Costing of Municipal Services Research Report

Final Report December 2015

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Table of Contents

Glossary ................................................................................................................................................... H

Acronyms ................................................................................................................................................. M

Units of Measurement ............................................................................................................................... N

Executive Summary .................................................................................................................................. O

PHASE 1

1. Purpose .......................................................................................................................................... 1

1.1 Scope and objectives of this report ...................................................................................................... 1

1.2 Background ...................................................................................................................................... 1

1.3 How to read this report ...................................................................................................................... 3

2. About Cost Estimation ..................................................................................................................... 4

2.1 Classification of costs ......................................................................................................................... 4

2.2 Capital costs ..................................................................................................................................... 4

2.3 Operating costs ................................................................................................................................. 7

2.3.1 Bulk purchases ................................................................................................................... 7

2.3.2 Contracted services ............................................................................................................ 7

2.3.3 Employee related costs – salaries & wages ............................................................................. 8

2.3.4 Insurance .......................................................................................................................... 8

2.3.5 Other expenditure – loose tools & overheads .......................................................................... 8

2.3.6 Other materials .................................................................................................................. 8

2.3.7 Rent of facilities and equipment ............................................................................................ 9

2.3.8 Repairs and maintenance ..................................................................................................... 9

2.3.9 Transportation costs ........................................................................................................... 10

2.4 Municipal differentiation ..................................................................................................................... 10

2.5 Cost influencing factor ....................................................................................................................... 10

2.5.1 Topography ....................................................................................................................... 11

2.5.2 Location ............................................................................................................................ 11

2.5.3 Distance from economic centers ........................................................................................... 11

2.5.4 Development status ............................................................................................................ 12

2.5.5 Cost influencing factor index ................................................................................................ 13

2.6 Cost adjustment factors ..................................................................................................................... 15

2.7 Towards sustainability and greater efficiency ........................................................................................ 16

2.7.1 Demand management ......................................................................................................... 16

2.7.2 Provision for asset care ....................................................................................................... 17

2.8 Population size and growth ................................................................................................................. 19

2.9 Capital Need Elements and Grant Funding ............................................................................................ 20

PHASE 2

3. Capital Cost Needs: Electricity ........................................................................................................ 22

3.1 Typical scope of infrastructure to be funded .......................................................................................... 22

3.2 Capital cost estimates for provision of electricity to the poor: Model B: Responsible asset custodianship ....... 22

3.3 Recommendations ............................................................................................................................. 23

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4. Capital Cost Needs: Refuse Removal and Disposal (Solid Waste) .................................................... 25


4.2 Capital cost estimates for provision of solid waste services to the poor: Model A: Asset sweating ................. 25

4.3 Capital cost estimates for provision of solid waste services to the poor: Model B: Responsible asset custod ... 25


5. Capital Cost Needs: Roads and Stormwater .................................................................................... 27


5.2 Capital cost estimates for provision of roads and storm water infrastr to the poor: Model B: Responsible asset

custodianship ................................................................................................................................... 28


6. Capital Cost Needs: Water .............................................................................................................. 30


6.2 Capital cost estimates for provision of water infrastr to the poor: Model B: Responsible asset custodianship .. 30

6.3 Water services funding needs ............................................................................................................. 31


7. Capital Cost Needs: Sanitation ........................................................................................................ 32


7.2 Capital cost estimates for provision of sanitation infrastructure to the poor: Model B: Responsible asset

custodianship ................................................................................................................................... 32

7.3 Comparison of modelled results to DORA allocations .............................................................................. 33

8. Capital Cost Needs: Health – Cemeteries ........................................................................................ 34


8.2 Capital cost estimates for provision of cemetery infrastructure to low income households ............................ 34

9. Capital cost needs: fire-fighting services ........................................................................................ 36


9.2 Capital cost estimates for provision of fire-fighting services immovable infrastr to low income households ..... 37

9.3 Capital cost estimates for provision of fire-fighting services movable infrastr to low income households ........ 43

9.4 Capital funding requirements .............................................................................................................. 45

10. Capital Cost Needs: Operational Buildings ...................................................................................... 46


10.2 Capital cost estimates: Operational buildings infrastructure for low income households ............................... 46

11. Summarized Capital Cost Needs: All services .................................................................................. 50

PHASE 3

12. Operating cost needs: municipal administration ............................................................................. 52

12.1 Typical scope of municipal administration services ................................................................................. 52

12.2 Approach and methodology employed to determine municipal administration operating costs ...................... 53

12.2.1 Administrative services ........................................................................................................ 53

12.2.2 Administration expenses ...................................................................................................... 54

12.2.3 Data sources ...................................................................................................................... 54

12.2.4 Data Analysis ..................................................................................................................... 57

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12.3 Operating cost estimates for provision of municipal administration services to low income households .......... 66

13. Operating Cost Needs: Municipal Health Services ........................................................................... 68

13.1 Typical scope of municipal health services ............................................................................................ 68

13.2 Operating cost estimates for provision of municipal health services to low income households ..................... 69


14. Operating Cost Needs: Municipal Roads and Stormwater ................................................................ 71

14.1 Typical scope of municipal roads and stormwater operating and maintenance cost activities ........................ 71

14.2 Operating cost estimates for provision of municipal roads and stormwater services to low income households72

14.2.1 Data sources ...................................................................................................................... 72

14.2.2 Data analysis ..................................................................................................................... 74

15. Operational Cost Needs: Fire-fighting services ............................................................................... 78

15.1 Operating cost estimates for fire protection services for low income households ......................................... 78

15.2 Determining benchmarks ................................................................................................................... 79

15.3 Employee and administrative cost ....................................................................................................... 79

15.4 Operational and maintenance cost ....................................................................................................... 81

15.5 Depreciation of vehicles and movable equipment ................................................................................... 82

15.6 Summary – Operating and maintenance cost (incl. depreciation) attributable to poor households ................. 83

15.7. Recommendations ............................................................................................................................. 84

16. Operational Cost Needs: Operational Buildings ............................................................................... 85

16.1 Operating cost estimates for provision of operational buildings facilities .................................................... 85


17. Operational Cost Needs: Other Municipal Services .......................................................................... 88

18. Summary of Operational Cocst Needs ............................................................................................. 92

19. Conclusion ...................................................................................................................................... 95

19.1 Capital funding requirements .............................................................................................................. 95

19.2 Operational funding requirements ........................................................................................................ 96

19.3 Municipal administration Costs ............................................................................................................ 97

APPENDICES

APPENDIX A: Base Year (2014/15) Data for Households and Growth - Source: Treasury Website ........................... 98

APPENDIX B: Calibration and testing of results ............................................................................................. 104

APPENDIX C: Unit rates for services ........................................................................................................... 107

APPENDIX D: Administrative cost per household attributable to poor households .............................................. 108

APPENDIX E: Immovable Asset growth (R 000) – Part A ................................................................................ 115

APPENDIX F: Immovable Asset growth (R 000) – Part B ................................................................................ 123

APPENDIX G: Capital needs (Growth and 15% of Backlog annually) - Part A .................................................... 131

APPENDIX H: Operational needs 2015/16 (Operations, Maintenance, Bulk purchases and depreciation) - Part A ... 139

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LIST OF FIGURES

Figure 1: Scope of maintenance

Figure 2: Application of capital development cost premiums to Buffalo City

Figure 3: Travel times from main economic centers

Figure 4: Case study demonstrating the superiority of the DRC method in determining depreciation provisions

Figure 5: Households per Province (expressed in ‘000)

Figure 6: Comparison of electricity capital funding needs for the poor – 2015

Figure 7: Solid waste capital funding needs for the poor – 2015/16

Figure 8: Comparison of roads and storm water capital funding needs for low income households

Figure 9: Water funding needs for low income households – 2015/16

Figure 10: Comparison of sanitation capital funding needs for low income households – 2015/16

Figure 11: Growth and Estimated cost of growth and backlog needs (Cemeteries) – 2015/16

Figure 12: Accessibility for fire protection coverage – National level

Figure 13: Accessibility for fire protection coverage – Gauteng and surrounding areas

Figure 14: Accessibility for fire protection coverage – Ekurhuleni and surrounding municipalities

Figure 15: Accessibility for fire protection coverage – Polokwane municipality

Figure 16: Estimated growth and backlog eradication cost for Fire stations (immovable assets)

Figure 17: Estimated growth and backlog eradication cost for Operational Buildings

Figure 18: Consolidated capital needs for growth and backlogs - 2015/16

Figure 19: Comparison of capital needs for growth and backlogs (15%/a) - 2015/16

Figure 20: Municipal structure reflecting administrative functions only

Figure 21: Number of households – Selected municipalities

Figure 22: Number of councillors and staff – selected municipalities

Figure 23: Operating and expenditure budget – Selected municipalities

Figure 24: Median cost per household – Test municipalities

Figure 25: Cost per councillor per category of municipality

Figure 26: Cost per councillor per household

Figure 27: Relationship between the administrative staff cost and average staff cost

Figure 28: Audit fee – Comparison between actual and 1% projection

Figure 29: Identified administrative cost to be component attributable to low income households– per province

Figure 30: Identified administrative cost to be component attributable to poor households – per category

Figure 31: Estimated cemeteries’ operation, maintenance and depreciation costs – Scenario A

Figure 32: Estimated cemeteries’ operation, maintenance and depreciation costs – Scenario B


Figure 34: Number of households – Extent of Roads (Kilometers)

Figure 35: Roads and Stormwater operations and maintenance cost attributable per poor household

Figure 36: Roads and Stormwater operations, maintenance and depreciation costs (Scenario A)

Figure 37: Roads and Stormwater operations, maintenance and depreciation costs (Scenario B)

Figure 38: Combined operational, maintenance and depreciation costs (movable assets)

Figure 39: Combined operational costs for fire-fighting services (movable assets) per poor household

Figure 40: Estimated operational costs for operational buildings - 2015/16 – Scenario A

Figure 41: Estimated operational costs for operational buildings - 2015/16 – Scenario B

Figure 42: Electricity operations and maintenance costs (Scenario B)

Figure 43: Water operations and maintenance costs (Scenario B)

Figure 44: Sanitation operations and maintenance costs (Scenario B)

Figure 45: Solid waste operations and maintenance costs (Scenario B)

Figure 46: Roads and storm water operations and maintenance costs (Scenario B)

Figure 47: Cemeteries’ operations and maintenance costs

Figure 48 Aggregate operational costs and depreciation, for all poor households

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Figure 49a Consolidated operational costs and depreciation, for all poor households

Figure 49b: Total operational cost per service and aggregate cost per poor household (2016)

Figure 50: Operational costs compared across services (2016)

Figure 51: Capital costs required to address growth and backlog (15% of) across all services (2016)

Figure 52: Operations and maintenance costs required to address operational expenditure across all services (2016)

LIST OF TABLES

Table 1: Report editions and scope of municipal services

Table 2: Municipal asset valuations informing asset values and capital cost estimates

Table 3: Cost comparison for water and sanitation infrastructure

Table 4: Municipal classification

Table 5: Development status factors

Table 6: Cost influencing factor index - topography and location

Table 7: Cost influencing factor index - Distance from economic center and loss of economy of scale

Table 8: Cost adjustment factors

Table 9: Provision for realistic levels of consumption of utility services and production of wastes

Table 10: Households per Province: 2014/15

Table 11: Assumed Backlogs

Table 12: Estimated infrastructure funding needs (low income)

Table 13a: Growth and backlog needs for solid waste for the poor per PDG category - 2015/16

Table 13b: Growth and backlog needs for solid waste for the poor per province - 2015/16

Table 14a: Growth and estimated backlog needs (15% of total) for roads and storm water/ Province 2015/16

Table 14b: Growth and estimated backlog needs (15% of total) for roads and storm water/ Province 2015/16

Table 15a: Growth and backlog capital needs for water services for low income hh per PDG category - 2015/16

Table 15b: Growth and backlog capital needs for water services for low income hh per Province - 2015/16

Table 16a: Growth and estimated backlogs capital needs for sanitation services per PDG category - 2015/16

Table 16b: Growth and estimated backlogs capital needs for sanitation services per Province - 2015/16

Table 17a: Growth in low income hh and estimated capital funding needs for cemeteries per PDG category - 2015/16

Table 17b: Growth in low income hh and estimated capital funding needs for cemeteries per Province - 2015/16

Table 18: Unit rate cost of immovable facilities per poor household (2014)

Table 19: Estimated capital needs for fire services: Poor hh growth and backlogs (immovable assets) 2015/16

Table 20: Norms for equipment requirements (movable assets)

Table 21: Current replacement cost for equipment (movable assets)

Table 22a: Capital costs for fire-fighting services - 2015/16 (movable and immovable combined, R 000)

Table 22b: Capital costs for fire-fighting services - 2015/16 (movable and immovable combined, R 000)

Table 23: Growth in low income hh and estimated capital needs for operational buildings - 2015/16

Table 24: Growth and backlog immovable asset infrastructure needs 2015/16 (R 000)

Table 25: Investment in, and reduction of Backlogs (R million at 15% per annum)

Table 26: Expenditure types

Table 27: Base data - Selected municipalities

Table 28: Councillor Remuneration – test data

Table 29 Councillor Remuneration – per municipal category

Table 30: Number of administrative staff per household – test data

Table 31: Relationship between administrative staff cost and average staff cost

Table 32: Total cost of administrative staff per low income household – per category of municipality

Table 33: Total cost of administrative staff serving low income households – per province

Table 34 Comparison between actual and 1% projection on audit fees

Table 35: Distribution of proposed audit fee projection – per category

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Table 36 Allocation of administration cost

Table 37: Allocation of administration basket of cost – per category of municipality

Table 38: Allocation of administration basket of cost – per province

Table 39: Summarised cost of municipal administration services benefiting low income households – per province

Table 40: Identified administrative cost to be component attributable to poor households – per category

Table 41: Operations, maintenance and depreciation costs for cemeteries per province - 2015/16 (Scenario A) (HH and

Rand in Thousands)

Table 42a: Operations, maintenance and depreciation costs for cemeteries per PDG category - 2015/16 (Scenario B) (HH

and Rand in Thousands)

Table 42b: Operations, maintenance and depreciation costs for cemeteries per province - 2015/16 (Scenario B) (HH and

Rand in Thousands)


Table 44: Test Municipalities – Equalisation of cost

Table 45: Test Municipalities – Cost per household with access to roads and stormwater

Table 46: Test Municipalities – Median of cost per household with access to roads and stormwater services

Table 47: Roads and Stormwater operations and maintenance cost attributable per poor household

Table 48: Estimated roads & sw operations, maintenance and depreciation costs per province - 2015/16 (R 000) Scenario A

Table 49: Estimated roads & sw operations, maintenance and depreciation costs per province - 2015/16 (R 000) Scenario B

Table 50: Response times for fire-fighting services

Table 51: Cost per fire-fighting services employee

Table 52: Median operating and maintenance cost (for movable assets) per employee

Table 53: Number of employees required per fire station

Table 54: Median number of employees per municipality

Table 55: Fire-fighting employee cost attributable to poor households – 2015/16

Table 56: Operational and maintenance cost per employee

Table 57: Median to be applied to remainder of municipalities

Table 58: Operational and maintenance cost attributable to poor households


Table 60: Current replacement cost per fire-fighting unit

Table 61: Depreciation costs associated with movable assets attributable to poor households

Table 62: Operational, maintenance and depreciation costs for fire-fighting services (function and movable assets) 2016

Table 63: Operational costs for operational bldgs - 2015/16 (Scenario A, HH and Rand in Thousands)

Table 64a: Operational costs for operational bldgs - 2015/16 (Scenario B, HH and Rand in Thousands)

Table 64b: Operational costs for operational bldgs per PDG category - 2015/16 (Scenario B, HH and Rand in Thousands)

Table 65a: Electrical services Operational costs per province (2015/16 - Scenario B)

Table 65b: Electrical services Operational costs per PDG category (2015/16 - Scenario B)

Table 66a: Water services Operational costs per province (2015/16 - Scenario B)

Table 66b: Water services Operational costs per PDG category (2015/16 - Scenario B)

Table 67a: Sanitation services Operational costs per province (2015/16 - Scenario B)

Table 67b: Sanitation services Operational costs per PDG category (2015/16 - Scenario B)

Table 68a: Solid Waste services Operational costs per province (2015/16 - Scenario B)

Table 68b: Solid Waste services Operational costs per PDG category (2015/16 - Scenario B)

Table 69: Operational costs, poor customers including bulk purchases and depreciation per PDG category (2015/16 – R

million)

Table 70: Operational costs for poor for all services, grouped per province (2015/16 – R million)

Table 71: Total capital costs per province (poor households only - 2015/16)

Table 72: Total operational costs per service (poor households only - 2015/16 – R million)

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Glossary

Asset

A resource owned or controlled by an entity as a result of past events and from which future economic benefits or

service potential are expected to flow to the entity.

Capital (financial concept of)

Net assets of an entity.

Capital (physical concept thereof)

The productive capacity of an entity as measured in optimised depreciated replacement cost.

Capital expenditure

Expenditure used to create new assets, increase the capacity of existing assets beyond their original design capacity

or service potential, or to return the service potential of the asset or expected useful life of the asset to that which it

had originally. CAPEX increases the value of capital asset stock.

Capital upgrading

Enhances the service potential of the asset or the economic benefits that can be obtained from use of the asset and

may also increase the life of the asset beyond that initially expected.

Condition

The physical state of the asset.

Condition assessment or condition monitoring (IIMM)

The inspection, assessment, measurement and interpretation of the resultant data, to indicate the condition of a

specific component so as to determine the need for some preventive or remedial action.

Corrective maintenance

Maintenance carried out after a failure has occurred and intended to restore an item to a state in which it can perform

its required function. Corrective maintenance can be planned or unplanned.

Current replacement cost

The cost the entity would incur to acquire the asset on the reporting date. The cost is measured by reference to the

lowest cost at which the gross future economic benefits could be obtained in the normal course of business, or the

minimum it would cost to replace the existing asset with a new modern equivalent asset with the same economic

benefits allowing for any differences in the quantity and quality of output and in operating costs.

Deferred Maintenance

The portion of planned maintenance work necessary to maintain the service potential of an asset that has not been

undertaken in the period in which such work was scheduled to be undertaken.

Demand management

The active intervention in the market to influence demand for services and assets with forecast consequences, usually

to avoid or defer CAPEX expenditure. Demand management is based on the notion that as needs are satisfied

expectations rise automatically and almost every action taken to satisfy demand will stimulate further demand.

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Density

Measurement of the population of a defined geographic urban area, excluding non-urban land-uses. Non-urban uses

include regional open space, agriculture and water-bodies. Density can be measured using any of the following

means, depending on the purpose of the measurement:

• Floor area ratio (FAR) - the total floor area of buildings divided by land area of the lot they are built on

• Residential density - the number of dwelling units in a given area

• Population density - the number of people in a given area

• Employment density - the number of jobs in a given area

• Gross density - any density figure for a given area of land that includes uses not necessarily directly relevant

to the figure (normally roads, typically accounting for about 20% the land cover of a settlement)

• Net density - a density figure for a given area of land that excludes land not directly related to the figure.

For purposes of this report reference to "density" means population density.

Depreciated replacement cost

The replacement cost of an asset less accumulated depreciation calculated on the basis of such cost to reflect the

already consumed or expired economic benefits of the asset.

Depreciation

Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

Disposal

Actions necessary to decommission and dispose of assets that are no longer required.

Economic life

The period from the acquisition of the asset to the time when the asset, while physically able to provide a service,

ceases to be the lowest cost alternative to satisfy a particular level of service. The economic life is at the maximum

when equal to the physical life, however obsolescence will often ensure that the economic life is less than the physical

life.

Facility

A complex comprising many assets (e.g. a water treatment plant) which represents a single management unit for

financial, operational, maintenance or other purposes.

Incident

Unplanned event or occurrence resulting in damage or other loss.

Life

A measure of the anticipated life of an asset or component, such as time, number of cycles, distance intervals etc.

Financing costs

Includes annual interest costs and capital repayments (principle amount) for the investment over the period of the

loan.

Greenfields development

Development that is unconstrained by existing fixed structures.

Impairment loss

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An impairment loss of a cash-generating asset is the amount by which the carrying amount of an asset exceeds its

recoverable amount.

Infrastructure assets

Stationary systems forming a network and serving whole communities, where the system as a whole is intended to be

maintained indefinitely at a particular level of service potential by the continuing replacement and refurbishment of its

components.

Inventories

Inventories are assets: (a) in the form of materials or supplies to be consumed in the production process; (b) in the

form of materials or supplies to be consumed or distributed in the rendering of services; (c) held for sale or

distribution in the ordinary course of operations; or (d) in the process of production for sale or distribution.

Investment costs

The initial capital investment plus any intermittent capital expenditure required to achieve the project outcomes.

Level of service

Levels of service statements describe the outputs or objectives an entity intends to deliver to customers.

Lifecycle

The time interval that commences with the identification of the need for an asset and terminates with the

decommissioning of the asset or any liabilities thereafter.

Lifecycle cost

The total cost of an asset throughout its life including planning, design, construction, acquisition, operation,

maintenance, renewal and disposal costs.

Maintenance

All actions intended to ensure that an asset performs a required function to a specific performance standard(s) over its

expected useful life by keeping it in as near as practicable to its original condition, including regular recurring activities

to keep the asset operating, but specifically excluding renewal.

Note: Maintenance also specifically excludes restoring the condition or performance of an asset following a recognised impairment

event, which would be classified as either renewal or upgrading, depending on the circumstances.

Maintenance of capital

Expenditure to ensure that the productive or operating capacity of the asset base is maintained over time. The value

vested in capital assets is maintained when the entity has at least as much capital at the end of the period as it had at

the beginning thereof.

Maintenance expenditure

Recurrent expenditure as required to ensure that the asset achieves its intended useful life. Maintenance is funded

through the entity’s operating budget, and such expenditure is expensed in the entity’s Statement of Financial

Performance.

Maintenance objectives

Objectives for what maintenance has to achieve to ensure the assets are in the right condition to meet the needs of

the entity. Maintenance performance measures and targets are the means of assessing whether the maintenance

objectives are being met.

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Maintenance standards

The standards set for the maintenance service, usually contained in preventive maintenance schedules, operation and

maintenance manuals, codes of practice, estimating criteria, statutory regulations and mandatory requirements, in

accordance with maintenance quality objectives.

Material

Omissions or misstatements of items are material if they could, individually or collectively, influence the decisions or

assessments of users made on the basis of the financial statements. Materiality depends on the nature or size of the

omission or misstatement judged in the surrounding circumstances. The size of the information item, or a

combination of both, could be the determining factor.

Modern equivalent asset

The most cost-efficient asset currently available that will provide equivalent functionality to the asset that will be

replaced (or are currently being valued using the DRC methodology).

Monitoring

Determining the status of a system, a process or an activity.

Objective

Result to be achieved at strategic, tactical or operational level. Objectives can be set in a variety of domains or

outcome areas (e.g. economic, social or environmental outcomes), or can relate to elements of the entity (e.g.

corporate level or units in the entity), or can relate to processes, services, products, programmes and projects.

Obsolescence

The asset can no longer be maintained, or suffers a loss in value due to a decrease in the usefulness of the asset,

caused by technological change, or changes in people's behavioural patterns or tastes, or environmental changes.

Performance

Measurable result of either quantitative or qualitative nature that can relate to the management of activities,

processes, products or services, systems or entities.

Policy

Intentions and direction of an entity as formally expressed in a documented statement approved by top management

and communicated throughout the entity.

Predictive action

Action to monitor the condition of an asset and predict the need for preventative or corrective action. Also referred to

condition monitoring or performance monitoring.

Preventative maintenance

Maintenance carried out at pre-determined intervals, or corresponding to prescribed criteria, and intended to reduce

the probability of failure or the performance degradation of an item. Preventative maintenance is planned or carried

out on opportunity.

Property, plant and equipment (PPE)

Property, plant and equipment are tangible items that: (a) are held for use in the production or supply of goods or

services, for rental to others, or for administrative purposes; and (b) are expected to be used during more than one

reporting period.

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Remaining useful life

The time remaining until an asset ceases to provide the required service level or economic usefulness.

Renewal

Expenditure on an existing asset which returns the service potential of the asset or expected useful life of the asset to

that which it had originally.

Note 1: Renewal can include works to replace existing assets or facilities with assets or facilities of equivalent capacity or

performance capability.

Note 2: Expenditure on renewals is funded through the entity’s capital budget, and such expenditure is recognised in the entity’s

Statement of Financial Position.

Risk

The effect of uncertainty on objectives. Risk events are events which may compromise the delivery of the entity's

strategic objectives.

Risk exposure

The level of risk to which an entity is exposed to. Risk exposure is a function of the probability of an occurrence times

the impact of that occurrence.

Routine maintenance

Day to day operational activities to keep the asset operating (replacement of light bulbs, cleaning of drains, repairing

leaks, etc.) and which form part of the annual operating budget, including preventative and periodic maintenance.

Statement of Financial Performance

The Statement of Financial Performance, also known as an income statement, shows the revenue and expenses of an

entity over a period of time.

Statement of Financial Position

The Statement of Financial Position, also known as the Balance Sheet, presents the financial position of an entity at a

given date. The statement comprises three main components, these being assets, liabilities and equity, and gives

users of financial statements insight into the financial soundness of an entity in terms of liquidity risk, financial risk,

credit risk and business risk.

Unplanned maintenance

Corrective work required in the short term to restore an asset to working condition so that it can continue to deliver

the required service or to maintain its level of security and integrity.

Useful life

The useful life of an asset is the period over which an asset is expected to be available for use by an entity or the

number of production or similar units expected to be obtained from the asset by an entity.

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Acronyms

ARC Agricultural Research Council

CAPEX Capital Expenditure

CPIX Consumer Price Index

CRC Current Replacement Cost

DORA Division of Revenue Act

DRC Depreciated Replacement Cost

DWAS Department of Water and Sanitation

FFC Financial and Fiscal Commission

GAPD General Administration, Planning and Development

GRAP Generally Recognised Accounting Practice

HV High Voltage

IAS International Accounting Standards

INEP International Infrastructure Management Manual

IT Information Technology

LES Local Government Equitable Share

LV Low Voltage

MIG Municipal Infrastructure Grant

MTREF Medium Term Revenue and Expenditure Framework

MV Medium Voltage

MWIG Municipal Water Infrastructure Grant

NERSA National Electricity Regulator South Africa

PPE Property, Plant and Equipment

RBIG Regional Bulk Infrastructure Grant

RCM Reliability-Centered Maintenance

RHIG Rural Housing Infrastructure Grant

RUL Remaining Useful Life

SALGA South African Local Government Association

SAFCEC South African Federation of Civil Engineering Contractors

STATS SA Statistics South Africa

USDG Urban Settlements Development Grant

UIF Unemployment Insurance Fund

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Units of Measurement

hh Household

kg Kilogram

kℓ Kiloliter (1 000 liters)

km Kilometer (1 000 meters)

km2 Square kilometer

kWh Kilowatt hours

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Executive Summary

Background

National government is responsible in terms of the constitution to provide funding to local government for the

provision of services to households with income below an agreed threshold. The FFC in 2013/14 undertook research

and the development of a fully functioning, flexible costing model to assist in the process of determining and allocating

grants for operational funding (due to funding constraints, work on the initial model in the first phase focussed on

estimating the operating costs of water, sanitation and refuse removal only). For the second phase, operational cost

estimates for roads, stormwater, health services, administration and fire-fighting services were also included when the

FFC, together with SALGA, appointed i @ Consulting (Pty) Ltd to expand the Excel-based model. Estimates for capital

funding needs

1. Comprehensive municipal-specific profiling (e.g. nr of households in a particular municipality located on

mountainous terrain).

2. Assemble a database of estimated municipal costs.

3. The costs of municipal basic services can be moderated individually, per category or in total, based on

exogenous cost-influencing factors such as spatial characteristics, topography and geology.

4. Provide the ability to establish the cost of municipal services based on actual costs, benchmarked costs,

average costs or some combination of these.

5. Source data that influences costs (e.g. population, topography and number of settlements) and apply the

resulting cost influencing factors in the model.

6. The model allows for temporal adjustments to variable base datasets (e.g. population size and nr of

households).

7. The model discourages municipal inefficiencies through the establishment of loss-limiting factors through a

combination of quantification of demand based on national policy allowance and the setting of limits for

unaccounted water and electricity.

8. The production of a proposed 3-year DORA allocation schedule and additional reporting capability.

9. Reporting capability in both tabular and graphical formats.

10. Scenario analysis based on varying levels of consumption, and in view of the growing renewals backlogs, on

different levels of investment in renewals and asset creation, and the impacts on operations and maintenance.

The main objective is to inform the allocation of capital grants for infrastructure and other municipal facilities, and

equitable share allocations to municipalities to fund the operating costs of service provision. The project scope is

reflected in the table below.

Report edition Scope of municipal services

Operating costs Capital costs

2014/15 Edition (Phase 1)

• Municipal administration • Municipal health services

• Water, Sanitation • Refuse removal • Electricity


• Municipal roads and stormwater

• Municipal roads and stormwater • Municipal administration • Municipal health services


• Fire-fighting services • Operational buildings

• Fire-fighting services • Operational buildings

In essence the objective is to determine the cost of the infrastructure required to provide appropriate essential

services by determining the cost for each service per low income household for each municipality. This includes all

relevant investment needed, consisting of both the capital cost required to provide the required assets, which is

FFC AND SALGA

P COST OF MUNICIPAL SERVICES

utilised to provide the service, and the operational cost consisting of the operating and maintenance cost, plus bulk

purchases and the cost of renewing infrastructure without which services cannot be sustained.

The base year used for the 1st phase report was 2014, and for the 2nd and 3rd phase, 2015. The report focused on the

three year period from 2015/16 until 2017/18, to coinside with the three-year window of the latest DORA allocations

published.

Cost estimation

The most critical aspect of the report concerns the estimation of costs that need to be incurred by local government to

provide essential services required in terms of the delegations and obligations of each municipality. Costs have been

shown to be determined and affected by numerous factors, which are, in the main, unique for each municipality. To

this end the methodology agreed on and implemented provided for appropriate adjustment of cost elements and

factors at national, provincial and local level. The model has been developed to allow for the adjustment, on an annual

basis, of those variables that are prone to change regularly, e.g. escalation, bulk purchase rates such as water and

electricity, salary increases, etc. Information regarding municipal-specific factors such as size, topography,

development density, economy of scale and climate are not likely to change but can still be adjusted if circumstances

require.

Cost estimation depends to a large degree on population and especially household numbers, while household growth

determines, to a large degree, estimates of future needs. For phase 2 and phase 3, the approach was followed by

Treasury in the determination of the current ES, and published on the MFMA web site ‘http://mfma.treasury.gov.za/

Media_Releases /LGESDiscussions/ Pages/default.aspx’ . This consist of using the household data and growth from

Census 2011 data, as provided by Statistics SA as a basis, which was updated based on the 2013 General Household

Survey.

The results were:

• The total number of households nationally for 2014/15 amounts to 14 877 844 and the number of indigent

households (income less than R 2 300/ month/ household) to 8 702 989, or 58.49% of the total number.

• The corresponding numbers for 2015/16 are 15 336 205 in total, with the number of indigent households

amounting to 8 965 789, with indigent households accounting for 48.46 % of total households.

Methodology applied

a) Direct service delivery

It is accepted that asset care has been neglected in the municipal environment, and that a renewals backlog is

emerging. The World Bank, the National Treasury, the FFC and South African Cities Network have all in recent years

published research on this matter. National Treasury has also issued the MFMA Circular 55 that requires municipalities

to allocate at least 40% of their capital budgets towards asset renewal. The approach followed in the determination

of the cost of services therefore included the analysis of two scenarios, one where infrastructure is not managed

appropriately (with a lack of asset renewals and maintenance with deteriorating standards of service and escalating

life cycle cost) and a second scenario where a risk based asset management approach is followed to ensure that

maintenance and renewal work is properly planned and prioritised to maximise benefit over the life cycle of

infrastructure in terms of the benefit derived from investments made, even if funding is limited.

The two scenarios can be summarised as:

• Model A - Asset sweating, characteristic signs:

FFC AND SALGA

Q COST OF MUNICIPAL SERVICES

o Continuation of current investment approach,

o Proportionally higher investment in new asset creation, and

o Neglect of current infrastructure.

FFC AND SALGA

R COST OF MUNICIPAL SERVICES

• Model B: Responsible asset custodianship and investment aligned to growth, evidence of:

o Investment in new assets linked to population growth,

o Evidence of sound risk based life cycle approach to asset management, and

o Adequate provision for infrastructure renewal.

The results clearly demonstrate the advantage in using the ‘responsible asset custodianship’ approach. Considering

the importance of discouraging rather than rewarding municipal inefficiencies, ‘Model B’ has been adopted as the

appropriate and preferred option in determining estimated costs.

b) Administrative costs

Municipal administrative services relates to those functions which deal with the governance of the municipality, both

political and managerial. In essence, the administrative service enables the service delivery departments and can be

viewed as internal service delivery.

Some administrative cost are easily identifiable due to the nature of the expense, such as the remuneration of the

Municipal Manager. However, certain types of expenses which are commonly seen as administrative expenditure,

often also play a pivotal role in service delivery and cannot solely be placed in the administrative ‘basket’. Telephone,

printing, stationery and salaries are but a few of the types of expenses which can relate to either municipal

administration or service delivery.

As a point of departure, the various expenditure items which would ultimately make up the totality of the

administrative cost basket were identified and grouped based on the cost drivers which influences them. In order to

establish a basis from where these groupings could be analysed and modelled across all municipalities, a number of

test municipalities were selected to represent the various categories, sizes, different socio-economic profiles and

locations in order to identify commonalities which could be standardised as norms for cost determination.

Cost determination

Operating costs

Operating costs are all recurrent costs incurred to deliver services to customers, as well as general administration and

planning costs. It should be noted that although infrastructure renewal is done from the capital budget, depreciation

which is determined based on the consumption of the benefit derived from assets serves as proxy for, and represents

the provision for renewal of assets, is accounted for as expenditure under the operating budget.

The following cost structure was adopted for operating expenditure for each of the infrastructure services modelled:

a. Bulk purchases

b. Contracted services

c. Employee-related costs – salaries & wages

d. Insurance

e. Other expenditure –loose tools & overheads

f. Other materials

g. Rent of facilities and equipment

h. Operations

i. Repairs and maintenance

j. Transportation costs

k. Energy costs

FFC AND SALGA

S COST OF MUNICIPAL SERVICES

Cost influencing factors

A number of factors can significantly influence the cost of infrastructure development (CAPEX) as well as of service

delivery (OPEX). The following key factors were selected to moderate projected CAPEX and OPEX needs:

a. Topography (flat, rolling or mountainous terrain) – this dataset was obtained from the Agricultural Research

Council (ARC), 25 November 2013;

b. Location (coastal or inland);

c. Climate/ rainfall;

d. Distance from economic centers;

e. Development status referring to number of settlements and densities; and

f. Loss of economy of scale.

By way of example, the impact of the distance of municipalities from the nearest significant economic centre was

modelled spatially, as indicated in the figure that follows, and applied in the model by adjusting service provision costs

per municipality (Table 7 in the report provides detail regarding the cost influencing factors determined and applied).

Demand and management of demand

Demand for services for the poor is another significant element to be considered, and not as readily determined for all

services as for water and electricity. An important factor throughout most of the services considered is the

management of demand, which requires a healthy partnership between the municipality and customers – since it is

unlikely that demand management can succeed without the municipality planning, developing and implementing

proper and appropriate life cycle strategies and standards of service, and the community utilising services correctly

and assisting the municipality in safeguarding infrastructure, using services responsibly and conserving scarce

resources.

Capital costs

FFC AND SALGA

T COST OF MUNICIPAL SERVICES

The estimated capital needs consist of the investment in new assets (and/or upgrading existing assets) required to

provide infrastructure for provision of basic services for the growth in low income households, plus investment

required for eradicating the existing access backlogs. For comparative purposes only, an assumption was made that

backlogs will be eradicated at 15% of the current backlog annually. The extent and cost of infrastructure required to

serve poor households provides the basis for the required cost estimates, taking into account the level of service,

demand and all local aspects that will affect the cost of infrastructure. As indicated a large number of factors were

identified and taken into consideration in the model developed to estimate costs, and the model provides for all

significant and relevant cost adjustment factors. The following highlights the most important elements in the

methodology that was considered in the determination of infrastructure costs required to provide for services to the

poor.

Unit rates

Extensive use was made of detailed information from selected municipalities - where credible component level asset

registers, providing information on the extent and CRC (Current Replacement Cost), have been established. This data

served as a benchmark for both extent and cost, which was calibrated against MIG and DWA guidelines on the cost of

infrastructure to determine unit rates for the CRC of infrastructure. The CRC values used include the total cost of

providing assets, inclusive of planning, design, procurement and construction costs and applicable overheads (e.g. site

establishment, supervision, preliminary and general expenditure, etc.).

Backlogs

The point of departure in service provision is, and has been for many years, provision of services to those who have

either no service, or where the level and standard of service is below the agreed level, with a minimum as determined

by the appropriate authority.

Assumed Backlogs

Province Energy Water Sanitation Cemeteries Solid Waste Roads

W Cape 5.8% 2.7% 9.7% 12.9% 14.4% 12.9%

N Cape 10.8% 6.4% 18.1% 13.9% 25.5% 13.9%

E Cape 17.8% 25.7% 37.0% 31.2% 50.9% 31.2%

FS 8.2% 3.9% 20.3% 17.9% 24.0% 17.9%

KZN 25.3% 29.7% 37.4% 34.2% 63.9% 34.2%

MP 11.3% 13.1% 30.6% 18.4% 39.5% 18.4%

LIM 9.4% 21.2% 50.2% 9.8% 63.6% 9.8%

NW 13.1% 14.0% 35.5% 19.0% 48.6% 19.0%

GT 12.0% 5.0% 11.0% 20.5% 11.5% 20.5%

Total 14.5% 16.8% 30.2% 22.0% 43.2% 22.0%

Capital Cost Needs

Capital costs were determined for the following services:

1. Electricity

2. Water

3. Sanitation

4. Refuse removal and Disposal

5. Roads and Stormwater

6. Health services

7. Fire-fighting services

8. Operational buildings

FFC AND SALGA

U COST OF MUNICIPAL SERVICES

FFC AND SALGA

V COST OF MUNICIPAL SERVICES

For each of the services above, the main infrastructure asset types were determined. The following asset types were,

for example, identified and addressed for electricity:

• HV and MV Substations and switching stations

• Mini-substations

• MV transformers (Pole Mounted, Floor Mounted or Indoor)

• Overhead conductors (HV, MV and LV)

• Cables (HV, MV and LV)

• Service connections (kiosks, conductors, meters)

Unit rates per customer were determined for each service on the basis of the extent of assets required per customer

at the appropriate LOS (Level of Service) and the appropriate costs, informed by the factors and municipal profile

data, and adjusted per municipality on the basis of the cost influencing factors (per asset type applicable) per poor

customer for each municipality. The model was used to calculate the CRC, and from the CRC and household growth,

the growth needs per annum, as well as the access backlogs based on the relevant rates. Modelling for consecutive

years made provision for the aging and depreciation of assets and renewals, the asset portfolio growth resulting from

the addition of assets, and for escalation of the cost of infrastructure (CRC). Provision was also made for adjustment

to factors such as the level of investment in renewals. The determination for costs for various services have followed

a similar process in many respects, although each service is unique with many characteristics that differ from other

services. From a regulatory perspective electricity stands out from other trade services on account of legislative

requirements, which originates from the nature of the service which bears high risk to both suppliers and users should

safety and safe work procedures not be followed. Fire-fighting services on the other hand provides a service that,

unlike other services, is aimed at protecting the safety of communities and property. This service is also strongly

regulated (notably the standard SANS 10090: 2002, Edition 3 published by the Standards board of South Africa),

which determine standards, risk ratings and area categories that responsible authorities must apply and comply with.

These requirements necessitated a spatial analysis to assess response times, and determine the number of poor

customers not served in accordance with regulatory criteria to determine the backlog. An extract from the results

shows the central Limpopo area, indicating areas that meet requirements as specified for Area C (urban criteria,

shaded in yellow) and Area D (rural criteria, shaded in oorange), and the areas where customer service is not

currently compliant (areas not shaded):

Accessibility for fire protection coverage – Polokwane municipality

FFC AND SALGA

W COST OF MUNICIPAL SERVICES

Based on the relevant data the unit rate for immovable assets (cost per household) to provide appropriate facilities

was determined as:

Unit rate cost of immovable facilities per poor household (2014)

Sector CRC - R per hh PDG Category Buildings External Facilities

Fire Stations

446 A & B1 - Fire risk E 419 27

370 B1 - Fire risk A 348 22

302 B2 - Fire risk B 284 18

232 B3 - Fire risk C 218 14

162 B4 - Fire risk D 152 10

9 Covered parking 8 1

The capital needs for new infrastructure to

provide services to reflect the growth in the

poor households (households with income

less than R 2 300/month) were thus

established, as well as the backlogs. With

regard to access backlogs, the figures

included in the summary table below,

indicating all capital needs (growth and

backlogs) for poor households, is based on

the assumption that 15% of the original

backlog will be addressed annually, which

provides a total annual need in 2015/16 of

R 47 billion, including growth amounting to

R 23 billion. The entire need at this point

amounts to R 183 billion (R 23 billion growth

need and R 160 billion for the total backlog). Detailed information at individual municipal level is provided in

Appendice E for Backlogs, Appendice F for growth needs, and for the combined capital needs in Appendice G:

Growth and backlog capital needs combined for all services (movable and immovable assets, R 000) 2015/16

Pro

vin

ce

Elec

tric

ity

Ro

ads

&

s'w

ater

Wat

er

San

itat

ion

So

lid W

aste

Cem

eter

ies

Fire

st

atio

ns

Op

erat

ion

al

bu

ildin

gs

Tota

l

Eastern Cape 824 752 1 934 701 1 241 336 1 278 210 76 521 14 026 18 404 75 697 5 463 647

Free State 293 547 818 118 268 265 501 757 26 868 4 204 6 654 43 659 1 963 072

Gauteng 2 060 516 6 819 373 1 699 934 2 305 486 146 403 21 596 41 707 301 398 13 396 413

Kwazulu-Natal 1 826 531 4 022 416 2 304 970 2 303 241 174 829 26 186 21 141 161 371 10 840 686

Limpopo 765 277 843 565 1 303 493 1 395 377 67 487 14 971 23 449 93 519 4 507 138

Mpumalanga 586 824 1 107 296 723 417 876 969 50 449 8 813 13 535 76 888 3 444 191

Northern Cape 122 311 203 496 123 818 161 069 8 020 1 581 1 807 15 297 637 399

North West 544 687 1 208 182 640 826 991 890 64 451 8 626 18 296 72 390 3 549 348

Western Cape 507 662 1 552 502 472 187 662 062 44 149 6 126 9 931 87 622 3 342 241

Total 7 532 108 18 509 648 8 778 245 10 476 061 659 178 106 130 154 925 927 841 47 144 135

FFC AND SALGA

X COST OF MUNICIPAL SERVICES

Growth and backlog needs – movable and immovable asset infrastructure

Operational Cost Needs

Municipal administration services

Municipal administration services include the basket of services referred to as General Administration, Planning and

Development (GAPD), and includes:

• The costs associated with the political structure, including those costs incurred in the execution of their

mandated responsibilities.

• The costs associated with the overall management of the municipality, a function and responsibility assigned to

the Accounting Officer through Chapter 8, Sections 60 and 61 of the Municipal Finance Management Act, No. 56

of 2003.

• The costs associated with the financial, human resource and operational management of the municipality,

including the provision of support services to service delivery departments. These costs are referred to as the

cost of internal service delivery.

For the purpose of developing reasonable norms to determine the administrative cost per municipality, the following

data sources were used:

• Annual Financial Statements – 2013/14;

• MTREF – 2014/15 and 2015/16;

• Annual Report - 2013/14.

A detailed study and analysis of the cost elements covered the aspects below. For the purposes of this report

inefficiencies were ignored, and analysis performed under the assumption that all administrative processes are equally

efficient:

a. The costs associated with the political structure, including those costs incurred in the execution of their

mandated responsibilities

b. The costs associated with the overall management of the municipality, including financial and human resource

management

c. Employee Related Cost and Section 57 Employees

d. Audit Fees

e. Administrative cost determined by the number of staff

0

10

20

30

40

50

60

70

80

90

100

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

E Cape FS GT KZN LIM MP N Cape NW W CAPE

Thou

san

ds

Mill

ion

s

Electricity Roads & s'water Water Sanitation Solid Waste Cemeteries Fire stations Operational blds HH Growth

FFC AND SALGA

Y COST OF MUNICIPAL SERVICES

The combined costs of municipal administration services to low income households, estimated at some R 39 688

million per annum, is summarised per province in the table below:

Summarised cost of municipal administration services benefiting low income households – per province

Pro

vin

ce

Nu

mb

er o

f P

oo

r H

ou

seh

old

s (2

01

4/

15

)

Ad

min

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ost

C

om

po

nen

t A

ttri

bu

tab

le t

o P

oo

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ou

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s

Clr

Rem

un

erat

ion

Emp

loye

e R

elat

ed

Co

st

Au

dit

Fee

s

Ad

min

istr

ativ

e B

aske

t o

f S

ervi

ces

Co

st/

low

inco

me

hh

EC 854 505 4 655 5 2 799 66 1 784 4 286

FS 521 195 1 214 5 807 24 378 3 392

GAU 2 037 619 4 769 10 2 860 124 1 775 2 320

KZN 1 631 433 2 938 5 1 908 64 961 3 161

LIM 1 032 486 7 022 12 4 004 157 2 849 2 529

MPU 685 131 2 894 4 2 031 59 801 2 044

NW 174 651 3 443 6 2 263 103 1 071 1 620

NC 676 505 2 947 5 2 060 68 815 2 123

WC 769 634 9 806 2 5 273 125 4 405 4 012

Total: 39 688 55 24 005 789 14 838

Operating cost needs: Direct services

Maintenance and renewal backlogs for all services rapidly leads to poor standards of service, and increased costs. For

roads infrastructure for example, the results of insufficient maintenance and renewals include irretrievable damage to

the road surface layers and structural layers, reduced life of the infrastructure with increased life cycle cost and

reduced service standards, and if not addressed, may result in infrastructure having to be re-built completely, at huge

cost. The most significant activities and cost drivers were identified for each of the services, and analysis done to

determine factors such as the geographical distribution of households, extent and standard of services available to

each community, also the availability and quality as well as costs of resources, rainfall, etc, have a significant impact

on operations and maintenance cost. In addition to the base data from the large array of municipalities that were used

for benchmarking, detailed information from test municipalities was used to calibrate and improve cost data. Test

municipalities for each service was based on the availability of information and knowledge of these conditions and

access to officials within these municipalities to assist in understanding and interpreting these factors. The following

table illustrates the various differences between these municipalities:

Base data - Selected municipalities

Test Data Province Code Category 1Number of Households (2013/14)

Number of Poor

Households (2013/14)

Poor vs. Total Households Paved KM Gravel KM

Ekurhuleni Gauteng EKU A 1 015 465 532 516 52,44% 7399 515

Buffalo City Eastern Cape BUF A 223 568 134 930 60,35% 1082 636

George Western Cape WC044 B1 53 551 25 377 47,39% 404 94

City Of Matlosana North West NW403 B1 120 442 69 705 57,87% 801 425

Bitou Western Cape WC047 B3 16 645 10 112 60,75% 138 17

Hessequa Western Cape WC042 B3 15 873 6 954 43,81% 231 43

Greater Tzaneen Limpopo LIM333 B4 108 926 79 378 72,87% 705 1595

Moses Kotane North West NW375 B4 75 193 49 844 66,29% 222 362

Based on the results, unit rates were developed for the basic costs for the maintenance and operation of

infrastructure, plus the cost influencing factors that were applied at the level of individual municipalities to determine

1 2013/14 data was used as this is the latest actual expenditure data available.

FFC AND SALGA

Z COST OF MUNICIPAL SERVICES

the operational costs associated with the rendering of appropriate services to the poor households for each

municipality. As indicated when describing the methodology adopted, it was assumed that inefficiencies should not be

funded, but rather discouraged, and the approach indicated as ‘Model B’ was therefore adopted in the determination of

operational costs. The resulting operational funding needs, per individual municipality are included as Appendix H, for

the financial years 2015/16 to 2017/18.

Operating cost needs: Fire-fighting services

The responsibility for fire protection is shared between the district and local municipalities, with metropolitan and large

municipalities providing the services directly, while for other municipal categories the district municipalities are

involved to an extent that varies according to local circumstances and agreements. The Standards Board of South

Africa, with the assistance of the Fire Protection Association of Southern Africa, has issued a standard - SANS 10090:

2002, Edition 3 – for fire-fighting services which regulates and guides the facilities, equipment and standard of

service.

The application and implication of the fire-risk ratings, fire-fighting service levels and area categorisations were used

as basis for the determination of the service needs and requirements, and hence the operating costs for fire-fighting

services. Operational and maintenance costs for fire-fighting services includes not only the actual response to call-

outs to incidents, but also all administrative functions, training and exercises as well as accommodation for staff. It

includes also all maintenance and repair of immovable assets (buildings and associated infrastructure) as well as

movable assets (vehicles, machinery and equipment). The spatial determination of current services and backlogs

which were undertaken, as described in the section addressing the estimation of capital costs, also played a significant

role in the determination of the operational costs, since it assists with the determination of response times, as

summarised below, and which provides essential information required in the determination of the number and size of

fire stations, equipment and staffing:

Response times for fire-fighting services

Risk category Max call receipt & dispatching time

(in minutes)

Turnout time (in

minutes)

Max appliance travel time

(in minutes)

Max total attendance time

(minutes)

A:Central Business districts & industrial areas of large towns 2 1 5 8

B:Central Business districts & industrial areas of smaller towns 2 1 7 10

C:Residential areas of conventional construction 2 1 10 13

D:Rural areas with limited buildings 2 1 20 23

E:Special risk e.g. large shopping centres, informal settlements, hospitals, prisons, airports, petrochemical Within the requirement of the appropriate risk category above

With respect to the methodology followed to determine operational costs for fire-fighting services, the following

aspects were considered, and assumptions applied, based, where applicable, on test municipalities:

Employee and administrative cost

• Employee numbers are largely regulated by SANS requirements;

• Benchmarks were established for the number of, and cost per employee per fire; and

• This benchmark was then projected against the number of fire stations per municipality.

Operating and maintenance cost (excluding depreciation)

• Costs are directly related to the type of equipment and vehicles;

• A benchmark of ‘operations and maintenance cost per employee’ was determined; and

• This benchmark was then projected against the number of employees per fire station.

FFC AND SALGA

AA COST OF MUNICIPAL SERVICES

Depreciation (equipment and vehicles)

• Capital norms per category of fire station (SANS 10090 and NFPA 1901) were calculated;

• Each municipality was categorised, norms applied and cost determined;

• Depreciation based on the replacement periods specified under SANS 10090,was calculated; and

• Depreciation component attributable to poor households were calculated.

Fire stations are provided as a basis from which equipment and resources operate in a manner that enables the

authorities to respond to incidents and fires effectively. Where appropriate, provision was only made for the shelter

and protection of dispersed light fire-fighting vehicles. Provision for the maintenance and operational costs associated

with facilities (immovable assets), and depreciation on the immovable assets were determined separately, based on

the replacement cost of infrastructure per municipality. The combined operational cost for fire stations, including both

the function, movable and immovable asset related costs is estimated to be R 3.3 billion, as summarised in the table

below (households and amounts in thousands):

Total Operational, maintenance and depreciation costs for fire-fighting services (R 000)

Province Poor Households Employee cost Operating and maintenance cost

Depreciation (equipment and

vehicles)

Total operations and maintenance cost

Eastern Cape 1 192 241 861 57 073 24 152 323 086

Free State 532 240 140 54 767 16 374 311 281

Gauteng 2 124 259 630 66 422 28 542 354 594

Kwazulu Natal 1 678 238 407 56 042 20 353 314 802

Limpopo 1 064 122 596 27 847 15 932 166 375

Mpumalanga 708 130 288 29 668 11 517 171 474

North West 696 124 717 28 381 12 202 165 299

Northern Cape 179 37 337 8 480 3 988 49 804

Western Cape 793 195 680 47 353 16 866 259 899

Total 8 966 1 590 656 376 031 804 149 925 746 2 116 614

The total combined operational costs, which includes both operations and maintenance costs as well as bulk purchase

costs, and depreciation (which as indicated is an operational expenditure even though renewals constitutes a capital

expenditure), for all services, per province, is presented below:

Operational costs for all services, grouped per province (2015/16 – R million)

Province Operations cost Maintenance cost

Combined Operational

Costs

Bulk purchases Depreciation

Total Operational

cost

Eastern Cape 1 419 1 432 2 852 1 684 1 690 6 225

Free State 1 083 1 197 2 280 622 1 647 4 549

Gauteng 3 942 3 986 7 928 2 634 5 397 15 959

Kwazulu-Natal 2 139 2 199 4 338 1 840 2 723 8 901

Limpopo 1 013 1 220 2 232 1 109 1 345 4 686

Mpumalanga 929 974 1 903 866 1 128 3 898

Northern Cape 337 287 624 255 324 1 203

North West 893 942 1 835 850 1 140 3 824

Western Cape 1 490 1 502 2 992 961 1 927 5 879

Total 13 246 13 739 26 985 10 820 17 321 55 125

FFC AND SALGA

BB COST OF MUNICIPAL SERVICES

The proportional operational costs for services for the poor, for 2016, are indicated in the next figure and shows that

the services responsible for the major share of the costs are roads and stormwater, water and electricity:

Operational costs compared across services (2016)

Conclusion

Capital funding requirements

With regard to the capital costs for municipal services, the following aspects need to be highlighted:

• The calculated infrastructure costs are based on the growth in poor households per municipality, plus the

backlogs per service based on the provincial access backlogs - based on appropriate, and not necessarily the

minimum levels of service.

• The amounts needed to address access backlogs have been determined based on modelled backlogs and the

assumption that these backlogs will be reduced by 15% per annum.

• Although not based on actual figures it is apparent that the improvement in access to services and the

standards of services are not in relation to the investments made in this regard.

Capital costs required to address growth and backlog (15% of) across all services (2016)

Electricity 23%

Water 24%

Sanitation 9%

Roads and Storm water 25%

Solid Waste 10%

Cemeteries 0% Fire Stations

6% Operational Buildings 3%

7 532

18 510

8 778 10 476

659 106 155 928

0 2 000 4 000 6 000 8 000

10 000 12 000 14 000 16 000 18 000 20 000

Elec

tric

ity

Roa

ds

& s

'wat

er

Wat

er

San

itat

ion

Sol

id W

aste

Cem

eter

ies

Fire

sta

tion

s

Op

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ion

al b

lds

Mill

ion

s

FFC AND SALGA

CC COST OF MUNICIPAL SERVICES

Operational funding requirements

Operational costs for basic services are currently only funded for water, sanitation, electricity and solid waste services,

and not for roads and stormwater, cemeteries, fire-fighting services and operational buildings.

The following aspects should be noted:

• Operational costs relating to the provision of roads and stormwater services are highest of all services (R 13

billion).

• The renewal needs for services is a very significant factor, and essential to prevent loss of assets and to be able

to provide services sustainably – however from an accounting perspective it does not form a part of normal

operations and maintenance activities and expenditure, but falls under capital funding.

• In practice, cash flow constraints and financial distress within a municipality is often suppressed through the

curbing of operational and maintenance expenditure on roads and stormwater.

• This leads to a lower standard of service and an inflated renewals and maintenance backlog, often more so for

the roads and stormwater portfolio.

Operations and maintenance costs required to address operational expenditure across all services (2016)

Municipal administration costs

The costs for municipal administration have been determined and the following aspects should be given consideration:

• It can be argued that some costs which are considered as ‘corporate overheads’ should be allocated to service

departments based on certain cost influencing factors, such as allocating a portion of the municipal manager’s

salary towards each service based on the level of effort spent on those departments.

• Unless a costing methodology and accurate time tracking system is implemented, such allocations will create

nothing more than a false sense of accuracy.

• For the purpose of this modelling exercise, an approach of relevance and reasonability was adopted, but more

importantly, what is practical and universally applicable.

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1 COST OF MUNICIPAL SERVICES

1. Purpose

1.1 Scope and objectives of this report

This report provides estimates of the costs of municipal services, the aim of which is to inform the allocation of capital

grants for infrastructure and other municipal facilities, and equitable share allocations to municipalities to fund the

operating costs of service provision. The scope of services for which costs are provided include, in this edition of the

report (editions are linked to FFC research cycles), the following:

Table 1: Report editions and scope of municipal services

Report edition Scope of municipal services

Operating costs Capital costs

2014/15 Edition • Municipal roads and stormwater • Municipal administration • Municipal health services

• Municipal roads and stormwater • Water and Sanitation • Refuse removal • Electricity

2015/16 Edition • Fire-fighting services • Municipal administration • Municipal health services • Fire-fighting services

This report therefore completes the process of developing a model for determining the operating costs of services to

poor households (including operations, maintenance, bulk purchase as well as depreciation), and the capital funding

requirements (to address access backlogs and provide for needs to service the growth in low income households) for

the following services:

• Electricity;

• Water and sanitation;

• Roads and stormwater;

• Health services;

• Fire-fighting services;

• Operational buildings; and

• Determine administration costs.

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1.2 Background

The FFC in the 2013/14 financial year formed part of a team that reviewed and implemented the new Local

Government Equitable Share (LES) formula. During the process it became clear that there is very little information or

research on the costs of providing basic municipal services. Much of the limited body of data is outdated, municipal

financial reporting does not fully support services’ cost analysis, and there are significant differences in the costs of

delivering basic services as a result of economies of scale in operation, spatial patterns, local influencing factors such

as topography etc.

The FFC in 2013/14 undertook research and the development of a fully functioning, flexible costing model to assist in

allocating grants to municipalities. To this end the FFC appointed i @ Consulting (Pty) Ltd develop the costing

methodology, assemble a database of estimated municipal costs, data that influences costs (e.g. population,

topography and number of settlements), and to construct an Excel-based model to calculate basic service costs. Due

to funding constraints, work on the model in the first phase focussed on estimating the operating costs of water,

sanitation and refuse removal only. Key model features include:

1. Comprehensive municipal-specific profiling (e.g. nr of households in a particular municipality located on

mountainous terrain).

2. The costs of municipal basic services can be moderated individually, per category or in total, based on

exogenous cost-influencing factors such as spatial characteristics, topography and geology.

3. Ability to establish the cost of municipal services based on actual costs, benchmarked costs, average costs or

some combination of these

4. The model allows for temporal adjustments to variable base datasets (e.g. population size and nr of

households).

5. The model discourages municipal inefficiencies through the establishment of loss-limiting factors through a

combination of quantification of demand based on national policy allowance and the setting of limits for

unaccounted water and electricity.

6. The production of a proposed 3-year DORA allocation schedule and additional reporting capability.

7. Reporting capability in both tabular and graphical formats.

8. Scenario analysis for, amongst other, policy analysis purposes. This includes, amongst other:

a) Varying levels of consumption-based demand for infrastructure services, and the impacts thereof on

operations and maintenance costs;

b) Different levels of investment in infrastructure investment, and the impacts on operations and

maintenance costs; and

c) Different approaches to infrastructure investment, and the impacts on operations and maintenance, as

follows:

• Model A: Asset sweating – continuation of current investment approach: investment in new

asset creation and neglect of current infrastructure

• Model B: Responsible asset custodianship and investment aligned to growth – investment

in new assets linked to population growth, and adequate provision for infrastructure renewal

The approach in 2014 was focused to a larger extent on modelling the infrastructure status and cost of services for the

indicated services (water, sanitation, solid waste, as well as electricity) to all households per municipality, and the cost

of services to low income households derived from the results. During the process it became evident that it is essential

that the full spectrum of needs be considered – including administration costs – in order to quantify and evaluate the

respective and overall funding needs, and help ensure equitable prioritisation in the allocation process. In the current

model the cost of services rendered to the poor and the capital needs for providing services to low income households

(both infrastructure to serve the growth in households, and the cost for eradicating access backlogs) have been

included, and the emphasis across the spectrum is now focused on low income households, and the services include

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roads and stormwater. The FFC and SALGA have since partnered to scope and finance phases 2 and 3 to expand the

model to estimate both the capital and operating costs of all municipal basic services.

1.3 How to read this report

Section 2 of this report explains the approach and methodology to determining both the capital and operating costs of

municipal infrastructure. General elements of both capital and operating costs are described. Municipal service costs

are highly place-specific, and are influenced by factors such as topography, soil conditions and distances from major

economic centres. These spatial factors affect both construction costs (capital costs) and the cost of operations. This

report recognises the impact of spatial characteristics, and documents the approach and methodology followed in

developing spatially nuanced costs.

The base year adopted for the modelled results reported is 2014. This report, and the electronic cost model that

generates municipal services cost estimates, ultimately aim to inform allocations in the Division of Revenue Act

(DORA) that has a rolling three-year window. This requires updating of both population and cost estimates. Section 2

explains the indices used to update various projections, as well as the specific indices to which specific elements of

costs are linked to. Sections 3 – 6 detail the capital cost estimates per municipal services, and Sections 7 – 9 provide

operating cost estimates for selected municipal services, including the costs of municipal administrative services.

Population and household numbers, and growth have been based on the census 2011 data, updated with the results of

the 2013 household survey, as adopted and published by Treasury, and used in the determination of the current Local

Government Equitable Share allocation. It was assumed that the growth for the period following 2018/19 would be the

same as for the 2017/18 year.

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2. About Cost Estimation

2.1 Classification of costs

Municipal costs are classified as either capital expenditure or operating expenditure. Capital expenditure (CAPEX) is

expenditure used to create new assets, increase the capacity of existing assets beyond their original design capacity

or service potential, or to return the service potential of the asset or expected useful life of the asset to that which it

had originally. Capital created, enhanced or renewed bolsters the productive capacity of a municipality, and it is for

this reason that CAPEX is reported on in a municipality’s Statement of Financial Position. Expenses incurred in the

daily operation or ongoing operation of a municipality is referred to as Operating Expenditure (OPEX) and are reported

on in the Statement of Financial Performance.

2.2 Capital costs

Capital cost estimates have been determined per service (e.g. sanitation) per household based on average current

replacement costs per household as determined for some 12% of municipalities (32 municipalities). For the

estimation of capital costs during the cost establishment process data for municipalities across South Africa was used.

These municipalities are listed in Table 2. In most instances asset valuation has been done for purposes of asset

register preparation, and in most cases unqualified audit results were recorded. The dataset therefore displays the

qualities of a consistent approach aligned with accounting standards, and quality assured results. The constituent

elements included in capital costs used in determining current replacement cost are as defined in the Generally

Recognised Accounting Practice Standard 17 on Property, Plant and Equipment (GRAP 17). GRAP 17 defines the

elements of the capital cost of assets as follows (March 2012: 11-12):

a. Purchase price, inclusive of import duties and non-refundable purchase taxes after deduction of trade discounts

and rebates.

b. Any costs attributable to delivering the asset to the location and condition necessary for it to be able to operate

in the manner intended by management. Examples of directly attributable costs are:

• costs of employee benefits arising directly from construction or acquisition of the item;

• costs to prepare the site;

• initial delivery and handling costs;

• installation and assembly costs;

• cost of testing that the asset is functioning as per specification; and

• professional and general fees.

c. The initial estimate of costs to dismantle and remove the structure or item, and to restore the site on which it

is located.

Cost estimates informing the asset valuations of the municipalities noted in this report were in turn based upon

COGTA’s “Municipal Infrastructure: An Industry Guide to Infrastructure Service Delivery Levels and Unit Costs – June

2010” as well as of cost records of infrastructure acquisition or construction projects in these municipalities.

As noted, the unit of cost is average current replacement cost per service per household. The emphasis here is on

“average”. Section 2.3 notes cost-influencing factors, which can lead to significant variances in site-specific costs.

Seen at the aggregate scale, there is very little value in conducting a detailed cost analysis of only a few

municipalities, and to extrapolate to national scale, as costs can vary significantly in a municipality, between

municipalities, and between provinces. There are a number of reasons for this, in addition to the factors listed in the

following section. These include, to mention but a few, the type of technology employed, the configuration of

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infrastructure systems and the levels of service offered – in all these cases, there is little firm comparative data

available.

Table 2: Municipal asset valuations informing asset values and capital cost estimates

Municipality Province

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Buffalo City EC • • • • • • • •

Ekurhuleni GAU • • • • • • • •

Johannesburg GAU • •

Tshwane GAU • •

Emfuleni GAU • • • • • • •

Govan Mbeki MPU • • • • • • •

Lephalale LIM • •

Mogale City GAU • • • • • • •

Msunduzi KZN •

Polokwane LIM • • • • • • • •

Steve Tshwete MPU • • • • • • •

Abaqulusi KZN

Albert Luthuli MPU • • • • • • •

Bela-Bela LIM • • • • • • • •

Dipaleseng MPU • • • • • • • •

Dr JS Moroka MPU • •

Elias Motsoaledi LIM • • • • • • •

Merafong GAU • • • • •

Mkondo MPU • • • • • • •

Modimole LIM • •

Mohokare FS • • • • • • •

Mookgophong LIM • • • • • • •

Msukaligwa MPU • •

Naledi FS • • • • •

Pixley-ka-Seme MPU • •

Randfontein GAU • • • •

Thembisile Hani MPU • • • •

Victor Khanye MPU • • • • • • • •

Westonaria GAU • • • • • •

Greater Sekhukhune LIM • • • • •

Ugu KZN • •

West Rand GAU •

Metropolitan municipality Secondary city (local municipality)

Other local municipality District municipality

It is, for example, often assumed that municipalities in rural settings offer basic levels of service for water, and that

water is obtained from either boreholes or from rivers where water is purified through chemical dosing and/or sand

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filtration. But in the case of the Sekhukhune District in Limpopo, for example, the nutrient composition of water is not

optimal, local water availability is not always assured, and the cost of basic systems often excessive. So dual systems

are in some cases in use (combining local source abstraction and treatment with piped water conveyed from

elsewhere), and there has been a move toward regional water scheme consolidation. Safety considerations also often

necessitate the installation of higher levels of service in dense urban settings. Capital cost of infrastructure was

determined after exploring alternative methods to independently calculate the replacement cost of infrastructure

assets required to service customers at specific LOS (levels of service). The results were compared and calibrated

against actual values for municipalities where the extent and value of assets were known and could be used as

benchmarks. The alternatives explored included:

a. Developing current all-inclusive replacement values for infrastructure assets per service based on

comprehensive component level immovable asset registers that i @ Consulting (Pty) Ltd established for

more than 40 municipalities of different sizes, from different provinces, and with varying levels of efficiency

over the past decade. Based on the extensive information available, CRC values per household were

determined for typical infrastructure replacement costs for all infrastructure services.

b. Detailed benchmark infrastructure extent and costs per household were determined from asset registers for a

smaller sample of municipalities. The unit costs determined were used to calculate CRC values per municipality

and were compared to the CRC values derived above to test the validity of the initial calculations. An example

of comparative testing done is shown in Appendix A. The results indicate that the overall infrastructure costs

for water per customer in the rural area did not differ significantly from the overall costs in urban areas in this

instance. Bulk water infrastructure was significantly higher in one of the urban areas (Zone 2). The cost for

water treatment facilities was relatively low, as a large proportion of bulk water is purchased from bulk

suppliers. The overall cost for sanitation infrastructure is much lower in the rural area because the majority of

customers do not have waterborne services. The cost for outfall sewers per customer was once again higher in

Zone 2, as was the case for water bulk mains. These municipalities included:

• Bela-Bela LM

• City of Tshwane

• Dipaleseng LM

• Dr JS Moroka LM

• Ekurhuleni Metro

• Joburg Water

• Mogale City LM

• Randfontein LM

• Steve Tshwete LM

• Thembisile Hani LM

• Westonaria LM

c. Additional analysis of infrastructure cost was done, for which the ‘MIG guidelines’ were used (published as ‘An

Industry Guide to Infrastructure Service Delivery Levels and Unit Costs- 2010 (Final)’). The guidelines were the

result of a collaborative effort involving all affected government departments (e.g. CoGTA, National Treasury,

DWS, expert private sector consultants, CSIR, CIDB and DBSA)

d. Unit Rates were determined as follows:

Appendix B indicates the result of comparisons done between asset CRC values derived, and extracts from the ‘MIG

Guidelines’ as well as Buffalo City. In general the asset CRC values derived from benchmarking were lower than the

guideline values. The reason for this is in part the difference in approach used (the benchmarking based on actual

service delivery areas with some mixed levels of service, and the guidelines on homogenous service levels). Table 3

indicates the various estimations for asset infrastructure costs for water and sanitation services.

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Table 3: Cost comparison for water and sanitation infrastructure

Source Water R/hh Sanitation R/hh Comment

Benchmark 16 059 18 405 Metro/ Secondary cities

Benchmark 18 155 15 367 Other (than Metro/ Secondary cities - and B4 for sanitation)

Benchmark NA 9061 B4 (Rural municipalities)

MIG 28 359 28 024 50 000 people (based on scheme size)

MIG 29 501 32 733 20 000 people

Buffalo City MM 18 038 15 880 Average urban cost/hh

Buffalo City MM 14 974 10 245 Average rural cost/hh

The benchmark values have been adopted and used for the current model.

2.3 Operating costs

Operating costs are all recurrent costs incurrent to deliver services to customers, as well as general administration and

planning costs. The following cost structure was adopted for operating expenditure for each of the infrastructure

services modelled:

a. Bulk purchases

b. Contracted services

c. Employee-related costs – salaries & wages

d. Insurance

e. Other expenditure – Loose tools & overheads

f. Other materials

g. Rent of facilities and equipment

h. Operations / Repairs and maintenance

i. Transportation costs

j. Energy costs

These are briefly described below:

2.3.1 Bulk purchases

These are the costs incurred to buy bulk water from external providers, either from the Department of Water and

Sanitation (DWAS) or from a water board, as well as the costs of purchasing bulk electricity, typically from Eskom.

2.3.2 Contracted services

These are services provided by external contractors on either a spot or term basis, and typically includes the

following:

a. Audit forensic

b. Banking services: security company

c. Cleaning services

d. Connections via contractor

e. Consultant fees

f. Contracted services

g. Lease agreements

h. Management: landfill site

i. Rental: earthmoving equipment

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j. Security services

k. System support

l. Third party collections commission

2.3.3 Employee related costs – salaries & wages

This category includes the following elements of cost:

a. Acting allowance

b. Basic salaries

c. Casualty contribution

d. Group insurance

e. Housing subsidy

f. Industrial council levy

g. Industrial council levy

h. Labour - building workshop

i. Labour - roads workshop

j. Leave bonus

k. Medical fund

l. Overtime

m. Pension contributions

n. Redemption of leave

o. Skills development levy

p. Standby allowance

q. Telephone allowance

r. Transport allowance

s. U.I.F

t. Uniforms

2.3.4 Insurance

This category includes insurance premiums and excess payments related to asset, service delivery, public liability and

other third party-related risks.

2.3.5 Other expenditure – loose tools & overheads

Typical items included in this category are:

a. Catering

b. Departmental electricity - Eskom

c. Equipment

d. Loose tools

e. Marketing/promotion/advertisements

2.3.6 Other materials

Other materials typically include the following:

a. Stationery/printing/binding etc

b. Stock and materials

c. Periodicals/reference book/magazines

d. Purchase & distribution of 240 litre bins

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2.3.7 Rent of facilities and equipment

This category includes rental or lease of office space or operational facility space such as stores, workshop or yards, as

well as of office equipment, IT equipment and other equipment used in service delivery, such as honeysuckles.

a. Hire of equipment

b. Lease of IT equipment

c. Lease: office equipment

d. Rental: office space

e. Rental: toilets

2.3.8 Repairs and maintenance

Repairs and maintenance include all actions intended to ensure that an asset performs a required function to a specific

performance standard(s) over its expected useful life by keeping it in as near as practicable to its original condition,

including regular recurring activities to keep the asset operating, but specifically excluding renewal.

Figure 1: Scope of maintenance

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2.3.9 Transportation costs

This category of cost includes the following items:

a. License fees: Vehicles

b. Mechanical repairs on vehicles

c. Oil & fuel

d. Rental of earthmoving equipment

e. Transport (fleet)

f. Tyres

g. Vehicle leases

2.4 Municipal differentiation

For purposes of profiling and cost estimation municipalities have been classified as follows:

Table 4: Municipal classification

Class Characteristics

A Metros Category A municipalities

B1 Secondary cities All local municipalities referred to as secondary cities

B2 Large towns All local municipalities with an urban core. There is huge variation in population sizes amongst these municipalities and they have a large urban dwelling population

B3 Small towns

Characterised by the lack of a large town as a core urban settlement. They tend to have a relatively small population, a significant portion of which is urban and based in one or more towns. Rural areas are characterised by commercial farms and the local economies are largely agriculturally based

B4 Mostly rural Characterised by the presence of at most one or two small towns, communal land tenure and villages or scattered groups of dwellings typically located in former homelands

C1 Districts District municipalities that are not water services providers

C2 Districts District municipalities that are water services providers

2.5 Cost influencing factors

A number of factors can significantly influence the cost of infrastructure development (CAPEX) as well as of service

delivery (OPEX). The following key factors were selected to moderate projected CAPEX and OPEX needs:

a. Topography (flat, rolling or mountainous terrain) – this dataset was obtained from the Agricultural Research

Council (ARC), 25 November 2013;

b. Location (coastal or inland);

c. Distance from economic centers;

d. Development status referring to number of settlements and densities; and

e. Loss of economy of scale

These factors have been selected since credible and consistent national data is available for all municipalities. As

noted in Section 2.2, there are other cost influencing factors, such as the type of technology and configuration of

infrastructure, that also affect municipal service costs. However, as data is limited, in many cases outdated and

generally not prepared in a consistent format, these have not been factored for in cost estimates. A further set of

factors not considered is soil type and condition, such as unstable soils which would add a construction premium –

these were excluded as more specific knowledge would be needed as to the proposed siting of development, and

because, all things being equal, feasibility assessments would point against development on such sites. A geo-spatial

profile was developed for all municipalities in South Africa which includes all cost-influencing factors listed in a – e

above, and also for geology, though geology has not been taken into consideration for moderation of costs for the

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reasons noted above. The geological profile includes the occurrence of collapsing soils, dolomite, expansive clays and

restricted soil depth per municipal area. In future years it may become necessary to add geo-technical factors to the

list of cost-influencing factors as the trend of urbanisation continues, cities become more dense and greenfields land

availability in city spaces become more limited. The cost influencing factors considered in cost estimates include:

2.5.1 Topography

Topography can be an important consideration in both capital and operating costs. Water and sanitation networks, for

example, would under ideal conditions be designed to enable conveyance (water and sewerage) through gravity. In

rolling and mountainous terrain it becomes necessary to construct pump stations to boost flow in these systems,

which adds to the cost of construction (CAPEX). The pump stations consume energy, which adds to energy costs

under operating expenditure. Following is an example of how topography and geology affect the capital cost of

development in Buffalo City:

Figure 2: Application of capital development cost premiums to Buffalo City

2.5.2 Location

For purposes of the costing model, location differentiates between coastal and inland. In inland settings, for example,

all sewerage must be treated for safe discharge into natural water systems. This requires the construction and

operation of wastewater treatment works. In coastal settings biological sewerage is routinely discharged into oceans,

or receive rudimentary treatment only before being discharged into oceans, where the volume of water coupled with

the salt content is generally sufficient to treat wastewater.

2.5.3 Distance from economic centers

Specialised goods and services tend to be concentrated in larger economic centers. This is generally true for

professional services such as town planning and engineering consulting services, for the suppliers and distributors of

specialised capital equipment and spares, and for consumables such as chemicals. Municipalities situated some

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distance away from main economic centers pay a premium to acquire specialised goods and services in the form of

increased delivery costs for goods, and travel disbursements for specialised services.

Figure 3: Travel times from main economic centers

2.5.4 Development status

The size of the municipal area, number of settlements, whether households are located in urban or rural settings, and

density all affect both capital and operating cost structures. Density deserves special mention. The densification

objective is currently high on the South African urban agenda, and is specifically noted in the National Development

Plan, the Integrated Urban Development Framework and in the Urban Networks Strategy. It is widely assumed that

infrastructure can be provided more cost efficiently to dense or compact spatial forms. This is however not necessary

true in all places and instances. The UN Habitat (2009: 160) notes that research on this topic highlights that the

relationship between cost efficiency and compact form is much more complex, and that study of actual development

indicates highly variable unit costs between types of infrastructure, topography, geotechnical conditions, available

capacity and service thresholds. The following datasets have been incorporated in the geo-spatial profile of the cost

estimation model:

Table 5: Development status factors

Category Element Data source Data datestamp

Settlement typology

Size of municipal area (km2) Municipal Demarcation Board Nov-2011

Nr of settlements StatsSA - number of Sub Places per Municipality 2011

Size of largest settlement (nr of hhs) StatsSA - Sub Place with the largest number of Households per municipality 2011

Population density (hhs/km2) Population (StatsSA 2011) / Size of Municipal Area 25-Nov-2013

Level of urbanisation

HHs in urban areas StatsSA - Geo Type 2011

HHs in farm areas StatsSA - Geo Type 2011

HHs in tribal/traditional areas StatsSA - Geo Type 2011

% hhs urbanised Calculated: HHs in urban areas / total hhs. 25-Nov-2013

2.5.5 Cost influencing factor index

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The impacts of the cost-influencing factors described above on cost elements per infrastructure service are as

indicated in the following index:

Table 6: Cost influencing factor index - topography and location Cost influencing factor (on Operation and Maintenance) : 0% = no

influence Topography Location

Class Cost element Flat Rolling Mountainous Coastal Inland

Electricity

Bulk purchases 0% 0% 0% 0% 0%

Contracted services 0% 2% 4% 0% 0%

Employee-related costs – salaries & wages 0% 2% 4% 0% 0%

Insurance 0% 0% 0% 0% 0%

Other expenditure – Loose tools & overheads 0% 0% 0% 0% 0%

Other materials 0% 0% 0% 0% 0%

Rent of facilities and equipment 0% 0% 0% 0% 0%

Operations / Repairs and maintenance 0% 0% 5% 0% 0%

Transportation costs 0% 5% 10% 0% 0%

Energy costs 0% 0% 2% 0% 0%

Refuse




Insurance 0% 0% 0% 0% 0%







Sanitation

Bulk purchases 0% 0% 0% -2% 0%



Insurance 0% 0% 0% 0% 0%







Water




Insurance 0% 0% 0% 0% 0%






Energy costs 0% 5% 10% 0% 0%

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Cost influencing factor (on Operation and Maintenance) : 0% = no influence Topography Location

Class Cost influencing factor Flat Rolling Mountainous Coastal Inland

Roads and Stormwater




Insurance 0% 0% 0% 0% 0%







Note that no standard density factors have been included, as these are calculated for each municipality based on its

unique spatial characteristics (e.g. nr of settlements, population distribution between urban and rural areas, and

population densities).

Table 7: Cost influencing factor index - Distance from economic center and loss of economy of scale Cost influencing factor (on Operation and Maintenance) : 0% = no

influence Distance from main

economic center Loss of economy of scale

Class Cost element A B1 B2-4 C1-2 A B1-2 B3-4

C1-2

Electricity

Bulk purchases 0% 0% 0% 0% 0% 0%

Contracted services 0% 5% 10% 0% 2% 5%

Employee-related costs – salaries & wages 0% 0% 0% 0% 2% 5%

Insurance 0% 0% 0% 0% 0% 0%

Other expenditure – Loose tools & overheads 0% 5% 10% 0% 2% 5%

Other materials 0% 5% 10% 0% 2% 5%

Rent of facilities and equipment 0% 5% 0% 0% 2% 5%

Operations / Repairs and maintenance 0% 5% 10% 0% 2% 5%

Transportation costs 0% 5% 10% 0% 2% 5%

Energy costs 0% 0% 0% 0% 0% 0%

Refuse




Insurance 0% 0% 0% 0% 0% 0%






Energy costs 0% 2% 0% 0% 2% 5%

Sanitation

Bulk purchases 0% 5% 10% 0% 0% 0%



Insurance 0% 0% 0% 0% 0% 0%






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Cost influencing factor (on Operation and Maintenance) : 0% = no influence

Distance from main economic center Loss of economy of scale

Class Cost element A B1 B2-4 C1-2 A B1-2 B3-4

C1-2

Water




Insurance 0% 0% 0% 0% 0% 0%






Energy costs 0% 0% 0% 0% 0% 0%


Energy costs 0% 0% 0% 0% 0% 0%

Roads and Stormwater




Insurance 0% 0% 0% 0% 0% 0%






Energy costs 0% 0% 0% 0% 0% 0%

2.6 Cost adjustment factors

The various elements of cost are driven by different cost factors, some of which are driven by administrative price

increases (typically bulk purchases costs), through negotiation (employee-related costs), or through market forces

(materials, other expenditure, and repairs and maintenance). This report provides a five-year view on cost estimates

that have been adjusted over the projection period as per the cost adjustment factors indicated in the table below:

Table 8: Cost adjustment factors

Cost structure Source Cost adjustment factor

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Employee related costs SALGA 6,65% 6,40% 7.00% 6.80% 6.80% 6.80%

CRC adjustment percentage SAFCEC 5,70% 6.04% 6.04% 6.04% 6.04% 6.04%

Bulk water purchases DWA Determined on a scheme to scheme basis

Bulk electricity purchases NERSA 8,00% 16.75% 12.69% 12.69% 12.69% 12.69%

Other materials CPIX 5,40% 5,80% 5,80% 5,80% 5,80% 5,80%

Other expenditure CPIX 5,40% 5,80% 5,80% 5,80% 5,80% 5,80%

Repairs and Maintenance CPIX 5,40% 5,80% 5,80% 5,80% 5,80% 5,80%

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The operating and maintenance cost estimation was based largely on research using available municipal financial data,

as published by the National Treasury. The team also engaged with selected municipalities and analysed costs from

the following municipalities:

• Mogale City Local Municipality;

• Buffalo City Metropolitan Municipality (EC)

• Nkangala District Municipality (MPU)

• Thembisile Hani Local Municipality (MPU)

• Polokwane Municipality (LIM)

• Hessequa Municipality (WC)

Zero based cost data for maintenance and operations was also used to test and calibrate the results obtained.

Significant cost influencing factors were used in the determination of operating and maintenance costs, to provide for

the effect of location, topography and other factors, as indicated below:

• Topography

• Location

• Distance from economic centre

• Development density

• Economy of scale

• Asset condition

For roads and cemeteries there are additional cost influencing factors, namely rainfall and mortality rates respectively.

The Depreciated Replacement Cost (DRC) methodology was used during cost establishment to determine the

estimated remaining value of assets (for municipalities where asset registers were developed) at the date of cost

establishment, this provided information on the typical level of consumption of the asset base. The depreciation

charges for infrastructure is based on the estimated useful life of assets, determined at component level and

aggregated per service. The annual depreciation thus calculated represent the annual cost of asset renewals under

ideal conditions, and is used to represent the depreciation requirements. CRC and DRC values have been calculated

for dozens of municipalities in several provinces, and were extrapolated to all municipalities considering the category

of municipality.

2.7 Towards sustainability and greater efficiency

2.7.1 Demand management

A key principle adopted for purposes of estimating the quantum of grant allocations is to fund at levels of realistic

efficiency. This applies specifically to the demand for utility services where national policies prescribed the quantum of

free basic water and electricity to be provided to poor households. In the case of water, for example, national policy

dictates that each household shall receive 6 kℓ of free water per month. Costing equitable share allocations at this

level of consumption would however disadvantage municipalities as, regardless of how efficient a municipality’s

physical infrastructure networks and management regime may be, some system losses are unavoidable. On the other

hand, systems losses in many municipalities are excessive. Not only would it be bad practice to fund inefficiencies, it

would place unnecessary burdens on the Fiscus and on the environment. It is therefore proposed that costing

estimates, and therefore grant allocations, provide for both national policy provisions as well as realistic losses.

FFC AND SALGA


Deemed realistic provisions are noted below and have been factored into the cost estimates presented in this report:

Table 9: Provision for realistic levels of consumption of utility services and production of wastes

Infrastructure service Description Allowance Unit

Water

Free / Basic 6 kl/month per hh

Allowance for acceptable level of losses / minimisation 20 %

Effective demand 86,4 kℓ/pa per hh

Electricity

Free / Basic 50 kWh/month per hh


Effective demand 660 kWh/pa per hh

Solid waste

Free / Basic 1,2 kg/day per hh


Effective demand 329 kg/pa per hh

Sanitation

Free / Basic 4 kℓ/month per hh


Effective demand 48 kℓ/pa per hh

2.7.2 Provision for asset care

Provision for maintenance

Government has over the course of the past decade or so made consistent, sizeable and ever-increasing capital

transfers via DORA to municipalities for the construction of municipal infrastructure and amenities for the poor. The

creation of infrastructure assets and municipal amenities in turn give rise to operating liabilities in the form of both

asset maintenance and depreciation. The traditional approach to budgeting for maintenance was to provide for this

item as a percentage of the operating budget (National Treasury established a benchmark of 8%). The basis of

estimation for maintenance using this method is flawed, as the quantum of maintenance needs is a function of the size

of the asset portfolio to be maintained, and the specific needs and statutory maintenance obligations of specific assets

in that portfolio.

A listing of municipalities that established asset registers using the Depreciated Replacement Cost (DRC) methodology

is included in Table 2. From this dataset the average Current Replacement Cost (CRC) per service per household was

determined and extrapolated to determine CRC and DRC values for all municipalities. The cost estimates provided for

maintenance in this report are based on an annualised percentage of CRC of various asset portfolios. Maintenance

cost estimates as a percentage of CRC have been confirmed in detailed infrastructure asset management plans

prepared for over 50% of the municipalities listed in Table 2.

Provision for depreciation

Most municipalities calculate depreciation on the basis of historic cost, and current depreciation charges are simply not

representative of the actual consumption of asset value. A case study of the insufficiency of depreciation provisions

on the basis of historic cost is provided in the following figure, using the example of a reservoir constructed in 1993.

Three valuation methods are applied, namely (1) DRC (fair valuation), (2) componentised historic cost and (3)

bundled historic cost.

Reporting on the basis of historic cost would result in understatement of the value of the reservoir by some 68-69%,

depending on the level of componentisation. At the reporting date the water-retaining reinforced concrete structure,

which is the one component within the reservoir that represents a little over 50% of the total value of the reservoir,

will have had 29 years’ of remaining useful live left. Over time, the magnitude of the understatement using the

historic cost method would simply keep on increasing. This is because the CRC of the reservoir will continue to

escalate and depreciation will continue to drive down the carrying value of the asset.

FFC AND SALGA


Figure 4: Case study demonstrating the superiority of the DRC method in determining depreciation provisions

A 300 kℓ reservoir constructed in 1993 at a cost of R 890 526

The Current Replacement Cost (CRC) of the reservoir as at 30 June 2013 would have been in the order of R 2 856 038. The financial position

of the reservoir at this reporting date would have been:

Measurement

Basis Carrying

value Accumulated depreciation

Annual depreciation

DRC (fair valuation) 1 457 602 1 398 437 73 089

Componentised historic cost 463 876 426 650 22 790

Bundled historic cost 454 170 436 356 24 044

Measured against the lifespans of its longer-life, high-value components (pipework 80 years, civil structures of about

50 years), about a third of the life of the reservoir has been consumed by 2013. At that point the CRC was close to R

2.9 million – more than three times the original acquisition cost – and will continue to rise over the next forty years

until replacement of the reservoir. Yet the total amount available for asset renewal or replacement through

depreciation provisions using the historic cost method would forever remain fixed at R 890 526. This amount is

woefully insufficient to replace the reservoir now or at any point in the future. Accounting for the reservoir using the

DRC mechanism, on the other hand, would ensure that sufficient provision for replacement is made through

depreciation charges that continually keep track with escalation in CRC. From a sustainability point of view, therefore,

DRC is the preferred method, and is therefore the method chosen to model depreciation provisions that forms part of

the operating cost envelope per service modelled for each municipality.

Modelling for application of capital investment and asset renewal needs

There is increasing recognition that asset care has been neglected in the municipal space, and that a renewals backlog

is emerging. The World Bank, the National Treasury, the FFC and South African Cities Network have all in recent

years published research on this matter. National Treasury has also issued the MFMA Circular 55 that requires

municipalities to allocate at least 40% of their capital budgets towards asset renewal. Cost modelling informing the

cost estimates presented in this report considered two scenarios of the possible treatment of asset renewals within a

municipality’s capital investment programme, as follows:

Model A: Asset sweating

This scenario models capital investment based on municipal budgets, and assumes a fixed split between investment in

infrastructure to be renewed, and new infrastructure or infrastructure to be upgraded, based on reported results and

selected interviews. This scenario was modelled as follows:

1. Capital investment for 2013/14 – 2015/16 based on available municipal budget data (MTREF), with high

preference given to creation of new infrastructure.

2. Investment for the period 2016/17 outward based on average for MTREF and adjusted with SAFCEC based

assumed escalation (of 6.04% /annum).

3. Initial investment in renewals based on average for number of municipalities (of various categories), and

progressively increased to meet the ‘40% of capital invested required’.

Model B: Responsible asset custodianship

The application of capital investment (to renewal, new infrastructure creation and upgrading) is based on rational

approach aimed at sustainability in asset portfolios and therefore the productive capacity vested in those portfolios.

It is therefore not primarily based on municipal budget provisions, but rather on a combination of the needs to

address service access backlogs through infrastructure creation and upgrading, and with respect to renewal, the

condition and level of annual asset consumption determined through the DRC method. This scenario was modelled as

follows:

FFC AND SALGA


1. Investment in ‘New and upgrading of infrastructure’ has been based on the growth in households, with

allowance for scenario modelling – a key assumption was the annual production of additional fully served

dwellings equal to 100% of new household formation.

2. Investment in ‘Renewals’ is based on a (service specific, component based) annual depreciation as a

percentage of the CRC value – currently set to equal the annual depreciation value (maintaining asset status),

and with a scenario modeller function provided to model:

a. increasing the investment proportionally (to eradicate renewal backlogs/ improve asset health status),

or

b. decreasing the investment where municipalities cannot meet the target – with a resultant decrease in

asset health.

Cost impacts, both of a capital and operating nature, of both models have been calculated and are presented in this

report. The preferred funding model is Model B (2) (a) as described above.

2.8 Population size and growth

The model is based on the households per municipality, which forms the basis, and is used in conjunction with other

data and attributes to determine and estimate key elements such as the infrastructure replacement costs. The

estimates presented in this report takes into account specifically the number of indigent households in municipalities.

The household data and growth was obtained from Statistics SA, and population estimates were amended using the

Census 2011 data as basis, and updated based on the 2013 General Household Survey. This approach was followed by

Treasury in the determination of the current ES, and published on the MFMA web site ‘http://mfma.treasury.gov.za/

Media_Releases /LGESDiscussions/ Pages/default.aspx’.

1. The total number of households nationally for 2014/15 amounts to 14 877 844 and the number of indigent

households to 8 702 989, or 58.49% of the total number.

2. The corresponding numbers for 2015/16 are 15 336 205 in total, and the number of indigent households to

8 965 789, with indigent households accounting for 48.46 % of total households.

A significant factor to be noted is that in the model prepared in the first phase the number of households with income

below R2 300/m increased from 6 288 963 in 2011 (based on census 2011 figures), to 6 638 272 in 2014 (applying

growth figures to census 2011 and used as basis in the 2014 model). Based on the household numbers that have now

been adopted, the number of low income households have risen very sharply to 8 702 989 in 2015 and 8 965 789 in

2016 (as per the LGES, which used 2013 household survey figures to adjust the census 2011 data), equivalent to an

increase of 31% during 2014, or 7.35% pa from 2011 to 2015. Part of the reason for the increase may be that

household numbers are increasing more rapidly than population numbers to decreasing number of people per

household. The household numbers for 2015, as well as the numbers for households per municipality, with monthly

income below the threshold of R 2 300 and growth rate as determined by Treasury and applied in this model, is shown

in Appendix C. The comparative number of households, and households with income less than R 2 300/ month is

displayed per province in the table and image below:

Table 10: Households per Province: 2014/15

Province Households HH with Income < R2 300

Eastern Cape 1 712 757 1 174 335

Free State 840 444 521 195

Gauteng 4 074 572 2 037 619

Kwazulu-Natal 2 592 308 1 631 433

Limpopo 1 460 475 1 032 486

FFC AND SALGA


Province Households HH with Income < R2 300

Mpumalanga 1 112 741 685 131

Northern Cape 308 976 174 651

North West 1 091 621 676 505

Western Cape 1 683 951 769 634

Total 14 877 844 8 702 989

Figure 5: Households per Province (expressed in ‘000)

2.9 Capital Need Elements and Grant Funding

Capital subsidy grants are provided to allow municipalities to provide or upgrade infrastructure services to serve the

growth in low income households as well as eradicate the access backlogs. The estimated capital needs consist of the

investment in new assets (and or upgrading existing assets) required to provide infrastructure for provision of basic

services for the growth in low income households, plus investment required for eradicating the existing access

backlogs.

Modelling the Backlog

The best source of information on backlogs for various services, even if slightly outdated, and considering the changes

to backlogs resulting from new (and upgraded) infrastructure provided, is the 2011 census data. A search for more

recent data that can be considered as reliable and authoritative enough to be used as alternative to census 2011 data

have not yielded significant results, although publications by for instance INEP, DWS have provided insight and

information that could be used to inform assumptions regarding the change in backlog over the intervening years.

Based on the available information, the backlog for the various services for 2015 has been estimated to be:

Table 11: Assumed Backlogs

Province Energy Water Sanitation Cemeteries Solid Waste Roads

W Cape 5.8% 2.7% 9.7% 12.9% 14.4% 12.9%

N Cape 10.8% 6.4% 18.1% 13.9% 25.5% 13.9%

E Cape 17.8% 25.7% 37.0% 31.2% 50.9% 31.2%

FS 8.2% 3.9% 20.3% 17.9% 24.0% 17.9%

KZN 25.3% 29.7% 37.4% 34.2% 63.9% 34.2%

MP 11.3% 13.1% 30.6% 18.4% 39.5% 18.4%

LIM 9.4% 21.2% 50.2% 9.8% 63.6% 9.8%

NW 13.1% 14.0% 35.5% 19.0% 48.6% 19.0%

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GT 12.0% 5.0% 11.0% 20.5% 11.5% 20.5%

Total 14.5% 16.8% 30.2% 22.0% 43.2% 22.0%

For the purpose of calculating the annual rate and cost of backlog eradication, it has been assumed that the backlog in

the various municipalities will be reduced at the rate of 15% of the 2015 backlog p/a. This factor is adjustable, for

each sector individually, in the model.

Grant Funding

The focus in this report will be on the modelling and estimation of funding requirements and needs for poor

households, for capital as well as operational expenditure, and not on available funding mechanisms or grants.

FFC AND SALGA


3. Capital Cost Needs: Electricity

3.1 Typical scope of infrastructure to be funded

Municipal electricity infrastructure typically includes the following asset types:

• HV and MV Substations and switching stations

• Mini-substations

• MV transformers (Pole Mounted, Floor Mounted or Indoor)

• Overhead conductors (HV, MV and LV)

• Cables (HV, MV and LV)

• Service connections (kiosks, conductors, meters)

For purposes of costing estimates in this report it is assumed that all municipalities buy bulk electricity from Eskom,

and that the extent of off-grid supply is not material - hence generation infrastructure is excluded from the scope of

infrastructure to be funded.

3.2 Capital cost estimates for provision of electricity to the poor: Model B: Responsible asset

custodianship

Cost estimates were developed for electricity infrastructure required to service low income households. Costs are

inclusive of all infrastructure elements from the Eskom bulk supply point to the individual households, including the

connections and meters, and design and overhead costs. The average cost of service per low income household

amounts to R 16 021 per household, with a total value of R 4.3 billion for growth needs, and R 3.1 billion for backlog

reduction (at 15% backlog reduction/a) for 2015/16. The estimated capital cost required to provide electricity

infrastructure service low income households for the 2015/16 financial year, as well as the INEP grant (for

municipalities and Eskom) per province, is indicated in Table 12.

FFC AND SALGA


Table 12a: Estimated infrastructure funding needs (low income per PDG category)

Municipal Category Electricity

PDG Classification Growth/ annum Backlog (Total) Total

A - Metropolitan 1 963 053 965 7 574 554 942 9 537 608 907

B1 - Secondary cities 732 735 382 2 827 524 508 3 560 259 890

B2 - Large towns 356 599 605 1 813 452 137 2 170 051 742

B3 – Small towns 506 330 963 2 781 149 965 3 287 480 928

B4 - Predominantly Rural 799 701 951 6 161 223 063 6 960 925 014

Total 4 358 421 866 21 157 904 614 25 516 326 481

Table 12a: Estimated infrastructure funding needs per province (low income)

Electricity Growth Backlog (15%) Funding Need/ Poor HH Growth

Eastern Cape 294 310 549 530 441 215 46 475 17 746

Free State 184 984 515 108 562 323 26 318 11 154

Gauteng 1 424 322 370 636 193 213 23 992 85 883

Kwazulu-Natal 767 689 091 1 058 842 304 39 458 46 290

Limpopo 516 472 892 248 804 607 24 574 31 142

Mpumalanga 386 219 374 200 604 221 25 199 23 288

Northern Cape 74 088 534 48 222 920 27 381 4 467

North West 316 562 139 228 124 857 28 536 19 088

Western Cape 393 772 403 113 890 031 21 382 23 743

Total 4 358 421 866 3 173 685 692 28 661 262 801

The figure below displays the estimated capital needs against the growth in low income customers:

Figure 6: Comparison of electricity capital funding needs for the poor – 2015

The current funding allocation for electrification per household varies significantly from one province (and

municipality) to the next – especially and consistently across all services for the Eastern Cape - for reasons unknown.

This anomaly will need to be given further attention. It has also been noted that there are a number of municipalities

with ‘0%’ growth in poor households, yet infrastructure grants are still provided. This is assumed to have been made

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as part of the process of funding allocated towards eradicating existing backlogs and which should enable these

municipalities to eradicate the backlogs sooner.

3.3 Recommendations

The estimated infrastructure cost for electricity services used in the Model were increased from the final values used in

the final version of the model developed during 2014, but is still relatively low, and providing for the minimum

infrastructure and service level only. The need for bulk supply infrastructure, and the fact that actual installations are

typically not 20 amp connections as assumed in these estimates should be given consideration, since it is in general

not considered practical to design and install networks that will not be able to supply the actual demand two – five

years after installation. Further investigation of the anomalies regarding the variation in funding allocations per

household, and amongst municipalities and provinces is recommended – including the household growth that was

used as basis, since this might be a contributing factor explaining anomalies.

FFC AND SALGA


4. Capital Cost Needs: Refuse Removal and Disposal (Solid Waste)


Municipal solid waste infrastructure typically includes the following immovable asset types:

• Landfill sites (active and closed)

• Transfer stations

• Garden waste sites

• Drop-off sites

The service differs from other infrastructure services with regard to the methods used to convey the product, which is

not done by way of a fixed reticulation network, but by transporting the waste product by road using specialised

vehicles.

4.2 Capital cost estimates for provision of solid waste services to the poor: Model A: Asset sweating

The investment required in new infrastructure to serve the growth in low income households is the same whether for

the ‘Model A: Asset sweating’ scenario or the ‘Model B: Responsible asset custodianship’. The difference between the

two scenarios is to be found in the negative effect (under the ‘Model A’ scenario) on the standard of service, in the

deferred investment in renewals, the increased level and cost of maintenance required, and the reduced life

expectancy of infrastructure.

4.3 Capital cost estimates for provision of solid waste services to the poor: Model B: Responsible asset

custodianship

FFC AND SALGA


The capital needs for infrastructure required to serve the growth in low income households (for 2016) has been

estimated at R 246 million. The needs per province is shown in Table 13:

Table 13a: Growth and backlog needs for solid waste for the poor per PDG category - 2015/16

Municipal Category Roads and stormwater


A - Metropolitan 139 102 468 1 102 026 947 1 241 129 415

B1 - Secondary cities 58 193 956 680 347 932 738 541 888

B2 - Large towns 13 110 102 184 482 347 197 592 450

B3 – Small towns 18 614 857 314 647 494 333 262 351

B4 - Predominantly Rural 16 970 089 473 069 477 490 039 566

Total 245 991 473 2 754 574 198 3 000 565 670

Table 13b: Growth and backlog needs for solid waste for the poor per province - 2015/16

Solid Waste Growth Backlog (15%) Total need HH Growth Funding Need/ Poor HH - growth

Eastern Cape 13 357 549 63 163 156 76 520 706 17 746 753

Free State 9 802 596 17 065 325 26 867 921 11 154 879

Gauteng 99 431 932 46 971 158 146 403 090 85 883 1 158

Kwazulu-Natal 38 820 478 136 008 071 174 828 549 46 290 839

Limpopo 16 835 861 50 650 857 67 486 719 31 142 541

Mpumalanga 19 474 437 30 974 776 50 449 213 23 288 836

Northern Cape 3 147 238 4 873 209 8 020 447 4 467 705

North West 20 307 331 44 144 162 64 451 494 19 088 1 064

Western Cape 24 814 050 19 335 415 44 149 465 23 743 1 045

Total 245 991 473 413 186 130 659 177 602 262 801 936

The figure below displays the estimated capital needs for solid waste immovable infrastructure, while indicating the

growth in low income customers:

Figure 7: Solid waste capital funding needs for the poor – 2015/16

4.4 Recommendations

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Since Solid Waste services are an essential service, it is recommended that a grant allocation be provided for funding

capital needs for Solid Waste needs.

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5. Capital Cost Needs: Roads and Stormwater


Municipal roads and stormwater infrastructure typically includes the following asset types:

• Roads;

• Road furniture (regulatory signs and signage, traffic signals, road markings, guard rails etc.);

• Stormwater infrastructure, inclusive of pipes, kerb inlets, culverts and stormwater attenuation infrastructure;

• Kerbs;

• Streetlights; and

• Bridges.

The MIG Guidelines indicate that although no national standard has been adopted, for rural areas the basic level of

service to be provided is a minimum of access to the center point in a village or an area, and that this basic service

can be extended to include some of the main accesses, spurs or lanes linked to the main thoroughfare in the village.

The guidelines further state that:

‘In the urban context, a gravel road is not acceptable as a basic service. This is due to the impact of O & M costs and

other urban road users applications (e.g. emergency services refuse removal, street sweeping by mechanical means),

the type of vehicles (e.g. taxis, buses), as well as the vehicle count per day. In the metropolis areas, the basic level of

road service is a durable, all weather surfaces that results in a minimum of O & M costs to be incurred’

For the purpose of the model it has been assumed that in rural areas gravel roads are provided, with paved distributor

and collector roads, and that in the urban area paved roads are provided as a basic service.

FFC AND SALGA


5.2 Capital cost estimates for provision of roads and storm water infrastructure to the poor: Model B:

Responsible asset custodianship

The all-inclusive cost for basic roads and stormwater services to serve the growth in low income customers for 2016

has been estimated at R 8 837 million. Estimates took into account the level of urbanisation, allowing for a higher

target level of basic service in urban areas (paved roads plus storm water), compared to the areas outside the urban

environment, where the target level will be predominantly gravel roads and the associated appropriate storm water

infrastructure.

Table 14a: Growth and estimated backlog needs (total) for roads and storm water/ PDG category 2015/16

Municipal Category Water


A - Metropolitan 5 264 369 925 37 544 549 636 42 808 919 561

B1 - Secondary cities 1 792 000 271 10 391 802 916 12 183 803 187

B2 - Large towns 486 085 965 3 862 140 210 4 348 226 175

B3 – Small towns 690 186 898 6 059 368 095 6 749 554 993


Total 8 837 188 982 64 483 060 690 73 320 249 672

Table 14b: Growth and estimated backlog needs (15% of total) for roads and storm water/ province 2015/16

Roads and Stormwater Growth Backlog (15%) Total need HH Growth Funding Need/

Poor HH - growth

Eastern Cape 498 784 906 1 435 916 414 1 934 701 320 17 746 28 107

Free State 360 012 925 458 104 691 818 117 616 11 154 32 277

Gauteng 3 706 480 965 3 112 891 631 6 819 372 596 85 883 43 157

Kwazulu-Natal 1 395 909 926 2 626 505 694 4 022 415 620 46 290 30 156

Limpopo 573 908 683 269 656 473 843 565 156 31 142 18 429

Mpumalanga 632 243 030 475 053 104 1 107 296 134 23 288 27 149

Northern Cape 110 903 086 92 592 451 203 495 537 4 467 24 827

North West 644 419 353 563 762 813 1 208 182 166 19 088 33 760

Western Cape 914 526 109 637 975 833 1 552 501 942 23 743 38 518

Total 8 837 188 983 9 672 459 104 18 509 648 087 262 801 33 627

When the amounts per province is used to derive the average cost per new low income household, the resulting

‘average unit rates’ vary from R 27 088/ hh in Limpopo to R 109 022/ hh (in the Eastern Cape). The backlog

eradication as shown is based on a reduction of 15% per annum. The figure below displays the estimated capital

needs while also indicating the growth in numbers for low income customers:

FFC AND SALGA


Figure 8: Comparison of roads and storm water capital funding needs for low income households

5.3 Recommendations

Current grant funding is not sufficient to provide essential roads and stormwater services to low income households

when both backlogs and growth needs are considered. Grants totalling an estimated R 18.5 billion per month would be

required in order to allow for the reduction of the existing backlog over approximately 7 years and growth in poor

customers.

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6. Capital Cost Needs: Water


Municipal water infrastructure typically includes the following asset types:

• Boreholes;

• Dams;

• Water Treatment Works

• Pump stations;

• Reservoirs;

• Bulk main pipelines; and

• Distribution network.

6.2 Capital cost estimates for provision of water infrastructure to the poor: Model B: Responsible asset

custodianship

The estimated capital needs for immovable infrastructure required to serve the ‘new’ low income households (growth

for 2016) amount to R 4 982 million at national level. The estimates provide for bulk and distribution needs, adopting

target levels suited to the nature of the municipality. The estimated needs, aggregated per province, are indicated in

the table that follows:

FFC AND SALGA


Table 15a: Growth and backlog capital needs for water services for low income hh per PDG category - 2015/16

Municipal Category Water


A - Metropolitan 1 900 854 787 6 486 642 332 8 387 497 119


B2 - Large towns 437 525 568 2 473 497 236 2 911 022 804

B3 – Small towns 621 236 645 3 822 313 264 4 443 549 908


Total 4 736 030 219 26 948 099 611 31 684 129 830

Table 15b: Growth and backlog capital needs for water services for low income hh per Province - 2015/16

Water Growth Backlog (15%) Total need HH Growth Funding Need/

Poor HH - growth

Eastern Cape 331 555 107 909 780 946 1 241 336 054 17 746 18 683

Free State 206 835 698 61 429 072 268 264 769 11 154 18 544

Gauteng 1 408 278 658 291 655 224 1 699 933 882 85 883 16 398

Kwazulu-Natal 858 357 297 1 446 612 926 2 304 970 223 46 290 18 543

Limpopo 622 504 299 680 988 239 1 303 492 539 31 142 19 989

Mpumalanga 449 530 147 273 886 610 723 416 757 23 288 19 303

Northern Cape 89 293 550 34 524 436 123 817 986 4 467 19 990

North West 357 891 624 282 934 412 640 826 037 19 088 18 750

Western Cape 411 783 839 60 403 076 472 186 915 23 743 17 343

Total 4 736 030 219 4 042 214 942 8 778 245 161 262 801 18 021

The assumption, as for other services, is that the backlog is to be eradicated at 15% per annum.

6.3 Water services funding needs

The figure below displays the estimated capital needs, and also indicates the growth in low income customers:

Figure 9: Water funding needs for low income households – 2015/16

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6.4 Recommendations

It appears that the current funding arrangements are sufficient to meet the growth needs in low income housing, as

well as to address backlog and other needs amounting to approximately R 8.8 billion/annum.

7. Capital Cost Needs: Sanitation


Municipal sanitation infrastructure typically includes the following asset types:

• Reticulation network;

• Main outfall sewers;

• Pump stations; and

• Waste Water Treatment Works.

7.2 Capital cost estimates for provision of sanitation infrastructure to the poor: Model B: Responsible

asset custodianship

The estimates provide for reticulation and bulk needs, including treatment in the case of waterborne services, and all

associated costs to create the infrastructure assets. Target levels of service appropriate to the needs of the

municipality were adopted – waterborne services for urbanised areas, and largely VIP (Ventilated Improved Pit

latrines) for rural areas.

The estimated capital needs for immovable infrastructure required to serve the ‘new’ low income households (growth

for 2016) amount to R 4 595 million overall. The estimated needs, aggregated per province, are indicated in the Table

16.

FFC AND SALGA


Table 16a: Growth and estimated backlogs capital needs for sanitation services per PDG categorye - 2015/16

Municipal Category Sanitation


A - Metropolitan 2 178 583 098 12 469 812 391 14 648 395 488


B2 - Large towns 370 338 091 3 628 739 167 3 999 077 258

B3 – Small towns 525 838 054 6 409 696 610 6 935 534 663


Total 4 475 876 924 40 001 225 472 44 477 102 396

Table 16b: Growth and estimated backlogs capital needs for sanitation services per Province - 2015/16

Sanitation Growth Backlog (15%) Total need HH Growth Funding Need/

Poor HH - growth

Eastern Cape 276 564 413 1 001 645 912 1 278 210 324 17 746 15 585

Free State 200 071 658 301 685 328 501 756 986 11 154 17 937

Gauteng 1 588 905 275 716 580 803 2 305 486 078 85 883 18 501

Kwazulu-Natal 757 530 895 1 545 710 499 2 303 241 394 46 290 16 365

Limpopo 401 298 802 994 077 845 1 395 376 647 31 142 12 886

Mpumalanga 380 078 374 496 891 038 876 969 412 23 288 16 321

Northern Cape 77 603 659 83 464 939 161 068 599 4 467 17 373

North West 358 765 553 633 123 976 991 889 529 19 088 18 795

Western Cape 435 058 295 227 003 481 662 061 776 23 743 18 324

Total 4 475 876 924 6 000 183 821 10 476 060 744 262 801 17 031

The average cost per additional household amounts to R 17 000, while the ratio between grant funding and capital

needs, based on a 15% annual backlog reduction range between61% and 222%.

7.3 Comparison of modelled results to DORA allocations

The figures below display the estimated capital needs, also indicating the growth in low income customers:

FFC AND SALGA


Figure 10: Comparison of sanitation capital funding needs for low income households – 2015/16

7.4 Recommendations

The situation for sanitation is similar to water in respect of funding availability. There are sizeable challenges for bulk

services, in terms of supplies, capacity and infrastructure.

8. Capital Cost Needs: Health - Cemeteries


Municipal functions related to health services include cemeteries, abattoirs, air quality monitoring stations, and water

testing laboratory services. Most municipalities do not provide abattoir services anymore, and few have crematoria.

In many instances where municipalities do still have abattoirs and crematoria, these functions are outsourced to the

private sector. Likewise most municipalities do not have fixed air quality monitoring stations or water testing

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laboratories, instead opting to outsource these services. Therefore, for purposes of modelling capital funding needs

for municipal health services, the focus is on cemeteries.

Typical infrastructure included in cemeteries are:

• Access and internal roads and road furniture;

• Perimeter protection;

• External facilities; and

• Stores and ablution facilities.

The provision of solid waste services can also be regarded to form part of the scope of municipal health services, but

has been modelled separately due to its significance.

8.2 Capital cost estimates for provision of cemetery infrastructure to low income households

The costs to provide cemetery services have been based on a similar approach to that followed in determining the

costs for other municipal infrastructure services. The CRC (current replacement cost) of infrastructure associated for

cemeteries were determined for the municipalities included in the benchmark data. These costs were analysed against

the household numbers, the capital expenditure and the operational expenditure of municipalities, as well as the GVA

(Gross Value Added) data for the corresponding municipalities. The mortality rate will have an effect on the rate of

burials and therefore the demand for burial plots, and it is considered as a cost influencing factor, and will be included

as such during phase 2 of the project.

The best correlation with the known CRC values was found to be the household numbers per municipality, and this

was used to develop the estimated CRC per municipality on a national basis. The estimates provide for all basic needs,

and all associated costs to create the infrastructure assets. The estimated capital needs for immovable infrastructure

required to serve the ‘new’ low income households (growth for 2016) amount to R 49.054 million overall. The funding

for cemeteries is currently not specifically catered for under the ‘P’ allocation (public municipal infrastructure). The

estimated needs, for growth in low income households are indicated in the table that follows:

Table 17: Growth in low income hh and capital funding needs for cemeteries per PDG category - 2015/16

Municipal Category Cemeteries


A - Metropolitan 19 648 913 112 058 570 131 707 483


B2 - Large towns 4 000 509 34 047 841 38 048 350

B3 – Small towns 5 680 269 56 254 354 61 934 623


Total 46 521 324 397 391 328 443 912 653

Table 17b: Growth in low income hh & estimated capital funding needs for cemeteries per Province - 2015/16

Cemeteries Growth Backlog (15%) Total need HH Growth Funding Need/

Poor HH - growth

Eastern Cape 3 163 586 10 862 761 14 026 347 17 746 178

Free State 1 990 751 2 213 209 4 203 960 11 154 178

Gauteng 14 457 123 7 139 260 21 596 383 85 883 168

Kwazulu-Natal 8 290 858 17 895 465 26 186 323 46 290 179

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Cemeteries Growth Backlog (15%) Total need HH Growth Funding Need/

Poor HH - growth

Limpopo 5 794 046 9 177 180 14 971 226 31 142 186

Mpumalanga 4 332 798 4 480 102 8 812 900 23 288 186

Northern Cape 831 162 749 851 1 581 012 4 467 186

North West 3 551 349 5 074 629 8 625 978 19 088 186

Western Cape 4 109 651 2 016 242 6 125 893 23 743 173

Total 46 521 324 59 608 699 106 130 024 262 801 177

Figure 11: Growth and Estimated cost of growth and backlog needs (Cemeteries) – 2015/16

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9. Capital Cost Needs: Fire-fighting Services


Fire-fighting services typically require that staff be employed and equipment provided to plan and render the services.

For metropolitan and large municipalities this typically require highly skilled personnel, vehicles and equipment. For

smaller municipalities the requirements could be limited to a smaller vehicle, minimal equipment and part-time staff.

The following infrastructure and equipment may be found in the fire-fighting department:

• Fire station facilities typically include relevant offices;

• Staff accommodation;

• Garages;

• Stores;

• Training and maintenance facilities;

• Fire engines and support vehicles;

• Communication equipment;

• Pumps and generators;

• Protective suits and clothes;

• Breathing apparatus;

• Hoses, nozzles etc.; and

• Water storage facilities.

FFC AND SALGA


9.2 Capital cost estimates for provision of fire-fighting services immovable infrastructure to low income

households

Facility costs for the following facilities were utilised to determine unit rates for various municipal categories:

• Chief Albert Luthuli LM

• Dipaleseng

• Emfuleni

• Govan Mbeki

• Lesedi

• Steve Tshwete

• Victor Khanye

• Westonaria

The costs to provide the immovable infrastructure associated with fire-fighting services have been based on an

approach similar to the methodology followed in determining the costs for other municipal infrastructure services. The

CRC (current replacement cost) of infrastructure associated with fire-fighting services were determined for the

municipalities that were included in the sample. These costs were analysed against the household numbers, the capital

expenditure and the operational expenditure of municipalities, as well as the GVA (Gross Value Added) data for the

corresponding municipalities.

The provision of effective fire-fighting services by municipal authorities is an essential service which comes with the

onerous responsibility to prevent injury, death and loss of property. The responsibility for fire protection is shared

between the district and local municipalities, with metropolitan and large municipalities providing the services directly.

The Standards Board of South Africa, with the assistance of the Fire Protection Association of Southern Africa, have

issued a standard - SANS 10090: 2002, Edition 3 – for fire-fighting services. The purpose of this standard is to

provide advice on the measures that should be taken to ensure that fire services are efficient. It includes a schedule

against which the performance potential of each aspect, as well as of the whole, of a fire service can be judged. A

fire-risk rating based on this schedule will indicate the extent to which loss of life and property can be avoided in any

particular given area.

These levels are identified as follows:

• Category 5 a): A brigade with adequate arrangements and provisions in place, in relation to risk, as measured

in the assessments section of Annexure A and C of the Standard (SANS 10090: 2002, Edition 3) for:

o Risk profile of area of jurisdiction;

o Weight and speed of response;

o Call receipt and processing requirements;

o Vehicle/equipment availability and maintenance;

o Incident management procedures;

o Pre-fire planning and risk visits;

o Training/personnel;

o Water supplies; and

o Fire safety functions.

• Category 5 b): A brigade that is able to meet performance criteria for staff availability per appliance

availability, pre-determined attendance (PDA), manning levels and attendance times, 35 % to 45 % of the

time, measured annually.

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• Category 3: A brigade as given for category 5 a) as monitored by relevant performance indicators or statistics,

or both, and which is able to meet performance criteria as given for category 5 b) 56 % to 65 % of the time,

measured annually.


or both, and which is able to meet performance criteria as given for category 5 b) 66 % to 75 % of the time,

measured annually.


or both, and which is able to meet performance criteria as given for category 5 b) more than 75 % of the time,

measured annually.

The norm for the level and standard of service for Metropolitan and larger municipalities is ‘Category 1’. For smaller

municipalities the standard adopted depends on the risk, capacity and resources, but all should endeavour to achieve

and maintain, if not a ‘Category 1’ service, then the highest possible category that can be provided effectively and

sustainably. SANS 10090 also determines that areas should be classified into one of the fire-risk categories as

detailed in Section 15. Poor households normally fall in either category C or D of this categorisation. Guidelines have

furthermore been developed by the CSIR for the ‘Provision of Social Facilities in South African Settlements’ which

provide social facility provision guidelines for access norms and standards, which in turn determines the type of fire-

fighting services facilities required. The table that follows list these requirements:

A. Metropolitan Cities/Regions - Catchment size: > 1 000 000

Compulsory provision of a fire station – threshold between 60 000 - 100 000

B. Large Cities/Small Metros - Catchment size: 350 000 - 1 000 000

Compulsory provision of a fire station – Threshold between 60 000 - 100 000

C. Large Towns/Regional Service Centres - Catchment size: 100 000 – 350 000


D. Small-Medium Towns/Regional Service Centres - Catchment size: 60 000 – 100 000


E. Small Towns/Isolated Regional Service Centres - Catchment size: 25 000 – 60 000


Discretionary fire bakkie pump deployment point in low density areas where conventional deployment is not

feasible

F. Dense Dispersed Settlements - Catchment size: 10 000 – 100 000; continuous development with 12

or more persons per ha over 10 km2)

Discretionary fire bakkie pump deployment point in low density areas where conventional deployment is not

feasible

G. Villages - Catchment size: 5 000 – 25 000

Discretionary fire bakkies pump deployment point if no conventional fire-fighting service within reach (20

minutes)

H. Remote villages - Catchment size: 500 – 5 000

Discretionary fire bakkies pump deployment point if no conventional fire-fighting service within reach (20

minutes)

Services will not necessarily be rendered from a fire station, as the appropriate facilities in rural and sparsely

populated areas may consist of a smaller suitably equipped vehicle that could operate from a basic shelter. All facilities

and equipment provided for use in fire-fighting has to be maintained, repaired or replaced meticulously since defective

equipment or lack of essential staff or resources can result in injury, death and/or huge material losses. Those

facilities that only serve low income households, such as in the rural villages, would be the exception. Costs have

therefore been determined utilising the tried methodology where the appropriate proportional cost relative to the

replacement value of the infrastructure used to provide the service, is used to calculate the annual operating cost.

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The methodology followed included the following steps:

• Fire station locations were determined, based on information provided by Cogta Disaster Management Centre,

and augmented with information obtained directly from individual municipalities.

• Location of fire stations was used as a starting point, and spatial accessibility requirements

• SANS 10090:2003 standard was used to determine a level of service, more specifically risk category C and D

o Category C – residential areas of conventional construction – within 10 minutes;

o Category D – rural areas remote from urban areas – within 20 minutes.

• An accessibility surface was developed spatially for each municipality, on the basis described in the paragraphs

below.

The spatial determination of access was a comprehensive procedure, since it required, as base information, not only

the location of each fire station, but also the individual residential units.

The following process and assumptions were adopted:

• Use was made of the SPOT Building Count as proxy for Residential Customers.

• The 2011 Census was used to identify “Poor” areas

• Major roads – 50, 60, 70, 75, 85 and 100 km/hr, depending on the location of the road relative to built-up

areas.

• Main roads – 45, 50, 60 75 km/hr, depending on the location of the road relative to built-up areas

• Roads – between 20 and 65 km/hr, depending on the location of the road relative to built-up areas

• The Spot Building Count was intersected with the accessibility surface to calculate the distance from each

household to the nearest fire station.

• The results of this analysis were used to determine the backlogs for Risk Categories C and D for ‘poor

customers’.

Examples of the results obtained from the accessibility assessment and response time analysis are shown in the

figures below.

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Figure 12: Accessibility for fire protection coverage – National level

Figure 13: Accessibility for fire protection coverage – Gauteng and surrounding areas

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Figure 14: Accessibility for fire protection coverage – Ekurhuleni and surrounding municipalities

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Figure 15: Accessibility for fire protection coverage – Polokwane municipality

The best correlation with the known CRC values was again found to be the household numbers per municipality, and

this was used to develop the estimated current CRC per municipality on a national basis. The estimates provide for all

basic needs, and all associated costs to create the infrastructure assets. The estimated capital needs for immovable

infrastructure required to serve the growth in low income households (growth for 2016) amount to R 72.3 million.

The cost per household to provide appropriate facilities was determined as:

Table 18: Unit rate cost of immovable facilities per poor household (2014)

Sector CRC - R per hh PDG Category Buildings External Facilities

Fire Stations

446 A & B1 - Fire risk E 419 27

370 B1 - Fire risk A 348 22

302 B2 - Fire risk B 284 18

232 B3 - Fire risk C 218 14

162 B4 - Fire risk D 152 10

9 Covered parking 8 1

The backlogs for facilities for fire services have been determined on the basis of customers with income below subsidy

level not serviced effectively currently. A detailed analysis was performed to establish the number of customers that

are not currently adequately serviced by authorities. The approach consisted of establishing the estimated response

time for all poor municipal customers per municipality. To this end, the location of each fire station was mapped in

GIS, and an access and response time spatially determined for all customers.

FFC AND SALGA


The backlog was determined as follows:

• The SPOT Building Count was used as proxy for Residential Customers

• The 2011 Census data was used to determine areas with predominantly poor households - suburbs with an

average annual household income of R76 400 and less.

• SANS 10090:2003 standard was used as and indication of the level of service, more specifically response times

(determined spatially for individual municipalities) for risk category C and D:

o Category C – residential areas of conventional construction – within 10 minutes;

o Category D – rural areas remote from urban areas – within 20 minutes.

• The backlogs for both categories C and D above were calculated separately.

The number of customers not adequately served, with a response time of under 23 minutes, was used as basis for the

calculation of the backlog. Rural customers are sometimes serviced by appropriately equipped vehicles provided

under the auspices of the FPA (Fire Protection Association), and which may not be operating from dedicated fire

stations as found in the urban environment. Provision also needs to be made for future growth in the number of poor

households that cannot afford such services. The household growth, as previously adopted, has been used, in

conjunction with the previously determined unit rate or cost per household. The estimated capital needs to address

the backlogs - at 15% per annum - and to provide proportionally for growth in low income households are indicated in

the table that follows:

Table 19a: Capital needs - fire services: Poor hh growth & backlogs/PDG category (immovable assets)

2015/16

Municipal Category Fire services


A - Metropolitan 52 791 658 27 945 468 80 737 126


B2 - Large towns 7 278 035 40 792 113 48 070 148

B3 – Small towns 7 938 689 44 843 843 52 782 532


Total 96 605 450 388 796 257 485 401 707

Table 19b: Estimated capital needs for fire services: Poor hh growth and backlogs (immovable assets)

2015/16

Fire Stations Growth Backlog (15%) Total need HH Growth Funding Need/ Poor HH (growth)

Eastern Cape 5 659 123 12 744 984 6 707 207 17 746 319

Free State 3 997 315 2 656 930 3 179 440 11 154 358

Gauteng 37 599 893 4 107 234 29 769 228 85 883 438

Kwazulu-Natal 15 943 362 5 198 126 12 785 316 46 290 344

Limpopo 7 250 143 16 198 673 9 760 876 31 142 233

Mpumalanga 7 543 179 5 991 733 5 684 968 23 288 324

Northern Cape 1 335 561 471 573 1 181 741 4 467 299

North West 7 547 562 10 748 383 5 171 818 19 088 395

Western Cape 9 729 313 201 803 7 169 700 23 743 410

Total 96 605 449 58 319 439 81 410 294 262 801 368

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Figure 16: Estimated growth and backlog eradication cost for Fire stations (immovable assets)

9.3 Capital cost estimates for provision of fire-fighting services equipment to low income households

The requirements for plant, equipment and vehicles to provide effective fire protection and fighting services are

comprehensive. Provision has been made to establish the capital needs to address backlogs as well as the need to

provide assets to be able to render services for the growth in poor customers.

Capital norms were determined first:

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• Capital CRC norms, based on the minimum equipment and vehicle requirements per category of fire station

(SANS 10090 and NFPA 1901), were established based on actual expenditure identified through the test

municipalities;

• Each municipality was categorised based on the SANS 10090 fire-risk classification and the CRC norms per risk

category were applied to determine the total CRC for 2014/15.

Table 20: Norms for equipment requirements (movable assets)

Equipment requirements Risk category

A B C D E

Fully equipped fire-fighter, aerial appliance and pumping unit (Specialised fire containment) - - - - 1

Fully equipped fire-fighter, aerial appliance and pumping unit 1 1 - - -

Fully equipped fire-fighter and pumping unit 1 1 1 - 1

Off-road vehicles 1 1 1 1 1

Light vehicles 1 1 1 1 1

Emergency and fire-fighting apparatus (not included in equiped fire-fighters) 1 1 1 1 1

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For service access backlogs, the following methodology, as described for immovable assets in section 9.2, was

adopted:

• As is the case with fire stations, service access backlogs were determined by assessing the number of

household which fall outside the radius of the acceptable response time.

• These households represent the service access backlog and the cost to eradicate this backlog in respect of poor

households was determined by applying the same capital CRC norms as described above.

Table 21: Current replacement cost for equipment (movable assets)

Current replacement cost (CRC) per unit


A B C D E

Fully equipped fire-fighter, aerial appliance and pumping unit (Specialised fire containment) - - - - 4 270 070

Fully equipped fire-fighter, aerial appliance and pumping unit 2 658 085 2 658 085 - - -

Fully equipped fire-fighter and pumping unit 2 017 544 2 017 544 2 017 544 - 2 017 544

Off-road vehicles 545 500 545 500 545 500 545 500 545 500

Light vehicles 1 932 300 1 932 300 1 932 300 1 932 300 1 932 300

Emergency and fire-fighting apparatus (not included in equipped fire-fighters) 794 880 794 880 794 880 794 880 1 685 599

7 948 309 7 948 309 5 290 224 3 272 680 10 451 013

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9.4 Capital funding requirements

The report provides an overview of the results of the model that has been completed, indicating at this final stage, the

needs across all services.

A few important aspects that should be noted are:

• The calculated infrastructure costs for municipalities are based on the annual growth in poor households per

municipality, plus the backlogs per service.

• The amounts needed to address access backlogs have been determined based on modelled backlogs (spatially

determined for fire-fighting services, and in correlation with average backlogs for operational buildings).

• It has been assumed that the backlogs related to immovable assets will be reduced by 15% per annum, while it

could be advisable that the backlog in movable assets be addressed in the first year.

• The annual capital funding needs combined for movable and immovable assets relating to fire-fighting services,

should backlogs for both be addressed at 15% per annum, amounts to R 244 million in 2015/16, as indicated in

the next table.

• Should the backlog for equipment and vehicles be addressed immediately, the amount required for capital

funding for 2015/16 would increase to R 440 million, and there-after decrease to approximately R 210 million/

annum.

Table 22: Capital costs for fire-fighting services - 2015/16 per PDG category (movable and immovable

combined, R 000)

PDG Category Growth Backlog Total Poor HH

A - Metropolitan 75 380 4 902 80 282 3 320 944


B2 - Large towns 13 327 8 598 21 925 730 963

B3 – Small towns 22 095 22 507 44 603 1 265 985


Total 151 627 92 874 244 501 8 965 790

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10. Capital Cost Needs: Operational Buildings


Operational buildings are required to enable municipalities to perform the functions that they are responsible for. This

includes all of the building types that are listed below:

• Office buildings - staff;

• Office accommodation – councillors;

• Customer care centres and pay-points;

• Workshops;

• Depots;

• Stores; and

• Parking associated with the above.

Building structures forming part of facilities used to render infrastructure or community services such as those listed

below have not been included in operational buildings facilities:

• Pump stations;

• Substations;

• Libraries;

• Traffic test centres;

• Clinics;

• Halls;

• Airport buildings;

• Museums and theatres;

• Housing; and

• Sports and recreation facilities.

10.2 Capital cost estimates: Operational buildings infrastructure for low income households

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The capital costs required to provide operational buildings (immovable infrastructure) that are needed to render

services to low income households have been based on a similar approach to that followed in determining the costs for

other municipal buildings. The extent and value of operational buildings for the following municipalities were used to

develop benchmark replacement costs per household for the different municipal categories :

• Bela Bela

• Buffalo City

• Chief Albert Luthuli

• Dipaleseng

• Dr JS Moroka

• Ekurhuleni

• Emfuleni

• Govan Mbeki

• Lesedi

• Modimolle

• Mogale

• Mohokare

• Polokwane

• Randfontein

• Steve Tshwete

• Victor Khanye

• Westonaria

FFC AND SALGA


In addition the capital and operational expenditure of municipalities, as well as the GVA (Gross Value Added) data for

the corresponding municipalities was used and analysis done to test the correlation with the municipal replacement

costs per municipality. The degree of correlation proved to be much lower than with household data, and the best

correlation with services infrastructure CRC values was thus found to be the number of households per municipality.

This data was used to determine the estimated current CRC of operational buildings per municipality on a national

basis. The estimated CRC includes all relevant needs, and all associated costs to create the infrastructure assets.

The CRC (current replacement cost), of infrastructure constituting operational buildings was determined for the

municipalities included, based on the unit rates derived from the benchmark data. The estimated capital needs for

immovable infrastructure required to serve the growth in low income households (growth for 2015/16 and subsequent

years) amounts to R 622.7 million overall.

Realistic and credible information on the backlogs in provision of operational buildings required for service rendering is

not available on a national level, neither could it be derived from existing and available data such as the 2011 census.

Various options were considered to determine a realistic operational buildings backlog figure including an assessment

of staffing levels (administrative and those directly related to services), but analysis showed that the aggregate

infrastructure services backlog provides a better basis for the determination of the backlog for operational buildings.

It has therefore been assumed that the operational building backlogs is proportional to the overall backlog per

municipality. The result has been expressed as a percentage of the estimated CRC of operational buildings. This

percentage reflects the total backlog for each municipality. The backlog per municipality, for poor customers, was

calculated as a proportional amount (a percentage based on the nr. of poor households relative to total number of

households) per municipality.

Additional operational building capacity will be required in the future proportional to the growth in poor household

numbers. The household growth as previously determined was used. The investment required to provide the

additional facilities was calculated as the product of the growth and the unit rate for operational buildings per

household. The estimated capital needs to address the backlog at 15% per annum, and to provide for additional

operational buildings - proportional to the growth in low income households - are indicated in the table that follows:

Table 23a: Growth and estimated low income capital needs for operational buildings/ PDG category - 2015/16 Municipal Category Water


A - Metropolitan 299 823 474 888 188 028 1 188 011 502


B2 - Large towns 44 704 485 143 168 546 187 873 031

B3 – Small towns 63 475 295 247 959 494 311 434 789


Total 622 771 521 2 033 798 314 2 656 569 836

Table 23b: Growth in low income hh and estimated capital needs for operational buildings - 2015/16

Operational buildings Growth Backlog (15%) Total need HH Growth Funding Need/ Poor HH - growth

Eastern Cape 38 830 069 36 866 611 75 696 680 17 746 2 188

Free State 25 767 943 17 891 242 43 659 185 11 154 2 310

Gauteng 217 469 684 83 928 622 301 398 306 85 883 2 532

Kwazulu-Natal 105 735 028 55 635 993 161 371 021 46 290 2 284

Limpopo 63 516 180 30 003 245 93 519 425 31 142 2 040

Mpumalanga 54 486 712 22 401 678 76 888 391 23 288 2 340

Northern Cape 9 754 759 5 542 048 15 296 807 4 467 2 184

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Figure 17: Estimated growth and backlog eradication cost for Operational Buildings

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North West 49 099 104 23 290 679 72 389 783 19 088 2 572

Western Cape 58 112 041 29 509 629 87 621 670 23 743 2 448

Total 622 771 521 305 069 747 927 841 268 262 801 2 370

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11. Summarized Capital Cost Needs: All services

Detailed information on the needs for growth in poor customers and proposed eradication of the backlogs, at

individual municipal level, is provided in the Appendices, with Appendice E and F indicating growth and backlogs

respectively, and Appendice G the annual capital requirements. The consolidated capital needs for immovable

infrastructure (based on growth and addressing 15% of the estimated backlog annually), are shown in the table and

figure shown below:

Table 24a: Growth and backlog immovable asset infrastructure needs/ PDG category - 2015/16 (R 000)

Municipal Category All sectors combined

PDG Classification Growth - A Backlog - B Backlog (15%) Total - A+B

A - Metropolitan 11 818 228 78 024 007 11 703 601 89 842 235

B1 - Secondary cities 4 443 069 29 738 849 4 460 827 34 181 919

B2 - Large towns 1 719 642 13 899 962 2 084 994 15 619 604

B3 - Towns/ Rural 2 439 302 22 175 535 3 326 330 24 614 836

B4 - Small towns / Rural 2 999 166 37 745 906 5 661 886 40 745 072

Total 23 419 408 181 584 258 27 237 639 205 003 666

Table 24b: Growth and backlog immovable asset infrastructure needs/ Province - 2015/16 (R 000)

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Eastern Cape 824 752 1 934 701 1 241 336 1 278 210 76 521 14 026 18 404 75 697 5 463 647

Free State 293 547 818 118 268 265 501 757 26 868 4 204 6 654 43 659 1 963 072

Gauteng 2 060 516 6 819 373 1 699 934 2 305 486 146 403 21 596 41 707 301 398 13 396 413

Kwazulu-Natal 1 826 531 4 022 416 2 304 970 2 303 241 174 829 26 186 21 141 161 371 10 840 686

Limpopo 765 277 843 565 1 303 493 1 395 377 67 487 14 971 23 449 93 519 4 507 138

Mpumalanga 586 824 1 107 296 723 417 876 969 50 449 8 813 13 535 76 888 3 444 191

Northern Cape 122 311 203 496 123 818 161 069 8 020 1 581 1 807 15 297 637 399

North West 544 687 1 208 182 640 826 991 890 64 451 8 626 18 296 72 390 3 549 348

Western Cape 507 662 1 552 502 472 187 662 062 44 149 6 126 9 931 87 622 3 342 241

Total 7 532 108 18 509 648 8 778 245 10 476 061 659 178 106 130 154 925 927 841 47 144 135

FFC AND SALGA


Figure 18: Consolidated capital needs for growth and backlogs - 2015/16

-

10

20

30

40

50

60

70

80

90

100

-

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000


Thou

san

ds

Mill

ion

s

Electricity Roads & s'water Water

Sanitation Solid Waste Cemeteries

Fire stations Operational blds Household

FFC AND SALGA


Figure 19: Comparison of capital needs for growth and backlogs (15%/a) - 2015/16

The effect on the backlogs, should 15% of the estimated backlog be addressed per sector every year, is indicated in

the table below. It has been assumed that the amount invested in backlog eradication will increase at a rate equal to

cost escalation. At the indicated rate and without allowing for new backlogs, it will take approximately 8 years to

eradicate the backlog overall although it will be less for some services, as indicated in Table 25:

Table 25: Investment in, and reduction of Backlogs (R million at 15% per annum)

Ser

vice

Elec

tric

ity

Wat

er

San

itat

ion

Cem

eter

ies

Ro

ads

and

S

torm

wat

er

Op

erat

ion

al

Bu

ildin

gs

Fire

S

tati

on

s

Yea

r En

din

g

Red

uce

Rem

ain

Red

uce

Rem

ain

Red

uce

Rem

ain

Red

uce

Rem

ain

Red

uce

Rem

ain

Red

uce

Rem

ain

Red

uce

Rem

ain

2015 21 158 26 948 40 001 2 341 64 483 2 034 619

2016 3 174 17 984 4 042 22 906 6 000 34 001 413 2 341 9 672 54 811 305 1 729 93 526

2017 3 365 15 705 4 286 20 003 6 363 29 692 438 2 045 10 257 47 864 323 1 405 98 428

2018 3 569 13 085 4 545 16 666 6 747 24 739 465 1 704 10 876 39 879 343 1 062 104 323

2019 3 784 10 091 4 820 12 853 7 154 19 078 493 1 314 11 533 30 755 364 699 111 213

The proposed 15% annual reduction in backlog (equivalent to a period of approximately 7 – 8 years) is not an exact

figure, but rather an approximation, after considering the very significant amounts involved, and taking cognisance of

the fact that in many cases the municipalities with very large backlogs are not in a position to implement massive

projects without support and time to ramp up gradually to the point where significant implementation will be possible.

The 15% should therefore be regarded as an indication of the average rate of implementation and reduction and not

as the ideal or most appropriate rate for each municipality or service. The extent of the backlog is also not regarded

as the only, or in many instances even the prime consideration when the rate for a service in a specific municipality is

determined. The capacity of the municipality is one of the most critical parameters, while financial resources is of

course also a very important factor in determining the rate at which the backlog can and should be eradicated. At the

indicated rate and without allowing for new backlogs, it will take approximately 8 years to eradicate the backlog

overall, but because of the wide variation in extent, resources and capacity the appropriate period will in fact probably

range from 1 year to 15 plus years.

Electricity 16%

Roads & s'water 39%

Water 19%

Sanitation 22%

Solid Waste 2%

Cemeteries 0%

Fire stations 0% Operational blds

2%

FFC AND SALGA


12. Operating Cost Needs: Municipal Administration

12.1 Typical scope of municipal administration services

Municipal administration services include the basket of services referred to as General Administration, Planning and

Development (GAPD), and includes:

• The costs associated with the political structure, including those cost incurred in the execution of their

mandated responsibilities. Typical examples are:

o Councillor’s remuneration;

o Administrative support to the political structure;

o Ward committee costs;

o Public participation and imbizos; etc.

• The costs associated with the overall management of the municipality, a function and responsibility assigned to

the Accounting Officer through Chapter 8, Sections 60 and 61 of the Municipal Finance Management Act, No. 56

of 2003. Typical examples are:

o Municipal/city manager’s office; and

o Administrative support to the municipal/city manager’s office;

• The costs associated with the financial, human resource and operational management of the municipality,

including the provision of support services to service delivery departments. These costs, referred to as the cost

of internal service delivery, include:

o Budget and treasury offices, dealing with the financial administration of the municipality;

o Human resources management;

o Information technology;

o Legal services;

o Property services;

o Planning and development; etc.

FFC AND SALGA


12.2 Approach and methodology employed to determine municipal administration operating costs

12.2.1 Administrative services

Municipal administrative services relates to those functions which deal with the governance of the municipality, both

political and managerial. In essence, the administrative service enables the service delivery departments and can be

viewed as internal service delivery. A typical municipal functional structure is illustrated in Figure 16 below.

Figure 20: Municipal structure reflecting administrative functions only

Council

Budgeting

Revenue

Secretariat

Legal

HR

Expenditure

LED

Planning and Development

Archiving

Planning

Planning Corporate Services CFO Budget and Treasury Internal Audit

MM

Some administrative cost are easily identifiable due to the nature of the expense, such as the remuneration of the

Municipal Manager. However, service delivery expenses do not only consist of items such as bulk purchases and a

significant component of operational expenses used to deliver services to the community are similar in type and

nature to what is commonly referred to as overheads. Telephone, printing, stationery and salaries are but a few of

the types of expenses which can relate to either municipal administration or service delivery. The grouping as

illustrated in the diagram above and the association of the expense with the correct action and department, is

therefore pivotal to the process of identifying the cost of administration, as the latter is often determined based on

‘who’ incurs the expense.

Indirect Costs

FFC AND SALGA


12.2.2 Administration expenses

In order to determine the cost of administration, the various expenditure items which will ultimately make up the

totality of the administrative cost basket need to be identified. Table 26 below identifies the various expenditure

types and the respective allocation considerations that need to be made during the determination of the cost

allocation.

Table 26: Expenditure types

Expenditure type Allocation consideration

Councillor Remuneration Always considered as part of the cost of governance

Section 57 Employee Cost. Based on department allocation within the operational structure of the Municipality

Employee Related Cost Based on department allocation within the operational structure of the Municipality

Audit Fees Administration – Corporate overhead

Human Resource Management Administration – Corporate overhead

ICT Administration – Corporate overhead

Legal Fees Administration – Corporate overhead

Marketing and Promotions Administration – Corporate overhead

Rental of Equipment and facilities Based on department allocation within the operational structure of the Municipality

Office overheads (General expenditure) • Conferences and functions; • Licence fees; • Printing and stationery; • Subscription; • Telephone and communications; • Transport and vehicle cost • Travelling;

Based on department allocation within the operational structure of the Municipality

It can be argued that some cost which are considered as ‘corporate overheads’ should be allocated to service

departments based on certain cost influencing factors, such as allocating a portion of the municipal manager’s salary

towards each service based on the level of effort spent on those departments. However, unless a costing

methodology and accurate time tracking system is implemented, such allocations will create nothing more than a false

sense of accuracy. For the purposes of determining baseline administrative cost, an approach of relevance and

reasonability is adopted, but more importantly, what is practical and universally applicable.

12.2.3 Data sources

For the purpose of developing reasonable norms to determine the administrative cost per municipality, the following

data sources were used:


• MTREF – 2014/15 and 2015/16;

• Annual Reports for 2013/14.

In addition to the information listed above which are available in the public domain, the following municipalities were

used as test sites in order to perform detailed analysis of the various expenses and cost influencing factors.

• Buffalo City Metropolitan Municipality;

• Polokwane Local Municipality;

• Hessequa Local Municipality;

• Nkangala District Municipality

Although the accounting processes are governed through the GRAP Accounting Framework, some groupings and

classifications of expenditure items are not regulated and is left up to the discretion of the municipality itself, usually

guided by historic practices of specific needs of various role-players at the time. This does not influence the quality of

FFC AND SALGA


the reporting process, but does complicate the comparison of data on a one-on-one basis, especially in the case of

items which are typically associated with administration cost. In order to bridge this challenge, the following

additional municipalities were selected to aid in the standardisation of results:

• City of Matlosana Local Municipality;

• Drakenstein Local Municipality;

• Joe Gqabi District Municipality;

• Knysna Local District Municipality;

• Midvaal Local Municipality;

• Mnquma Local Municipality;

• Mogale City Local Municipality;

• Moses Kotane Local Municipality; and

• Xhariep Local Municipality;

The test municipalities were specifically selected to represent the various categories, sizes, different socio-economic

profiles and locations in order to identify commonalities which could be standardised as norms for cost determination.

The following table illustrates the various differences between the municipalities:


Test Data

Pro

vin

ce

Cat

ego

ry

Nr

of

Ho

use

ho

lds

(20

14

/1

5)

Nr

of

Po

or

Ho

use

ho

lds

(20

14

/1

5)

Po

or

vs.

tota

l hh

s.

Nu

mb

er o

f C

ou

nci

llors

Nr

of

Sta

ff

Op

erat

ing

R

even

ue

Bu

dg

et

20

14

/1

5 (

R’0

00

)

Op

erat

ing

Ex

pen

dit

ure

B

ud

get

20

14

/1

5

(R’0

00

)

Buffalo City EC A 227 315 137 191 60,35% 100 5 440 6 009 798 5 242 997

Drakenstein WC B1 61 378 25 548 41,62% 61 2 204 1 666 428 1 665 850

Stellenbosch WC B1 45 059 23 083 51,23% 43 1 145 1 254 529 1 245 211

City Of Matlosana NW B1 122 662 70 990 57,87% 70 2 467 2 224 896 2 195 252

Mogale City GAU B1 122 115 66 385 54,36% 68 2 425 2 258 611 2 515 935

Polokwane LIM B1 185 357 113 199 61,07% 76 1 913 2 806 063 2 261 283

Knysna WC B2 22 676 12 046 53,12% 19 807 632 950 587 087

Midvaal GAU B2 31 507 16 239 51,54% 27 674 853 324 914 024

Hessequa WC B3 16 201 7 098 43,81% 15 560 350 775 336 990

Mnquma EC B4 70 184 53 164 75,75% 62 532 329 008 265 696

Moses Kotane NW B4 76 134 50 468 66,29% 62 413 697 064 619 156

Nkangala MPU C1 371 694 205 008 55,16% 59 218 348 336 345 412

Xhariep FS C1 45 874 30 797 67,14% 17 113 69 998 72 386

Joe Gqabi FS C2 99 323 75 010 75,52% 24 1 265 552 126 501 710

FFC AND SALGA



Figure 22: Number of councillors and staff – selected municipalities

-

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

Number of Households (2014/15) Number of Poor Households (2014/15)

0

2000

4000

6000

Number of Councillors Number of Staff

FFC AND SALGA


Figure 23: Operating and expenditure budget – Selected municipalities

12.2.4 Data Analysis

The extent of the cost that could be included in administrative cost have already been discussed in Section 12.2.2 and

illustrated in Figure 23. The various cost elements are discussed below:

• The costs associated with the political structure, including those costs incurred in the execution of

their mandated responsibilities

This cost is a direct product of the political structure, number of councillors, portfolio committees, etc.

Accounting practice also dictates that councillor remuneration should be recognised separately, and then only

to include the actual remuneration package of the Councillors and not include administrative support staff’s

cost. As the above has been standard practice, even before the implementation of the GRAP Accounting

Framework, it is reasonable to accept that the financial information represented in the financial statements and

National Treasury data base, serve as a reasonable representation of this principle. In order to determine the

reasonability of the assumption made above, the test data collected from the selected Municipalities have been

measured against the entire population (all municipalities). For comparison purposes, the total cost of

councillor remuneration was reduced to comparable units. Firstly, the cost (R/c) per Councillor was

determined. Secondly, the cost per Councillor was further reduced to represent the cost per councillor, per

household.

R-

R1 000

R2 000

R3 000

R4 000

R5 000 M

illio

ns

Operating Revenue Budget 2014/15 Operating Expenditure Budget 2014/15

FFC AND SALGA


Table 28: Councillor remuneration – test data

Test Data Category Cost per

Councillor (Test Data)

Cost per Household (Test

Data) (2015/16)

Cost per Household (2015/16)

Total Cost - Poor Households (2014/15)

Total Cost Poor


Buffalo City A 452 613 2,1026 2,1714 288 462 302 885

City Of Matlosana B1 297 864 2,5643 2,6438 182 041 191 143

Drakenstein B1 307 303 5,2871 5,4064 135 076 141 830

Mogale City B1 354 035 3,0616 3,0898 203 242 213 404

Polokwane B1 316 352 1,8023 1,8173 204 019 214 220

Stellenbosch B1 321 332 7,5307 7,6197 173 832 182 524

Knysna B2 328 417 15,2938 15,5038 184 235 193 446

Midvaal B2 323 738 10,8504 10,8355 176 195 185 005

Hessequa B3 309 598 20,1803 20,7581 143 233 150 395

Mnquma B4 349 090 5,2525 5,4796 279 243 293 205

Moses Kotane B4 281 387 3,9029 4,0474 196 970 206 819

Nkangala C1 198 892 0,5651 0,5696 115 842 121 634

Xhariep C1 213 218 4,9082 5,0967 151 160 158 718

Joe Gqabi C2 209 347 2,2258 2,3007 166 955 175 302

Figure 24: Median cost per household – Test municipalities

0,0

5,0

10,0

15,0

20,0

25,0

Ran

d p

er h

ouse

hol

d

Median (Cost) Per Councillor per Household (2015/16) Average Cost per Household (2015/16)

FFC AND SALGA


The following table presents an analysis of councillor remuneration per municipal category.

Table 29 Councillor Remuneration – per municipal category

Municipal Category

Median (Cost) Per Councillor

Median (Cost) Per Councillor - Test Data

Variance - Cost per

Councillor

Median (Cost) Per Councillor

per Household (2015/16)

Median (Cost) Per Councillor per Household

(2015/16) Test Data

Variance - Cost per Councillor per Household

(2015/16)

Total Cost - Poor


Category A 276 779 452 613 -63,53% 0,5209 2,1714 -316,83% 2 183 087

Category B1 197 998 316 352 -59,78% 3,0898 3,0898 0,00% 3 805 924

Category B2 192 809 326 078 -69,12% 8,3647 13,1697 -57,44% 5 275 616

Category B3 200 245 309 598 -54,61% 20,0590 20,7581 -3,49% 21 742 195

Category B4 223 279 281 387 -26,02% 7,3535 4,0474 44,96% 15 692 847

Category C1 128 157 213 218 -66,37% 1,3588 5,0967 -275,10% 2 943 912

Category C2 160 420 209 347 -30,50% 1,1276 2,3007 -104,03% 3 346 658

54 990 239

Comparing the results confirms the assumption that the number of councillors for each category of municipality

determines the total councillor remuneration. This is best illustrated through the strong correlation of the test data

(represented by the green line in the graph below), with the median of the cost per councillor for the entire

population. Using the number of Councillors to determine the cost per household is therefore proposed as the basis for

cost allocation.

Figure 25: Cost per councillor per category of municipality

-

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

500 000

Category A Category B1 Category B2 Category B3 Category B4 Category C1 Category C2

Cos

t (

R)

Median (Cost) Per Councillor Median (Cost) Per Councillor - Test Data

FFC AND SALGA


Viewing the same data, but expressed as cost per councillor per household, reflects the impact of the difference in the

number of households represented by each councillor. This is best illustrated as follows:

Figure 26: Cost per councillor per household

One should guard against using the cost per household as this basis for cost allocation since the fact that a Councillor

in Municipality X represents a smaller number of households, does not mean that a larger allocation should be made

to these households.

The costs associated with the overall management of the municipality, including financial and human

resource management

As discussed under Section 12.2.2, the type of expenditure that that ultimately aggregate to the totality of

Administrative Cost, is mostly determined by ‘who’ incurs them. That nature of the accounting process and the

municipal budget format is such that administrative cost is already allocated in some format to the administrative

departments. However, the application of accounting practices are not ‘equal’ over the entire municipal population

and the question remains what universal cost driver can be utilised to establish a reasonable comparison of what the

administrative cost per municipality should be. In order to identify these cost influencing factors, the same group of

municipalities has been used to perform a detailed study of what influences their costs and what common

denominator/s exists.

The cost elements

As discussed under Section 12.2.2. the types of administrative cost is common amongst all municipalities. For the

purposes of this discussion, inefficiencies are ignored, and analysis are performed under the assumption that all

administrative processes are equally efficient. The various components of these cost elements are discussed below:

Employee Related Cost and Section 57 Employees

By virtue of the type of expense, employee related cost is a product of the number of employees on the payroll. The

question is therefore, what determines this number. The remuneration paid to an employee is determined based on

the remuneration scale per category of Municipality and the level where the employee fits into the remuneration scale.

It holds true that a number of municipalities perform functions which are not mandated through Schedule 4 and 5 of

the Constitution. These functions are performed out of necessity and form part of the municipal funding

0,0000

5,0000

10,0000

15,0000

20,0000

25,0000


Cos

t (R

)

Median (Cost) Per Councillor per Household (2015/16)

Median (Cost) Per Councillor per Household (2015/16) Test Data

FFC AND SALGA


requirements. The cost of these functions are already accounted for under the total Employee Related Cost, and no

further adjustment for this will be required. In order to understand the total impact of these ‘un-mandated’ functions,

a detailed analysis of each type of these functions need to be performed. The latter does not form part of the analysis

performed and discussed in this report, and no further attention will be given to this component embedded within

administrative cost. With the above considerations in mind, the test data was analysed with the following results:

Table 30: Number of administrative staff per household – test data

Test Data Cat Number of

House-holds

Total Employee

Related Cost (R‘000)

Admin Staff Cost (R’000)

Total Number of Staff

Number of Admin

Staff

Staff per House-

hold

Admin staff per

Household

Buffalo City A 227 315 1 237 215 250 999 5440 651 0,0239 0,0029

Drakenstein B1 61 378 434 516 147 435 2204 510 0,0359 0,0083

Stellenbosch B1 45 059 324 832 113 273 1145 276 0,0254 0,0061

City Of Matlosana B1 122 662 468 821 113 787 2467 401 0,0201 0,0033

Mogale City B1 122 115 570 351 140 065 2425 405 0,0199 0,0033

Polokwane B1 185 357 504 000 139 904 1913 383 0,0103 0,0021

Knysna B2 22 676 176 163 66 579 807 214 0,0356 0,0094

Midvaal B2 31 507 186 356 70 807 674 188 0,0214 0,0060

Hessequa B3 16 201 115 482 41 504 560 130 0,0346 0,0080

Mnquma B4 70 184 121 324 47 510 532 143 0,0076 0,0020

Moses Kotane B4 76 134 152 935 96 351 413 180 0,0054 0,0024

Nkangala C1 371 694 60 539 29 255 218 68 0,0006 0,0002

Xhariep C1 45 874 39 164 34 064 113 66 0,0025 0,0014

Joe Gqabi C2 99 323 149 844 22 488 1265 128 0,0127 0,0013

Following the above, a reasonable cost per administrative staff member needed to be determined. Since the exact

composition of all staff within the entire population is not known, the cost per administrative staff member within the

test data was determined and analysed to establish if this cost could be applied as a norm / unit rate to the rest of the

municipalities. The following table and its accompanying graph illustrate the close relationship between the difference

of the cost determined per staff member and that of the administrative staff.

Table 31: Relationship between administrative staff cost and average staff cost

Test Data Cat

Number of

House-holds

Total Employee Related

Cost (R’000)

Admin Staff Cost

(R’000)

Total Number of Staff

Number of Admin

Staff

Cost per Staff

Member

Cost of Admin Staff

Member

Cost per Staff

Member vs. Cost per

Admin Staff Member

Buffalo City A 227 315 1 237 215 250 999 5440 651 227 429 385 559 169,529%

Drakenstein B1 61 378 434 516 147 435 2204 510 197 149 289 089 146,635%

Stellenbosch B1 45 059 324 832 113 273 1145 276 283 696 410 413 144,666%

City Of Matlosana B1 1 226 62 468 821 113 787 2467 401 190 037 283 758 149,317%

Mogale City B1 122 115 570 351 140 065 2425 405 235 197 345 840 147,043%

Polokwane B1 185 357 504 000 139 904 1913 383 263 461 365 285 138,649%

Knysna B2 22 676 176 163 66 579 807 214 218 294 311 117 142,522%

Midvaal B2 31 507 186 356 70 807 674 188 276 493 376 633 136,218%

Hessequa B3 16 201 115 482 41 504 560 130 206 219 319 266 154,819%

Mnquma B4 70 184 121 324 47 510 532 143 228 054 332 243 145,686%

Moses Kotane B4 76 134 152 935 96 351 413 180 370 303 535 283 144,553%

Nkangala C1 37 1694 60 539 29 255 218 68 277 702 430 222 154,922%

Xhariep C1 45 874 39 164 34 064 113 66 346 591 516 126 148,915%

Joe Gqabi C2 99 323 149 844 22 488 1265 128 118 454 175 693 148,322%

FFC AND SALGA


Figure 27: Relationship between the administrative staff cost and average staff cost

Based on this close relationship illustrated through the test data, it is reasonable to assume that this relationship will

also exist within the rest of the population. The median of the cost per administrative staff member will therefore be

used to model the cost associated with administrative staff for all municipalities. The following tables illustrate the

results after applying this ‘unit rate’ for administrative staff cost:

Table 32: Total cost of administrative staff per low income household – per category of municipality

Category Households 2015/16

Poor Households (<R2 300)) (2015/16)

Administrative Staff per

Household

Unit Cost per Administrative Staff member

Number of Administrative Staff Required to serve Poor Households

Cost Administrative Staff Required to

serve Poor Households

Category A 6 616 040 3 315 518 0,0029 385 559 18 947 7 305 357 590

Category B1 2 304 106 1 265 019 0,0033 345 840 7 642 2 642 797 504

Category B2 1 240 192 729 035 0,0077 343 875 9 552 3 284 674 547

Category B3 1 986 197 1 263 646 0,0080 319 266 15 938 5 088 439 077

Category B4 3 174 300 2 374 554 0,0022 433 763 6 986 3 030 363 112

Category C1 4 342 707 2 537 943 0,0008 473 174 3 521 1 666 154 978

Category C2 4 362 089 3 094 312 0,0013 175 693 5 622 987 659 844

24 005 446 651

Table 33: Total cost of administrative staff serving low income households – per province

Province Households 2015/16

Poor Households (<R2 300)) (2015/16)

Administrative Staff per Household

Unit Cost per Administrative Staff member

Number of Administrative Staff Required to serve Poor Households

Cost Administrative Staff Required to

serve Poor Households

Eastern Cape 2 906 414 2 055 693 0,0049 349 486 8 536 2 860 059 989

Free State 1 469 734 929 431 0,0064 351 863 5 474 1 907 919 811

Gauteng 4 830 153 2 444 134 0,0046 374 123 13 897 5 273 188 403

Kwazulu Natal 4 295 324 2 776 967 0,0039 353 100 12 031 4 003 727 556

Limpopo 3 008 525 2 125 789 0,0036 368 024 6 840 2 262 727 630

Mpumalanga 2 302 878 1 415 669 0,0047 375 919 5 403 2 031 044 947

North West 2 244 676 1 388 483 0,0047 350 747 5 969 2 060 236 885

Northern Cape 633 608 357 736 0,0066 348 491 2 354 807 454 914

Western Cape 2 334 319 1 086 126 0,0061 354 706 7 704 2 799 086 515

24 005 446 651

-

100 000

200 000

300 000

400 000

500 000

600 000 C

ost

(R)

Cost per Staff Member Cost of Administrative Staff

FFC AND SALGA


Audit Fees

Audit fees are determined by the Auditor General on a basis of time-and-cost associated with performing the audit.

This in turn is a product of the volume of audit work that need to be performed in order to formulate an opinion of the

total population under the audit scope. This volume of audit work is based on the value of transactions and the

associated risk that a single transaction, on its own or in combination with other transactions, may change the opinion

on the accuracy or completeness of the entire population. Various factors influence this risk, of which internal

efficiencies and control are just samples. Value of transactions, or in this case the Expenditure or Revenue Budget,

Value of Property Plant and Equipment, etc. could be used to formulate an universal measurement, but efficiencies

cannot be gauged on that basis.

The Audit outcome could also be considered, but numerous municipalities have fairly ‘large’ Audit fees, yet still receive

Unqualified or Clean audits, while the Audit Reports of other municipalities with fairly “small’ audit fees reflect

qualifications. The following graph illustrates the variance of audit cost, if a common factor of 1% of the total

spending during a year is used to determine the audit fee. (Note that audit teams adopt an approach where 1% of the

spending is used as the ‘starting point’ to determine the extent of the audit work. This 1% is then adjusted upwards

or downwards through a complex mechanism of risk assessments, which cannot be pre-determined and which

requires an annual risk assessment.)

Table 34 Comparison between actual and 1% projection on audit fees

Test Data Province Cat Number of Households (2014/15)

Actual Audit Fees

(2013/2014)

Audit Fee per Household

Calculated Audit Fee @

1%

Difference (1% vs. Actual)

Buffalo City EC A 227 315 11 692 400 51 54 700 136 79%

Drakenstein WC B1 61 378 5 447 663 89 18 084 091 70%

Stellenbosch WC B1 45 059 4 753 380 105 13 018 536 63%

City Of Matlosana NW B1 122 662 2 021 883 16 21 257 742 90%

Mogale City GAU B1 122 115 215 530 2 26 593 117 99%

Polokwane LIM B1 185 357 4 897 935 26 28 383 354 83%

Knysna WC B2 22 676 5 415 766 239 6 342 014 15%

Midvaal GAU B2 31 507 2 140 825 68 7 573 737 72%

Hessequa WC B3 16 201 2 098 988 130 3 923 703 47%

Mnquma EC B4 70 184 2 964 222 42 2 650 490 -12%

Moses Kotane NW B4 76 134 2 445 503 32 6 227 551 61%

Nkangala MPU C1 371 694 2 946 563 8 4 517 461 35%

Xhariep FS C1 45 874 2 269 611 49 617 899 -267%

Joe Gqabi FS C2 99 323 4 770 494 48 6 362 241 25%

FFC AND SALGA


Figure 28: Audit fee – Comparison between actual and 1% projection

The significant variance between the actual audit fee and the 1% projection is clear from both the graph as well as the

table above. Based on the distribution of the variance, this will hold true for any fixed percentage used in the

calculation. As an alternative, it is proposed that a norm / unit rate, based on the audit cost expressed as a cost per

household, be established through the test municipal data and extrapolated over the rest of the municipalities. The

result of the proposed methodology is depicted in below.

Table 35: Distribution of proposed audit fee projection – per category

Category Audit Fee per category of municipality (R)

Category A 340 308 669

Category B1 60 884 517

Category B2 190 230 038

Category B3 257 334 940

Category B4 118 013 757

Category C1 124 641 080

Category C2 209 510 765

Administrative cost determined by the number of

staff

The number of staff, which is a product of the functions and the size of the municipality, has a direct impact on the

majority of administrative cost components. For the purposes of this discussion, the following cost elements are

considered:

• Conferences and functions;

• Human resource management;

• ICT;

• Licence fees;

• Marketing and Promotions;

• Printing and Stationery;

• Subscription;

• Telephone and communications;

• Transport and vehicle cost; and

• Travelling;

-300%

-250%

-200%

-150%

-100%

-50%

0%

50%

100%

150%

0

Per

cen

tag

e d

iffe

ren

ce

Category A 26%

Category B1 5%

Category B2 15%

Category B3 20%

Category B4 9%

Category C1 9%

Category C2 16%

FFC AND SALGA


The cost elements listed above represent the majority of the type of administrative expenditure that is incurred a daily

basis. Each one of these expenditure items is a product of the number of staff members that function within the

municipality. As mentioned earlier, it is possible to argue that factors such as the nature and levels of service, size of

the municipality, etc. determine the staff compliment, but each one of these influencing factors culminate in the

number of people incurring the expense. However, before an allocation can be made based on the number of staff

within the municipality, it needs to be established what component of each of these expenditure items actually relate

to administrative cost. In order to identify this, these expenditure items have been analysed for each of the test

municipalities, and the following allocation between indirect service delivery cost and administration cost have been

identified.

Table 36 Allocation of administration cost

Test Data Category Number of Councillors

Number of Staff

Basket of Admin Expenses

(2015/16)

% Utilised within Admin

Admin Component

Admin Cost per Staff Member

Buffalo City A 100 5440 921 273 430 58,90% 542 630 050 97 948

Drakenstein B1 61 2204 207 812 421 67,20% 139 649 947 61 656

Stellenbosch B1 43 1145 181 775 223 61,90% 112 518 863 94 713

City Of Matlosana B1 70 2467 186 461 927 71,30% 132 947 354 52 403

Mogale City B1 68 2425 167 875 416 69,09% 115 985 125 46 524

Polokwane B1 76 1913 342 114 236 52,09% 178 207 305 89 596

Knysna B2 19 807 112 581 313 75,50% 84 998 891 102 904

Midvaal B2 27 674 56 623 136 75,50% 42 750 468 60 985

Hessequa B3 15 560 41 198 329 74,18% 30 560 920 53 149

Mnquma B4 62 532 81 564 806 79,20% 64 599 326 108 753

Moses Kotane B4 62 413 103 364 782 76,60% 79 177 423 166 689

Nkangala C1 59 218 32 967 622 72,50% 23 901 526 86 287

Xhariep C1 17 113 18 459 484 86,90% 16 041 292 123 395

Joe Gqabi C2 24 1265 60 454 864 88,48% 53 490 464 41 498

Applying the above norms to the rest of the population, the basket of administrative costs is allocated to the various

municipalities and summarised per category and province as follows:

Table 37: Allocation of administration basket of cost – per category of municipality

Category % Utilised within Administration

Median of Administrative Cost per

Staff Member

Administrative Component

Administrative Cost Component - Poor

Household

Category A 58,90% 97 948 14 531 711 106 7 284 413 126

Category B1 67,20% 61 656 3 357 517 662 1 826 575 677

Category B2 75,50% 81 945 2 317 229 435 1 320 757 063

Category B3 74,18% 53 149 2 142 506 542 1 322 331 821

Category B4 77,90% 137 721 2 835 403 920 2 121 848 692

Category C1 79,70% 104 841 787 144 907 438 501 453

Category C2 88,48% 41 498 729 570 089 523 649 256

26 701 083 662 14 838 077 087

Table 38: Allocation of administration basket of cost – per province

Province Administrative Component Administrative Component for Poor Households

Eastern Cape 3 905 616 560 1 784 131 367

Free State 701 096 284 377 505 435

Gauteng 2 710 689 169 1 774 932 198

Kwazulu Natal 1 597 900 233 961 148 855

Limpopo 4 749 558 326 2 848 893 728

FFC AND SALGA


Province Administrative Component Administrative Component for Poor Households

Mpumalanga 1 294 601 291 800 732 525

North West 1 511 927 544 1 070 763 347

Northern Cape 1 382 783 293 814 566 315

Western Cape 8 846 910 962 4 405 403 317

26 701 083 662 14 838 077 087

12.3 Operating cost estimates for provision of municipal administration services to low income

households

The following tables and graphs summarise the combined costs of municipal administration services, estimated at

some R 39 688 million per annum, to low income households, first per province, and then by category of municipality.

Table 39: Summarised cost of municipal administration services benefiting low income households – per

province

Pro

vin

ce

Nu

mb

er o

f P

oo

r H

ou

seh

old

s (2

01

4/

15

)

Ad

min

istr

ativ

e C

ost

C

om

po

nen

t A

ttri

bu

tab

le t

o

Po

or

Ho

use

ho

lds

Clr

R

emu

ner

atio

n

Emp

loye

e R

elat

ed C

ost

Au

dit

Fee

s

Ad

min

istr

ativ

e B

aske

t o

f S

ervi

ces

Co

st/

lo

w in

com

e h

h

EC 854 505 4 654 944 366 5 445 238 2 799 086 515 66 281 246 1 784 131 367 4 286

FS 521 195 1 213 611 277 5 003 852 807 454 914 23 647 076 377 505 435 3 392

GAU 2 037 619 4 768 575 706 9 871 200 2 860 059 989 123 712 320 1 774 932 198 2 320

KZN 1 631 433 2 937 936 931 4 914 367 1 907 919 811 63 953 898 961 148 855 3 161

LIM 1 032 486 7 022 298 965 12 219 150 4 003 727 556 157 458 531 2 848 893 728 2 529

MPU 685 131 2 894 207 322 3 835 597 2 031 044 947 58 594 253 800 732 525 2 044

NW 174 651 3 443 042 531 6 327 807 2 262 727 630 103 223 747 1 070 763 347 1 620

NC 676 505 2 947 206 608 4 892 120 2 060 236 885 67 511 287 814 566 315 2 123

WC 769 634 9 805 945 140 2 480 907 5 273 188 403 124 872 512 4 405 403 317 4 012

39 687 768 847 54 990 239 24 005 446 651 789 254 869 14 838 077 087

Figure 29: Identified administrative cost to be component attributable to low income households– per province

R 0

R 500

R 1 000

R 1 500

R 2 000

R 2 500

R 3 000

R 3 500

R 4 000

R 4 500

R 5 000

Eastern Cape Free State Gauteng Kwazulu Natal Limpopo Mpumalanga North West Northern Cape Western Cape

Cost per Poor Household Poor Household Income Theshold

FFC AND SALGA


Table 40: Identified administrative cost to be component attributable to poor households – per category

Cat

ego

ry

Nu

mb

er o

f P

oo

r H

ou

seh

old

s (2

01

4/

15

)

Ad

min

istr

ativ

e C

ost

C

om

po

nen

t A

ttri

bu

tab

le t

o P

oo

r H

ou

seh

old

s

Co

un

cillo

r R

emu

ner

atio

n

Emp

loye

e R

elat

ed

Co

st

Au

dit

Fee

s

Ad

min

istr

ativ

e B

aske

t o

f S

ervi

ces

Co

st p

er P

oo

r H

ou

seh

old

Category A 3 315 518 14 762 493 835 2 183 087 7 305 357 590 170 540 032 7 284 413 126 4 453

Category B1 1 265 019 4 506 606 426 3 805 924 2 642 797 504 33 427 321 1 826 575 677 3 562

Category B2 729 035 4 722 532 197 5 275 616 3 284 674 547 111 824 972 1 320 757 063 6 478

Category B3 1 263 646 6 596 233 060 21 742 195 5 088 439 077 163 719 967 1 322 331 821 5 220

Category B4 2 374 554 5 256 185 558 15 692 847 3 030 363 112 88 280 908 2 121 848 692 2 214

Category C1 2 537 943 2 180 442 451 2 943 912 1 666 154 978 72 842 107 438 501 453 859

Category C2 3 094 312 1 663 275 319 3 346 658 987 659 844 148 619 562 523 649 256 538

39 687 768 847 54 990 239 24 005 446 651 789 254 869 14 838 077 087

Figure 30: Identified administrative cost to be component attributable to poor households – per category

Considering the administrative component per poor household, it is noticeable that the allocation is significantly lower

under the District Municipality category. With Employee Related cost being the largest contributor (R24 billion),

followed by the contribution determined through the analysis of what has been grouped together as the

‘Administrative Basket of Services’ (R14 million), the significant lower administrative cost component under the

District Municipality Category is supported by the fact that staff numbers is the main cost influencing factor of both

these components. It should be noted that the administrative cost component could be refined through detailed

analysis of a larger selection of test municipalities, based on data available and interactions with representatives of

these municipalities. The analysis is however still dependent on the accuracy of base-line information, and the

representation of this data.

-

1 000

2 000

3 000

4 000

5 000

6 000

7 000


Cost per Poor Household Poor Household Income Theshold

FFC AND SALGA


13. Operating Cost Needs: Municipal Health Services 13.1 Typical scope of municipal health services

The National Health Act, Act 61 of 2003, defines municipal health services as follows: “municipal health services”, for

the purposes of this Act, includes-

• water quality monitoring;

• food control;

• waste management;

• health surveillance of premises;

• surveillance and prevention of communicable diseases, excluding immunisations;

• vector control;

• environmental pollution control;

• disposal of the dead; and

• chemical safety.

This description include the following services that require infrastructure assets to enable municipalities to perform the

functions:

• Cemeteries - item (h);

• Solid waste services – item (c).

The services above are included in the proposed Model. Water quality monitoring has been excluded as it is included in

the water services rendered by municipalities, to the varying extent that municipalities provide in-house or contracted

services to test water quality.

FFC AND SALGA


13.2 Operating cost estimates for provision of municipal health services to low income households

Cemeteries are facilities provided to the communities on a basis where it is mostly difficult or impossible to provide

such services in a ring-fenced manner, or determine the costs to the poor accurately. Those cemeteries that only

serve low income households, such as in the rural villages would be the exception, where this would be possible. Costs

have therefore been determined utilising the tried methodology where the appropriate proportional cost relative to the

replacement value of the infrastructure used to provide the service, is used to calculate the annual operating cost.

Different approaches to infrastructure investment, and the impacts on operations and maintenance were also

considered with two scenarios used to determine the impact of improved asset management on costs, as follows:

• Scenario / Model A: Asset sweating – continuation of current investment approach: investment in new

asset creation and neglect of current infrastructure

• Scenario / Model B: Responsible asset custodianship and investment aligned to growth – investment

in new assets linked to population growth, and adequate provision for infrastructure renewal

Table 41 contains the cost estimates for the operating cost associated with low income households in terms of

Scenario A, with a total value of R 124 million per annum required for 2015/16. The estimated costs have been

aggregated at provincial level:

Table 41: Operations, maintenance and depreciation costs for cemeteries per province - 2015/16 (Scenario A)

(HH and Rand in Thousands)

Province Poor HH Operations Maintenance Depreciation Total Cost

Eastern Cape 1 192 4 314 5 727 8 429 18 470

Free State 532 1 887 2 507 3 780 8 175

Gauteng 2 124 7 514 10 035 15 521 33 070

Kwazulu-Natal 1 678 6 011 7 977 11 817 25 804

Limpopo 1 064 3 551 4 727 7 368 15 646

Mpumalanga 708 2 575 3 418 5 199 11 192

Northern Cape 179 617 821 1 278 2 716

North West 696 2 365 3 141 4 828 10 334

Western Cape 793 2 742 3 667 5 801 12 210

Total 8 966 31 576 42 020 64 022 137 618

Table 42: Operations, maintenance and depreciation costs for cemeteries per province - 2015/16 (Scenario B)

(HH and Rand in Thousands)


Eastern Cape 1 192 3 863 5 128 7 548 16 539

Free State 532 1 704 2 263 3 414 7 380

Gauteng 2 124 6 637 8 864 13 709 29 211

Kwazulu-Natal 1 678 1 746 2 327 3 476 7 550

Limpopo 1 064 6 894 9 150 13 806 29 851

Mpumalanga 708 2 268 3 011 4 585 9 864

Northern Cape 179 553 736 1 146 2 434

North West 696 2 218 2 946 4 529 9 692

Western Cape 793 2 417 3 233 5 112 10 761

Total 8 966 28 300 37 658 57 325 123 283

FFC AND SALGA


Table 42b: Operations, maintenance and depreciation costs for cemeteries per PDG category - 2015/16

(Scenario B) (HH and Rand in Thousands)

PDG Category Operations Maintenance Operations &

Maintenance Depreciation

Poor

Households

A - Metropolitan 10 333 13 808 24 141 21 203 3 320 944 B1 - Secondary cities 3 956 5 264 9 220 8 171 1 267 797 B2 - Large towns 2 299 3 057 5 356 4 698 730 963 B3 - Small towns 4 066 5 391 9 457 8 101 1 265 985 B4 - Rural 7 646 10 139 17 785 15 152 2 380 100 Total 28 300 37 658 65 958 57 325 8 965 790

Comparison between the results in terms of Scenario A and Scenario B shows little difference in 2015/16. The

estimated costs as indicated in the tables above are presented graphically below:

Figure 31: Estimated cemeteries’ operation, maintenance and depreciation costs – Scenario A

Figure 32: Estimated cemeteries’ operation, maintenance and depreciation costs – Scenario B

0

500

1 000

1 500

2 000

2 500

0

5

10

15

20

25

30

35

East

ern

Cap

e

Free

Sta

te

Gau

ten

g

Kw

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atal

Lim

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Mp

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Nor

ther

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Nor

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tern

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Mill

ion

s

Operations Maintenance Depreciation Poor HH

10

00

hh

0

500

1 000

1 500

2 000

2 500

0

5

10

15

20

25

30

35

East

ern

Cap

e

Free

Sta

te

Gau

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Cap

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Mill

ion

s


10

00

hh

FFC AND SALGA


13.3 Recommendations

Operating and maintenance costs for cemetery services are relatively low compared to the costs for other services.

Since cemeteries are often managed by the same departments responsible for Parks and/or Sports, consideration

should be given to allocating a proportional amount from the grant allocated to sports facilities, to cemeteries.

FFC AND SALGA


14. Operating Cost Needs: Municipal Roads and Stormwater

14.1 Typical scope of municipal roads and stormwater operating and maintenance cost activities

Operating and maintenance of roads and stormwater includes a multitude of activities not limited to physical

maintenance repairs and operations (that includes preventative and reactive activities). Additionally, it also includes

strategic and planning activities. All of the activities form part of the integrated asset management of the

infrastructure, and include functions such as the development of asset management plans, integrated transport plan

development, and interaction with stakeholders ranging from provincial transport authorities, taxi associations etc.

Regular monitoring of roads and stormwater condition (and of all associated infrastructure) is required, as well as the

development and maintenance of asset registers. Periodic detailed PMS (pavement management system) assessments

are required, and associated studies, such as pavement analysis, traffic surveys and traffic counts.

The most significant cost elements or drivers are listed below:

• Pot-hole repair, crack sealing and edge repairs

• Maintaining kerbs, kerb inlets, man-holes and structures;

• Bridge maintenance

• Surface enrichment;

• Road condition assessment;

• Maintenance of road furniture, marking of roads;

• Stormwater maintenance and cleaning

Road surface maintenance is normally the most significant maintenance activity on paved roads, accounting for the

largest investment in terms of resources. The age and condition of roads have direct influence, and renewal backlogs

can result in a severe escalation in the required maintenance.

FFC AND SALGA


Maintenance backlogs rapidly leads to irretrievable damage to the road structural layers, reduced life of the

infrastructure with increased life cycle cost and reduced service standards, and if not addressed, may result in roads

having to be re-built. Following is a brief analysis of the nature of operations and maintenance activities:

• Repairing kerbs, kerb inlets, man-holes and structures

Damage to kerbs, as well as kerb inlets, storm water manholes and other road structures through wear and

tear, accidents, vehicles driving over kerb inlets etc. need to be repaired to ensure functionality is maintained

and to ensure the safety of road users and the public in general

• Bridge maintenance

Bridges and engineering structures (e.g. erosion protection and retaining structures) require specialised

management and maintenance to prevent damage or losses and the endangerment of life and property

• Surface enrichment

Bitumen surfaces become brittle over time as a result of oxidisation of the binder, and bitumen enrichment is

required to prevent the loss of aggregate and reduced functionality and life of the road surface

• Road condition assessment

Assessment of roads and associated infrastructure is essential for budgeting and planning, as well as for the

planning of maintenance (and renewal) work, and to ensure the safety of road users

• Maintenance of road furniture, marking of roads

Road furniture includes signage (regulatory and information), traffic lights, guard rails, road markings etc.

Regular maintenance is essential, and response for infrastructure such as traffic lights need to be rapid in order

to ensure mobility and safety for road users

• Stormwater maintenance and cleaning

Operations of stormwater system includes inspection and monitoring of pipes and culverts (also CCTV

inspections), channels, discharge points for damage, siltation and blockages. The responses include unblocking,

rodding, repairs to pipes, channels and man-holes, cleaning of screens and removal of debris

• Cleaning of kerb inlets

Kerb inlets need to be cleaned of litter, leaves and sand or gravel on a routine planned basis, and in response

to blockages to ensure the correct functioning of the storm water system, and prevent flooding of the roads

and property.

14.2 Operating cost estimates for provision of municipal roads and stormwater services to low income

households

In addition to preventative and reactive maintenance and operations, activities and expenditure include planning,

traffic management, engineering reviews and assessments, maintenance of the asset register/s, financial planning,

budgeting and the various other activities required to actively and effectively implement life cycle asset management.

For the purposes of determining baseline operations and maintenance cost, eight (8) municipalities were selected as

test sites and the actual cost incurred to provide this service was analysed, interpreted and calibrated to represent the

typical operations and maintenance needs in the provision of roads and stormwater services to low income

households. The methodology applied and the ensuing results are further discussed below.

14.2.1 Data sources

For the purpose of developing reasonable norms to determine the operations and maintenance cost per municipality,

the following data sources were used:


• MTREF – 2014/15 and 2015/16; and

• Annual Reports for 2013/14.

FFC AND SALGA


In addition to the information listed above which are available in the public domain, additional information was

obtained through municipal officials and existing data sets to clarify information and to provide insight into the key

elements that influence these costs. The test sites utilised in this study are:

• Bitou Local Municipality;


• City of Matlosana Local Municipality;

• Ekurhuleni Metropolitan Municipality;;

• George Local Municipality

• Greater Tzaneen Local Municipality;

• Hessequa Local Municipality;

• Moses Kotane Local Municipality.

The most significant challenge in establishing a baseline cost for the provision of roads and stormwater services, is the

number and variability of cost influencing factors. Factors such as the geographical distribution of households, extent

of gravel and paved roads and standard of roads available to each community, availability and quality of resources

such as a local quarry, rainfall, etc, have a significant impact on the operations and maintenance cost. To bridge this

challenge, test municipalities were selected based on the availability of information and knowledge of these conditions,

or as a minimum, access to officials within these municipalities to assist in understanding and interpreting these

factors. The following table illustrates the various differences between these municipalities:


Test Data Province Code Category 2Number of Households (2013/14)

Number of Poor


Poor vs. Total Households Paved KM Gravel KM

Ekurhuleni Gauteng EKU A 1 015 465 532 516 52,44% 7399 515

Buffalo City Eastern Cape BUF A 223 568 134 930 60,35% 1082 636

George Western Cape WC044 B1 53 551 25 377 47,39% 404 94

City Of Matlosana North West NW403 B1 120 442 69 705 57,87% 801 425

Bitou Western Cape WC047 B3 16 645 10 112 60,75% 138 17

Hessequa Western Cape WC042 B3 15 873 6 954 43,81% 231 43

Greater Tzaneen Limpopo LIM333 B4 108 926 79 378 72,87% 705 1595

Moses Kotane North West NW375 B4 75 193 49 844 66,29% 222 362


Figure 34: Number of households – Extent of Roads (Kilometers)

2 2013/14 data was used as this is the latest actual expenditure data available.

- 100 000 200 000 300 000 400 000 500 000 600 000 700 000 800 000 900 000

1 000 000 1 100 000

Ekurhuleni Buffalo City George City of Matlosana

Bitou Hessequa Greater Tzaneen

Moses Kotane

Number of Households (2013/14) Number of Poor Households (2013/14)

FFC AND SALGA


14.2.2 Data analysis

As eluded to earlier, the standard of roads and stormwater (standards of service) has a significant impact on the

expenditure needs. In order to normalise this standard and to establish a baseline which could be extrapolated across

all municipalities, actual cost incurred by the test municipalities were adjusted to reflect similar circumstances. These

adjustments, as illustrated in the table below, are based on assumptions made in order to equalise expenditure

required based on maintenance regimes and local conditions. In other words, the expenditure which would have

been incurred if all conditions were equal and a general road and stormwater infrastructure condition of fair was

required.

Table 44: Test Municipalities – Equalisation of cost

Test Data Province Code Category Actual operations and

maintenance cost (2013/14)

Adjustment factor

Adjusted operations and maintenance

cost

Ekurhuleni Gauteng EKU A 442 090 000 0% 442 090 000

Buffalo City Eastern Cape BUF A 107 478 292 25% 134 347 865

George Western Cape WC044 B1 38 115 000 0% 38 115 000

City of Matlosana North West NW403 B1 52 383 000 15% 60 240 450

Bitou Western Cape WC047 B3 7 607 000 0% 7 607 000

Hessequa Western Cape WC042 B3 16 431 487 -30% 11 502 041

Greater Tzaneen Limpopo LIM333 B4 36 080 000 20% 43 296 000

Moses Kotane North West NW375 B4 10 231 000 35% 13 811 850

The next step in the process is to determine the cost per household. As discussed under the Capital Cost segment of

this report, all households do not have access to roads. In order to determine the cost per household, only

households with access to roads were taken into account and the cost per poor household with access to roads have

been determined. This cost is illustrated in the following two tables below:

Table 45: Test Municipalities – Cost per household with access to roads and stormwater

Test Data Code Category Adjusted operations and maintenance cost

Households with access to service

Rand per household with access

Ekurhuleni EKU A 442 090 000 796 268 555

Buffalo City BUF A 134 347 865 164 697 816

George WC044 B1 38 115 000 45 317 841

City of Matlosana NW403 B1 60 240 450 100 765 598

Bitou WC047 B3 7 607 000 12 221 622

Hessequa WC042 B3 11 502 041 14 934 770

Greater Tzaneen LIM333 B4 43 296 000 101 058 428

Moses Kotane NW375 B4 13 811 850 59 579 232

-

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

Ekurhuleni Buffalo City George City of Matlosana

Bitou Hessequa Greater Tzaneen

Moses Kotane

Km Paved Roads Km Gravel Roads

FFC AND SALGA


In order to extrapolate the above results to the entire population, a median of cost per category of municipality was

calculated. This median, as illustrated in the table below forms the base for the distribution of cost to poor

households.

Table 46: Test Municipalities – Median of cost per household with access to roads and stormwater services

Category Median - cost per household

Category A 685

Category B1 719

Category B2 696

Category B3 696

Category B4 330

The element that has the largest impact on the total cost of operations and maintenance of roads and stormwater

infrastructure lies within the difference between expenditure requirements of paved and gravel roads. Although it is a

known reality that the majority of poor households only have access to gravel roads, the extent of this distribution

cannot be normalised and attempting to do so will only create a false sense of accuracy. In lieu of a reasonably

acceptable norm relating to the distribution, the current replacement cost (CRC) and its distribution between poor and

other households, as modelled in the capital segment of this report is used to accommodate for this cost factor. A

norm of 45% CRC attributable to poor households have therefore been used as the factor to determine operations and

maintenance cost attributable to poor households. This distribution was in turn used to project the adjusted 2013/14

actual cost to the 2014/15 equivalent, after taking into account an assumed CPIX of 5.8%, and projecting the cost

attributable to poor households based on the total poor household population for 20145/15 and the following years.

The summarised results, per category is illustrated in the table and figure below and Appendix D provides the detail

per municipality.

Table 47: Roads and Stormwater operations and maintenance cost attributable per poor household

Category 2014/15 - Cost per poor h/h

2014/15 Cost per

poor h/h as % of CRC per poor

h/h

2015/16 Cost per poor h/h

2015/16 Cost per

poor h/h as % of CRC per poor

h/h

2016/17 Cost per poor h/h

2016/1Cost per poor

h/h as % of CRC per poor h/h

2017/18 - Cost per poor h/h

2017/18 Cost per poor h/h as % of CRC per poor h/h

A 441,27 0,94% 452,62 0,90% 462,81 0,87% 474,04 0,84%

B1 468,44 1,22% 479,64 1,18% 489,02 1,13% 499,76 1,09%

B2 468,01 2,19% 481,38 2,12% 492,87 2,05% 505,91 1,98%

B3 493,10 2,31% 510,77 2,25% 527,38 2,19% 545,56 2,14%

B4 263,45 2,22% 274,62 2,18% 284,45 2,13% 295,62 2,09%

Figure 35: Roads and Stormwater operations and maintenance cost attributable per poor household

FFC AND SALGA


Based on the analysis above, and with the addition of the estimated annual cost for renewal of roads and stormwater

infrastructure, the model have been used to determine the combined operational cost for the provision of roads and

storm water services to the poor. The combined operations, maintenance and depreciation cost package determines

the annual operational expenditure, totalling R 14.2 billion per annum to serve low income households, as indicated in

the table below:

Table 48: Estimated roads and stormwater operations, maintenance and depreciation costs per province -

2015/16 (R 000) Scenario A


Eastern Cape 1 192 157 862 423 340 822 758 1 403 960

Free State 532 194 050 518 916 1 037 219 1 750 185

Gauteng 2 124 509 664 1 363 410 2 799 630 4 672 703

Kwazulu-Natal 1 678 271 248 727 467 1 422 092 2 420 807

Limpopo 1 064 106 379 285 051 556 015 947 445

Mpumalanga 708 92 554 247 928 484 182 824 664

Northern Cape 179 24 988 66 755 134 827 226 571

North West 696 91 450 244 393 489 971 825 814

Western Cape 793 173 429 464 786 934 736 1 572 951

Total 8 966 1 621 625 4 342 046 8 681 430 14 645 101

Table 49a: Estimated roads and stormwater operational & depreciation costs /PDG category - 2015/16 (R 000)



Poor

Households

A - Metropolitan 823 656 390 2 204 499 482 3 028 155 873 4 492 232 951 3 320 944

B1 - Secondary cities 274 668 514 734 140 203 1 008 808 717 1 463 302 694 1 267 797

B2 - Large towns 103 033 757 275 580 817 378 614 573 544 943 521 730 963

B3 - Small towns 202 873 229 544 246 504 747 119 733 1 054 592 773 1 265 985

B4 - Rural 162 574 472 436 475 517 599 049 989 833 965 059 2 380 100

Total 1 566 806 363 4 194 942 523 5 761 748 885 8 389 036 998 8 965 790

Table 49b: Estimated roads and stormwater operations, maintenance and depreciation costs per province -

2015/16 (R 000) Scenario B


Eastern Cape 1 192 145 784 390 896 760 646 1 297 325

Free State 532 193 582 517 642 1 034 891 1 746 115

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2014/15 - Cost per poor h/h 2015/16 - Cost per poor h/h 2016/17 - Cost per poor h/h 2017/18 - Cost per poor h/h

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Gauteng 2 124 500 327 1 338 392 2 747 770 4 586 489

Kwazulu-Natal 1 678 134 524 360 642 714 332 1 209 498

Limpopo 1 064 218 568 586 062 1 131 987 1 936 618

Mpumalanga 708 89 411 239 478 468 095 796 984

Northern Cape 179 24 041 64 219 129 746 218 006

North West 696 90 053 240 646 482 521 813 220

Western Cape 793 170 516 456 966 919 048 1 546 530

Total 8 966 1 566 806 4 194 943 8 389 037 14 150 786

Although the effect of asset sweating is not very significant early in the cycle, it shows already that lower expenditure

on maintenance results in higher depreciation (and renewal needs). The results above are shown graphically in the

figures that follows.

Figure 36: Roads and Stormwater operations, maintenance and depreciation costs (Scenario A)

Figure 37: Roads and Stormwater operations, maintenance and depreciation costs (Scenario B)

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15. Operational Cost Needs: Fire-fighting services

The extent of fire-fighting services provided in South Africa varies from municipality to municipality. The nature of the

service is mostly based on the requirements as stipulated in SANS 10090:2003 (South African National Standard –

Community protection against fire) which provides specific fire protection requirements for each of 5 predefined fire-

risk categories. These categories are included for reference purposes below:

• Category A - Central business districts and extensive commercial and industrial areas normally found in cities

and large towns (areas where the risk of life and property due to fire occurrences and spread is likely to be

high);

• Category B - Limited central business districts, smaller commercial or industrial areas normally associated with

small towns and decentralised areas of cities and large towns (areas where the risk of life and property due to

fire occurrences and spread is likely to be moderate);

• Category C - Residential areas of conventional construction;

• Category D – Rural areas of limited buildings and remote from urban areas; and

• Category E – Special risk areas. Individual areas requiring a pre-determined attendance over and above the

predominant risk category. This includes large shopping/entertainment centres, informal settlements,

harbours, hospitals, prisons, large airport buildings and petrochemical plants.

The standard further regulates the service by categorising fire brigades according to the type and extent of equipment

and staff required per fire-risk category, specifying minimum communication requirements and outlying the maximum

response times. The latter is further guided by the CSIR Guidelines for the Provision of Social Facilities in South

African Settlements. Determining the cost of operations and maintenance is therefore largely determined by the

aforementioned South African National Standard and SCIR Guideline.

The cost included under operations and maintenance consists of:

• Administrative cost, which is a product of the type of fire brigade and staffing requirements;

• Cost of the actual fire-fighting service, such as:

o Fire-fighter salaries;

o Training of fire-fighters;

o Uniforms and protective equipment;

o Consumables;

o Vehicle running cost (fuel); and

o Maintenance of vehicles and equipment.

15.1 Operating cost estimates for fire protection services for low income households

The main cost driver of the service lies in the category of fire brigade required, mainly determined on location and

legislated response times. This fact, coupled with the provision of the service by either local or district authority and

the distribution of poor households throughout the municipal boundary with varied proximities to the fire brigade,

means the cost of the service to poor households cannot be associated with a specific type of fire brigade or service.

The same household could literally be exposed to different levels of service.

Fire stations are provided as a basis from which equipment and resources operate in a manner that enables the

authorities to respond to incidents and fires effectively. This requires that the services and resources are located

spatially so that all premises can be reached within a time, as determined based on the specific risk category, with

FFC AND SALGA


appropriate equipment and numbers of competent staff that is sufficient to treat incidents appropriately and within the

least time possible. It is worth noting that the emphasis on response times is based on the huge advantage to be

obtained from reaching a fire event during the early stages, and conversely the tremendous difficulty in extinguishing

a fire which has spread, and reached peak temperatures. The recommended maximum response times are indicated in

Table 50 below:

Table 50: Response times for fire-fighting services

Risk category Max call receipt & dispatching time

(in minutes)

Turnout time (in minutes)

Max appliance travel time (in

minutes)

Max total attendance time

(minutes) A:Central Business districts & industrial areas of large towns 2 1 5 8

B:Central Business districts & industrial areas of smaller towns 2 1 7 10

C:Residential areas of conventional construction 2 1 10 13

D:Rural areas with limited buildings 2 1 20 23

E:Special risk e.g. large shopping centres, informal settlements, hospitals, prisons, airports, petrochemical

Within the requirement of the appropriate risk category above

15.2 Determining benchmarks

Section 156 of the South African Constitution, 1996, (Act 108 of 1996) assigns executive authority to local

government to administer fire-fighting services with provincial and national government having concurrent legislative

competence. However, in large number of instances, this function is performed at a District Municipality level.

Furthermore, it also has to be noted that not all category B3, B4, C1 and C2 municipalities provide the same level of

fire-fighting services throughout the country, whereas category A1, B1 and B2 municipality generally provide the full

basket of services. As a result, meaningful comparisons between all municipalities cannot be made based on a

municipal category level and an approach was followed to select municipalities which provide the full basket of fire-

fighting services to which poor households have access and determine benchmarks on a level of service basis.

With the abovementioned criteria in mind, the following municipalities were selected:


• Polokwane Local Municipality;

• Stellenbosch Local Municipality;

• Emfuleni Local Municipality;

• Midvaal Local Municipality

15.3 Employee and administrative cost

The first element of cost to be established relates to the cost of fire-fighters and employees responsible for managing

fire-fighting services. Since the staff compliment for fire-fighting services are largely regulated by SANS 1009 and

NFPA 1710, the test municipalities were considered to provide a representative basis to serve as a benchmark per

type of service.

FFC AND SALGA


In order to determine the employee costs to provide fire-fighting services, costs per employee for the test

municipalities were determined, and the median values then derived, and applied to individual municipalities:

Table 51: Cost per fire-fighting services employee

Test Data Province Municipal code Category

Number of fire-fighting employees

Fire-fighting services

employee cost

Cost per fire-fighting services

employee

Buffalo City Eastern Cape BUF A 185 50 359 548 272 214

Stellenbosch Western Cape WC024 B1 45 10 848 825 241 085

Polokwane Limpopo LIM354 B1 85 19 897 676 234 090

Emfuleni Gauteng GT421 B1 88 22 799 480 259 085

Midvaal Gauteng GT422 B2 47 13 084 000 278 383

Since the test municipalities were selected based on the fact that they represent the total basket of fire-fighting

services available to the poor, the median of the cost associated with Category B municipalities were also adopted for

category B3 and B4 municipalities.

Table 52: Median operating and maintenance cost (for movable assets) per employee

Category Median of cost per fire-fighting services employee Note

Category A 272 214

Median calculated from actual results – test municipality Category B1 241 085

Category B2 278 383

Category B3 278 383 Adopted median from category B2 municipalities

Category B4 278 383

After determining the cost norm per employee, the number of employees per municipality needed to be calculated.

This was done by determining the median of employees per fire station, which could then be projected against the

number of fire stations per municipality – which was determined based on a combination of data received via

CoGSTA’s National Disaster Management database and spatial assessments (representing all fire stations in South

Africa).

Table 53: Number of employees required per fire station

Test Data Province Municipal code Category Nr of fire-fighting

services employees Nr of fire stations

Nr of employees

per fire station

Buffalo City Eastern Cape BUF A 185 8 23,13

Stellenbosch Western Cape WC024 B1 45 2 22,50

Polokwane Limpopo LIM354 B1 85 3 28,33

Emfuleni Gauteng GT421 B1 88 3 29,33

Midvaal Gauteng GT422 B2 47 2 23,50

Once again, the median determined for category B2 municipalities were adopted for category B3 and B4

municipalities.

Table 54: Median number of employees per municipality

Category Median of employees per fire station Note

Category A 23,13

Median calculated from actual results – test municipality Category B1 28,33

Category B2 23,50

Category B3 23.50 Adopted median from category B2 municipalities

Category B4 23.50

FFC AND SALGA


The information and costs thus determined allowed the calculation of the employee cost required for fire-fighting

services for each municipality. This cost, at provincial level, amounts to R 1.59 billion for 2015.

Table 55: Fire-fighting employee cost attributable to poor households – 2015/16

Province Households Poor Households Total fire-fighting services employee cost

Employee cost attributable to poor households (2015/16)

Eastern Cape 1 740 125 1 192 081 361 904 984 241 860 797

Free State 859 069 532 349 367 301 595 240 140 300

Gauteng 4 247 783 2 123 502 520 057 959 259 630 151

Kwazulu Natal 2 667 387 1 677 722 370 673 547 238 407 197

Limpopo 1 505 301 1 063 628 177 500 225 122 595 870

Mpumalanga 1 152 389 708 419 219 062 158 130 288 360

North West 1 124 523 695 593 192 027 933 124 716 656

Northern Cape 317 250 179 118 72 250 742 37 336 983

Western Cape 1 735 962 793 378 419 014 959 195 680 021

2 699 794 103 1 590 656 334

15.4 Operational and maintenance cost

The next cost element consists of operations and maintenance cost. These costs consists of all costs required to

provide the fire-fighting service, excluding employee costs, the cost of depreciation and any cost associated with the

maintenance of fire station buildings. The number of employees providing the service was deemed to provide the

most representative basis. The actual operating and maintenance cost per employee, as informed by an analysis of

the test municipalities, was determined. (Represented by Table 56 below)

Table 56: Operational and maintenance cost per employee

Test Data Province Municipal code Category

Number of fire-

fighting services

employees

Operating and maintenance

cost

Operating and maintenance cost per fire-

fighting services

employee

Buffalo City Eastern Cape BUF A 185 13 133 839 70 994

Stellenbosch Western Cape WC024 B1 45 2 492 944 55 399

Polokwane Limpopo LIM354 B1 85 4 652 090 54 730

Emfuleni Gauteng GT421 B1 88 5 023 441 57 085

Midvaal Gauteng GT422 B2 47 2 968 000 63 149

With the cost per employee determined, a median was established per category of municipality. As was the case

when employee cost for the service was determined, the basis established for Category B2 was adopted for Category

B3 and B4 municipalities. (Refer Table 57 below)

Table 57: Median to be applied to remainder of municipalities

Category Median of operating and maintenance cost per fire-fighting employee Note

Category A 70 994 Median calculated from actual results – test municipality Category B1 55 399

Category B2 63 149

Category B3 63 149 Adopted median from category B2 municipalities

Category B4 63 149

FFC AND SALGA


The deemed number of fire-fighting services employees, habing already been established, the above median was

applied to the remainder of municipalities and the cost attributable to poor households was determined. The results

are reflected in Table 58 below.


Province Households Poor Households

Operating and maintenance cost


attributable to poor HH

(2015/16)


cost attributable to poor HH (2016/17)


cost attributable to

poor HH (2017/18)

Eastern Cape 1 740 125 1 192 081 85 943 139 57 072 699 60 382 916 63 885 125

Free State 859 069 532 349 83 847 616 54 766 797 57 943 272 61 303 981

Gauteng 4 247 783 2 123 502 133 229 349 66 421 846 70 274 313 74 350 223

Kwazulu Natal 2 667 387 1 677 722 87 625 466 56 042 161 59 292 606 62 731 578

Limpopo 1 505 301 1 063 628 40 324 894 27 846 771 29 461 884 31 170 673

Mpumalanga 1 152 389 708 419 49 913 944 29 668 442 31 389 212 33 209 786

North West 1 124 523 695 593 43 721 050 28 380 614 30 026 690 31 768 238

Northern Cape 317 250 179 118 16 409 631 8 479 688 8 971 510 9 491 857

Western Cape 1 735 962 793 378 101 777 784 47 352 785 50 099 247 53 005 003

642 792 873 376 031 804 397 841 649 420 916 464

15.5 Depreciation of vehicles and movable equipment

The next and last element relating to the cost of operations is the depreciation of assets, which serves as proxy for

renewal needs, required over the life cycle of assets to ensure that services can be rendered sustainably. In order to

determine the depreciation applicable to each municipality, the minimum vehicle and equipment requirements,

(apparatus unit) per category of fire station (SANS 10090 and NFPA 1901), were established and a current

replacement cost (CRC) per unit was determined, based on actual expenditure identified through the test

municipalities. (Refer Table 59 and Table 60 below)


Categorisation of vehicle and equipment units


A B C D E

Fully equipped fire-fighter, aerial appliance and pumping unit (Specialised fire containment) - - - - 1

Fully equipped fire-fighter, aerial appliance and pumping unit 1 1 - - -

Fully equipped fire-fighter and pumping unit 1 1 1 - 1

Off-road vehicles 1 1 1 1 1

Light vehicles 1 1 1 1 1

Emergency and fire-fighting apparatus (not included in equipped fire-fighters) 1 1 1 1 1

Table 60: Current replacement cost per fire-fighting unit

Current replacement cost (CRC) per unit


A B C D E Fully equipped fire-fighter, aerial appliance and pumping unit (Specialised fire containment) - - - - 4 270 070

Fully equipped fire-fighter, aerial appliance and pumping unit 2 658 085 2 658 085 - - -

Fully equipped fire-fighter and pumping unit 2 017 544 2 017 544 2 017 544 - 2 017 544

Off-road vehicles 545 500 545 500 545 500 545 500 545 500

Light vehicles 1 932 300 1 932 300 1 932 300 1 932 300 1 932 300

Emergency and fire-fighting apparatus (not included in equipped fire-fighters) 794 880 794 880 794 880 794 880 1 685 599

7 948 309 7 948 309 5 290 224 3 272 680 10 451 013

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After the establishment of a capital unit cost per fire-risk category, each municipality was categorised based on the

SANS 10090 fire-risk classification and the cost norms per risk category were applied to determine the total capital

cost relating to vehicles and equipment, which in turn informs the depreciation charge, based on asset replacement

periods as specified under SANS 10090, Section 5.3.2.2. The depreciation charge, as an element of operational cost,

attributable to poor households, are reflected in Table 61 below.

Table 61: Depreciation costs associated with movable assets attributable to poor households

Province Households Poor Households Depreciation

(equipment and vehicles) 2015/16


vehicles) attributable to poor

households (2015/16)

Eastern Cape 1 740 125 1 192 081 36 027 516 24 152 015

Free State 859 069 532 349 25 249 464 16 374 162

Gauteng 4 247 783 2 123 502 57 411 310 28 541 807

Kwazulu Natal 2 667 387 1 677 722 32 252 525 20 352 892

Limpopo 1 505 301 1 063 628 22 689 786 15 932 009

Mpumalanga 1 152 389 708 419 18 940 439 11 517 218

North West 1 124 523 695 593 18 834 948 12 201 750

Northern Cape 317 250 179 118 7 272 103 3 987 737

Western Cape 1 735 962 793 378 36 517 841 16 866 155

255 195 931 149 925 746

15.6 Summary – Operating and maintenance cost (incl. depreciation) attributable to poor households

As reflected in Table 62 below, the estimated combined operational and maintenance costs relating to fire-fighting

services, attributable to poor households amounts to R 2.1 billion per annum in 2015/16.

Table 62a: Operational + depreciation costs: Fire-fighting services (function and movable assets) 2016

Province Poor Households

Employee cost attributable to

poor households (2015/16)


attributable to poor households

(2015/16)


vehicles) attributable to poor

households (2015/16)

Total operations and maintenance cost attributable

to poor households (2015/16)

Eastern Cape 1 192 081 247 924 659 57 072 699 24 152 015 323 085 512

Free State 532 349 227 609 787 54 766 797 16 374 162 311 281 259

Gauteng 2 123 502 259 981 237 66 421 846 28 541 807 354 593 803

Kwazulu Natal 1 677 722 233 144 745 56 042 161 20 352 892 314 802 251

Limpopo 1 063 628 125 419 616 27 846 771 15 932 009 166 374 650

Mpumalanga 708 419 134 666 095 29 668 442 11 517 218 171 474 020

North West 695 593 118 782 168 28 380 614 12 201 750 165 299 021

Northern Cape 179 118 40 792 426 8 479 688 3 987 737 49 804 408

Western Cape 793 378 191 500 294 47 352 785 16 866 155 259 898 961

Total: 1 590 656 334 376 031 804 149 925 746 2 116 613 884

Table 62b: Operational + depreciation costs: Fire-fighting services (function and movable assets R 000) 2016



Poor

Households

A - Metropolitan 433 813 883 113 139 256 546 953 140 49 292 434 3 320 944 B1 - Secondary cities 160 197 490 36 811 667 197 009 157 14 517 521 1 267 797 B2 - Large towns 130 095 719 29 511 166 159 606 884 13 148 789 730 963

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Poor

Households

B3 - Small towns 590 975 978 134 058 140 725 034 118 41 115 621 1 265 985 B4 - Rural 275 573 264 62 511 575 338 084 839 31 851 379 2 380 100 Total 1 590 656 334 376 031 804 1 966 688 138 149 925 746 8 965 790

Figure 38: Combined operational, maintenance and depreciation costs (movable assets)

Figure 39: Combined operational costs for fire-fighting services (movable assets) per poor household


Costs associated with the operating and maintenance of fire-fighting services are not in direct correlation with the cost

of fire-fighting events. As an emergency service a more effective service could be expected to be characterised by a

lower number of fire events occurring – plus the ability to minimise the risk of injury and extent of damage for actual

events occurring. ‘Prevention being better than cure’ certainly applies to fire-fighting services - conflagrations in

informal settlements and industrial properties, and the number of fire events where inadequate equipment and

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Eastern Cape Free State Gauteng Kwazulu Natal Limpopo Mpumalanga North West Northern Cape Western Cape

FFC AND SALGA


capacity resulted in total destruction that may have been prevented is enough evidence of the result when operations

and maintenance fell short.

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16. Operational Cost Needs: Operational Buildings

This description include the following services that require infrastructure assets to enable municipalities to perform the

functions, and includes facilities for:

• Executive and management purposes – civic centres, ward offices etc.;

• Administrative purposes – offices, customer care centres etc.; and

• The support of infrastructure and community services – offices, stores, depots, workshops etc.

The buildings and facilities provided to serve as an operational base for the municipality, and enable and support the

functions of a municipality, need to be operated and maintained in order to ensure the sustained and effective use of

such facilities.

16.1 Operating cost estimates for provision of operational buildings facilities

The maintenance and operations of operational buildings are often performed internally by a specific department on a

client basis for the various sectors and departments. Some of these services are outsourced, or sometimes performed

by the individual departments that occupy the specific buildings. This requires location of services and resources in

such manner that the overall efficiency and productivity of the municipality can be maximised. Effective functioning,

including communication, management and control is only possible when the facilities are functioning according to the

design and requirements.

Operational buildings that serve low income households exclusively are typically only found in areas where there are

large settlements, accommodating primarily poor households, or in larger rural villages. Costs have therefore been

determined utilising the tried methodology where the appropriate proportional cost relative to the replacement value

of the infrastructure used to provide the service, is used to calculate the annual operating cost. Different approaches

to infrastructure investment, and the impacts on operations and maintenance were also explored through two

scenarios to compare outcomes on costs. These scenarios are:

• Model A: Asset sweating – continuation of current investment approach: investment in new asset creation

and neglect of current infrastructure.

• Model B: Responsible asset custodianship and investment aligned to growth – investment in new

assets linked to population growth, and adequate provision for infrastructure renewal.

Table 63 contains the cost estimates for the operating cost associated with low income households in terms of

Scenario A, with a total value of R 248 million per annum required for 2015/16, with a slightly lower expenditure of R

241 million in terms of Scenario B. The estimated costs have been aggregated at provincial level.

FFC AND SALGA


Table 63: Operational costs for operational bldgs - 2015/16 (Scenario A, HH and Rand in Thousands)


Eastern Cape 1 192 31 068 61 992 95 377 188 437

Free State 532 14 511 28 999 46 126 89 636

Gauteng 2 124 67 010 134 396 216 057 417 464

Kwazulu-Natal 1 678 45 436 90 767 142 475 278 677

Limpopo 1 064 24 575 48 963 76 997 150 535

Mpumalanga 708 18 483 36 861 58 551 113 895

Northern Cape 179 4 540 9 049 14 361 27 950

North West 696 18 503 36 928 59 366 114 798

Western Cape 793 23 977 47 988 76 417 148 382

Total 8 966 248 102 495 944 785 728 1 529 774

Table 64a: Operational costs for operational bldgs - 2015/16 (Scenario B, HH and Rand in Thousands)


Eastern Cape 1 192 29 745 59 352 89 098 178 196

Free State 532 14 139 28 259 42 397 84 795

Gauteng 2 124 65 795 131 961 197 756 395 511

Kwazulu-Natal 1 678 43 329 86 547 129 876 259 751

Limpopo 1 064 24 080 47 978 72 058 144 116

Mpumalanga 708 17 924 35 747 53 671 107 342

Northern Cape 179 4 385 8 742 13 127 26 254

North West 696 18 580 37 084 55 665 111 329

Western Cape 793 23 370 46 774 70 143 140 287

Total 8 966 241 348 482 443 723 791 1 447 582

Table 64b: Operational costs for operational bldgs./ PDG category - 2015/16 (Scenario B, HH – R 000)



Poor

Households

A - Metropolitan 823 656 390 2 204 499 482 3 028 155 873 4 492 232 951 3 320 944

B1 - Secondary cities 274 668 514 734 140 203 1 008 808 717 1 463 302 694 1 267 797

B2 - Large towns 103 033 757 275 580 817 378 614 573 544 943 521 730 963

B3 - Small towns 202 873 229 544 246 504 747 119 733 1 054 592 773 1 265 985

B4 - Rural 162 574 472 436 475 517 599 049 989 833 965 059 2 380 100

Total 1 566 806 363 4 194 942 523 5 761 748 885 8 389 036 998 8 965 790

Comparison between the results in terms of Scenario A and Scenario B shows a difference of only 5.6% in 2015/16,

which will however increase over time. The estimated costs as indicated in the tables above are presented graphically

below.

FFC AND SALGA


Figure 40: Estimated operational costs for operational buildings - 2015/16 – Scenario A

Figure 41: Estimated operational costs for operational buildings - 2015/16 – Scenario B


Although the investment in operating and maintenance costs for operational buildings services is less than the costs

for other services, it still requires a significant amount to ensure that the benefit obtained from the investment is

maximised, and that municipal service rendering is effectively supported. Realisation of the importance of preventative

and comprehensive maintenance may not be sufficient to ensure appropriate allocation of the required funding,

considering the many and varied demands for funding. This may result in less than the minimum maintenance

requirements being funded.

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17. Operational Cost Needs: Other Municipal Services

The cost of maintenance of the other municipal services were already determined in Phase 1 of the project, which was

concluded during 2014. The model and the calculations were updated with the latest available information, and the

cost of maintenance and operations (for poor households) are indicated in the tables that follow.

Table 65a: Electrical services Operational costs per province (2015/16 - Scenario B)

Province Electricity Operations

Electricity Maintenance

Electricity Bulk purchase

Operational Costs -electricity

Electricity Depreciation

Eastern Cape 138 197 826 464 534 077 671 208 291 1 382 677 561 313 506 929

Free State 74 871 643 251 464 275 299 146 672 679 862 546 172 642 779

Gauteng 282 009 405 939 739 545 1 210 578 329 2 678 548 462 668 087 297

Kwazulu-Natal 192 866 897 646 065 799 940 485 641 1 944 043 825 445 820 609

Limpopo 149 279 299 504 109 661 597 109 660 1 364 154 291 338 207 121

Mpumalanga 97 499 526 328 106 339 398 090 934 900 332 690 223 943 283

Northern Cape 23 944 221 80 821 735 100 048 881 222 849 482 54 679 914

North West 91 929 799 308 755 141 390 509 314 862 767 135 213 930 769

Western Cape 112 512 571 376 010 978 450 054 793 1 026 914 040 265 485 993

Total 1 163 111 188 3 899 607 550 5 057 232 515 11 062 150 031 2 696 304 695

Table 65b: Electrical services Operational costs per PDG category (2015/16 - Scenario B) R 000



Poor

Households

A - Metropolitan 446 206 1 487 105 1 893 942 3 827 253 1 052 644


B2 - Large towns 93 771 312 242 409 982 815 995 222 749

B3 - Towns/ Rural 166 206 562 508 703 602 1 432 315 374 050

B4 - Small towns / Rural 288 925 978 017 1 334 321 2 601 264 646 619

Total 1 163 111 3 899 608 5 057 233 10 119 951 2 696 305

Figure 42: Electricity operations and maintenance costs (Scenario B)

Table 66a: Water services Operational costs per province (2015/16 - Scenario B)

Province Water Operations Water Maintenance

Water Bulk purchase

Operational Costs - Water Water Depreciation

0

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Operations Maintenance Bulk purchase Depreciation Poor HH

FFC AND SALGA


Province Water Operations Water Maintenance

Water Bulk purchase

Operational Costs - Water Water Depreciation

Eastern Cape 205 679 675 279 730 071 1 012 735 206 1 498 144 953 279 198 756

Free State 155 774 912 209 025 014 322 361 658 687 161 584 212 329 066

Gauteng 565 540 448 762 960 517 1 423 640 577 2 752 141 541 798 139 552

Kwazulu-Natal 344 609 457 468 207 536 899 450 078 1 712 267 071 472 345 047

Limpopo 217 556 998 291 905 130 511 477 647 1 020 939 775 293 038 169

Mpumalanga 171 268 642 229 918 707 468 155 090 869 342 439 231 564 657

Northern Cape 48 473 754 64 883 542 155 073 286 268 430 582 65 533 158

North West 166 737 049 223 078 233 459 239 103 849 054 385 226 904 665

Western Cape 219 637 939 298 009 409 510 456 986 1 028 104 335 306 792 626

Total 2 095 278 874 2 827 718 160 5 762 589 631 10 685 586 664 2 885 845 696

Table 66b: Water services Operational costs per PDG category (2015/16 - Scenario B) R 000



Poor

Households

A - Metropolitan 853 298 1 156 302 2 191 054 4 200 654 1 207 629 B1 - Secondary cities 325 989 438 124 815 771 1 579 884 445 202 B2 - Large towns 187 880 253 781 466 600 908 262 255 832 B3 - Small towns 342 657 461 103 829 205 1 632 964 461 249 B4 - Rural 385 454 518 408 1 459 960 2 363 822 515 934 Total 2 095 279 2 827 718 5 762 590 10 685 587 2 885 846

Figure 43: Water operations and maintenance costs (Scenario B)

Table 67a: Sanitation services Operational costs per province (2015/16 - Scenario B)

Province Sanitation Operations Sanitation Maintenance Operational Costs - Sanitation Sanitation Depreciation

Eastern Cape 120 661 494 149 419 639 291 999 675 177 537 225

Free State 96 694 514 118 942 820 233 299 065 141 491 256

Gauteng 536 238 142 657 063 132 1 315 660 104 811 852 443

Kwazulu-Natal 174 209 773 215 437 257 425 431 561 258 705 788

Limpopo 46 133 458 56 799 977 112 795 562 66 759 959

Mpumalanga 74 808 117 91 996 363 183 697 844 108 973 251

Northern Cape 28 551 378 35 194 652 69 269 859 41 357 815

North West 82 898 707 101 937 101 202 150 257 121 170 892

Western Cape 199 499 986 246 868 167 487 191 108 300 075 191

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Opera-ons Maintenance Bulk purchase Deprecia-on Poor HH

FFC AND SALGA


Province Sanitation Operations Sanitation Maintenance Operational Costs - Sanitation Sanitation Depreciation

Total 1 359 695 569 673 659 107 3 321 495 034 2 027 923 819

Table 67b: Sanitation services Operational costs per PDG category (2015/16 - Scenario B) R 000



Poor

Households

A - Metropolitan 800 218 984 559 1 784 777 1 213 981 3 321 B1 - Secondary cities 250 894 308 340 559 234 367 502 1 268 B2 - Large towns 103 396 127 308 230 704 151 133 731 B3 - Small towns 174 224 215 200 389 425 251 007 1 266 B4 - Rural 30 964 38 252 69 215 44 300 2 380 Total 1 359 696 1 673 659 3 033 355 2 027 924 8 966

Figure 44: Sanitation operations and maintenance costs (Scenario B)

The costs for the provision of solid waste services consist mainly of operational expenditure, with relatively little

expenditure on the maintenance and renewal of infrastructure assets (especially immovable assets) when compared to

the infrastructure services. This is clearly evident when the costs are compared to the other services, especially when

depreciation (the proxy for renewal cost) is considered.

Table 68a: Solid Waste services Operational costs per province (2015/16 - Scenario B)

Province Solid Waste Operations Solid Waste Maintenance

Operational Costs - Solid Waste

Solid Waste Depreciation

Eastern Cape 529 633 558 17 964 699 590 382 054 27 965 788

Free State 304 473 407 10 372 111 341 030 027 16 332 869

Gauteng 1 714 229 409 57 833 351 1 954 299 283 94 136 900

Kwazulu-Natal 881 056 114 29 825 498 993 392 017 46 997 520

Limpopo 346 789 010 11 849 223 392 152 291 18 246 001

Mpumalanga 343 186 336 11 680 458 390 151 342 18 204 170

Northern Cape 81 988 722 2 807 604 92 115 719 4 354 173

North West 400 312 462 13 623 840 453 631 195 21 387 218

Western Cape 562 629 953 19 026 558 634 962 099 30 931 761

Total 5 164 298 970 174 983 342 5 842 116 026 278 556 400

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Table 68b: Solid Waste services Operational costs per PDG category (2015/16 - Scenario B) R 000



Poor

Households

A - Metropolitan 2 729 298 92 124 2 821 422 150 107 3 321 B1 - Secondary cities 1 086 307 36 742 1 123 049 57 846 1 268 B2 - Large towns 290 923 9 822 300 745 15 395 731 B3 - Small towns 506 572 17 388 523 960 26 548 1 266 B4 - Rural 551 199 18 908 570 106 28 661 2 380 Total 5 164 299 174 983 5 339 282 278 556 8 966

Figure 45: Solid waste operations and maintenance costs (Scenario B)

The two figures that follow indicate the maintenance and operations costs only for roads and storm water as well as

for cemeteries, on a similar basis as the images for the subsidised services that are shown above.

Figure 46: Roads and storm water operations and maintenance costs (Scenario B)

Figure 47: Cemeteries’ operations and maintenance costs

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Operations movables Depreciation Poor HH

FFC AND SALGA


18. Summary of Operational cost needs

Detailed information on the needs for operational costs in respect of poor customers, including depreciation (although

as indicated, expenditure on renewals is a capital expenditure), at individual municipal level, is provided in Appendix

H.

The combined amount required for maintenance and operations costs for immovable infrastructure, plus bulk

purchases required to serve poor households for the services shown above - water, sanitation, electricity and solid

waste, roads and stormwater, health services (cemeteries), fire-fighting services and operational buildings) - amounts

to R 38 billion per annum. When depreciation is included, the total cost amounts to R 55 billion in 2015/16.

Table 69: Operational costs for poor customers including bulk purchases and depreciation per PDG category

(2015/16 – R million)

Province Combined Operations cost

Combined Maintenance

cost

Bulk purchases

Combined Operational

Costs Depreciation Poor HH

A - Metropolitan 6 201 6 261 4 085 16 547 8 520 3 320 944

B1 - Secondary cities 2 310 2 199 1 531 6 040 2 885 1 267 797

B2 - Large towns 928 1 045 877 2 850 1 262 730 963

B3 - Towns/ Rural 2 018 2 000 1 533 5 550 2 310 1 265 985

B4 - Small towns / Rural 1 753 2 163 2 794 6 710 2 272 2 380 100

Total 13 209 13 667 10 820 37 696 17 249 8 965 790

Figure 48 Aggregate operational costs and depreciation, for all poor households

The table below presents the operations and maintenance costs, excluding bulk purchase costs and depreciation. The

figures include the fire-fighting services cost associated with fire protection and movable assets with the total amounting to

R 27 billion.

Table 70: Operational costs for poor for all services, grouped per province (2015/16 – R million)

Province E Cape FS GT KZN LIM MP NW N Cape W Cape Total

Electricity 603 326 1 222 839 653 426 105 401 489 5 063

0

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2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

A - Metropolitan B1 - Secondary cities

B2 - Large towns

B3 - Towns/ Rural

B4 - Small towns / Rural

Operations Maintenance Bulk purchase Depreciation

R m

illio

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FFC AND SALGA


Province E Cape FS GT KZN LIM MP NW N Cape W Cape Total

Water 485 365 1 329 813 509 401 390 113 518 4 923

Sanitation 270 216 1 193 390 103 167 185 64 446 3 033

Solid waste 548 315 1 772 911 359 355 414 85 582 5 339

Roads and stormwater 537 711 1 839 930 370 329 331 88 627 5 762

Cemeteries 9 4 16 12 8 5 5 1 6 66

Fire-fighting 313 298 360 313 159 168 160 48 254 2 073

Operational Blds 89 42 198 130 72 54 56 13 70 724

Total 2 853 2 278 7 928 4 337 2 233 1 904 1 645 814 2 991 26 983

The cost of operating and maintaining services for the poor households that constitutes 58.5% of all households’

amounts to 51.8% of the total maintenance needs. This figure does not include the cost of maintaining services that

do not belong to the municipalities, for instance infrastructure in estates which are owned and maintained by other

entities, assets belonging to water boards or assets that belong to higher levels of government. Figure 49a indicates

the operations and maintenance costs for poor households for all services combined - including the cost for roads and

stormwater, cemeteries, fire-fighting services and operational buildings.

Figure 49a Consolidated operational costs and depreciation, for all poor households

The average total cost per province to serve households varies from R 2 100 (in Limpopo) to R 4 543 (in the Northern

Cape, as can be seen in the figure below.

Figure 49b: Total operational cost per service and aggregate cost per poor household (2016)

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Combined Operations cost Combined Maintenance cost Poor HH

FFC AND SALGA


The proportional operational costs for the services indicated in Figure 50, for 2016 shows that the services

responsible for the major share of the costs are roads and stormwater, water and electricity:

Figure 50: Operational costs compared across services (2016)

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Electricity Water Sanitation

Solid waste Roads and stormwater Cemeteries

Fire fighting Operational Blds Cost / hh

Electricity 23%

Water 24%

Sanitation 9%

Roads and Storm water 25%

Solid Waste 10%

Cemeteries 0% Fire Stations

6% Operational Buildings 3%

FFC AND SALGA


19. Conclusion

19.1 Capital funding requirements

The amounts required to fund annual capital and operational expenditure infrastructure have been determined in the

model for each service and for each municipality. This report provides an overview (figures for 2015/16 are shown),

while the impact over the three year period up to 2017/18 is shown in the Appendices.

With regard to the capital costs for municipal services, the following aspects need to be highlighted:

• The calculated infrastructure costs are based on the growth in poor households per municipality, plus the

backlogs per service, based on the provincial access backlogs - based on appropriate, and not necessarily the

minimum levels of service.

• The amounts needed to address access backlogs have been determined based on modelled backlogs and the

assumption that these backlogs will be reduced by 15% per annum.

• Although not based on actual figures, it is apparent that the improvement in services access and the standards

of services provided by municipalities do not always correlate with the investments made in this regard.

• The total amount required to address growth in poor households and 15% of the access backlog in 2015/16

amounts to R 44.8 billion.

Table 71: Total capital costs per PDG category (poor households only - 2015/16)

PDG Classification Growth needs Access backlogs (15%) Total Poor HH

A - Metropolitan 10 285 9 154 19 439 3 320 944


B2 - Large towns 1 720 1 827 3 547 730 963

B3 - Towns/ Rural 2 439 2 960 5 400 1 265 985 B4 - Small towns / Rural 2 999 5 212 8 211 2 380 100

Total 21 886 22 948 44 834 8 965 790

Figure 51: Capital costs required to address growth and backlog (15% of) across all services (2016)

10 285

4 443

1 720 2 439

2 999

9 154

3 794

1 827

2 960

5 212

0

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4 000

6 000

8 000

10 000

12 000

A - Metropolitan B1 - Secondary cities

B2 - Large towns B3 - Towns/ Rural B4 - Small towns / Rural

Growth needs Access backlogs (15%)

R m

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FFC AND SALGA


19.2 Operational funding requirements

Operational costs for basic services are currently only funded for water, sanitation, electricity and solid waste services,

and not for roads and stormwater, cemeteries, fire-fighting services and operational buildings.

The following aspects should be noted:

• Operational costs relating to the provision of roads and stormwater services are highest of all services (R 13

billion).

• The renewal needs for services is a very significant factor, and essential to prevent premature decay of assets,

and to be able to provide services sustainably – from an accounting perspective, the funding of renewal does

however not form a part of normal operations and maintenance activities and expenditure, but falls under

capital funding.

• In practice, cash flow constraints and financial distress within a municipality is often suppressed through the

curbing of operational and maintenance expenditure on roads and stormwater.

• This phenomenon leads to lower standards of service and an inflated renewals and maintenance backlog.

• The combined operations and maintenance expenditure to provide services to all poor households amounts to R

26.98 billion per annum, and R 54.99 billion inclusive of bulk purchases (at R 10.8 billion) and depreciation.

Figure 52: Operations and maintenance costs required to address operational expenditure across all services

(2016)

Table 72: Total operational costs per service (poor households only - 2015/16 – R million)

Province Combined Operations

cost

Combined Maintenance

cost

Operations and maintenance

Costs

Bulk purchases Depreciation

Total Operational

cost

Electricity 1 163 3 900 5 063 5 057 2 696 12 816

Water 2 095 2 828 4 923 5 763 2 886 13 571

Sanitation 1 360 1 674 3 033 NA 2 028 5 061

Roads and Storm water 1 567 4 195 5 762 NA 279 6 040

Solid Waste 5 164 175 5 339 NA 8 389 13 728

Cemeteries 28 38 66 NA 57 123

Fire Stations 1 627 448 2 075 NA 222 2 297

Operational Buildings 241 482 723 NA 764 1 487

5 063 4 923

3 033

5 339 5 762

66

2 073

724

0

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Total 13 245 13 739 26 984 10 820 17 321 55 125

FFC AND SALGA


19.3 Municipal administration Costs

The costs for municipal administration have been determined and the following aspects should be given consideration:

• It can be argued that some cost which are considered as ‘corporate overheads’ should be allocated to service

departments based on certain cost influencing factors, such as allocating a portion of the municipal manager’s

salary towards each service based on the level of effort spent on those department.

• Unless a costing methodology and accurate time tracking system is implemented, such allocations will create

nothing more than a false sense of accuracy.

• For the purpose of this modelling exercise, an approach of relevance and reasonability was adopted, but more

importantly, what is practical and universally applicable.

FFC AND SALGA


APPENDIX A: Base Year (2014/15) Data for Households and Growth -

Source: Treasury Website

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EASTERN CAPE

Buffalo City BUF A 231 344 139 622 1.77% 235 444 142 097 1.77% 239 616 144 615 1.77%

Nelson Mandela Bay NMA A 339 990 187 095 2.44% 348 287 191 661 2.44% 356 787 196 339 2.44%

Camdeboo EC101 B 12 783 7 197 1.59% 12 986 7 311 1.59% 13 192 7 428 1.59%

Blue Crane Route EC102 B 9 830 6 491 0.40% 9 869 6 516 0.40% 9 909 6 543 0.40%

Ikwezi EC103 B 2 963 2 110 0.86% 2 988 2 128 0.86% 3 014 2 146 0.86%

Makana EC104 B 22 217 12 745 1.97% 22 655 12 996 1.97% 23 102 13 252 1.97%

Ndlambe EC105 B 20 314 12 993 2.56% 20 834 13 325 2.56% 21 367 13 666 2.56%

Sundays River Valley EC106 B 15 765 10 330 3.44% 16 307 10 685 3.44% 16 868 11 053 3.44%

Baviaans EC107 B 4 698 2 955 0.99% 4 744 2 985 0.99% 4 791 3 014 0.99%

Kouga EC108 B 32 120 18 137 4.49% 33 561 18 951 4.49% 35 068 19 802 4.49%

Kou-Kamma EC109 B 11 458 6 848 1.96% 11 683 6 982 1.96% 11 913 7 119 1.96%

Mbhashe EC121 B 61 497 47 907 1.18% 62 223 48 473 1.18% 62 958 49 046 1.18%

Mnquma EC122 B 70 705 53 559 0.74% 71 230 53 956 0.74% 71 758 54 357 0.74%

Great Kei EC123 B 10 324 7 657 0.00% 10 324 7 657 0.00% 10 324 7 657 0.00%

Amahlathi EC124 B 34 304 25 530 0.26% 34 392 25 595 0.26% 34 480 25 661 0.26%

Ngqushwa EC126 B 21 438 16 996 0.12% 21 463 17 016 0.12% 21 488 17 036 0.12%

Nkonkobe EC127 B 36 103 27 167 1.10% 36 500 27 466 1.10% 36 902 27 768 1.10%

Nxuba EC128 B 6 770 4 646 0.48% 6 802 4 668 0.48% 6 834 4 690 0.48%

Inxuba Yethemba EC131 B 19 072 11 324 1.68% 19 392 11 514 1.68% 19 717 11 707 1.68%

Tsolwana EC132 B 9 906 7 572 2.19% 10 123 7 738 2.19% 10 344 7 907 2.19%

Inkwanca EC133 B 6 437 4 578 1.70% 6 546 4 656 1.70% 6 658 4 735 1.70%

Lukanji EC134 B 53 038 34 336 1.86% 54 022 34 973 1.86% 55 024 35 622 1.86%

Intsika Yethu EC135 B 41 492 33 086 1.33% 42 043 33 525 1.33% 42 602 33 971 1.33%

Emalahleni EC136 B 32 764 25 861 1.74% 33 335 26 311 1.74% 33 916 26 770 1.74%

Engcobo EC137 B 38 093 30 157 1.22% 38 558 30 525 1.22% 39 028 30 897 1.22%

Sakhisizwe EC138 B 16 409 12 168 0.84% 16 547 12 270 0.84% 16 687 12 374 0.84%

Elundini EC141 B 39 003 31 417 1.55% 39 609 31 906 1.55% 40 225 32 401 1.55%

Senqu EC142 B 39 079 30 591 1.40% 39 625 31 018 1.40% 40 177 31 451 1.40%

Maletswai EC143 B 12 759 7 719 2.71% 13 104 7 928 2.71% 13 459 8 143 2.71%

Gariep EC144 B 10 147 6 540 1.96% 10 347 6 669 1.96% 10 549 6 800 1.96%

Ngquza Hill EC153 B 57 710 44 685 1.37% 58 501 45 298 1.37% 59 304 45 920 1.37%

Port St Johns EC154 B 32 437 26 395 1.18% 32 820 26 706 1.18% 33 207 27 021 1.18%

Nyandeni EC155 B 63 454 50 487 1.50% 64 407 51 245 1.50% 65 373 52 014 1.50%

Mhlontlo EC156 B 43 558 34 149 0.20% 43 643 34 216 0.20% 43 728 34 282 0.20%

King Sabata Dalindyebo EC157 B 109 062 76 189 1.85% 111 077 77 596 1.85% 113 129 79 030 1.85%

Matatiele EC441 B 50 316 39 893 0.84% 50 740 40 229 0.84% 51 168 40 568 0.84%

Umzimvubu EC442 B 47 152 36 727 0.32% 47 305 36 846 0.32% 47 458 36 966 0.32%

Mbizana EC443 B 49 182 38 667 0.80% 49 576 38 977 0.80% 49 973 39 289 0.80%

Ntabankulu EC444 B 24 432 19 553 0.00% 24 432 19 553 0.00% 24 432 19 553 0.00%

FFC AND SALGA


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FREE STATE

Mangaung MAN A 246 755 134 258 3.24% 254 750 138 608 3.24% 263 004 143 099 3.24%

Letsemeng FS161 B 11 365 7 192 0.32% 11 402 7 215 0.32% 11 439 7 238 0.32%

Kopanong FS162 B 15 763 10 290 0.00% 15 763 10 290 0.00% 15 763 10 290 0.00%

Mohokare FS163 B 11 282 7 869 2.33% 11 545 8 053 2.33% 11 815 8 241 2.33%

Naledi FS164 B 7 842 5 705 1.08% 7 926 5 767 1.08% 8 012 5 829 1.08%

Masilonyana FS181 B 17 974 12 431 1.23% 18 194 12 583 1.23% 18 418 12 738 1.23%

Tokologo FS182 B 8 832 6 139 0.76% 8 899 6 186 0.76% 8 967 6 233 0.76%

Tswelopele FS183 B 12 150 8 076 0.57% 12 220 8 122 0.57% 12 290 8 168 0.57%

Matjhabeng FS184 B 125 882 75 381 1.17% 127 360 76 267 1.17% 128 856 77 163 1.17%

Nala FS185 B 21 865 15 113 0.00% 21 865 15 113 0.00% 21 865 15 113 0.00%

Setsoto FS191 B 34 453 24 567 1.22% 34 873 24 867 1.22% 35 298 25 170 1.22%

Dihlabeng FS192 B 40 464 23 420 2.49% 41 472 24 003 2.49% 42 504 24 601 2.49%

Nketoana FS193 B 18 147 12 017 2.46% 18 593 12 312 2.46% 19 051 12 615 2.46%

Maluti-a-Phofung FS194 B 104 063 77 271 1.99% 106 129 78 805 1.99% 108 237 80 370 1.99%

Phumelela FS195 B 13 266 8 794 1.55% 13 471 8 930 1.55% 13 679 9 068 1.55%

Mantsopa FS196 B 15 726 10 161 1.91% 16 026 10 355 1.91% 16 333 10 553 1.91%

Moqhaka FS201 B 47 328 28 659 1.90% 48 226 29 203 1.90% 49 142 29 758 1.90%

Ngwathe FS203 B 38 838 26 605 2.40% 39 771 27 244 2.40% 40 727 27 899 2.40%

Metsimaholo FS204 B 49 901 26 932 4.52% 52 158 28 150 4.52% 54 518 29 423 4.52%

Mafube FS205 B 17 176 11 469 2.25% 17 562 11 726 2.25% 17 956 11 989 2.25%

GAUTENG

Ekurhuleni EKU A 1 096 773 575 154 3.93% 1 139 902 597 771 3.93% 1 184 726 621 277 3.93%

City of Johannesburg JHB A 1 563 832 772 332 4.40% 1 632 696 806 342 4.40% 1 704 592 841 849 4.40%

City of Tshwane TSH A 1 004 266 455 108 4.97% 1 054 170 477 724 4.97% 1 106 553 501 462 4.97%

Emfuleni GT421 B 230 946 134 391 2.43% 236 563 137 659 2.43% 242 316 141 007 2.43%

Midvaal GT422 B 33 132 17 076 5.16% 34 840 17 956 5.16% 36 636 18 882 5.16%

Lesedi GT423 B 33 118 18 229 5.66% 34 992 19 261 5.66% 36 973 20 351 5.66%

Mogale City GT481 B 127 062 69 075 4.05% 132 210 71 873 4.05% 137 567 74 785 4.05%

Randfontein GT482 B 45 577 22 772 2.60% 46 763 23 364 2.60% 47 979 23 972 2.60%

Westonaria GT483 B 43 122 25 645 3.70% 44 719 26 595 3.70% 46 375 27 580 3.70%

Merafong City GT484 B 69 955 33 720 2.48% 71 687 34 555 2.48% 73 461 35 410 2.48%

KWAZULU-NATAL

eThekwini ETH A 1 005 970 557 023 2.96% 1 035 778 573 528 2.96% 1 066 470 590 523 2.96%

Vulamehlo KZN211 B 16 385 12 566 1.18% 16 579 12 715 1.18% 16 775 12 865 1.18%

Umdoni KZN212 B 25 060 16 021 5.11% 26 341 16 840 5.11% 27 687 17 701 5.11%

Umzumbe KZN213 B 35 262 26 988 0.12% 35 303 27 019 0.12% 35 344 27 051 0.12%

uMuziwabantu KZN214 B 22 411 16 999 2.23% 22 912 17 379 2.23% 23 424 17 767 2.23%

Ezingoleni KZN215 B 11 753 8 750 1.63% 11 944 8 892 1.63% 12 139 9 037 1.63%

Hibiscus Coast KZN216 B 78 104 46 110 4.45% 81 582 48 164 4.45% 85 216 50 309 4.45%

uMshwathi KZN221 B 29 395 21 182 2.66% 30 175 21 745 2.66% 30 976 22 322 2.66%

uMngeni KZN222 B 33 381 18 744 5.06% 35 072 19 694 5.06% 36 848 20 691 5.06%

Mpofana KZN223 B 10 747 7 285 1.82% 10 943 7 417 1.82% 11 142 7 552 1.82%

Impendle KZN224 B 8 287 6 522 0.90% 8 361 6 581 0.90% 8 436 6 640 0.90%

FFC AND SALGA


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Msunduzi KZN225 B 173 625 97 742 3.32% 179 386 100 985 3.32% 185 339 104 336 3.32%

Mkhambathini KZN226 B 15 674 11 357 2.76% 16 107 11 671 2.76% 16 552 11 993 2.76%

Richmond KZN227 B 17 550 12 883 3.75% 18 208 13 366 3.75% 18 890 13 867 3.75%

Emnambithi/Ladysmith KZN232 B 60 360 38 341 2.38% 61 797 39 254 2.38% 63 269 40 189 2.38%

Indaka KZN233 B 20 127 15 870 0.32% 20 191 15 920 0.32% 20 255 15 971 0.32%

Umtshezi KZN234 B 21 024 13 625 4.93% 22 061 14 297 4.93% 23 149 15 002 4.93%

Okhahlamba KZN235 B 28 053 21 026 1.27% 28 410 21 294 1.27% 28 772 21 565 1.27%

Imbabazane KZN236 B 22 529 17 012 0.59% 22 662 17 112 0.59% 22 796 17 213 0.59%

Endumeni KZN241 B 18 151 10 674 4.22% 18 917 11 124 4.22% 19 714 11 593 4.22%

Nqutu KZN242 B 32 430 23 805 1.70% 32 981 24 209 1.70% 33 541 24 620 1.70%

Msinga KZN244 B 39 329 31 401 2.53% 40 322 32 194 2.53% 41 341 33 007 2.53%

Umvoti KZN245 B 29 450 21 861 4.33% 30 724 22 806 4.33% 32 054 23 793 4.33%

Newcastle KZN252 B 88 142 56 268 2.69% 90 513 57 782 2.69% 92 948 59 336 2.69%

Emadlangeni KZN253 B 6 336 3 962 1.08% 6 405 4 005 1.08% 6 474 4 048 1.08%

Dannhauser KZN254 B 20 901 15 142 1.54% 21 223 15 375 1.54% 21 550 15 612 1.54%

eDumbe KZN261 B 16 536 12 041 1.64% 16 807 12 238 1.64% 17 083 12 439 1.64%

uPhongolo KZN262 B 29 967 22 245 2.47% 30 708 22 796 2.47% 31 468 23 360 2.47%

Abaqulusi KZN263 B 45 453 30 646 2.88% 46 759 31 527 2.88% 48 104 32 433 2.88%

Nongoma KZN265 B 35 311 24 338 1.82% 35 953 24 780 1.82% 36 606 25 231 1.82%

Ulundi KZN266 B 35 887 23 630 1.39% 36 384 23 958 1.39% 36 889 24 290 1.39%

Umhlabuyalingana KZN271 B 36 001 27 937 3.54% 37 276 28 926 3.54% 38 597 29 951 3.54%

Jozini KZN272 B 40 442 29 918 2.45% 41 432 30 650 2.45% 42 446 31 400 2.45%

The Big 5 False Bay KZN273 B 8 504 6 387 3.55% 8 805 6 614 3.55% 9 118 6 849 3.55%

Hlabisa KZN274 B 13 168 8 954 2.71% 13 524 9 196 2.71% 13 890 9 445 2.71%

Mtubatuba KZN275 B 37 786 25 698 4.47% 39 474 26 846 4.47% 41 239 28 046 4.47%

Mfolozi KZN281 B 27 413 19 108 3.94% 28 493 19 861 3.94% 29 615 20 643 3.94%

uMhlathuze KZN282 B 92 153 48 789 3.57% 95 447 50 533 3.57% 98 859 52 339 3.57%

Ntambanana KZN283 B 13 049 9 364 1.28% 13 216 9 484 1.28% 13 384 9 605 1.28%

uMlalazi KZN284 B 47 036 32 922 2.59% 48 252 33 773 2.59% 49 499 34 646 2.59%

Mthonjaneni KZN285 B 10 615 7 586 1.29% 10 752 7 684 1.29% 10 890 7 783 1.29%

Nkandla KZN286 B 22 543 15 832 0.21% 22 592 15 866 0.21% 22 640 15 900 0.21%

Mandeni KZN291 B 40 958 29 492 3.92% 42 565 30 649 3.92% 44 235 31 851 3.92%

KwaDukuza KZN292 B 78 005 49 133 5.78% 82 515 51 974 5.78% 87 286 54 979 5.78%

Ndwedwe KZN293 B 30 345 22 704 2.36% 31 061 23 239 2.36% 31 794 23 788 2.36%

Maphumulo KZN294 B 20 003 15 249 0.00% 20 003 15 249 0.00% 20 003 15 249 0.00%

Ingwe KZN431 B 23 700 18 168 1.76% 24 119 18 489 1.76% 24 544 18 815 1.76%

Kwa Sani KZN432 B 3 709 2 458 0.83% 3 740 2 478 0.83% 3 771 2 499 0.83%

Greater Kokstad KZN433 B 19 303 12 094 0.72% 19 441 12 181 0.72% 19 580 12 268 0.72%

Ubuhlebezwe KZN434 B 24 190 18 355 1.90% 24 650 18 704 1.90% 25 119 19 060 1.90%

Umzimkhulu KZN435 B 44 877 35 518 2.69% 46 083 36 473 2.69% 47 322 37 453 2.69%

LIMPOPO

Greater Giyani LIM331 B 66 606 51 597 2.41% 68 214 52 842 2.41% 69 861 54 118 2.41%

Greater Letaba LIM332 B 60 862 48 590 2.24% 62 228 49 680 2.24% 63 624 50 795 2.24%

Greater Tzaneen LIM333 B 115 453 84 135 2.99% 118 902 86 648 2.99% 122 455 89 237 2.99%

FFC AND SALGA


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Ba-Phalaborwa LIM334 B 43 968 26 733 3.45% 45 484 27 654 3.45% 47 051 28 607 3.45%

Maruleng LIM335 B 25 843 20 089 2.80% 26 568 20 652 2.80% 27 312 21 231 2.80%

Musina LIM341 B 22 615 16 274 6.26% 24 030 17 292 6.26% 25 534 18 374 6.26%

Mutale LIM342 B 25 357 19 559 3.36% 26 209 20 216 3.36% 27 090 20 896 3.36%

Thulamela LIM343 B 165 342 124 314 2.79% 169 955 127 782 2.79% 174 697 131 347 2.79%

Makhado LIM344 B 142 392 103 834 2.78% 146 348 106 719 2.78% 150 415 109 685 2.78%

Blouberg LIM351 B 42 564 33 728 1.69% 43 282 34 297 1.69% 44 011 34 875 1.69%

Aganang LIM352 B 34 682 26 412 1.16% 35 083 26 718 1.16% 35 489 27 026 1.16%

Molemole LIM353 B 30 828 23 504 1.33% 31 239 23 818 1.33% 31 655 24 135 1.33%

Polokwane LIM354 B 193 147 117 957 4.20% 201 264 122 914 4.20% 209 722 128 080 4.20%

Lepele-Nkumpi LIM355 B 62 204 45 536 2.13% 63 527 46 504 2.13% 64 878 47 493 2.13%

Thabazimbi LIM361 B 26 336 12 527 2.51% 26 998 12 842 2.51% 27 676 13 164 2.51%

Lephalale LIM362 B 32 642 17 706 4.56% 34 130 18 513 4.56% 35 686 19 357 4.56%

Mookgopong LIM364 B 10 586 6 941 3.35% 10 940 7 173 3.35% 11 307 7 413 3.35%

Modimolle LIM365 B 17 833 10 265 0.91% 17 995 10 358 0.91% 18 159 10 452 0.91%

Bela-Bela LIM366 B 19 715 11 982 4.49% 20 601 12 521 4.49% 21 527 13 083 4.49%

Mogalakwena LIM367 B 82 790 58 008 2.15% 84 570 59 256 2.15% 86 389 60 530 2.15%

Ephraim Mogale LIM471 B 34 578 27 023 3.53% 35 797 27 976 3.53% 37 060 28 963 3.53%

Elias Motsoaledi LIM472 B 64 439 47 283 3.45% 66 663 48 915 3.45% 68 964 50 603 3.45%

Makhuduthamaga LIM473 B 68 730 52 788 2.69% 70 581 54 210 2.69% 72 482 55 671 2.69%

Fetakgomo LIM474 B 24 000 16 740 2.52% 24 605 17 162 2.52% 25 225 17 594 2.52%

Greater Tubatse LIM475 B 91 790 60 104 5.07% 96 445 63 152 5.07% 101 337 66 356 5.07%

MPUMALANGA

Albert Luthuli MP301 B 49 732 35 765 2.14% 50 799 36 532 2.14% 51 889 37 316 2.14%

Msukaligwa MP302 B 43 849 25 068 3.55% 45 403 25 957 3.55% 47 013 26 877 3.55%

Mkhondo MP303 B 39 886 27 512 3.27% 41 190 28 411 3.27% 42 536 29 339 3.27%

Pixley Ka Seme MP304 B 20 320 13 730 1.25% 20 574 13 902 1.25% 20 831 14 076 1.25%

Lekwa MP305 B 32 550 17 714 2.40% 33 330 18 138 2.40% 34 128 18 573 2.40%

Dipaleseng MP306 B 13 449 8 166 3.20% 13 880 8 428 3.20% 14 325 8 698 3.20%

Govan Mbeki MP307 B 89 597 45 781 3.40% 92 641 47 336 3.40% 95 788 48 944 3.40%

Victor Khanye MP311 B 22 477 13 207 4.63% 23 518 13 819 4.63% 24 607 14 459 4.63%

Emalahleni MP312 B 132 300 61 398 5.10% 139 046 64 529 5.10% 146 136 67 819 5.10%

Steve Tshwete MP313 B 73 359 32 507 6.30% 77 983 34 556 6.30% 82 899 36 734 6.30%

Emakhazeni MP314 B 14 772 8 734 3.79% 15 331 9 065 3.79% 15 912 9 409 3.79%

Thembisile Hani MP315 B 80 253 52 113 3.05% 82 701 53 703 3.05% 85 225 55 342 3.05%

Dr JS Moroka MP316 B 64 334 45 764 1.77% 65 475 46 575 1.77% 66 636 47 401 1.77%

Thaba Chweu MP321 B 36 665 22 268 4.89% 38 458 23 357 4.89% 40 340 24 500 4.89%

Mbombela MP322 B 174 826 102 696 4.00% 181 818 106 803 4.00% 189 089 111 074 4.00%

Umjindi MP323 B 21 771 12 693 3.71% 22 579 13 164 3.71% 23 417 13 653 3.71%

Nkomazi MP324 B 101 576 75 426 3.17% 104 796 77 816 3.17% 108 118 80 283 3.17%

Bushbuckridge MP325 B 140 675 107 878 2.43% 144 090 110 496 2.43% 147 587 113 179 2.43%

NORTHERN CAPE

Richtersveld NC061 B 3 793 1 734 3.57% 3 929 1 796 3.57% 4 069 1 860 3.57%

Nama Khoi NC062 B 13 787 6 814 2.30% 14 104 6 970 2.30% 14 428 7 131 2.30%

FFC AND SALGA


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Kamiesberg NC064 B 3 234 1 952 1.48% 3 282 1 981 1.48% 3 330 2 010 1.48%

Hantam NC065 B 6 541 3 440 1.65% 6 648 3 497 1.65% 6 758 3 555 1.65%

Karoo Hoogland NC066 B 4 080 2 349 3.14% 4 208 2 422 3.14% 4 340 2 499 3.14%

Khâi-Ma NC067 B 4 061 2 063 3.52% 4 204 2 135 3.52% 4 352 2 210 3.52%

Ubuntu NC071 B 5 383 3 411 2.54% 5 520 3 498 2.54% 5 660 3 586 2.54%

Umsobomvu NC072 B 8 372 5 094 3.42% 8 658 5 268 3.42% 8 954 5 448 3.42%

Emthanjeni NC073 B 10 924 5 578 2.29% 11 174 5 706 2.29% 11 429 5 837 2.29%

Kareeberg NC074 B 3 441 2 084 3.43% 3 559 2 155 3.43% 3 681 2 229 3.43%

Renosterberg NC075 B 3 142 1 935 2.48% 3 220 1 983 2.48% 3 300 2 032 2.48%

Thembelihle NC076 B 4 290 2 367 1.86% 4 369 2 411 1.86% 4 450 2 455 1.86%

Siyathemba NC077 B 6 197 3 580 3.17% 6 393 3 693 3.17% 6 595 3 810 3.17%

Siyancuma NC078 B 9 603 5 826 0.00% 9 603 5 826 0.00% 9 603 5 826 0.00%

Mier NC081 B 1 820 1 092 1.09% 1 840 1 103 1.09% 1 860 1 115 1.09%

!Kai !Garib NC082 B 17 420 10 304 2.20% 17 802 10 531 2.20% 18 193 10 762 2.20%

//Khara Hais NC083 B 24 656 12 100 3.07% 25 413 12 471 3.07% 26 193 12 854 3.07%

!Kheis NC084 B 4 189 2 478 0.59% 4 214 2 492 0.59% 4 239 2 507 0.59%

Tsantsabane NC085 B 10 668 5 114 4.21% 11 118 5 329 4.21% 11 586 5 554 4.21%

Kgatelopele NC086 B 5 877 2 837 4.59% 6 147 2 967 4.59% 6 429 3 103 4.59%

Sol Plaatjie NC091 B 62 904 31 539 2.22% 64 300 32 239 2.22% 65 727 32 954 2.22%

Dikgatlong NC092 B 12 437 8 522 2.02% 12 689 8 694 2.02% 12 945 8 870 2.02%

Magareng NC093 B 6 246 4 210 1.10% 6 315 4 256 1.10% 6 384 4 303 1.10%

Phokwane NC094 B 17 821 11 663 0.86% 17 974 11 764 0.86% 18 129 11 865 0.86%

Joe Morolong NC451 B 24 289 18 442 1.30% 24 605 18 681 1.30% 24 924 18 924 1.30%

Ga-Segonyana NC452 B 29 524 17 393 5.01% 31 004 18 265 5.01% 32 558 19 180 5.01%

Gamagara NC453 B 12 550 5 199 7.83% 13 533 5 606 7.83% 14 593 6 045 7.83%

NORTH WEST

Moretele NW371 B 53 230 38 725 1.21% 53 877 39 195 1.21% 54 531 39 671 1.21%

Madibeng NW372 B 176 126 103 397 4.78% 184 552 108 344 4.78% 193 382 113 527 4.78%

Rustenburg NW373 B 219 978 109 604 5.23% 231 481 115 335 5.23% 243 586 121 366 5.23%

Kgetlengrivier NW374 B 15 589 10 729 3.18% 16 085 11 070 3.18% 16 596 11 422 3.18%

Moses Kotane NW375 B 77 238 51 199 1.45% 78 357 51 941 1.45% 79 493 52 694 1.45%

Ratlou NW381 B 27 379 21 801 1.01% 27 655 22 021 1.01% 27 934 22 243 1.01%

Tswaing NW382 B 31 471 22 231 1.46% 31 930 22 555 1.46% 32 395 22 883 1.46%

Mafikeng NW383 B 87 705 55 409 2.14% 89 578 56 593 2.14% 91 492 57 802 2.14%

Ditsobotla NW384 B 45 956 29 776 1.72% 46 747 30 289 1.72% 47 551 30 810 1.72%

Ramotshere Moiloa NW385 B 42 225 29 743 1.91% 43 030 30 310 1.91% 43 850 30 888 1.91%

Naledi NW392 B 19 297 11 920 2.03% 19 688 12 162 2.03% 20 087 12 409 2.03%

Mamusa NW393 B 15 414 10 550 2.77% 15 840 10 842 2.77% 16 279 11 142 2.77%

Greater Taung NW394 B 49 563 38 303 1.07% 50 093 38 713 1.07% 50 629 39 127 1.07%

Lekwa-Teemane NW396 B 15 751 10 032 2.81% 16 194 10 314 2.81% 16 650 10 604 2.81%

NW397 NW397 B 28 973 22 331 0.87% 29 225 22 525 0.87% 29 480 22 722 0.87%

Ventersdorp NW401 B 15 181 10 736 2.20% 15 516 10 973 2.20% 15 857 11 214 2.20%

Tlokwe NW402 B 57 277 31 745 4.52% 59 863 33 179 4.52% 62 566 34 677 4.52%

City of Matlosana NW403 B 125 165 72 438 2.04% 127 719 73 916 2.04% 130 325 75 425 2.04%

FFC AND SALGA


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Maquassi Hills NW404 B 21 006 14 922 1.31% 21 281 15 117 1.31% 21 560 15 315 1.31%

WESTERN CAPE

City of Cape Town CPT A 1 137 004 500 351 3.17% 1 172 998 516 190 3.17% 1 210 132 532 531 3.17%

Matzikama WC011 B 19 541 9 682 1.87% 19 907 9 864 1.87% 20 279 10 048 1.87%

Cederberg WC012 B 14 145 7 486 2.32% 14 474 7 660 2.32% 14 810 7 838 2.32%

Bergrivier WC013 B 17 258 7 565 2.99% 17 774 7 792 2.99% 18 305 8 024 2.99%

Saldanha Bay WC014 B 31 262 14 069 4.14% 32 555 14 651 4.14% 33 902 15 257 4.14%

Swartland WC015 B 32 345 14 661 5.04% 33 977 15 400 5.04% 35 690 16 177 5.04%

Witzenberg WC022 B 28 840 14 672 2.57% 29 581 15 050 2.57% 30 342 15 436 2.57%

Drakenstein WC023 B 63 041 26 240 2.71% 64 749 26 951 2.71% 66 503 27 681 2.71%

Stellenbosch WC024 B 46 772 23 960 3.80% 48 550 24 871 3.80% 50 395 25 817 3.80%

Breede Valley WC025 B 44 149 21 915 1.90% 44 989 22 332 1.90% 45 845 22 757 1.90%

Langeberg WC026 B 25 867 13 098 1.48% 26 249 13 292 1.48% 26 637 13 489 1.48%

Theewaterskloof WC031 B 30 030 15 915 1.98% 30 625 16 230 1.98% 31 231 16 552 1.98%

Overstrand WC032 B 30 265 15 176 3.96% 31 464 15 777 3.96% 32 710 16 402 3.96%

Cape Agulhas WC033 B 10 680 4 702 2.53% 10 951 4 821 2.53% 11 228 4 943 2.53%

Swellendam WC034 B 10 682 4 862 2.67% 10 967 4 992 2.67% 11 259 5 125 2.67%

Kannaland WC041 B 6 206 3 540 0.00% 6 206 3 540 0.00% 6 206 3 540 0.00%

Hessequa WC042 B 16 542 7 247 2.10% 16 889 7 399 2.10% 17 245 7 555 2.10%

Mossel Bay WC043 B 29 780 14 943 3.09% 30 701 15 406 3.09% 31 651 15 882 3.09%

George WC044 B 56 742 26 890 2.95% 58 416 27 683 2.95% 60 139 28 499 2.95%

Oudtshoorn WC045 B 22 616 11 122 1.61% 22 981 11 301 1.61% 23 351 11 483 1.61%

Bitou WC047 B 18 805 11 424 6.31% 19 992 12 144 6.31% 21 253 12 910 6.31%

Knysna WC048 B 23 494 12 481 3.61% 24 341 12 931 3.61% 25 218 13 397 3.61%

Laingsburg WC051 B 2 502 1 286 1.98% 2 552 1 312 1.98% 2 602 1 338 1.98%

Prince Albert WC052 B 3 806 2 043 3.15% 3 926 2 107 3.15% 4 049 2 173 3.15%

Beaufort West WC053 B 13 585 8 046 1.89% 13 841 8 198 1.89% 14 102 8 353 1.89%

Total 15 349 791 8 965 790 3.17% 15 839 201 9 238 038 3.19% 16 346 783 9 520 109 3.20%

FFC AND SALGA


APPENDIX B: Calibration and testing of results

Detailed information available from municipalities was used to determine and compare CRC values, and costs per

service at asset group level to calibrate values that were established. An example shown below, indicates the results

obtained when the infrastructure costs for the water and sanitation sectors for Buffalo City Metropolitan Municipality

were analysed. The data for the municipality was derived per SDF ‘priority zone’. Each of the zones included both high

and lower income customers, with the first four zones being mostly urban and the fifth zone mainly rural. The LOS

(levels of service) categories that were determined and used are indicated below:

LOS hierarchy for potable water services with minimum and target levels of service

LOS Description

0 Natural resources

1 Water point more than 200m distance

2 Communal standpipe or stationary water tank less than 200m distance

3 Yard tap connection (single tap)

4 15 - 25 mm connection to building (multiple taps)

5 40 - 100 mm consumer connection

6 150 mm or larger consumer connection

Note 1 Minimum Level of service and access target for rural customers

Note 2 Target for minimum level of service for urban customers

LOS hierarchy for sanitation services with minimum and target levels of service

LOS Description

0 No formal service

1 Bucket system

2 Unventilated pit latrines and soakaways

3 Ventilated improved pit (VIP)

4 Dry composting toilet

5 Communal chemical toilet

6 Flushing Communal Toilet

7 Septic or conservancy tank

8 Waterborne sewerage to each stand 110mm connection (no toilet structure)

9 Waterborne sewerage to each stand 110mm connection, with toilet structure

10 Waterborne sewer available, max connection size 150 mm or larger

11 Waterborne sewerage, discharge load is above normal limits.

Note 1 Minimum Level of service and access target for rural customers

Note 2 Target for minimum level of service for urban customers

The two tables that follows indicate the number of customers per LOS, summarised to show only the number of

customers for the minimum, target, and full LOS:

Nr of customer units at each LOS for water per priority area

Water Level of Service LOS <2 (min) LOS 3 LOS 6 Total

Priority Zone 1 - Central 504 27 506 101 590 129 599

Priority Zone 2 - Westbank 701 2 988 6 774 10 463

Priority Zone 3a - Berlin 266 7 591 25 638 33 495

Priority Zone 3b - Quennera 746 4 540 15 079 20 365

Rural 7 549 35 261 8 543 51 354

Total 9 766 77 886 157 624 245 276

FFC AND SALGA


Nr of customer units at significant LOS for sanitation per priority area

Sanitation Level of Service LOS <2 (min) LOS 7 LOS 10 Total

Priority Zone 1 - Central 5 942 2 004 121 654 129 600

Priority Zone 2 - Westbank 1 497 2 062 6 904 10 463

Priority Zone 3a - Berlin 1 333 5 260 26 902 33 495

Priority Zone 3b - Quennera 3 661 729 15 974 20 364

Rural 7 608 35 095 8 650 51 353

Total 20 041 45 150 180 084 245 275

The comparative cost per asset group per priority area was determined, as indicated in the next two tables, which

results indicate the difference in comparative costs for rural and urban areas:

Relative cost per asset group for water services per priority area

Priority Zone Bulk Mains Dams & Weirs Distribution Reservoirs WTW Other Total

Zone 1 34.9% 25.4% 31.6% 2.5% 2.9% 2.7% 100.0%

Zone 2 40.1% 18.5% 37.2% 2.1% 2.1% 0.1% 100.0%

Zone 3 22.7% 23.7% 40.8% 8.9% 2.7% 1.2% 100.0%

Zone 4 23.5% 23.9% 41.8% 7.6% 2.7% 0.5% 100.0%

Zone 5 22.2% 27.1% 39.5% 6.0% 3.1% 2.1% 100.0%

Total 30.0% 24.9% 35.6% 4.5% 2.8% 2.0% 100.0%

Relative cost per asset group for sanitation per priority area

Priority Zone Outfall sewer Pump stations Reticulation WWTW Total

Zone 1 19.3% 1.7% 74.0% 20.2% 100.0%

Zone 2 46.8% 2.9% 49.3% 6.6% 100.0%

Zone 3 10.8% 0.9% 63.5% 11.8% 100.0%

Zone 4 3.0% 8.8% 79.7% 12.1% 100.0%

Zone 5 14.1% 2.4% 38.3% 4.8% 100.0%

Total 17.6% 2.5% 65.4% 14.4% 100.0%

The cost variations across areas and per asset group is illustrated in the tables below. The major differences between

predominantly urban areas occur in Zone 2 (with higher than average costs), which includes both the Central East

London area, and Mdantsane where a large proportion of customers are in the lower income groups, having been

serviced more recently. The cost difference in the rural area is also evident, especially in terms of sanitation services:

Cost distribution – Water services

0

5 000

10 000

15 000

20 000

25 000

Zone1 Zone2 Zone3 Zone4 Rural

Bulk Mains Dams & Weirs Distribution Reservoirs Water treatment works (WTW)

FFC AND SALGA


Cost distribution – Sanitation services

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

Zone 1 Zone 2 Zone 3 Zone 4 Rural

Outfall sewer Pump stations Reticulation Waste water treatment works (WWTW)

FFC AND SALGA


APPENDIX C: Unit rates for services

Comparison – Original and adjusted Unit rates and MIG Guideline

Sector Unit Original values Adjusted 2014 CRC (ver 20)

Roads and stormwater

Metros - formal houses + 0.5 trad / informal 48 000 44 475

Secondary mun's (ditto) 22 000 36 188

Other LMs (ditto) 8 000 20 170

Districts (ditto) 10 000 11 186

Water and Sanitation

Metro & Secondary Water serviced hh +0.5 standpipes 13 000 16 059

Sanitation Metro & Secondary w'borne hh 18 000 18 405

other * ditto (water) 9 000 18 155

other * ditto (san) 12 000 15 367

other * ditto (san) 12 000 9 061

Electricity service total hh with Elec service 13 045 14 797

Cemeteries Cemeteries NA 166

Landfill site

Landfill site - A, B1 1 754 1 175

Landfill site - B2, B3 544 544

Landfill site - B4 314 314

Operational Bldgs

A, B1 NA 1 833

B2 - B3 NA 1 343

B4 NA 1 196

Fire station

Fire station (A) NA 446

Fire station (B1)e NA 446

Fire station (B1)a NA 370

Fire station (B2) 302

Fire station (B3) NA 232

Fire station (B4) NA 162

Fire station (B2-B4) - Vehicle shelters NA 9

FFC AND SALGA


APPENDIX D: Administrative cost per household attributable to poor

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Western Cape

Cape Town CPT A 500 222 264 301 1 255 143 393 25 729 851 1 106 839 300 4 774

Matzikama WC011 B3 9 680 194 170 50 050 023 1 254 147 11 850 624 6 544

Cederberg WC012 B3 7 484 217 461 36 229 321 969 660 9 057 318 6 210

Bergrivier WC013 B3 7 563 177 038 44 202 152 979 934 9 948 688 7 313

Saldanha Bay WC014 B2 14 065 165 505 82 776 086 2 157 434 41 155 744 8 976

Swartland WC015 B3 14 657 168 316 82 844 531 1 898 995 14 622 889 6 791

West Coast DC1 C1 53 450 105 820 43 938 503 1 534 078 33 664 741 1 483

Witzenberg WC022 B3 14 669 191 029 73 866 632 1 900 490 17 007 968 6 338

Drakenstein WC023 B1 26 234 141 830 72 288 506 693 205 58 128 628 5 003

Stellenbosch WC024 B1 23 954 182 524 53 633 104 632 976 37 523 266 3 839

Breede Valley WC025 B2 21 910 183 825 116 900 276 3 360 695 45 069 930 7 554

Langeberg WC026 B3 13 095 188 322 66 250 797 1 696 616 23 603 499 7 006

Cape Winelands DC2 C1 99 861 128 059 80 038 646 2 866 144 32 420 181 1 156

Theewaterskloof WC031 B3 15 911 192 818 76 914 914 2 061 481 17 773 893 6 093

Overstrand WC032 B2 15 172 176 413 80 137 348 2 327 167 47 334 588 8 567

Cape Agulhas WC033 B3 4 700 178 311 27 354 674 608 987 15 137 874 9 208

Swellendam WC034 B3 4 861 184 962 27 359 231 629 773 6 918 796 7 220

Overberg DC3 C1 40 644 150 727 31 321 367 1 166 538 22 183 589 1 349

Kannaland WC041 B3 3 540 301 246 15 899 831 458 704 5 275 625 6 196

Hessequa WC042 B3 7 245 150 395 42 366 741 938 687 13 388 996 7 846

Mossel Bay WC043 B2 14 939 178 905 78 852 233 2 291 534 42 681 843 8 300

George WC044 B1 26 883 166 940 65 066 211 710 357 32 811 812 3 674

Oudtshoorn WC045 B2 11 119 181 804 59 884 251 1 705 474 31 310 283 8 372

Bitou WC047 B3 11 421 244 054 48 164 833 1 479 692 17 305 757 5 884

Knysna WC048 B2 12 477 193 446 62 207 952 1 913 875 35 956 816 8 036

Eden DC4 C1 87 625 112 030 66 812 579 2 514 933 29 594 819 1 130

Laingsburg WC051 B3 1 286 186 699 6 409 397 166 610 1 748 426 6 619

Prince Albert WC052 B3 2 042 196 331 9 747 966 264 576 2 253 454 6 103

Beaufort West WC053 B3 8 044 196 705 34 794 518 1 042 233 12 749 509 6 064

Central Karoo DC5 C1 11 372 145 252 7 630 499 326 400 8 812 511 1 487

Northern Cape

Richtersveld NC061 B3 1 731 124 835 9 703 146 224 334 3 863 357 8 037

Nama Khoi NC062 B3 6 803 143 307 35 267 657 881 458 12 240 390 7 134

Kamiesberg NC064 B3 1 949 173 005 8 271 939 252 537 3 529 351 6 273

Hantam NC065 B3 3 435 153 715 16 730 842 445 038 4 305 114 6 298

Karoo Hoogland NC066 B3 2 345 154 189 10 436 314 303 819 3 457 244 6 120

Khai-Ma NC067 B3 2 060 139 671 10 389 110 266 844 2 240 480 6 329

Namakwa DC6 C1 18 324 92 572 13 597 961 525 909 5 853 897 1 095

Ubuntu NC071 B3 3 406 207 221 13 768 835 441 231 6 904 094 6 261

FFC AND SALGA


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Umsobomvu NC072 B3 5 086 201 857 21 415 842 658 970 7 922 840 5 938

Emthanjeni NC073 B3 5 570 168 136 27 943 273 721 650 9 770 934 6 931

Kareeberg NC074 B3 2 081 183 477 8 802 676 269 557 2 799 878 5 794

Renosterberg NC075 B3 1 932 11 708 8 036 480 250 330 4 026 584 6 379

Thembelihle NC076 B3 2 363 146 914 10 972 481 306 167 2 697 898 5 977

Siyathemba NC077 B3 3 574 154 352 15 850 578 463 115 5 987 743 6 282

Siyancuma NC078 B3 5 842 207 187 24 670 161 756 910 5 933 001 5 403

Pixley ka Seme DC7 C1 29 854 119 544 19 687 357 856 846 6 892 527 923

Mier NC081 B3 1 090 153 496 4 656 086 141 202 1 976 039 6 356

Kai! Garib NC082 B3 10 289 181 487 44 559 525 1 333 003 15 311 010 5 966

//Khara Hais NC083 B2 12 081 143 500 65 202 786 1 853 142 80 870 161 12 256

!Kheis NC084 B3 2 474 137 678 10 714 870 320 502 3 520 844 5 940

Tsantsabane NC085 B3 5 106 185 124 27 289 441 661 569 3 719 783 6 239

Kgatelopele NC086 B3 2 832 141 954 15 033 359 366 961 2 924 507 6 520

Siyanda DC8 C1 33 872 85 294 24 758 682 972 172 9 024 934 1 029

Sol Plaatje NC091 B1 31 490 165 516 72 039 864 832 111 79 724 010 4 851

Dikgatlong NC092 B3 8 509 189 763 31 813 333 1 102 398 7 319 974 4 751

Magareng NC093 B3 4 203 240 251 15 976 775 544 599 6 054 234 5 428

Phokwane NC094 B3 11 645 223 799 45 585 145 1 508 808 16 731 702 5 500

Frances Baard DC9 C1 55 848 125 335 38 080 963 1 602 903 12 800 991 942

Moshaweng (Segonyana) NC451 B4 18 413 217 830 23 152 348 684 569 14 952 749 2 118

Ga-Segonyana NC452 B3 17 366 176 194 75 522 650 2 250 017 15 404 870 5 376

Gamagara NC453 B3 5 191 121 131 32 101 969 672 506 8 696 536 8 013

John Taolo Gaetsewe DC45 C1 40 970 133 812 25 422 465 1 175 900 10 047 756 898

Eastern Cape

Buffalo City BUF A 139 491 302 885 255 206 224 7 174 971 327 492 375 4 231

Nelson Mandela Bay NMA A 186 919 282 570 375 058 875 9 614 519 383 661 885 4 112

Camdeboo EC101 B3 7 190 156 295 32 717 114 931 600 18 643 482 7 294

Blue Crane Route EC102 B3 6 484 202 762 25 159 781 840 127 12 387 882 5 951

Ikwezi EC103 B3 2 108 179 735 7 582 955 273 098 4 239 186 5 823

Makana EC104 B2 12 733 189 381 58 787 749 1 953 075 38 075 938 7 776

Ndlambe EC105 B3 12 981 177 507 51 994 361 1 681 792 16 996 928 5 458

Sunday'S River Valley EC106 B3 10 320 250 625 40 348 999 1 337 089 8 114 617 4 850

Baviaans EC107 B3 2 952 166 272 12 023 560 382 513 4 112 469 5 651

Kouga EC108 B3 18 120 194 851 82 209 599 2 347 655 37 425 072 6 743

Kou-kamma EC109 B3 6 841 166 764 29 326 228 886 344 6 320 970 5 365

Cacadu DC10 C1 79 730 137 131 50 652 611 2 288 344 10 510 228 798

Mbhashe EC121 B4 47 862 213 251 58 652 608 1 779 414 6 544 589 1 404

Mnquma EC122 B4 53 508 293 205 67 435 150 1 989 322 61 968 065 2 461

Great Kei EC123 B3 7 667 202 563 26 486 071 993 365 7 528 515 4 592

Amahlathi EC124 B3 25 506 261 856 87 800 745 3 304 543 13 171 699 4 099

Ngqushwa EC126 B4 17 000 329 853 20 470 682 632 022 23 474 744 2 642

Nkonkobe EC127 B3 27 141 250 267 92 405 348 3 516 450 24 276 183 4 438

Nxuba EC128 B3 4 642 200 280 17 326 853 601 375 3 975 908 4 762

FFC AND SALGA


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Amatole DC12 C2 183 326 206 723 54 558 433 8 805 121 43 884 660 586

Inxuba Yethemba EC131 B3 11 313 230 188 48 813 865 1 465 758 13 064 834 5 620

Tsolwana EC132 B3 7 565 223 457 25 355 167 980 127 5 484 464 4 236

Inkwanca EC133 B3 4 574 226 172 16 474 936 592 596 1 058 468 4 012

Lukanji EC134 B2 34 304 261 464 140 340 012 5 261 786 41 485 089 5 461

Intsika Yethu EC135 B4 33 055 267 971 39 573 025 1 228 902 32 506 662 2 226

Emalahleni (Ec) EC136 B4 25 836 252 555 31 249 015 960 536 29 893 242 2 413

Engcobo EC137 B4 30 129 242 271 36 331 625 1 120 122 27 693 448 2 170

Sakhisizwe EC138 B3 12 156 258 717 41 998 635 1 574 995 8 985 936 4 345

Chris Hani DC13 C2 158 932 164 973 49 134 384 7 633 482 1 276 471 366

Elundini EC141 B4 31 388 249 105 37 199 757 1 166 931 34 389 798 2 326

Senqu EC142 B4 30 562 224 738 37 272 009 1 136 230 20 914 516 1 948

Maletswai EC143 B3 7 712 182 762 32 656 361 999 168 10 321 915 5 726

Gariep EC144 B3 6 534 203 913 25 972 286 846 587 8 084 589 5 373

Joe Gqabi DC14 C2 76 196 175 302 22 844 292 3 659 684 40 396 454 880

Ngquza Hill EC153 B4 44 643 212 493 55 041 097 1 659 741 23 460 585 1 800

Port St Johns EC154 B4 26 370 181 823 30 936 963 980 377 35 973 547 2 581

Nyandeni EC155 B4 50 440 231 161 60 519 813 1 875 246 45 584 461 2 145

Mhlontlo EC156 B4 34 129 227 866 41 558 815 1 268 847 32 931 285 2 226

King Sabata Dalindyebo EC157 B2 76 117 237 496 288 580 798 11 675 409 129 030 446 5 643

O .R. Tambo DC15 C2 231 699 158 287 69 272 511 11 128 489 44 437 456 539

Matatiele EC441 B3 39 856 250 320 128 783 759 5 163 768 18 288 570 3 826

Umzimvubu EC442 B4 36 692 221 479 44 971 051 1 364 145 34 434 623 2 207

Mbizana EC443 B4 38 631 233 491 46 907 511 1 436 213 41 253 835 2 325

Ntabankulu EC444 B4 19 580 222 517 23 355 953 727 959 20 832 143 2 305

Alfred Nzo DC44 C2 134 759 165 903 38 712 399 6 472 481 20 343 963 487

Free State

Mangaung MAN A 134 020 292 981 271 981 432 6 893 595 312 136 304 4 412

Letsemeng FS161 B3 7 223 197 492 29 242 404 935 820 7 970 987 5 309

Kopanong FS162 B3 10 368 168 493 40 688 137 1 343 267 17 486 764 5 757

Mohokare FS163 B3 7 855 215 524 28 851 641 1 017 751 21 539 305 6 572

Naledi (Fs) FS164 B3 5 695 198 206 20 053 573 737 863 6 303 128 4 792

Xhariep DC16 C1 31 141 158 718 17 796 714 893 791 9 150 059 899

Masilonyana FS181 B3 12 409 208 531 45 964 946 1 607 667 20 180 229 5 477

Tokologo FS182 B3 6 138 210 007 22 623 593 795 311 8 054 082 5 161

Tswelopele FS183 B3 8 090 219 451 31 185 136 1 048 200 8 548 628 5 068

Matjhabeng FS184 B1 75 248 227 619 144 130 036 1 988 377 137 235 500 3 769

Nala FS185 B3 15 227 222 807 56 438 048 1 972 894 21 455 024 5 259

Lejweleputswa DC18 C1 117 113 159 541 71 605 300 3 361 280 14 012 763 761

Setsoto FS191 B3 24 524 212 460 88 108 010 3 177 320 29 409 773 4 930

Dihlabeng FS192 B2 23 379 215 506 106 980 960 3 585 986 65 071 344 7 522

Nketoana FS193 B3 11 995 219 421 46 408 642 1 554 142 19 497 821 5 642

Maluti A Phofung FS194 B3 77 134 240 244 266 126 012 9 993 585 51 581 503 4 252

Phumelela FS195 B3 8 779 222 165 33 925 667 1 137 401 12 473 060 5 440

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Mantsopa FS196 B3 10 143 206 886 40 216 152 1 314 145 11 538 953 5 252

Thabo Mofutsanyana DC19 C1 155 953 161 128 86 600 581 4 476 054 14 632 228 679

Moqhaka FS201 B2 28 608 218 682 125 126 424 4 388 149 44 609 318 6 094

Ngwathe FS203 B3 26 558 196 401 99 322 210 3 440 869 44 236 674 5 542

Metsimaholo FS204 B2 26 884 187 397 131 929 200 4 123 646 54 397 523 7 091

Mafube FS205 B3 11 448 227 997 43 925 093 1 483 269 17 708 926 5 533

Fezile Dabi DC20 C1 93 498 126 713 58 689 897 2 683 515 11 918 958 785

Kwa-Zulu Natal

Ethekwini ETH A 552 475 283 683 1 101 711 705 28 417 599 1 434 469 143 4 643

Vulamehlo KZN211 B4 12 463 299 726 15 514 026 463 354 8 555 311 1 992

Umdoni KZN212 B2 15 890 212 212 65 830 415 2 437 358 20 850 157 5 622

Umzumbe KZN213 B4 26 995 254 284 33 672 283 1 003 617 18 761 967 1 989

Umuziwabantu KZN214 B3 16 861 258 236 56 946 410 2 184 489 8 224 283 4 010

Ezinqoleni KZN215 B4 8 678 225 904 11 128 017 322 633 6 151 847 2 054

Hibiscus Coast KZN216 B2 45 733 201 310 205 170 287 7 014 944 56 988 686 5 890

Ugu DC21 C2 126 621 169 617 42 505 387 6 081 574 28 073 556 607

uMshwathi KZN221 B4 21 009 226 369 27 832 550 781 074 22 726 750 2 454

uMngeni KZN222 B2 18 591 155 512 87 688 278 2 851 695 23 559 445 6 146

Mphofana KZN223 B3 7 225 204 277 27 307 854 936 087 6 232 453 4 800

Impendle KZN224 B4 6 474 169 432 7 851 760 240 672 10 406 215 2 884

Msunduzi KZN225 B1 96 944 317 226 197 521 371 2 561 689 141 473 803 3 527

Mkhambathini KZN226 B3 11 264 236 588 39 827 132 1 459 416 4 274 718 4 066

Richmond KZN227 B4 12 778 218 055 16 617 717 475 064 17 085 588 2 692

Umgungundlovu DC22 C2 174 286 149 158 64 825 477 8 370 928 14 878 792 506

Emnambithi KZN232 B2 38 028 192 809 158 559 489 5 833 042 99 939 615 6 956

Indaka KZN233 B4 15 843 224 061 19 180 850 588 997 10 207 895 1 906

Umtshezi KZN234 B3 13 514 212 902 53 422 701 1 750 848 16 188 436 5 296

Okhahlamba KZN235 B4 20 855 217 788 26 562 313 775 327 23 948 030 2 470

Imbabazane KZN236 B4 16 936 206 965 21 412 585 629 659 11 959 060 2 020

Uthukela DC23 C2 105 175 117 108 34 204 098 5 051 564 25 800 234 620

Endumeni KZN241 B3 10 587 58 956 46 122 206 1 371 628 12 189 205 5 643

Nquthu KZN242 B4 23 610 187 406 30 706 891 877 776 22 947 548 2 318

Msinga KZN244 B4 31 145 208 431 37 239 095 1 157 893 12 865 238 1 653

Umvoti KZN245 B3 21 682 256 969 74 832 731 2 809 162 11 046 573 4 102

Umzinyathi DC24 C2 87 024 122 587 26 804 906 4 179 734 11 866 113 494

Newcastle KZN252 B1 55 809 211 084 100 272 732 1 474 705 108 396 647 3 769

Emadlangeni KZN253 B3 3 930 172 719 16 100 518 509 124 4 054 413 5 303

Dannhauser KZN254 B4 15 018 184 422 19 790 412 558 349 11 374 136 2 125

Amajuba DC25 C2 74 756 121 818 25 910 749 3 590 546 6 234 949 480

eDumbe KZN261 B3 11 942 239 571 42 018 231 1 547 273 6 927 340 4 248

uPhongolo KZN262 B4 22 064 213 480 28 374 283 820 278 23 922 956 2 417

Abaqulusi KZN263 B3 30 395 237 549 115 494 277 3 938 081 23 758 671 4 719

Nongoma KZN265 B4 24 139 179 180 33 434 169 897 431 28 761 801 2 621

Ulundi KZN266 B4 23 437 187 347 33 979 541 871 355 38 088 157 3 120

FFC AND SALGA


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Zululand DC26 C2 111 978 135 728 36 639 227 5 378 281 24 724 346 597

Umhlabuyalingana KZN271 B4 27 709 218 824 34 088 248 1 030 149 14 427 533 1 796

Jozini KZN272 B4 29 673 201 193 38 292 525 1 103 189 23 025 408 2 110

The Big 5 False Bay KZN273 B3 6 335 203 154 21 607 413 820 793 2 634 870 3 988

Hlabisa KZN274 B4 8 881 178 974 12 468 030 330 160 6 836 163 2 231

Mtubatuba KZN275 B3 25 488 210 236 96 012 857 3 302 260 8 494 427 4 238

Umkhanyakude DC27 C2 98 086 193 465 30 519 091 4 711 043 10 659 692 470

Mfolozi KZN281 B4 18 952 180 026 25 956 131 704 594 13 439 711 2 125

uMhlathuze KZN282 B1 48 390 209 456 104 836 168 1 278 682 80 724 478 3 865

Ntambanana KZN283 B4 9 288 189 598 12 355 641 345 308 5 534 677 1 984

uMlalazi KZN284 B4 32 653 204 293 44 536 526 1 213 982 36 244 876 2 517

Mthonjaneni KZN285 B3 7 524 204 819 26 972 659 974 855 4 292 193 4 312

Nkandla KZN286 B4 15 821 194 136 21 506 411 588 196 16 635 877 2 460

Uthungulu DC28 C2 132 629 149 656 47 828 865 6 370 160 11 203 487 494

Mandeni KZN291 B4 29 251 215 079 38 781 448 1 087 489 33 617 350 2 520

Kwa Dukuza KZN292 B2 48 732 218 848 204 910 158 7 474 883 59 150 598 5 577

Ndwedwe KZN293 B4 22 518 203 697 28 732 106 837 182 10 613 354 1 793

Maphumulo KZN294 B4 15 271 206 100 19 123 406 567 744 11 128 993 2 032

iLembe DC29 C2 115 772 168 733 38 065 528 5 560 533 18 288 961 536

Ingwe KZN431 B4 18 020 246 833 22 440 955 669 938 14 569 182 2 105

Kwa Sani KZN432 B3 2 441 163 853 9 437 058 316 261 3 557 255 5 520

Greater Kokstad KZN433 B2 12 026 197 779 50 833 904 1 844 617 41 845 044 7 876

Ubuhlebezwe KZN434 B4 18 205 133 140 22 904 736 676 821 24 766 216 2 663

Umzimkhulu KZN435 B4 35 228 289 378 42 492 378 1 309 716 26 596 154 2 007

Sisonke DC43 C2 85 920 167 413 26 012 639 4 126 730 12 693 150 500

Mpumalanga

Albert Luthuli MP301 B4 35 736 217 248 47 438 127 1 328 576 47 243 271 2 693

Msukaligwa MP302 B2 25 048 178 957 116 037 918 3 841 982 36 447 569 6 248

Mkhondo MP303 B3 27 489 179 565 102 100 472 3 561 507 25 771 862 4 788

Pixley Ka Seme MP304 B3 13 719 119 004 52 014 215 1 777 418 15 191 204 5 037

Lekwa MP305 B3 17 699 181 880 83 320 391 2 293 165 15 677 174 5 733

Dipaleseng MP306 B3 8 159 253 861 34 426 295 1 057 152 11 198 529 5 752

Govan Mbeki MP307 B1 45 743 146 674 102 682 529 1 208 733 52 642 900 3 425

Gert Sibande DC30 C1 173 593 138 329 110 935 083 4 982 329 15 672 832 759

Victor Khanye MP311 B3 13 196 225 807 57 535 542 1 709 702 15 052 739 5 647

Emalahleni MP312 B1 61 347 143 687 151 622 157 1 621 068 56 654 358 3 424

Steve Tshwete MP313 B1 32 480 144 753 84 072 900 858 261 42 511 102 3 928

Emakhazeni MP314 B2 8 727 210 317 39 090 661 1 338 587 19 962 016 6 944

Thembisile MP315 B4 52 070 200 662 76 550 324 1 935 853 29 959 385 2 087

Dr J.S. Moroka MP316 B4 45 726 196 234 61 366 424 1 699 991 28 998 148 2 018

Nkangala DC31 C1 213 546 121 634 148 546 177 6 129 040 16 017 523 800

Thaba Chweu MP321 B3 22 250 185 269 93 853 981 2 882 688 15 236 013 5 041

Mbombela MP322 B1 102 611 216 205 200 359 566 2 711 431 78 664 346 2 748

Umjindi MP323 B3 12 683 200 211 55 728 520 1 643 195 10 814 872 5 392

FFC AND SALGA


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Nkomazi MP324 B4 75 363 237 393 96 890 095 2 801 852 113 207 789 2 828

Bushbuckridge MP325 B4 107 789 200 669 134 185 290 4 007 362 125 573 586 2 449

Ehlanzeni DC32 C1 320 696 137 237 182 288 281 9 204 363 28 235 307 686

Limpopo

Greater Giyani LIM331 B4 51 561 243 079 63 542 071 1 916 929 43 847 958 2 125

Greater Letaba LIM332 B4 48 556 236 378 58 062 025 1 805 212 38 043 021 2 021

Greater Tzaneen LIM333 B4 84 077 226 142 110 141 410 3 125 790 78 282 841 2 281

Ba-Phalaborwa LIM334 B3 26 714 196 481 112 563 897 3 461 135 22 006 500 5 174

Maruleng LIM335 B4 20 075 244 676 24 654 324 746 353 21 625 457 2 355

Mopani DC33 C2 230 983 134 661 70 759 575 11 094 099 36 253 404 512

Musina LIM341 B3 16 263 247 860 57 897 787 2 107 045 13 768 884 4 552

Mutale LIM342 B4 19 546 234 271 24 190 172 726 665 18 272 010 2 222

Thulamela LIM343 B4 124 228 230 962 157 735 891 4 618 526 100 543 711 2 118

Makhado LIM344 B4 103 762 224 041 135 841 068 3 857 661 123 426 302 2 538

Vhembe DC34 C2 263 799 160 420 80 482 921 12 670 223 67 383 311 609

Blouberg LIM351 B4 33 705 249 301 40 605 636 1 253 065 20 298 451 1 852

Aganang LIM352 B4 26 394 263 928 33 086 950 981 278 14 578 510 1 853

Molemole LIM353 B4 23 488 237 489 29 409 853 873 239 16 380 523 1 997

Polokwane LIM354 B1 117 875 214 220 221 385 330 3 114 781 74 893 323 2 542

Lepele-Nkumpi LIM355 B4 45 504 169 543 59 342 770 1 691 747 39 519 958 2 214

Capricorn DC35 C2 246 966 155 069 82 229 602 11 861 775 37 926 717 535

Thabazimbi LIM361 B3 12 518 143 030 67 423 387 1 621 884 15 320 261 6 751

Lephalale LIM362 B3 17 694 177 393 83 568 520 2 292 475 15 683 582 5 749

Mookgophong LIM364 B3 6 936 228 701 27 101 478 898 635 10 140 698 5 532

Modimolle LIM365 B3 10 258 212 055 45 654 530 1 329 012 11 289 006 5 701

Bela Bela LIM366 B3 11 974 229 970 50 472 768 1 551 342 13 954 634 5 529

Mogalakwena LIM367 B2 57 968 208 144 219 120 163 8 891 641 53 569 156 4 861

Waterberg DC36 C1 117 348 117 379 72 808 960 3 368 042 13 679 169 767

Ephraim Mogale LIM471 B4 27 004 254 511 32 986 938 1 003 966 29 275 802 2 352

Elias Motsoaledi LIM472 B4 47 251 217 457 61 474 997 1 756 674 42 847 093 2 250

Makhudutamaga LIM473 B4 52 752 232 986 65 567 746 1 961 207 25 280 979 1 764

Fetakgomo LIM474 B4 16 729 253 138 22 896 075 621 943 13 256 569 2 213

Greater Tubatse LIM475 B4 60 062 208 318 87 567 049 2 232 994 27 955 765 1 964

Greater Sekhukhune DC47 C2 203 798 176 201 64 153 734 9 788 409 31 459 751 518

North West

Moretele NW371 B4 38 650 255 225 50 717 898 1 436 914 18 635 675 1 838

Madibeng NW372 B1 103 196 215 959 201 622 688 2 726 892 47 199 320 2 440

Rustenburg NW373 B1 109 391 197 998 251 823 310 2 890 577 240 167 268 4 526

Kgetlengrivier NW374 B3 10 708 264 620 39 860 701 1 387 368 8 486 313 4 669

Moses Kotane NW375 B4 51 100 206 819 73 592 219 1 899 778 43 363 795 2 330

Bojanala Platinum DC37 C1 313 044 91 334 207 605 359 8 984 761 32 328 070 795

Ratlou NW381 B4 21 759 271 269 26 086 877 808 953 20 287 848 2 181

Tswaing NW382 B3 22 188 234 334 80 470 037 2 874 722 12 126 868 4 313

Mafikeng NW383 B2 55 301 217 487 231 835 946 8 482 546 49 699 304 5 248

FFC AND SALGA


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Ditsobotla NW384 B3 29 718 173 090 117 505 087 3 850 365 27 825 375 5 026

Ramotshere Moiloa NW385 B3 29 686 254 208 107 965 617 3 846 117 14 975 504 4 280

Ngaka Modiri Molema DC38 C2 158 652 198 688 53 045 344 7 620 066 28 073 817 561

Naledi NW392 B3 11 897 222 843 49 339 966 1 541 437 17 368 692 5 755

Mamusa NW393 B3 10 530 254 093 39 412 706 1 364 274 10 986 429 4 940

Greater Taung NW394 B4 38 229 242 684 47 223 226 1 421 255 36 293 893 2 228

Lekwa-Teemane NW396 B3 10 012 225 361 40 274 772 1 297 200 12 930 688 5 466

Kagisano + Molopo NW397 B4 22 287 252 693 27 605 201 828 600 12 844 063 1 863

Dr Ruth Segomotsi Mompati DC39 C2 92 955 155 147 29 150 681 4 464 642 7 789 970 447

Ventersdorp NW401 B3 10 715 207 575 38 817 841 1 388 300 8 081 179 4 526

Tlokwe NW402 B1 31 684 189 865 65 568 864 837 221 47 020 858 3 586

City Of Matlosana NW403 B1 72 298 191 143 143 284 296 1 910 416 90 527 290 3 263

Maquassi Hills NW404 B3 14 893 241 430 53 710 373 1 929 510 13 856 048 4 683

Dr Kenneth kaunda DC40 C1 129 589 128 256 83 717 878 3 719 372 13 698 047 781

Gauteng

Ekurhuleni Metro EKU A 575 090 270 988 1 210 908 729 29 580 844 970 940 063 3 846

City Of Johannesburg JHB A 772 245 254 086 1 726 571 972 39 721 907 1 676 917 432 4 459

City Of Tshwane TSH A 455 057 231 592 1 108 775 259 23 406 747 1 071 956 625 4 844

Emfuleni GT421 B1 134 376 309 823 264 864 372 3 550 788 336 717 003 4 506

Midvaal GT422 B2 17 074 185 005 87 740 482 2 618 927 29 605 680 7 037

Lesedi GT423 B3 18 227 184 027 84 834 207 2 361 475 16 265 658 5 686

Sedibeng DC42 C1 169 676 141 252 114 011 441 4 869 916 57 887 414 1 043

Mogale City GT481 B1 69 067 213 404 145 723 500 1 825 051 83 559 765 3 349

Randfontein GT482 B2 22 769 177 178 120 698 066 3 492 542 43 849 475 7 388

Westonaria GT483 B2 25 642 217 302 114 196 093 3 933 160 32 310 043 5 875

Merafong City GT484 B2 33 716 169 433 185 256 610 5 171 677 55 931 251 7 312

West Rand DC48 C1 151 195 126 817 109 607 673 4 339 478 29 462 909 949

Total 54 990 239 24 005 446 651 789 254 869 14 838 077 087

Costing of Municipal Services Research Report

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Transcript of Costing of Municipal Services Research Report