Final Adopted IDP - KZN Development Planning

• Despite being the primary source of own revenue, the sale of conventional and
prepaid electricity does not generate sufficient revenue to cover the cost of
rendering this service; in the 2012 / 2013 financial year the rendering of an
electricity service within the licensed area of the Municipality is budgeted to
operate at a shortfall of R 3 476 554
CASH FLOW MANAGEMENT
As part of the Service Delivery and Budget Implementation Planning for the 2012 /
2013 financial year (included as Annexure J to this IDP Review document), a cash flow
projection was compiled, from which the following pertinent matters are noted:
• Although the overall net cash flow for the 2012 / 2013 financial year is projected
to be positive, only the months of July 2012, November 2012, January 2013,
February 2013 and June 2013 are projected to reflect a positive cash flow for the
month. These net cash flow positions correspond to the months when funds from
operational and / or capital grants are received.
• Although the overall net cash flow for the 2012 / 2013 financial year is projected
to be positive, when viewed cumulatively it is noted that the Municipality is
projected to have cash flow deficits in the months of October 2012, December
2012, April 2013 and May 2013. In the absence of cash reserves or other financial
arrangements being made by the Municipality to fund the anticipated cash
shortfalls, it will be unable to meet its commitments in these four months.
• Albeit that the month of July 2012 is projected to have a positive net cash flow
amounting to R 28 619 240, this is substantially due to the cash injection of
R 17 350 000 from capital grants provided by MIF and the INEF. The capital
grant funding can only be applied to expenditure on projects for which the funding
has been provided – in the case of MIG over the full financial year and in the case
if the INEF until the end of march 2013 when it is anticipated that the
electrification project in Ward 2 will be completed.
• The cash flow projection is based on 100% of budgeted own revenue being billed,
where appropriate, and collected over the course of the 2012 / 2013 financial
year. Should this not be the case, the Municipality will face limitations in its
working capital availability (in the main general expenditure and repair and
maintenance provisions since expenditure on salaries and allowances are committed
expenditure that cannot be delayed or avoided) which will have an adverse effect
on service delivery
During the course of the 2011 / 2012 financial year the Municipality has experienced
significant cash flow difficulties, due in the main to a lower than budgeted collection of
revenue. One of the primary initiatives to be undertaken during the 2012 / 2013
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