City’s imperatives through a skilled workforce (by developing, retaining and acquiring the appropriate skills).

Establishing a municipal academy / university.

A safe, secure and resilient City that protects, serves, builds and empowers communities

Promoting community-based policing and partnerships.

Implementing ‘smart technology’ (implement disaster management centres).

Promoting and facilitating life-long learning.

Introducing safe social spaces for cultural interaction.

Promoting public safety.

Introducing a ‘healthier lifestyles’ programme.

Economic growth

Promoting area-based development.

Implementing the Oasis in Soweto initiative, Alexandra and Ivory Park etc.

Accelerating the implementation of a skills hub.

Introducing Joburg Broadband.

A city where none goes hungry

Subsidising food programmes to ensure safe, affordable food for all (people’s restaurants, new markets, food exchanges and so forth.)

Introducing Agri-resource centres.

2012/13 Key Focus Areas: Flagship Programmes

18Service Delivery Performance: Sustainable Services

• Positive progress towards increased public transport use, roads

decongestion, and reducing carbon emissions

• Rea Vaya world class, affordable and reliable mode of public transport,

with an average of 35 953 passengers daily

• 16 489 457 Metrobus passengers in 2012/13


• Moving towards low carbon infrastructure, minimal resource reliance

and increased preservation of our natural resources.

• Over 27 091 solar water heaters installed in various communities & 19598 smart

meters also rolled out

• Improved waste management practices with over 90 000 tonnes of waste diverted

from landfill sites

• Unaccounted for water reduced from above 34% to 31.4%


• We are responding to the housing challenge through sustainable human

settlements:

• We delivered 3470 mixed housing opportunities in 2012/13

• 5 343 New public lights installed

• 3 307 first-time electricity household installations

• City awarded 2012 National Arbor City Award, 1st Place Gold Award and two

additional Gold Awards at the UNEP-endorsed Liveable Communities Awards

21Service Delivery Performance: Economic Growth

• The City recognises the need to create an inclusive economy, remain

competitive, innovation and increased investment

• During the year, a total of 3 967 SMMEs were supported through our SMME development

programmes.

• During the year, the City created 36 588 work opportunities through EPWP – earning Kamoso

Award for excellence in the implementation of the EPWP programme

• 900km broadband fibre rolled out and a spring board towards bridging digital divide

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• We are building a City that is safe, secure

and resilient; and that protects, serves,

and empowers our communities.

• 7,129,049 people - utilisation of libraries, sports,

recreation centres

• Health services continue to surpass targets and

evident in reduction of HIV infections - child

immunisation at 94.3% and HIV infections down

to 16.4%

• Joburg 10+ deployment and encouraging

performance in 5% reduction in assaults and

robberies in CCTV coverage areas (Inner City)

• ESP: 114,016 Individuals were connected with

at least 1 social service

• Established six agri-resource centres in Regions

A, C and G and food gardens in 2 Regions

• The City further provided ‘hub-and-spoke’

support for small scale producers in Orange

Farm and Poortijie.

Service Delivery Performance: Human and Social Development

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• We are building a City that is safe, secure

and resilient; and that protects, serves,

and empowers our communities.

• At least 20% risk reduction in fires and

flooding incidents throughout the regions

• The compliance levels in terms of by-law

enforcement in outlets for dangerous

goods and Flammable liquids had

increased to 74% against the target of

68%.

• It was also recorded that the mortality

rate was reduced by 4.2% against the 5%

target.

• Visible service delivery in 35 Wards

enabling quick identification and

resolution of service delivery breakdowns

at ward levels

Service Delivery Performance: Human and Social Development

24Infrastructure Investment

• The City’s capital expenditure for the 2012/13 financial year of R4.3

billion, biased towards water, electricity, roads and transportation

infrastructure services.

• Approximately R1. 2 billion on maintenance, upgrades and new infrastructure to enhance

service delivery: e.g. replacement of near redundant pipelines; public lighting, upgrade of

electrical network

• R594 million towards roads and storm water infrastructure - gravel roads upgrade to surfaced

standards; resurfacing, rehabilitation and reconstruction of roads & conversion of open

stormwater rains into underground systems (in Diepsloot, Ivory Park, Braamfischerville and

Orange Farm)

•92% expenditure recorded by end of 2012/13 FY: difference mainly as a result of delays in

procurement of BRT busses in support local content and job creation

25Putting Johannesburg on the map

Host of Major events such as :

• African Cup Of Nations 2013

• Metropolis Annual Mayor’s Meeting

• Joburg Open

• C40 Global Summit

• One Young World Summit

• World Anti-Doping Summit

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27Conclusion



ANNUAL FINANCIAL STATEMENTS PRESENTATION TO INVESTORS

GROUP CHIEF FINANCIAL OFFICERREGGIE BOQ0

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Financial Sustainability & Resilience

•Our finances remain stable

• A strong financial position with a net surplus of R3.4 billion

• A progressive increase in the City’s total assets

• Progressive increase in cash and cash equivalents

• Spending R30.1 billion of the R100 billion capital program over the next

three years

• State of responsiveness to billing issues has improved, through open days

and , revenue step change resulting in resolution of queries

• Collection of 92% of all billed revenue

• An unqualified audit opinion

• Higher allocation of Internal Generated Funds to Capex

30Revenue for the year ended 30 June 2013

Increase in revenue collected

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

June 2011 June 2012 June 2013

17,782,015

22,684,402

25,378,503 The increase of revenue collected is attributable to improving return on collection effort as a result of:• Open days, • Revenue step Change Programme • Resolution of queries and.

17%

55%

20%

2%

6%Revenue Composition

Property rates

ServiceCharges

Grants andsubsidies

Interestearned

Other

Total Revenue

R35bn

31Financial Performance year ended 30 June 2013

Increase in Capital expenditure• In 2012/13 financial year the City

began gradually to scale up capital investment toward the target of R100 billion.

• There is an increase in the percentage spent from 89% in the prior year to 93% in the current

• This trend continues in future years with R7,6 billion budgeted for the 2013/14 year.

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000


2,747,438

4,614,681

3,438,456

• The achievement of a surplus is in line with the City’s Growth and Development Strategy towards achieving financial sustainability and resilience.

• Surpluses will be augmented with contributions from private investors, national and provincial government towards target of spending R100billion on infrastructure over 10 years

Surpluses Generated

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000


3,812,518 3,749,203

4,548,057

32Financial Performance year ended 30 June 2013

Total assets

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000


47,440,465

56,374,108 60,191,121 The increase of assets over the

years mainly due to:growth in PPEincrease in cash and cash

equivalents

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000


695,161

2,220,393

5,401,407

Over the past 3 years the City has intentionally worked towards building up cash resources through the implementation of more stringent cash management practices including weekly and monthly cash projections which are proactively monitored

Cash and cash equivalents

33Prudential ratios

0.85

0.9

0.95

1

1.05

Actual Target Actual Target

30-Jun-13 30-Jun-12

1.04

1

0.92

1

Current ratio

1.85

1.90

1.95

2.00

2.05


30-Jun-13 30-Jun-12

2.022

1.92

2

Solvency ratio

34.00%

36.00%

38.00%

40.00%

42.00%

44.00%

46.00%


30-Jun-13 30-Jun-12

38.77%

45%

41.21%

45%

Debt: Revenue

34Prudential ratios

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%


30-Jun-13 30-Jun-12

36.59%

30%35.76%

30%

Remuneration: Expenditure

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%


30-Jun-13 30-Jun-12

2.19%

7%

1.63%

7%

Maintenance: Expenditure

4.20%

4.40%

4.60%

4.80%

5.00%

5.20%

5.40%

5.60%


30-Jun-13 30-Jun-12

4.69%

5%

5.44%

5%

Interest: Expenditure

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Group Balance Sheet as at 30 June 2013

2013 2012 2011

R '000 R ‘000 R ‘000

Net Assets and Liabilities

Net Assets 30,420,512 27,006,777 22,650,989

Non-current liabilities 16,358,977 16,067,284 15,753,187

Current liabilities 13,394,792 13,283,207 9,036,217

29,753,769 29,350,491 24,789,476

Assets

Non-current asset 46,294,826 44,126,224 40,776,422

Current assets 13,879,455 12,231,044 6,660,810

60,174,281 56,357,268 47,437,232

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Analysis of Annual Financial Statements – Income Statement

2013 2012 Growth

Actual Actual Variance

R'000 R'000 %

INCOME

Property rates 6 034 946 5 412 614 11%

Service Charges 19 220 098 18 135 473 6%

Grants 6 823 877 7 540 386 -10%

Interest received 561 710 433 721 30%

Other 2 186 980 2 718 218 -20%

34 827 611 34 240 412 2%

EXPENDITURE

Employee related costs 7 561 093 6 974 444 8%

Allowance for impairments of current receivables 2 850 709 2 191 637 30%

Depreciation and amortization 1 997 802 1717 514 16%

Finance Costs 1 477 487 1 598 227 -8%

Bulk Purchases 11 113 587 10 159 070 9%

Contracted services 1 882 488 1 978 748 -5%

Other 4 396 836 4 770 605 -8%

31 473 837 29 390 245 7%

Other adjustments 160 414 146 842

Taxation -75 732 -382 328

NET SURPLUS/(DEFICIT) after taxation 3 438 456 4 614 681 -25%

37Audit Opinion

Qualified Qualified Qualified Unqualified

2010 2011 2012 2013

• 2 Entities achieved clean audits

• Action plan to respond to AG-SA findings

CLEAN

AUDIT –

HERE WE

COME!!

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39Conclusion



TREASURY OPERATIONSPRESENTATION TO INVESTORS

GROUP HEAD: TREASURY & FINANCIAL STRATEGYKHOMOTSO LETSATSI

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Liquidity Management

42Liquidity : Year- end Cash position

Liquidity Position

• The City’s cash and cash equivalents held at balance sheet date were as

follows over the last five years

• General Banking Facilities and Commercial Paper not issued due to

positive cash balances throughout the year under review

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013

Cash balance (R’000 000)

AMOUNT

43Long Term Debt

• Main lending sources are depicted above

• Raised a R1.3 billion bilateral loan through Absa

• Total liability book for 2012/13 financial year is R12billion

• Successfully redeemed R1.7billion of bonds through the Sinking Fund

• Sinking Fund coverage ratio of 50.06% as at balance sheet date

BANKS31%

DFI12%

BONDS54%

Finance Leases3%

Funding Mix

44Medium Term Capital Funding

• Spending R30.1 billion of the R100 billion capital program over the next 3years

• Launching Green bond in the current year in support of Climate ChangeInitiatives

2013/2014 2014/2015 2015/2016

FUNDING SOURCE (R’000 000)

Loan Funding

CRR and Surplus Cash

Grants and Contributions

45Credit Rating

Agency Rating Outlook

Moody’s A1.za/P-1.za Negative Outlook

Fitch AA-.zaf/F1+.zaf Stable Outlook

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47Conclusion


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