Statement by the City’s Executive Mayor, Patricia de Lille
City highlights latest capex figures for the 2013/14 financial year
The City has consistently achieved the highest levels of capital expenditure in
South Africa as part of our commitment to infrastructure-led growth. However,
there are instances where factors beyond the City’s control affect this high
level of spend, leading to a projected reduced capital expenditure in the last
financial year. Read more below:
The City of Cape Town is committed to infrastructure-led growth as the way
to drive economic growth, development and inclusion.
We believe that a focused strategy of major capital expenditure is critical to
creating the necessary enabling environment for the private sector to thrive.
We have an impressive record in this regard, having spent over R20 billion
over the past five years on capital projects.
This expenditure has seen large-scale investments in public transport, roads,
broadband roll-out, housing and the Cape Town International Convention
Centre (CTICC) expansion, amongst others.
The net effect of these investments is that we have improved the lives of
residents – especially in areas that have experienced historical underinvestment. These capital investments are also the main reason why Cape
Town does not have the kind of failing infrastructure and backlogs regrettably
being experienced in many other municipalities throughout the country.
Last year we achieved a record spend of 94,3% of our capital budget –
spending R5,78 billion of the R6,2 billion on capital projects. This was a
reflection of a targeted approach designed to ensure that the City was able
to spend at the highest level possible. This was the highest capital
expenditure of any metro in South Africa.
Achieving and maintaining this level of spend, however, is a complex and
demanding task and while the City does everything possible to control the
variables over which we have direct control, there are always certain factors
over which we have no influence or control and which can have a materially
detrimental effect on our capital expenditure.
Over the last financial year, it is likely that we will see a reduced spend in the
region of 80,6%. This percentage is likely to increase once all outstanding
payments are finalised.
The City has therefore spent approximately R4,5 billion of its R5,6 billion capital
budget for the 2013/2014 financial year.
The reasons for this reduced capital expenditure are primarily factors beyond
our control such contractors being liquidated or companies underperforming.
The Capex figures are outlined below:
South Africa’s economic slowdown, which the City has no direct ability to
change, has negatively affected a number of companies that the City does
business with. In this depressed economic climate, a number of contractors
have been liquidated and have been unable to fulfil their contractual
obligations with the City. When awarding the tender, it is difficult to foresee
future problems.
In other instances, certain contractors have under-performed and the City
has been forced to institute the lengthy performance provisions that are
contained in law to remedy their performance.
In addition, some major City projects – especially in terms of Human
Settlements and the IRT roll-out – have been negatively affected and
delayed as a result of community resistance.
The table below indicates the underspend as a result of liquidation or
contract cancellation:
Directorate
Utility Services
Transport for Cape Town
Human Settlements
Tourism, Events and Marketing
Economic, Environmental and
Spatial Planning
Health
Community Services
Total
Amount
R23 962 261
Lumen: R15 000 000
Volvo/Busmark:
R76 000 000
Various: R91 600 000
R34 860 596
R917 520
R8 698 717
Total
R23 962 261
R182 600
000
R443 151
R8 415 188
R10 657 644
R443 151
R19 072 832
R34 860 596
R917 520
R8 698 717
R251 482
245
It needs to be underscored that the reduced capital expenditure as a result
of these factors does not mean that the projects are cancelled or that the
funds are lost to the City.
Rather, in the vast majority of cases, the funding will be rolled over and the
projects will be implemented on the basis of a revised project schedule.
Some significant examples of where these factors, as well as community
resistance, have led to underspending are the following:
Transport for Cape Town (TCT)
 TCT’s underspend is a result of various factors which the City has
already taken steps to rectify. These include the MyCiTi Lumen
Technologies contract which was cancelled earlier this year due to
non-performance and an amount of R15 million was held over. A
new contract has since been awarded.
 Another factor which affected TCT’s capital expenditure was the
R80 million compensation for the N2 Express. We have reached an
agreement with the respective parties and are now able to assign
the funds. Once complete, this will improve the TCT bottom line
expenditure by an additional 5%.
 There has also been an under spend of R48 million on the IRT project
(Phase 1B, N2 Express and Imizamo Yethu) due to labour unrest and
community participation issues. These issues have since been
resolved and we have received a commitment from National
Treasury that the amounts can be rolled over into the 2014/2015
financial year.

Several contractors for roadworks projects have also been
liquidated, affecting projects and TCT capital expenditure.
Human Settlements
 The underspend in Human Settlements is largely due to contractors
underperforming, as in the case of the Manenberg Community
Residential Unit (CRU) upgrades, where the contract was
terminated due to poor progress. An agreement has been reached
with a new contractor to complete the remainder of the work which
will continue in this financial year.
 In another example, the Marble Flats CRU project in Ottery was
delayed as the contractor was not performing. A new contractor
has since been appointed to complete the project also in this
financial year.
 The Heideveld CRU project was delayed as the contractor was
liquidated. A new contractor has been appointed to continue the
work in this financial year.
Finance
 In Finance, one of the main reasons for the underspend was the
change in the City’s approach to the Salazar Square project at the
CTICC. The City has decided not to develop the square ourselves
and rather lease the property to an adjacent property owner for
them to develop. Therefore the City funds allocated for the project
were not required. It must be noted that last year the Finance
Directorate spent 94% of its budget.
Community Services
 In the Community Services Directorate, several projects were
delayed due to community conflict and as a result of contractor
underperformance. These include the Imizamo Yethu SC upgrade
which was delayed due to conflict within communities.
 The Parow Library upgrade and extension was delayed due to
contractor performance.
 The new regional library in Kuyasa, Khayelitsha was negatively
affected due to community interference.
Utility Services
 The Utility Services Directorate achieved an 86,9% (R2,1billion) actual
spend against the total budget of R2,4 billion – with a final spend
projected to be 88%.
 The Solid Waste Management Department achieved a 97,9% actual
expenditure; Electricity Services achieved an 86,4% spend; and
Water and Sanitation an 86% spend.
 One of the main projects affected in the Electricity Services
Department is a R17,2 million electrification project in Joe Slovo.
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Progress has been delayed due to community conflict over the
allocation of housing units.
Another project affected was Phase 2 of the R17 million Koeberg
Switching Station and Gugulethu Main Substation upgrade. Building
work is behind schedule due to poor performance of the contractor
which negatively affected both the building construction and the
switchgear installation contracts’ spend. A site monitoring
professional was appointed to manage the project – the cost of
which is to be recovered from penalties imposed.
Another contract for R9,1 million for a pump station and rising main
in Dunoon was affected when the civil contractor was not
performing and fell behind on the schedule.
Under the Solid Waste Management Department, a vendor
approached the City advising of his imminent liquidation and was
therefore unable to deliver shipping containers required for waste
drop-off.
The City of Cape Town will not be satisfied until we spend 100% of our capital
budget. We will now redouble our efforts and strengthen our systems. As part
of our planning, the City will ensure that only tender-ready projects will be
included in the budgeting process.
We are also reviewing the methodology of planning and project
management capacity in the City. These aspects will strengthened in order
to ensure that we maintain our high level of capital expenditure, and that we
are able to mitigate the risk posed by factors such as the stagnant economic
environment and complex community dynamics.