city of johannesburg · political overview presentation to investors 26 – 28 february 2018 mmc...

City of Johannesburg INVESTOR PRESENTATION 26-28 February 2018

“Corridors of Freedom - Re-stitching our city to create a new future”

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Agenda

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Political Overview

Strategic Overview

Financial Analysis

Treasury Management 4

POLITICAL OVERVIEW PRESENTATION TO INVESTORS 26 – 28 February 2018

MMC FINANCE : CLLR FUNZELA NGOBENI


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Overview of the City of Joburg

South Africa’s biggest and most regionally dominant city in terms of population, size and reach of the economy: A dynamic, global scale, diversified city economy and a finance and logistics hub in the Region’s economic heartland …..

15.0% of national GDP

R 653 bn Current prices

Gross Domestic Product

Total Population

People below upper poverty line

41.8% City of Johannesburg

Weakening economic performance and population growth in Johannesburg has left unemployment and poverty levels high – despite improved growth prospects

Seven city regions with diverse characters ranging through semi-rural on the periphery

through dense informal settlements to previously

segregated townships, sprawling suburbs to multiple CBD’s and industrial areas each with their

own distinctive identity and character.

4.94m People

8.9% of national population

53.8% South Africa

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Governance Structure

• The City’s governance structure remains unchanged

• The institutional review is currently taking place which will

result in the reabsorption of some municipal entities in order to

improved service delivery

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What do we aim to achieve – IDP Pillars

What are the priorities….

The launch of A Re Sebetseng, a city-wide volunteer campaign aimed at cleaning up the City

Induction of an additional 1,500 JMPD Recruits.

The launch of the Inner City Revitalisation Programme aimed at rehabilitating bad buildings through their release to the private sector for conversion into low-cost housing and SMME opportunities

The Revenue Enhancement Program that will see the City improving its revenue collections from residents

and business owners who are able to pay

What are we doing differently…..

Looking ahead….

• Despite the difficult environment, the City made progress in 2016/17

• The message on the need for residents to experience and not only hear of good service delivery is

prioritised through a focus on service standards – Diphethogo programmes

• The anti-corruption message and theme has been constant, so has the message on ethical, clean

and professional civil service – Buya Mtheto

• The City is financially stable and is aware of its financial challenges which include the need to improve revenue collection, the need to collect what is owed to the City as well as the need to

improve its credit control process – Revenue Initiatives

• Change is often fraught with uncertainties but this administration is determined to make Johannesburg work.

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STRATEGIC OVERVIEW PRESENTATION TO INVESTORS 26 – 28 February 2018 CITY MANAGER DR NDIVHONISWANI LUKHWARENI


Policy Strategy

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Our Achievements

• The City’s SMME Hubs assisted 7 374 SMMEs

• 2130 title deeds issued in various neighbourhoods

• Unqualified Audit opinion with 5 Municipal Entities receiving Clean Audits

• Initiated skills audit and completed levels 1 and 2

• Initiated institutional review process

• Approved recruitment of 1500 JMPD officers

• Established and capacitated Group Forensic Investigations Services

• Improved transparency through open tender system

• Reconstituted Municipal Entity’s boards

• Invested in road maintenance , M1

• Extended operating hours at Clinics:

• Additional cleaning shifts implemented in the Inner City

• Valuation Roll of just over R1 Trillion

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Achievements in the Sustainable Services Cluster

City Power Johannesburg

• Reduction in electricity losses from 23% in 2016 to 19% in 2017

• Meter reading increased from 75% in 2016 to 89.6% in 2017

• 17 225 of Mega Watts energy was generated from alternative sources compared to 2688 in 2016

• Rolled out 136 742 smart meters in 2017 compared to 33 619 in 2016

• Improvement in Service standards

• Improved turn-around times

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• 4 504 EPWP job opportunities created

• 2 961 public lights installed against a target of

2000

• 4 850 households and informal settlements

electrified against a 4000 target

• 6 225 Ripple Relays installed


Johannesburg Water

• 1.5 billion litres of drinking water distributed daily

• 841 million litres of sewage treated per day

• 45 177 water pipes and 58 240 meters and connections repaired

• Water consumption decreased to 287.7 litres per person per day from 308.95 (2015/16)

• 97.89% of households in informal settlements have access to water at minimum LoS1

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• 100% compliance to sludge disposal requirements

• 1 115 job opportunities were created through the EPWP

• Response time to water pipe bursts, (48hrs), improved from 84.2% to 90.26% of completed jobs

• Response time to sewer blockages (24hrs) from 93.46% to 95.48% of completed jobs


Pikitup

• Diverted about 151 050 tons of waste from the landfill sites (49 009 tons of green waste, 62 258 tons of rubble and 39 523 of dry waste)

• Established 37 recycling co-operatives against target of 35

• Created 1362 jobs

• Created 5 448 jobs through the EPWP

• Weekly waste collection service to 858 313 formal houses

• Waste refuse management service to 164 informal settlements consisting of 183 895 structures

• 2.64% increase, to 94.84%, in the compliance of landfill sites to permit and licence conditions.

• 30 720 240-litre bins delivered in the period under review

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Johannesburg Social Housing

• JOSHCO created 727 jobs through the EPWP Incentive Grant.

• 4 inner city buildings were purchased and will supply JOSHCO with an additional 617 units

• Developed 1172 rental stock houses against a target of 1164

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• Approved Inner City Housing

Implementation Plan (ICHIP) • The plan examines the housing demand in

the Inner City through in depth analysis of the additional households in particular precincts, as well as case study analysis of living conditions in these precincts of the Inner City

• The plan proposes strategies that can be applied to extend the reach of commercial landlords and social housing institutions further down-market

• Estimated 30 000 households living in risk situations


And the award goes to … “Joburg”

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South Africa’s Greenest Municipality winner of the metropolitan category of the 2017 edition of the annual Greenest Municipality Competition (GMC) Awards City Parks and Johannesburg Zoo received Silver at the National Business Awards in the Top Performing Public Service category City Parks and Johannesburg Zoo received two bronze awards at the International Caines Awards in France

The City’s Council Chamber was the winner of the public services development category at the International Property Awards The building has succeeded in meeting the City’s objectives of sustainable and progressive design, transparency and accessibility.

Winner of the TomTom Traffic Index 2017 award for effective Traffic Management

In conclusion…

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• Focus remains on improved service delivery for all including the City’s poorest residence and getting the basics right.

• Institutional review has been initiated to improve the City’s ability to respond to service delivery.

• Diphethogo programme allows for focus on non-negotiables

• Housing backlog • Infrastructure backlog • Quality supply of electricity, water and

sanitation • Reliable road network • Inclusive economic growth • Public Safety

• The goal for a 5% economic growth remains • The Inner City regeneration project will help

restore the City to its former glory, premised on reclaiming hijacked buildings and converting these into decent living accommodation for residents.

• Partnerships with the private sector is crucial – 13 sites released to private sector.

Achieving the goals we have set will not be easy, but the City remains committed.

It is time for “business Unusual”

FINANCIAL OVERVIEW PRESENTATION TO INVESTORS 26-28 FEBRUARY 20178

A/GROUP CHIEF FINANCIAL OFFICER LUFUNO MASHAU


Financial overview for the year ended 30 June 2017

The City of Johannesburg has achieved the following in the year 2016/2017:

• Generation of surplus of R2.1 billion compared to R3.5 billion in 2016;

• Closing cash balance of R3.1 billion compared to the 2016 closing cash balance of R4.4

billion)

• Spent 78% (R7.7 billion) of capital expenditure compared to 90% in 2016

• A progressive increase in the City’s total assets by 6%

• Collection Rate of 94%

• Increase in total income by 4%

• Increase in total expenditure by 9%

• 5 Municipal owned entities received clean audits

• Credit rating with Moody's at Aa1.za/P-1.za

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Revenue streams for the year ended 30 June 2017

• The revenue composition has remained relatively unchanged from previous financial year with service charges and property rates accounting for 75% of the total revenue generated.

Total Revenue

R45.4 billion

4%

18%

57%

21%

1% 3%

Revenue Composition

Property rates

Service Charges

GovernmentGrants andsubsidies

Interest received

Other

Total

Expenditure

R43.8 billion

Expenditure Composition for the year ended 30 June 2017

9%

• The expenditure composition has remained relatively unchanged from previous financial year with bulk purchases (34%) and Employee related costs(23%) accounting for the largest portion

23%

9%

7%

5% 34%

5%

17%

Expenditure Composition

Employee related costs

Allowance for impairmentsof current receivables

Depreciation andamortisation

Finance Costs

Bulk Purchases

Contracted services

Other

Group Balance Sheet as at 30 June 2017

Included above is:

• PPE of R65.4 billion [2016: R60.4 billion]

• Consumer Debtors of R6.0 billion [2016: R5.3 billion]

2017 2016 2015

R '000 R ‘000 R ‘000

Net Assets and Liabilities

Net Assets 44 170 760 42 041 777 39 294 295

Non-current liabilities 23 555 893 24 050 246 24 637 483

Current liabilities 17 686 087 14 285 756 13 594 522

85 412 740 80 377 779 77 526 300

Assets

Non-current asset 71 610 657 68 002 059 61 343 993

Current assets 13 802 083 12 375 720 16 182 307

85 412 740 80 377 779 77 526 300

Declining cash balance is mainly attributable to a decline in the performance of the main cash generating entities.

Historical Trends

• The increase of assets over the years was mainly due to the growth in PPE and increase in cash and cash equivalents over the past years.

• PPE increased from R36 billion in 2011 to R66 billion in 2017

-

1 000

2 000

3 000

4 000

5 000

6 000

2011 2012 2013 2014 2015 2016 2017

BIL

LIO

N

2011 2012 2013 2014 2015 2016 2017

Cash 695 2 220 5 401 5 314 4 880 4 370 3 096

Cash and Cash Equivalents

-

20 000

40 000

60 000

80 000

100 000

2011 2012 2013 2014 2015 2016 2017

BIL

LIO

N

2011 2012 2013 2014 2015 2016 2017

Total Assets 47 440 56 357 61 132 66 924 78 367 80 377 85 412

Total Assets

Financial Performance year ended 30 June 2017

• Surplus is 66% lower than prior year • The City has spent R7.7bn (78%) of the approved capital budget of

R9.9bn • Generation of surpluses is important in light of City’s capex funding and

to ensure that the City effectively responds to historic backlogs in infrastructure

• The City is addressing this through the Financial Development Plan

Financial Performance year ended 30 June 2017

-

2 000

4 000

6 000

8 000

10 000

12 000

2011 2012 2013 2014 2015 2016 2017

Capex 3 812 3 749 4 548 7 287 10 10 8 334 7 728

BIL

LIO

N

CAPEX

-

1 000

2 000

3 000

4 000

5 000

2011 2012 2013 2014 2015 2016 2017

Surplus 2 741 4 615 3 488 4 042 3 624 3 521 2 125

BIL

LIO

N

SURPLUS

Electricity and Water Losses

0%

5%

10%

15%

20%

25%

30%

2014/15 2015/16 2016/17

28%

22% 20%

19%

13% 11%

9% 9% 9%

Electricity Losses

Total losses Non technical losses Technical losses

Total electricity losses decreased from R2.2bn to R1.9bn. Non technical losses are a result of: • Electricity theft/bypassed meters • Illegal decalibration of meters • Faulty meters • Customers without meters

Total water losses have increased from R0.89bn to R1.1bn • Backlog in infrastructure upgrade • Unmetered connections (metering

drive, prepaid meters)

0%

5%

10%

15%

20%

25%

30%

35%

40%

2014/15 2015/16 2016/17

36%

23%

27%

16% 16%

19% 20%

6% 8%

Water Losses

Total losses Physical losses Commercial losses

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30 June 2011/12

30 June 2012/13

30 June 2013/14

30 June 2014/15

30 June 2015/16

30 June 2016/17

AG Audit Opinion

• Qualified Audit Opinion – Group

• Qualified

Audit Opinion – 2MEs

• Unqualifi

ed Audit Opinion – 11 Mes

• Clean

Audit Opinion 2 MEs

• Unqualified Audit Opinion – Group

• Unqualified Audit Opinion – All Mes

• Clean Audit

Opinion 2 MEs



• Clean Audit

Opinion 4 MEs



• Clean Audit

Opinion 6 MEs



• Clean Audit Opinion 4 MEs



• Clean Audit Opinion 5 MEs

Auditor General audit opinion

In conclusion…

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The City will yield additional capacity through Revenue Enhancement Projects in the new financial year which includes among others, a city wide verification of electricity and water meters.

The Financial Development plan remains the tool to ensure Financial sustainability and effective financial planning Financial prudence remains a critical component of ensuring financial sustainability

TREASURY OPERATIONS PRESENTATION TO INVESTORS 26 - 28 FEBRUARY 2018

A/GROUP HEAD: TREASURY & FINANCIAL STRATEGY AND PLANNING CHARITY WURAYAYI


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Liquidity Position

• The City’s cash and cash equivalents held at balance sheet date were as follows over the last eight years

Liquidity : Year- end Cash position

-

1 000

2 000

3 000

4 000

5 000

6 000

2010 2011 2012 2013 2014 2015 2016 2017

Amount 306 695 2 220 5 401 5 314 4 880 4 370 3 096

BIL

LIO

N

Cash and Cash Equivalents

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• Total liability book for 2016/17

financial year is R20 billion

• R2.626 billion funding was

raised in the 2016/17 financial

year from DBSA

• R547 million was redeemed in

2016/17

• R2.733 billion will be redeemed

in the 2017/18 financial year

• Debt to revenue ratio was at

45%

Liability Profile

38%

48%

13% 1%

Liability Book

Bonds

DFI

Banks

Leases

R20 BILLION

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Sources of Funding

• The City increased its annual capital budget from R4,5 billion in 2012/13 financial

year to R9,9 billion in the year under review.

-

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

2013 2014 2015 2016 2017 2018(Adjust

ed)

2019(Foreca

st)

2020(Foreca

st)

Loan Funding 1 311 200 1 458 631 3 276 000 3 940 000 2 626 777 2 998 386 2 349 726 2 742 874

CRR & Surplus Cash 368 408 3 147 604 4 530 718 2 213 072 3 665 553 1 290 986 3 339 902 2 393 837

Grants and Contributions 2 868 251 3 094 028 3 021 231 3 170 485 3 613 240 3 084 698 3 761 103 3 821 815

Total 4 547 859 7 700 263 10 827 94 9 323 557 9 905 570 7 374 070 9 450 731 8 958 526

Sources of Funding

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Sources of Funding

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016 2017 2018(Adjusted)

2019(Forecast)

2020(Forecast)

29% 19%

30% 42%

27% 35%

25% 31%

8% 41%

42% 24% 37% 23%

35% 27%

63% 40%

28% 34% 36% 42% 40% 43%

Sources of Funding

Loan Funding CRR & Surplus Cash Grants and Contributions

As the City intensified Capex, the Funding mix has shifted towards more “own” funding in the form of Loans and Cash

City of Johannesburg Credit Rating

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Aa1.za/P-1.za

Credit Strengths

• Strong revenue growth supported by broad

tax base

• Strong liquidity level

• Sophisticated financial management

• Large and diversified economic base

Credit Challenges

• Increasing debt stock,

• High capital expenditure requirements

What could change the rating downward

• A weakening of the South African sovereign credit

profile

• Additionally, financial difficulties resulting in cash

flow tensions and consistently high or growing debt

level could lead to a downgrade independent of

sovereign rating movements

What could change the rating upward

• City’s global scale rating would require an upgrade

of the sovereign rating

• The national-scale ratings would experience upward

pressure independent of the sovereign impact if the

City’s liquidity position significantly improved while

maintaining moderate debt levels.

City of Johannesburg’s Rating by Moody’s Investors Services Last

review June 2017

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“A Joburg that works, is a South Africa that works”

city of johannesburg · political overview presentation to investors 26 – 28 february 2018 mmc...

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