DIPALESENG LOCAL MUNICIPALITY 2011/12 Tariff application

Transcription

1 DIPALESENG LOCAL MUNICIPALITY 2011/12 Tariff application

2 Index 1. Foreword 2. Overview of Dipaleseng Local Municipality 3. Tariff Discussions 3.1 Financial needs analysis 3.2 Social needs analysis 4. Questions

3 Foreword Dipaleseng Local Municipality is located in the town of Balfour, with an estimated population of citizens. Dipaleseng Municipality falls within the Gert Sibande District Municipality. DLM maintains its own infrastructure for supplying electricity to consumers. DLM also provide free basic electricity to its citizens. Dipaleseng Municipal Motto: Per Arde A Ad Astra Area: 2615km² Population (estimated): ± Location of Head Office: Balfour

4 Overview of DLM Vision To be a friendly, economically viable place providing a better life for all people, uplifting previously disadvantaged communities to enable them to become important role players in the development of Dipaleseng. Mission Dipaleseng Municipality will ensure a better life for all through efficient and effective service delivery; LED strategies to enhance job creation; developing and implementing a proper communication strategy; promoting prompt payment for services, and competent and skilled staff. Mayor Cllr MP Tsotetsi (New mayor to be confirmed) Municipal Manager Mr P Malebye Physical Address Cnr. Joubert & Stewart Streets Balfour Mpumalanga Postal Address Private Bag X 1005 Balfour 2410 Tel: Fax: dipaleseng@worldonline.co.za Website:

5 Overview (Continued) Map 1: Spatial location of Dipaleseng Local Municipality

6 Overview (Continued) EMPLOYMENT SECTOR Figure 5: Employment Distribution SOURCE: Stats SA, 2001 Clearly the majority of people are involved in the agricultural sector, followed by electricity, wholesale and retail trade, transport and construction and then manufacturing. Dipaleseng needs a strategy that will further diversify the economy, reducing dominance of agricultural in the employment per industry. High unemployment is a serious concern as it leads to socio-economic problems such as alcohol and drug abuse, crime, early pregnancy etc

7 Tariff Discussions 1. Financial needs analysis Average Increase 26% o o o When we look at the municipality s ability to continue providing basic electricity to all consumers, one must look at the municipality s bulk purchases vs billing payment per consumer history to identify possible shortcomings. The following table is an analysis for the last 2 financial years between bulk purchases from Eskom and the actual billing from the municipality. This clearly shows that, without even taken into consideration critical cost to provide the service; eg. Salaries, Repairs and maintenance to continue plant maintenance, Depreciation of plant and machinery; the municipality is operating at a loss. DLM is currently achieving a 22% consumer payment ratio. This can be explained as follows: Out of the estimated people is below the national poverty line, therefore indigent in nature. Most of these indigents receive a free 6kw per month. In the people an estimated households exists, of which is estimated as indigent. The actual cost of quantifying this service can be made as follows: o (households) * (6kw *.54) * 12 = R466, Noted from the table below the municipality has an accumulated loss of 5% for the last 2 financial years. Therefore the loss must be recovered to be able to continue as a GOING concern Electricity Purchases Billings Profit / (Loss) Percatange Loss 2008/ % 2009/ % TOTAL % Fig1 Bulk Purchases vs Billings

8 Tariff Discussions 2. Financial Needs (Continue) To conclude; DLM has increased our tariffs higher than the allowed norm of 20.38%. This will ensure that past losses do not recur in the current budget year. We must also highlight the fact that 26% increase will not suffice, as bulk purchases only make 70% of your direct costs to deliver the service. DLM is therefore set to undergo an in-depth data cleansing exercise with measurable objectives to identify all active users, update the indigent data base, base on the indigent policy. This will also identify the possible reasons to mitigate the distribution losses of +-30% to the acceptable norm of 10%. Another point to state is that DLM has implemented for the 2011/12 year IBL (Inclining Block Tariffs). 3. Social needs analysis To continue to provide basic services, we have identified that an estimated citizens require basic services. To provide basic electricity and to continue with social development in the DLM district, as per the IDP of DLM, all consumers should at least receive 6kw per month free. However, with the current status quo of the municipality, the goal seems unreachable as significant losses are being incurred, and the Equitable share can only suffice so much. In short should price hikes of electricity continue, the DLM will not be able to continue as a Going Concern.

9 Tariff Discussions The final questions is why? Why does DLM need assistance from the NER to achieve service delivery as well as to continue as a going concern. Should DLM only apply the 20.38% increase, more significant losses will be incurred. DLM also implemented an Inclining Block Tariff due also reduce unnecessary usage.

10 Any questions? Questions