The City of Cape Town is to slash its capital budget by more than R1 billion for the remainder of the current financial year, a decision that has outraged the opposition ANC.
But the city has defended its decision, saying the money woul not be lost, but would rather be used during the next financial year.
In June last year, the city approved a R5.6bn capital budget, but that has been revised to R4.6bn, a shift or decrease by R1.003bn.
The reason for the cut is owing to the capital budget being amended in line with the latest adjustment budget cash-flow projections, according to the city’s report.
However, all the amended finance directorate targets are still pending approval at tomorrow’s council meeting.
Deputy mayor and head of finance Ian Neilson says key reasons for the capital re-phasing are:
l Appeals on tender awards. Even if the appeals have no validity, these result in at least a three-month delay in the start of the contract.
l Delay in finalising environmental approvals.
l Delay in land purchases. Negotiations with sellers can sometimes be extensive. This delays both the expenditure of the land cost and the start of the capital works.
l Changing project programmes to more realistic time-frames. This is especially so for the IRT project.
“It is important to note that most of the money will still be spent, but later than originally envisaged. So the budgetary allocation is not lost, but reprioritised for the next financial year,” Neilson said.
The Municipal Finance Management Act (MFMA) requires the accounting officer (city manager) of a municipality to assess the municipality’s performance for the first half of the financial year by January 25 of each year.
“The leadership of the City of Cape Town has been carefully monitoring our capital expenditure. As a well-run and caring city, we want to maximise our spend and, in turn, our delivery to the citizens of Cape Town,” Neilson said. “It is normal practice … to allocate funds according to the operational environment in which we work. Our capital expenditure is determined by a range of factors, some beyond the city’s control.”
ANC chief whip Xolani Sotashe said he was concerned about the adjustment to the capital budget, and that this would affect a number of major projects.
“The IRT roll-out in Khayelitsha, for example, won’t happen. And I’m also in possession of the auditor-general’s report where he is concerned about the issue of Cape Town being unable to spend its capital budget year-in year-out. He said the city failed to spend R857 million at the end of June 2011, which is 23 percent of the budget,” he said.
The city’s report says Public Transport Infrastructure and Systems Grant (PTI&SG) funding was decreased by R557 million and R1.084bn in 2011/12 and 2013/14 respectively.
“The main reasons for these adjustments are to arrive at a more realistic budget in respect of PTI&SG-funded capital projects. Certain amendments are proposed on the IRT programme, which consist of multi-year projects (the longest being seven years),” the report said.
Sotashe said the claims by certain service providers were also a matter of concern.