Interest rates for borrowing and investment of funds The MFMA specifies that borrowing can only be utilised to fund capital or refinancing of borrowing in certain conditions. The Municipality engages in a number of financing arrangements to minimise its interest rate costs and risk. However, for simplicity the 2014/15 MTREF is based on the assumption that all borrowings are undertaken using fixed interest rates for amortisation-style loans requiring both regular principal and interest payments. As part of the compilation of the 2014/15 MTREF the potential of smoothing out the debt profile over the long term will be investigated. Collection rate for revenue services The base assumption is that tariff and rating increases will increase at a rate slightly higher that CPI over the long term. It is also assumed that current economic conditions, and relatively controlled inflationary conditions, will continue for the forecasted term. The rate of revenue collection is currently expressed as a percentage (76 per cent) of annual billings. Cash flow is assumed to be 76 per cent of billings, plus an increased collection of arrear debt from the revised collection and credit control policy. The performance of arrear collections will however only be considered a source of additional cash in-flow once the performance has been carefully monitored. Growth or decline in tax base of the municipality revenue is assumed to increase at a rate that is influenced by the consumer Debtor’s collection rate, tariff/rate pricing, real growth rate of the municipality, household debtor’s formation growth rate and the poor household change rate. Household formation is the key factor in measuring municipal revenue and expenditure growth, as is a greater municipal service factor than servicing servicing ‘households’ individuals. Household formation rates are assumed to convert to household dwellings. In addition the change in the number of poor households influences the net revenue benefit derived from household formation growth, as it assumes that the same costs incurred for servicing the household exist, but that no consumer revenue is derived as the limits consumption to the level of free basic services. ‘poor household’ It is important to note that Madibeng is a predominately rural municipality with many towns and villages under traditional management with limited revenue derived from the informal villages. Formalisation of these rural villages should be addressed as a high priority to broaden the revenue base. municipality’s Salary increases Provision has been made for a 4.4% salary increase in terms of the guidelines from National Treasury Impact of national, provincial and local policies
Interest rates for borrowing and investment of funds The MFMA specifies that borrowing can only be utilised to fund capital or refinancing of borrowing in certain conditions. The Municipality engages in a number of financing arrangements to minimise its interest rate costs and risk. However, for simplicity the 2014/15 MTREF is based on the assumption that all borrowings are undertaken using fixed interest rates for amortisation-style loans requiring both regular principal and interest payments. As part of the compilation of the 2014/15 MTREF the potential of smoothing out the debt profile over the long term will be investigated. Collection rate for revenue services The base assumption is that tariff and rating increases will increase at a rate slightly higher that CPI over the long term. It is also assumed that current economic conditions, and relatively controlled inflationary conditions, will continue for the forecasted term. The rate of revenue collection is currently expressed as a percentage (76 per cent) of annual billings. Cash flow is assumed to be 76 per cent of billings, plus an increased collection of arrear debt from the revised collection and credit control policy. The performance of arrear collections will however only be considered a source of additional cash in-flow once the performance has been carefully monitored. Growth or decline in tax base of the municipality Debtor’s revenue is assumed to increase at a rate that is influenced by the consumer debtor’s collection rate, tariff/rate pricing, real growth rate of the municipality, household formation growth rate and the poor household change rate. Household formation is the key factor in measuring municipal revenue and expenditure growth, as servicing ‘households’ is a greater municipal service factor than servicing individuals. Household formation rates are assumed to convert to household dwellings. In addition the change in the number of poor households influences the net revenue benefit derived from household formation growth, as it assumes that the same costs incurred for servicing the household exist, but that no consumer revenue is derived as the ‘poor household’ limits consumption to the level of free basic services. It is important to note that Madibeng is a predominately rural municipality with many towns and villages under traditional management with limited revenue derived from the informal villages. Formalisation of these rural villages should be addressed as a high priority to broaden the municipality’s revenue base. Salary increases Provision has been made for a 4.4% salary increase in terms of the guidelines from National Treasury Impact of national, provincial and local policies
FINAL_ANNUAL_BUDGET_MADIBENG_LOCAL_MUNICIPALITY_201516201718.docx