Page 222 - UGU Dstrct Mun IDP Report '21-22

6.1.3.1.1 Basic Services Component
The allocation of equitable share to this component helps the municipalities to provide free basic water, sanitation, electricity and refuse removal to households that fall below affordability threshold. However, in respect of uGu District municipality we only provide free basic water and sanitation. This must cover free 6kl of water provided to poor households per month. However, at uGu every household is getting free 6kl of water per month irrespective being indigent or non-indigent. Since government only subsidises only indigent households, it means the municipality funds free 6kl of water for non-indigents households through internally generated revenue, which currently is difficult to collect which give more financial strain to the municipality.
N.B. The affordability formula measure (i.e. used to determine how many households need free basic services) is based on the level of two state old pensions. From the recently approved National Budget by Parliament, it resolved that from 01 April 2018 to 30 September 2018, the state old age pension will be R1690.00 and from 01 October 2018 to 31 March 2019 will be R1700.00. It means that the poverty or affordability threshold from 01 April 2018 to 30 September 2018 will be: R1690 X 2 = R3380 per month; meaning that from this period all households who’s their total income per household of above R3380 per month must pay for municipal services. From 01 October 2018 to 31 March 2019 the poverty or affordability threshold will be: 1700 X 2 = R3400 per month. Following Statistics South Africa (STATS SA) has calculated that 59% of all households in South Africa fall below poverty or affordability threshold.
The basic services component provides a subsidy of R383.12 per month in 2018/2019 financial year for the costs of providing basic services to the poor households. The subsidy provides funding to poor households for free 6kl of water and sanitation based on the levels of services per National Policy. The monthly subsidy of R383.12 is allocated to the poor households as follows in terms of recently approved Division of Revenue Bill together with National Budget in February 2018:
Table 6.1.3.1.1.1: Monthly Allocations per Households Below Poverty Level
Source: Ugu District Municipality Draft Budget, 2021
N.B. When budgeting for 2021/22 for Free Basic Water and Sanitation to poor households, the following formula must be applied: Free Basic Water and Sanitation = R383.12 X Number of indigents households’ X 12 Months. However, our challenge is that the municipality is giving all households free 6kl of water on a monthly basis which gives financial strain or pressure to the municipality. Also, those who are able to pay for services are not paying.
As a result of this the municipality becomes unable to provide sufficient funding for the following:
• 8% of Value of Infrastructural Assets for Repairs and Maintenance of Infrastructure; of which currently the value of our completed Infrastructural Assets (i.e. Water and Sanitation) using 2016/17 audited Annual Financial Statements (AFS) is R2,358,985,132.00; meaning in 2021/22 financial year at minimum we should budget for R188,718,810.60 which is
impossible in the current situation;
• Replacement of Aging Infrastructure.
In terms of 2018 Division of Revenue Bill as approved by Parliament together with the budget, it has been proposed at minimum the Equitable Share subsidy allocated to uGu District for poor households must be broken down per local municipality in terms of spending as follows for 2021/22 financial year:
Monthly Costs Components
Operations
Maintenance
Total
Electricity costs
R73.46
R8.16
R81.62
Water costs
R112.90
R12.54
R125.45
Sanitation costs
R86.19
R9.58
R95.77
Other costs
R72
R8.03
R80.28
TOTAL
R344.81
R38.31
R383.12
220 UGU DISCTRICT MUNICIPALITY