revenue enhancement strategy - mbombela revenue enhancement strategy.pdf · revenue enhancement...

REVENUE ENHANCEMENT STRATEGY

FUNCTION PROBLEM STATEMENT OR CHALLENGE

EXTENT OF THE PROBLEM OR REVENUE LOSS

STRATEGIES ACTIVITIES OR INTERVENTION

REVENUE IMPACT

BUDGET OR FINANCIAL IMPLICATION

TIMEFRAME RESPONSIBLE

Human Settlements

Lack of development in identified land parcels such as White River x 71, Courts Hill, Maggiesdal, Friedenheim Tekwane South x2

Loss of revenue from 4 000 stands or properties.

Develop land parcels through the land availability agreement

Finalise Service Level Agreements with service providers appointed for the development of the identified land parcels.

Establishment of townships and development of the identified land parcels by the service providers.

The municipality to earn 10% revenue from the developed stands to be sold by the service providers. The selling of developed stands in Tekwane South will generate R9 million (Tekwane South x 2.

R5 000 000 30 June 2017 30 June 2020

General Manager - City Planning and Development





REVENUE IMPACT



Unavailability of serviced stands for integrated human settlements

33 000 housing backlog, with over 50% gap market

Purchase, service and sell stands (with the possibility of including FLISP)

Blinkwater – 2 000 stands

Friedenheim – 1 500

Tekwane (MEGA) properties – 10 000

Matsafeni – 10 000

Kwa-Khumalo – 2000

Nkosi City – 2000

Mpu-Green – 2000

Identification and purchase of developable pieces of land (with Housing Development Agency (HDA)

Servicing the pieces of land

Selling serviced stands

The possibility of public private partnerships (PPPs) mechanisms to be considered.

Generate revenue of R990 000 000 from the sale of 16 500 serviced stands (i.e. at approximately R60 000 per stand)

The cost of the purchase, township establishment and installation still need to be determined.

30 June 2022

Land Use Management

Formalisation of invaded areas (e.g. Next to Entokozweni)

Lack of collection of property rates and services charges in the areas

Expand revenue base through the land tenure upgrade

Township establishment or formalisation and transfer of the properties to the beneficiaries.

Revenue to be generated to be determined.

R10 000 000 30 June 2018

General Manager – City Planning and Development

Semi-formalisation of land under Traditional

More than 70% of the municipal area under traditional

Consultation of all affected members of the public,

Rates and taxes from over 67 000 stands

R234 500 000 30 June 2022





REVENUE IMPACT



leaders [including Emjindini]

leadership not formalised

traditional leaders and other appropriate stakeholders.

Pegging of stands

Developing general layout plans for each township

Land Use Management

Inefficiencies in the approval of the building plans due to turnaround time.

Long turnaround time to approve building plans

Enhance and improve on the building plan approval system (BAS)

Upgrade of the building plan approval application system

Development of workflow procedures

Additional property rates and services charges revenue to be generated due to the increase in the value of the property

R500 000 31 December 2017

Land Use Management

Inefficiencies in the approval of town planning evaluation system

Upgrade of town planning evaluation system (TEAS)

Development of workflow procedures


R500 000 31 December 2017





REVENUE IMPACT



Economic Development

Lack of infrastructure support for emerging enterprises

Loss of rental revenue from emerging enterprises

Development of incubation hubs (i.e. Rockydrift/Dingwell and Tekwane South)

Development of business plans for the incubation hubs for grant funding

Development and management of the hubs

Rental revenue from the incubation hubs

R2 000 000 30 June 2018


Real Estate Government amenities or facilities built on properties owned by the municipality

Property rates revenue is not generated from these properties

Improve property rates revenue generation.

Transfer the properties to relevant government departments and entities


R10 000 000 30 June 2018


Townships Established or formalised not registered in the deeds office and no transfer of title deeds (i.e. Phumlani and Entokozweni)

Property rates revenue is not generated from these properties

Improve property rates revenue generation.

Registration of the townships to the deeds office.

Transfer of the ownership of the properties to the beneficiaries.


R10 000 000 30 June 2018 30 June 2019





REVENUE IMPACT



Stadium

Management

Mbombela

Stadium not

financially

sustainable due to

lack a proper

stadium

management

model

Substantial

revenue is lost

due to the lack

of the proper

stadium

management

model

Enhance revenue

generation of the

stadium

Implementation of

the stadium

management model

Additional

revenue can be

generated from

naming rights,

hosting events,

selling of suits

etc.

30

September

2017

General

Manager –

Community

Services

Parks and

Cemeteries

Lack of proper

system to

manage

cemeteries

Records of

Sales and

reservation of

graves not

properly

accounted for

Enhance revenue

protection of selling

of graves.

Implementation of

the Cemeteries

management

system.

Potential for

revenue per sale

and reservations.

R2 000 000 31 December

2017

General

Manager –

Community

Services

Recreational

Facilities

Lack of proper

system to

manage

recreational

facilities

No evidence of

booking and

deposits

receipts as a

result

transactions

cannot be

traced to the

Core Financial

System.

Enhance revenue

protection for

utilisation of the

recreational

facilities

Implementation of

recreational

facilities

management

system

Potential revenue

per booking and

use of

recreational

facilities

R300 000 31 December

2017

General

Manager –

Community

Services





REVENUE IMPACT



Waste

management

No basic waste

collection services

in peri-urban and

rural areas.

At least 140 171

households do

not receive a

basic waste

collection

service.

Expanding the

revenue base. Conduct

feasibility studies on the service delivery mechanism.

Implementation of the waste management service delivery mechanism or model

Potential to

generate

approximately

R37 000 000

revenue per

annum.

R 11 774 364

per annum over

a period of five

years

31 December

2017

30 June

2019

General

Manager –

Community

Services

Waste

management

Inadequate

capacity to render

commercial,

industrial and bulk

or special waste

removal services.

Loss of revenue

in business and

industrial areas

amounting to at

least R38 million

per annum

Enhancing refuse

removal revenue

generation

Conduct capacity assessment analysis to render the waste collection services.

Extend the waste collection services to commercial and industrial areas

Additional

revenue of R 52

million per annum

is projected to be

generated.

R 26 600 000 30 June

2017

30 June

2019

General

Manager –

Community

Services

Energy Management

Commercial or non-technical

A loss of R40 million per annum is

Enhance electricity revenue protection

Conduct meter audits

Additional R4 million revenue to

R4 000 000 30 June 2018

General Manager – Energy





REVENUE IMPACT



electricity distribution losses

projected on the electricity distribution network and the billing system.

Verification of meter and stand data

Resealing of meters and replacement of faulty meters

Issuing of tamper fines

be generated per annum

Energy Management

Commercial or non-technical electricity distribution losses

A loss of R40 million per annum is incurred due to the electricity distribution network, unreliable meters and meter readings


Phased out all conventional or credit meters with smart meters for customers being billed above an average of R5 500 per month.

Phase out all conventional or credit meters with normal

Appointment of a service provider on a risk basis and at no upfront capital outlay by the municipality to provide the smart metering technology Funding to be provided on 2018/2019 budget.

30 December 2017 30 June 2019

General Manager – Energy and Chief Financial Officer General Manager – Energy





REVENUE IMPACT



prepayment meters for customers being billed less than R5 500 per month

Revenue Management

Commercial or non-technical electricity distribution losses

Misappropriation of prepayment revenue by vending points and third agencies.


Conduct regular audits and reconciliation of the prepayment revenue collected by all vending points and third party agencies

Not applicable Monthly basis

Chief Financial Officer

Revenue Management

Commercial or non-technical electricity losses

Inaccurate customer records on the billing system

Enhance revenue protection

Conduct customer data records cleansing and update

Linking of billing system to the Geographic Information System

R4 500 000 30 June 2018






REVENUE IMPACT



Energy Management

Electricity Supply By-laws outdated

The enforcement of the two distinct Electricity Supply By-Laws of the two former municipalities is not effective


Formulate Electricity Supply By-Laws

Not applicable 30 April 2017 General Manager – Energy

Energy Management

Technical electricity losses in the distribution networks

The technical electricity losses are estimated as R55 million per annum


Identify excessively overloaded lines, cables and transformers

Ensure proper load balancing on the three phases of LV networks per substation

Improve network configuration and network switching

Run network on balanced normal open rings on MV side(33/22/11/6.6KV)

Reduce the MV rings to max 14x M/S per ring feeder

Upgrade or replace equipment identified above

The reduction of the electricity losses still need be determined

Financial implications still to be determined.

30 June 2022


or install additional equipment if the overload conditions cannot be addressed through network configuration

Renew old Substations with energy efficient equipment





REVENUE IMPACT



Energy Management




Upgrading 33/11 KV and 22/11 KV substations to 132/11KV substations

Identify the optimum operational voltage profile for the network

The estimated cost is R180 million

30 June 2022


Energy Management




Install and maintain all power factor correction equipment at intake supply points at optimum levels

All new main sub stations (20 MVA) to have power factor equipment installed as part of the design.

Operating Budget for 2017/2018

30 June 2018






REVENUE IMPACT



Land Use Management

New township establishment not response to the revenue base expansion initiatives

Water and sanitation, and electricity supply rendered by Eskom and Sembcorp.

Expand the revenue base

The approval of township establishment for any development should include a condition that all services will be rendered by the municipality, where the municipality has a capacity to render such as services.

The service agreement should reflect the condition that the all services will be rendered by the municipality, except where the municipality does not have the required capacity.

Installation and connection to municipal services to be funded from services contribution

30 April 2017 General Managers – City Planning and Development, Energy, and Water and Sanitation.





REVENUE IMPACT



Energy Management

The excessive cost incurred on the Eskom bulk account and accounts for municipal facilities such as water treatment plants, sewer treatment plants etc.

The consolidation of the Eskom bulk account will result in prevention double charging of fixed charges. There is no mechanisms in place to verify the meter readings on the Eskom accounts for the supply of the municipal facilities

Reduction in Energy purchase cost- Consolidation of Eskom reselling billing points and supply own use supply point from own network where possible

Change network configuration to Maximise the Notified Maximum Demand from Eskom. Combine the bulk accounts of the two former municipalities. Install electricity check meters on the Eskom supply points to the municipal facilities to verify Eskom readings

Reduction on the electricity cost

To be determined Not Applicable Implemented as part of the smart metering technology programme

30 June 2018 30 June 2017 30 June 2018


Energy Management

The excessive cost incurred on the Eskom bulk account and accounts for municipal facilities such as water treatment plants, sewer treatment plants etc.

The electricity cost per unit by Eskom is expensive than the cost per unit by the Independent Power Producers (IPPs)

Implement alternative energy strategy

Explore alternative energy sources to be 15% of the municipality demand. Conclude alternative energy purchase agreements with IPPs.

Reduction on energy Cost

Power Purchase Agreements

30 June 2022






REVENUE IMPACT



Energy management

Excessive electricity cost incurred

Energy efficiency – Municipal plants Water treatment and Waste water plants

Identify plants that can be approved and install power factor correction

Reduction on energy cost

31 December 2017

General Manager – Water and Sanitation Department

Energy Management

Excessive electricity cost incurred

Energy efficiency – Municipal Buildings

Identify municipal buildings that have not been retrofitted with energy efficiency lighting equipments or energy savings equipments

Reduction on energy cost

31 December 2017

General Manager – Corporate Services

Traffic Fines revenue

Lack of enforcement measures to execute Warrant of Arrest (WoA

Outstanding income out of Traffic Fines Warrant of Arrest (WoA) amount to R32 million

Improve execution of Warrant of Arrest

• Implement a bulk SMS/MMS system

• Establish a Call Centre

• Establish a Dedicated WoA Unit

• Appointment of Human Resources (Traffic Officers and Clerks of the Court)

• Procure four Roaming Vehicles fitted

Additional revenue of R7 000 000 per annum

R2 000 000 30 June 2018

General Manager – Public Safety

with ANPR Cameras

• Procure one minibuses for transportation of unit

• Maximise the utilization of the Municipal Court.

• Implement traffic fines payment Portal

Licencing services revenue

Outdated Service Level Agreement between the municipality and the Provincial Department of Safety.

The full cost of rendering the licencing services on behalf of the Provincial Department is not fully recovered with the 17% - 20% agency fees.

To enhance licencing fees revenue

Re-model cost of the licencing services due to the amalgamation.

Re-negotiate the licencing service level agreement with Provincial Department of Safety

Additional revenue of R36 000 000

R700 000 31 September 2017 31 December 2017

Chief Financial Officer General Manager – Public Safety

Security Services

Excessive security services cost.

Total security cost per annum is over R40 million

Cost containment of the security services by implementing of the Security Master Plan.

Identification of surplus security personnel

Replace physical security on low risk sites with appropriate technological systems.

Strengthen Security Contract Management by appointing a

Reduction of Security services cost

R1 700 000 30 June 2019

General Manager – Public Safety

Manager Security and a Senior Security Officer.

Establishment of Security War Room

Property rates revenue

Loss of revenue due to properties registered in the name of municipality occupied/ owned by third parties

Approximately 19 000 properties are registered in the name of the municipality resulting in a possible loss of income

To enhance the property rates revenue generation.

Identify and verify all properties registered in the of the municipality to be transferred to the rightfully owners;

Additional revenue of R15 million per annum will be generated.

R57 000 000 30 June 2020


Government and business properties in the state trust and communal land are not listed on the general valuation roll.

Approximately 188 government facilities are situated in the communal land are not included on the valuation roll (schools, clinics, and police stations, etc.)

Expand the property rated revenue base.

Develop individual property diagrams and formalisation of the individual properties.

Revenue base to increase by approximately R18 million per annum

R3 500 000 30 June 2017


Two separate non-rationalised general valuation rolls of the two former municipalities expiring on 30 June 2018

Approximately 80 000 properties exist on the two separate rolls.

To protect the property rates revenue

Compile a new General Valuation roll. Compile Supplementary Valuation rolls

R16 million 30 June 2018 30 June 2018


Solid Waste Revenue

Solid waste revenue not optimised

Approximately 11 000 households are not billed for refuse removal, resulting in a

To enhance refuse removal revenue generation

Reconcile the billing database, refuse removal register and the property master register.

Additional R24 million per annum revenue will be generated

R 200 000 31 December 2017


loss of R24 million per annum.

Update the billing database with properties or households not billed for refuse removal

Introduce refuse removal basic charge tariff to all serviced properties or households

Develop a Solid Waste Management By-Laws

31 December 2017 31 May 2017 30 April 2017

Chief Financial Officer Chief Financial Officer General Manager – Community Services

Revenue Management

Loss of revenue due to inefficient workflow between different departments

Lack of workflow processes and interface between sub-systems result in revenue losses

To improve revenue generation.

Develop interdepartmental business and workflow processes (mSCOA-compliance). Interface of all sub-subsystems to the Core financial system (SOLAR System)

31 December 2017 31 December 2017

mSCOA Technical Committee

Loss of revenue due to interest charged after 60 days

Approximately R2,5 million per annum lost due to interest not charges after the accounts

To improve revenue protection

Review and implement the Credit Control and Debt Collection Policy and By- Law on interest charges.

Additional revenue of R2,5 million per annum

30 June 2017


payment due date.

Consumer Deposits held by the municipality not in line with Refunds and Deposits policy

Consumer deposits held are not mitigating the credit and default risks pose by customers.

To improve revenue protection

Review of the deposit structure in line with the Refunds and Deposits policy, and Credit Control and Debt Collection By-Laws

30 June 2017

High level of discrepancies on the billing system of the former Umjindi. Variance in the provisional billing versus the final billing for Southern Region water and electricity meters (R27 million versus R13 million)

There is an average of R14 million per month experience between the provisional or dummy billing before any corrections and the final billing

To improve revenue generation

Investigate, verify the cause of the billing discrepancies on the metered services charges (water, sewerage and electricity).

Correct the billing system

Potential of additional R168 million revenue to be generated

R2 000 000 30 June 2017

Water Loss Management

Unauthorised connections on bulk distribution networks

Unauthorised connections due to lack of reticulation and inconsistent resulting in communities taping directly onto bulkwater lines blocking water from

To improve revenue generation through the implementation Water Conservation and Demand Management Strategy

Removal and legalisation of unauthorised connections

Reduction of revenue losses

R1 500 000 30 June 2018

General Manager – Water and Sanitation

reaching reservoirs


Unmetered connections/Truck filling points and unbilled connections

Unmetered connections due to un-updated customer information and water being collected from truck filling points for free


Relocate truck filling points, installation of metered points and separation of private and municipal filling areas

More customers to be billed and reduction of unaccounted-for-water

R2 000 000 30 June 2018


Revenue management

Old and faulty meters

Old meters which have reached life spans, stuck meters and buried/covered meters


Meter assessment, replacement and calibration program

Accurate meter readings and billing

R3 000 000 30 June 2019



Extremely high water losses in White River, Hazyview and Barberton

Over 60% aggregate unaccounted-for-water

To improve revenue protection through the implementation Water Conservation and Demand Management Strategy

Installation and monitoring of bulk water meters

Verification and analysis of zonal water management boundaries

Establishment of water distribution zones and determination of zonal water losses/non-revenue water

Reduction of losses/revenue enhancement

R1 600 000 30 June 2018


Determination and elimination of real vs. apparent losses ratios

Water Demand Management

Huge customer dissatisfaction, affecting revenue collection

Low payment rate in Kabokweni due to inconsistent water supply

To improve revenue protection through the implementation Water Conservation and Demand Management Strategy

Implementation of 1813 on-site storage project

Improved reliability of water supply and increased revenue collection

R2 000 000 30 June 2019


Revenue management

Inefficient meter reading processes and estimation water usages which lead to lower customer billing

Meter reading estimates results to 21nderestimation and increased unaccounted-for-water levels

Pilot Smart Metering project for White river Country Estates

Replacement of 303 conventional meters to smart meters

Increased accuracy of readings and billing with increased revenue collection

R2 000 000 required.

30 June 2018


Revenue Management

New developments in urban edges and areas previously earmarked for natural progression of areas serviced by private Water Service Providers (WSPs)

Loss of revenue by extending private Water SP’s operational areas

To expand the revenue base

Sound conditions for the Municipality’s first right of refusal for the provision of both bulk and retail water services

More revenues to be generated by extending the municipality’s service areas and revenue base

None, done under normal operations

Ongoing General Manager – Water and Sanitation

Water loss management

Tampering and vandalisation of water infrastructure assets

Excessive loss of water, unauthorised connections uncontrollable valve systems

Finalisation, promulgation and enforcement of Water and Sanitation by-laws

Strict enforcement of Water and Sanitation by-laws by Law-Enforcement Officers

Reduction of water losses and revenue enhancement

None 30 June 2018

General Managers – Water and Sanitation, Legal Services

and Public Safeyt

Revenue Management

Provision of retail water services by private Water Services Providers (WSPs)

Loss of revenue from end users

Finalisation of Section 78 Assessment for Water Services

Section 78 Assessment and cost benefit analysis in the entire City of Mbombela

To be determined by the report

R2 000 000 30 June 2019


Financial Management

The cost of rendering services is not in line with principles of financial management relating to effectiveness, efficiency and value for money

Trading services such as water, sanitation and refuse removal are not generating trading surpluses, cost incurred cannot be trace to the value chain of rendering services and support services cost are not allocated to the primary services functions.

Implement value chain analysis and cost remodelling strategy

Conduct cost remodeling on all primary services delivery functions.

Develop new tariff structure for property rates.

Develop new tariff structure for service and sundry charges

R9 000 000 30 June 2019 31 March 2018 30 June 2019


Revenue Management

Ineffective collection of municipal outstanding debts

The municipal outstanding debts at 31 March 2017 amounts to R477 million

To improve outstanding debt collection

Implement the rand to rand payment incentive on outstanding debts

Implement the payment incentive for good customers

Reduce outstanding debts by 30 per cent

30 September 2017 30 June 2017


Explore the possibility of implementing the debtors factoring

Monitor and review the performance of the debt collectors

Write off irrecoverable outstanding debts

31 December 2017 Ongoing 30 June 2017

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