includes:- Direct operating costs e.g. Salaries, allowances including overtime, materials used, repairs and maintenance, general expenses and plant and vehicle hire. Depreciation / capital charges based on usage, life of buildings, plant and equipment and infrastructure used. Financing outlays which include loan service costs. Allocated costs that include costs allocated through support services. Trading services must be ring fenced and be fully financed from service charges. Trading services must make a surplus at year end of at least 10%. It is critical that the gross profit margins must at least be 40%, in order to provide fully for expenditure in particular maintenance cost. Losses in these services must be realistic (Water 15% and Electricity 7%). Normally Water and Electricity is classified as Trading Services. 6.2 Rates and General Services This service is further classified into three categories i.e. economic, subsidised and community services. 6.2.1 Economic Service These are services for which tariffs are fixed in such a way that the full cost of providing the service is recovered without incurring a surplus or deficit e.g. trade effluent includes commercial and industrial refuse removal. The consumption of an economic service can be measured or determined with reasonable accuracy and apportioned to an individual consumer. Whilst they are also managed like businesses, the tariffs for these services are normally determined in such a way that user charges cover the cost of providing the service. These costs can be determined as follows:- Full cost of providing the serviced as explained in 6.1 above. The rate per unit is based on projected usage. 6.2.2 Subsidised Services These are services for which tariffs are fixed in such a way that at least a portion of the cost of providing the service can be recovered. The consumption of these services can be determined reasonably accurately and can be apportioned to individuals and consumers. However, if the tariffs for using this service were based on its real cost, nobody would be able to afford it. In most
includes:- Direct operating costs e.g. Salaries, allowances including overtime, materials used, repairs and maintenance, general expenses and plant and vehicle hire. Depreciation / capital charges based on usage, life of buildings, plant and equipment and infrastructure used. Financing outlays which include loan service costs. Allocated costs that include costs allocated through support services. Trading services must be ring fenced and be fully financed from service charges. Trading services must make a surplus at year end of at least 10%. It is critical that the gross profit margins must at least be 40%, in order to provide fully for expenditure in particular maintenance cost. Losses in these services must be realistic (Water 15% and Electricity 7%). Normally Water and Electricity is classified as Trading Services. 6.2 Rates and General Services This service is further classified into three categories i.e. economic, subsidised and community services. 6.2.1 Economic Service These are services for which tariffs are fixed in such a way that the full cost of providing the service is recovered without incurring a surplus or deficit e.g. trade effluent includes commercial and industrial refuse removal. The consumption of an economic service can be measured or determined with reasonable accuracy and apportioned to an individual consumer. Whilst they are also managed like businesses, the tariffs for these services are normally determined in such a way that user charges cover the cost of providing the service. These costs can be determined as follows:- Full cost of providing the serviced as explained in 6.1 above. The rate per unit is based on projected usage. 6.2.2 Subsidised Services These are services for which tariffs are fixed in such a way that at least a portion of the cost of providing the service can be recovered. The consumption of these services can be determined reasonably accurately and can be apportioned to individuals and consumers. However, if the tariffs for using this service were based on its real cost, nobody would be able to afford it. In most
FINAL_ANNUAL_BUDGET_MADIBENG_LOCAL_MUNICIPALITY_201516201718.docx