Restructuring South African Cities:
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2.
3.
4.
A recap on the Restructuring Grant
Restructuring Jo’burg
Effective management in Mangaung
Some preliminary comparisons
What is the Restructuring
Grant?
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Grant administered by National Treasury
Aimed at approximately the largest 15
municipalities
• Those whose success or failure would have an
impact on the national economy
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Was developed in the context of a response to
the Johannesburg crisis
Intended to facilitate restructuring which
• pre-empts and avoids key threats
• Leads to significant enhancement of a municipality
Characteristics of the grant
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Not intended to finance specific projects
Aimed at getting municipalities to develop a
coherent strategy and programme for
improvement….and stick to it
Structural reform programme to be
determined by municipality – not Treasury
Agreed amounts are paid out on the basis of
reaching pre-agreed targets and milestones
Aimed at developing a more substantial
relationship between bigger cities and
Treasury
Amounts available are considerable
Content of application
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Key motivation of about 10 to 15 pages
• Annexures containing detail
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Must show proper appreciation and ownership
of key issues and problems
Must indicate strategies to address key
problems and opportunities
Must include indicators against which
progress in addressing key problems can be
measured
• To be refined in the process of negotiations
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Emphasis on financial sustainability
What are we looking for?
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An understanding of the current context and trends
w.r.t. economic, social , service delivery, financial &
organisational issues
A vision and approach that addresses these issues
that is credible, owned and understood by key
leadership (political and administrative), and clearly
communicated
A set of lead programmes and projects which give life
and momentum to the vision
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Limited number
Appropriately balanced between inward and outward focus
Milestones that can be monitored
Aimed at supporting key drivers and managing key risks
Must be based on financial sustainability & address
revenue/income issues
Restructuring
Amalgamating Johannesburg
Pre 1994
11 Administrations
1995 Elections
8 Councils
City of Johannesburg
Post elections 2000
The Need for Change
Reality in 1999: a City in crisis
•Financial crisis – expenditure control and revenue management
•growing non-payment (debtors at 240 days, 42% of total
income)
•weakening revenue streams due to fragmented billing,
service delivery and treasury functions
•expensive structures (42 000 staff), esp middle mgmt
•aggressive capital budget
•large overdraft, zero surplus, abundant arrears
•Low morale
•No accountability
•Poor customer service
•Reduced service quality
•Duplications
•Fragmented Systems & Procedures
SOLUTION

An institutional restructuring programme with
an efficiency objective:
• clarifying roles and lines of accountability of
legislature – executive – management – providers
- residents
• developing performance culture & incentives
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Strategy to redefine council structure
• Polit- admin interface
• Service provision:- from delivery to enablement
• Stakeholder participation shifted towards more
diffuse interests
A new organisation designed
Council
Exec
Mayor
•City Power
•Pikitup
•JHB Water
•Roads Agency
•City Parks
•JHB Zoo
•Civic
•The Market
•Metrobus
•ProCom
CM
Contracts
Finance
Corporate
Community
MPS
Regions X 11
Heritage
Services
EMS
Peoples Centres
Health
Social
Services
Housing
Libraries
The People
Good governance
Sustainable services
Social & Economic Development
Healthy and Safe Environment
Participatory and Inclucivity
Planning
Sport &
Recreation
Political/ Admin Interface Structure
Executive
Mayor
City Manager
Speaker
109
Mayoral
Committee
Central
Admin
RM
Council Section 79
Committees
Regions
The People’s Assembly
108
PR
Ward
217
Regional
Ward
Offices
Ward
Committees
Internal Organisational Structure
Council
Executive Mayor
CEO
Finance
Corp.
Service
Comm.
Dev
Contr.
Mangt
Heritage
EMS
Plan
Regions X 11
Health
Social
Services
Housing
Peoples Centres
Libraries
Sport &
Recreation
MPS
Utilities and Agencies
UTILITIES: (Dividend-paying)
•Joburg Water, Citipower, Pikitup
•AGENCIES (Subsidised)
•Johannesburg Roads, City Parks
CORPORATISED ENTITIES
•The Civic Theatre, The Zoo, Metro Bus, Fresh Produce Market,
Johannesburg Property Company, JDA, MTC
Independent Boards, Service delivery agreements
Privatisation, Corporatisation & Outsourcing
Privatisation
Corporatisation
Outsourcing
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Rand Airport
(June) S197 of the LRA facilitated transfer
• Employee briefings and consultations extensive
• All Contracts protect employee provisions and give job guarantee
Metro gas
 Corporatisation
 IT outsourcing
 Fleet outsourcing

(August)
(July)
(September)
(October)
Contract Management & Regulation
Exec Mayor
Shareholder
Shareholders
Unit
CEO
Contract Management
Unit
Consultants
Accountant
•Financial
Analysis
Economic
•Tariffs
•Pricing Policy
Engineering
legal
•Quality
•Service Delivery
•Strategy
Agreements
•Busn’s plans •Governance
The financial plan
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Weakly developed at first
• Revenue not focused on, but
• Condition of the Project (the financial outcome of iGoli
2002 plan), and of Restructuring Grant (R525m over 3
years)
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Realised that a financially stronger city can
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•
•
•
•
•
Build its own reserves
Borrow at cheaper rates
Achieve sound financial administration
Achieve acceptable payment levels
React to changes in payment levels
Maintain assets and service levels
Strategic Planning Cycle
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iGoli 2010 - long term and strategies
3 year rolling strategic plan & budget annual review cycle.
Integral Part of the Strategic Planning
Cycle
This 3 year financial plan is being
produced in a time of change.
Revised as the transition process
progresses
4
What did it mean ...
As a resident……..
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Participation
Improved services
Transparency
Ongoing development of facilities
Accountable local government
Enhanced access
As an employee...
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Greater role clarity
Career development
Plans for salary parity to be addressed
Reskilling opportunities
Working partnership
Johannesburg Restructuring Grant
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Negotiated btw March and August 2000, based
on iGoli 2002, providing R525 million over 3
years
• Partnership btw central and local government
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Institutional conditions to ensure timely
implementation of iGoli 2002 plan
Financial conditions to address risks:
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external debt management
management of expenditure mix
cash flow improvements
enhanced and responsible capital spending
revenue improvement
City permitted to adjust financial trendline but
not outcome
Quarterly reporting required
Progress in Jo’burg
Still too early to tell, but:
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Greater political focus on governance and delivery
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More uniform and stable political centre
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Greater administrative confidence and capacity, within
performance culture
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Vastly improved strategic capacity
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Consciously and successfully branded as a success
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Limited progress of revenue enhancement, but improved
financial reporting and debt management through
establishment of Budget Office
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Greater focus on economic development and job creation
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Service delivery improvements emerging from increased
capital spending, and new service subsidies for poor
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Improvements in housing delivery, customer care and
management of inner city
Lessons from Jo’burg
 Although complex and time-consuming, it can be done
 Key success factor is local ownership of problems and solutions
 Strong political and admin leadership is necessary to take tough
decisions
 A crisis provides significant momentum, by framing issues
necessary for action
 Not necessarily accurate in complex systems
 Designing residual functions (including regulatory framework) is
complex and difficult
 Credible, concrete and implementable programme is essential
 Never ignore revenue performance
 Branding is important
Effective City Management in
Mangaung
(Bloemfontein / Botshabelo /
ThabaNchu)
Towards a strategic framework
Situation analysis
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State of development
• stagnant economy with evidence of decline
• growing population - younger, poorer
• large anticipated impact of HIV/AIDS
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State of services and finance
• reasonably sound finances but signs of stress
• significant basic service backlogs but manageable
• development services poorly developed
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State of municipal organisation
• reasonably solid administration but lots of
improvement needed
Service
Protection
1994/5
16.7
2001/2
13.9
11.6
7.8
2.8
10.6
5.8
3.6
Engineering
8.8
11.1
Treasury
5.4
3.5
13.9
14.9
3.8
23.5
13.6
4.6
14.4
9.9
Parks
Health
HR
Sanitation
Sundry
Urban
Planning
C\Sec
Debt and provision for debt
350000000
300000000
250000000
200000000
150000000
100000000
50000000
Debtor
Provision for bad debt
99/00
98/99
97/98
96/97
95/96
94/95
93/94
92/93
91/92
90/91
89/90
0
2
1.5
1% grow th
1
3% grow th
0.5
6% grow th
Years
2011
2009
2007
2005
2003
0
2001
Size of econom y
Implications of different growth
rates of local economy
What resources will be available
to deliver services ten years
from now?
6% growth
1% growth
R1521m
R935m
R850m
Now
Ten years time
3 locational
advantage
10 workforce skills
12 access to
information and
technology
13 land availability
21 redistribution
marketing and
incentives
16 poverty and
unemployment
15 HIV/AIDS
2 crime rate
1 economic growth
7 community cohesion
8 common approach
and programme
22 private
investment
23 civic leadership
20 environment
5 municipal revenue
19 basic services
provided
11 competitive
tariffs
18 quality service
delivery
Our strategy for achieving this
Virtuous circle of growth, community self-reliance and service excellence
Community
resilience &
self-reliance
Economic
growth
Civic Leadership
Common purpose
Service
excellence
Our strategy for achieving this
Virtuous circle of growth, community resilience and self-reliance and service
excellence
Community
resilience &
self-reliance
Economic
growth
Safety
Income
Civic Leadership
Common purpose
CBD
Environment
HIV/AIDS
Housing
Roads and water
Service
excellence
Education
Implementation
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Focus on key drivers
Manage key risks
Focus on key drivers
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“Mangaung on the Move” (growth initiative)
• engage immediately with key potential investors (MDP)
• CBD renewal
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“Community Power” (community support programme)
• pilots for community service delivery
• implementation of ward plans
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AIDS ACTION
Service Charter 2006
• sustainable service levels
• getting out of non-core business (engage MIIU)
• service strategies for each service (waste management,
community/development services)
Focus on key drivers (cont)
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100% Campaign (debt collection)
• tax and tariff policy
• re-organisation of income administration
“The Benchmark Municipality” Municipal Reform
programme
• finalising organisation design and associated
systems
• responsiveness and customer care
• performance management and benchmarks
• efficient decision-making and administrative
systems
Manage key risks
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Turning around rising personnel cost trend
• organisation restructuring to reduce over time total cost of
employment
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Addressing disparities and challenges of BBT reality
• short term measures
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work with FSDC to fill idle factories in Thaba Nchu and Botshabelo
service extension as per agreed levels and standards
• investigate longer term approaches
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long-term transport strategy
investigation of Botshabelo EPZ
• no major new infrastructure development until trends and
strategies clearer?
Manage key risks
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‘Ahead of the RED’
• Responding pro-actively to creation of REDS
• speedy movement to business unit
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understanding costs
understand systems
enhanced positioning
• active lobbying at all levels to maximise municipal interest
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Enhancing position of Mangaung in inter-governmental
system
• active lobbying and networking for 1 effective tier (ideally metro
status)
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Addressing the AIDS pandemic
Lessons from Mangaung
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Well-managed authorities should not
rest on their laurels
Participatory processes can deliver
high-quality and innovative results,
while still making tough decisions
Inter-governmental relationships are
critical to manage proactively
Strong leadership and clear
communication are critical
Comparisons
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Focus on the big picture, save detail for
specific interventions
Decisions required on level of integration
• Mangaung a more typical CDS, but only a
starting point to frame agenda, considerable
work required on technical design
• Jo’burg far more technically developed, less
typical - reflects different motivations
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Leadership is critical
• A small, committed team
• Quick and deep decision-making essential
• Change managers NOT crisis managers