It is well known that spending more than your income is not a good business practice.

For the new financial year the Makhado Municipality has budgeted for a deficit of R29.5m. The budgeted revenue in the operational budget for 2013/14 is R692 549 000 and the budgeted expenditure is R722 069 000, leaving a shortfall of R29 520 000.

The total capital budget to implement capital projects is R134 398 764.

The Makhado Municipality confirmed that the budget for 2013/14 had been approved by Council at its special meeting of 30 May.

The increase in tariffs is a subject of interest for every resident who needs to prepare his personal budget. Tariff increases were moderate, with an electricity increase of 7%. The charges for the other services still rendered by the Makhado Municipality and for sundry tariffs rise by 5.6%

The Council approved an overall increment rate of 6.85% in salaries and wages as guided by the National Treasury. The total salary bill to the amount of R233 567 000 includes the budgeted positions to be filled during the 2013/14 financial year. 

An amount of R241 152 000 has been set aside for general expenses and this amount includes capital expenditure.

In the next financial year, the Makhado Municipality will once again rely greatly on grants for their capital budget. The municipality budgets for a municipal infrastructure grant (MIG) of R86,7 million, an integrated national electrification programme grant (INEP) of R15 million and a local government financial grant (FMG) of R319 765. Apart from the grants as their source of funding, an amount close to R32 379 000 will come from operational income.

DA Councillor Brian du Plooy raised the question whether the municipality complied with finance regulations and the MFMA by budgeting for a deficit. “Expenditure should only be incurred in terms of the approved budget and within the limits of the amounts appropriated for the different votes in the budget,” said Du Plooy, quoting from Chapter 4.15 of the MFMA. The “votes” refer to the main sections into which the budget is divided.

A previous municipal budget circular states that  "there is no legal requirement that the operating budget of a municipality be balanced or in surplus" (2011/2012 MTREF) but it continues to say that “if  the municipality’s operating budget shows a deficit it is indicative that there are financial imbalances that need to be addressed. These problems may be related to a failure to collect revenues, tariffs that are too low or expenditures that are too high. Whatever the main cause of the deficit, the municipality needs to put in place appropriate strategies to address the problem, and explain these measures in its budget document.”

Du Plooy was concerned that the deficit of R29,5 million could be even more. “The municipality also faces the possibility of having to pay back the R27 million of MIG funds that they utilized for operational income purposes,” said Du Plooy.