RAYMOND MHLABA LOCAL MUNICIPALITY EC 129 ANNUAL FINANCIAL STATEMENTS 30 JUNE 2020 RAYMOND MHLABA LOCAL MUNICIPALITY INDEX Content Page General Information 1 - 3 Approval of the Financial Statements 4 Statement of Financial Position 5 Statement of Financial Performance 6 Statement of Changes In Net Assets 7 Cash Flow Statement 8 Statement of comparison of budget and actual amounts - Statement of Financial Position 9 - 10 - Statement of Financial Performance 11 - 12 - Cash Flow Statement 13 - 14 Accounting Policies 15 - 48 Notes to the Financial Statements 49 - 110 APPENDICES - Unaudited A Schedule of External Loans 111 B Disclosure of Grants and Subsidies 112 __________________________ RAYMOND MHLABA LOCAL MUNICIPALITY GENERAL INFORMATION NATURE OF BUSINESS Raymond Mhlaba Local Municipality (EC129) performs the functions as set out in the Constitution. LEGAL FORM SouthAfricanCategoryBMunicipality(LocalMunicipality)asdefinedbytheMunicipalStructuresAct. (Actno117 of 1998). The municipalityprovidesfunctions asincludedinSchedule 4B and Schedule 5B of the Constitution.It should however be noted that the Water and Sanitation function, which is generally allocated to Category B municipalities, are performed by the District Municipality. TheMinisterofCo-operativeGovernanceandTraditionalAffairshasrequestedtheMunicipalDemarcationBoard to re-determine the boundaries of Nkonkobe and Nxuba Municipalities as per section 122 of the Local Government Municipal Demarcation Board. The Raymond Mhlaba Local Municipalitywas subsequently established by the amalgamationof NkonkobeLocal MunicipalityandNxubaLocalMunicipality. OperationsintheRaymondMhlabaLocalMunicipalitycommencedon 6 August 2016. JURISDICTION The Raymond Mhlaba Local Municipality includes the following areas: Alice Hogsback Adelaide Katberg Middledrift Seymour Bedford Fort Beaufort Balfour Healdtown MEMBERS OF THE COUNCIL Position Councillor Ward / Additional Portfolio Mayor Bandile Ketelo PR Councillor Speaker Anele Ntsangani PR Councillor Chief Whip Lindelwa Doris Penisi Ward 20 Councillor Zukisa Kenneth Qaqawe Ward 1 Councillor M Matayo Ward 2 Councillor N Sango-Blackie Ward 3 Councillor Xolani Dyantyi Ward 4 Councillor Nandipha Colleen Guzi Ward 5 Councillor Singilizwe Alfred Nivi Ward 6 Councillor Luyolo Lennox Kiswa Ward 7 Councillor Elten Bantam Ward 8 Councillor Xola Bethwell Jezile Ward 9 Councillor Mlumgiseleli Lookington Ndongeni Ward 10 Councillor Ntombomzi Klaas Ward 11 Councillor Selinah Mkwayimba Ward 12 _________________________ Page 1 RAYMOND MHLABA LOCAL MUNICIPALITY GENERAL INFORMATION MEMBERS OF THE COUNCIL (CONTINUED) Position Councillor Ward / Additional Portfolio Councillor Zukiswa Mpendu Ward 13 Councillor Songezo Mashengqana Ward 14 Councillor Thozama Ngaye Ward 15 Councillor Millicent Nonkoliseko Qawu Ward 17 Councillor Thobeka Priscilla Mjo Ward 18 Councillor Zamikhaya Lunga Papu Ward 19 Councillor Frans Christian Ward 22 Councillor Mhlobo Douglas Dywili Ward 23 Ward 16 / Portfolio Head: Councillor Xolile Caswell Badi Corporate Service Ward 21 / Portfolio Head: Councillor Sinethemba Mjakuca Engineering Councillor Mandla Johnson Makeleni Portfolio Head: Finance Councillor Pasika Jack Portfolio Head: Community Service Portfolio Head: Sports, Arts Councillor Sinovuyo Kley and Culture Portfolio Head: Strategic Councillor Portia Sabane Planning & LED Councillor Bukelwa Sharon Tyhali MPAC Chairperson Councillor Ernst Lombard EXCO (PR Councillor) Councillor Siphiwo Mavuso EXCO (PR Councillor) Councillor Zingiswa Modelia Rasmeni PR Councillor Councillor Nomonde Mavis Geza PR Councillor Councillor Vuyiswa Ndevu PR Councillor Councillor Nombuyiselo Agreenette Metusa PR Councillor Councillor Nobesutu Makhenyane PR Councillor Councillor Nomthetheleli Vece PR Councillor Councillor Kayalethu Baliso PR Councillor Councillor Cecilia Anne Auld PR Councillor Councillor Sivuyile Mahlengele PR Councillor Councillor Buyiswa Eunice Mfondini PR Councillor Councillor Malixole Ncume PR Councillor Councillor Nonkazimlo Primrose Mlamla PR Councillor MUNICIPAL MANAGER Ms Unathi Malinzi ACTING CHIEF FINANCIAL OFFICER Ms Ngcwelekazi Smith _________________________ Page 2 RAYMOND MHLABA LOCAL MUNICIPALITY GENERAL INFORMATION REGISTERED OFFICE 8 Somerset Street, Fort Beaufort, 5720 POSTAL ADDRESS PO Box 36, Fort Beaufort, 5720 AUDITORS Office of the Auditor General (EC) PRIMARY BANKER ABSA Bank PANEL OF ATTORNEYS Lionel Trichardt & Associates A A Solwandle Attorneys Inc. NT Vuba Incorporated Smith Tabata Attorneys Siya Cockile Inc. Kirchmanns Inc. Gravett Schoeman Inc. Ntsiki-Pakade Attorneys RELEVANT LEGISLATION Municipal Finance Management Act Division of Revenue Act The Income Tax Act Value Added Tax Act Municipal Structures Act Municipal Systems Act Municipal Planning and Performance Management Regulations Water Services Act Housing Act Municipal Property Rates Act Electricity Act Skills Development Levies Act Employment Equity Act Unemployment Insurance Act Basic Conditions of Employment Act Supply Chain Management Regulations, 2005 Collective Agreements Infrastructure Grants SALBC Leave Regulations Municipal Budget and Reporting Regulations mSCOA Regulations Municipal Cost Containment Regulations, 2019 _________________________ Page 3 RAYMOND MHLABA LOCAL MUNICIPALITY APPROVAL OF FINANCIAL STATEMENTS APPROVAL OF ACCOUNTING OFFICER Iamresponsibleforthepreparationofthesefinancialstatementsfortheyearended30June2020,whichareset out on pages 1 to 112 in terms of Section 126 (1) of the Municipal Finance Management Act and which I have signed on behalf of the Municipality. The financial statements have been prepared in accordance with GRAP. IacknowledgethatIamultimatelyresponsibleforthesystemofinternalfinancialcontrolandthatthesystemof internal control provides reasonable assurance that the financial records can be relied on. IhavereviewedtheMunicipality’scashflowforecastfortheyearto30June2021andIamsatisfiedthatdespite the current financial status, the Municipality can continue in operational existence for the foreseeable future. Significant measures are currently being put in place to ensure improved revenue collection, revenue enhancement and finally cashflow. The users should also take note of the financial sustainability matters adressed in note 57 of the financial statements. The external auditors are responsible for independently reviewing and reporting on the Municipality’s financial statements. I certify that the remuneration of Councillors and in-kind benefits are within the upper limits of the framework envisaged in Section 219 of the Constitution, read with the Remuneration of Public Office Bearers Act and the Minister of Provincial and Local Government's determination in accordance with this Act. As perGovernmentGazette no.43582 dated5thAugust2020, NationalTreasuryhasgrantedmunicipalitiesand municipalentitiesatwo-monthextensionregardingthesubmissionofAFS.Themunicipalityhastakenadvantage of this exemption. Ms Unathi Malinzi Date Municipal Manager __________________________ Page 4 RAYMOND MHLABA LOCAL MUNICIPALITY STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2020 30 JUNE 2020 30 JUNE 2019 R R Notes (Actual) (Restated) ASSETS Current Assets 9 1 527 883 6 7 234 907 Cash and Cash Equivalents 2 1 6 527 353 1 0 041 076 Receivables from exchange transactions 3 2 2 083 958 1 8 418 759 Receivables from non-exchange transactions 4 3 0 690 768 2 2 542 234 VAT Receivable 5 2 2 225 804 1 6 232 837 Operating Lease Assets 6 - - Non-Current Assets 755 346 376 719 998 291 Investment Property 7 8 3 745 433 8 0 561 833 Property, Plant and Equipment 8.1 657 362 791 624 657 591 Property, Plant and Equipment - Capitalised Restoration Cost 8.2 1 4 168 152 1 4 708 867 Heritage Assets 9 70 000 70 000 Intangible Assets 10 - - Total Assets 846 874 259 787 233 197 Current Liabilities 351 394 539 270 393 389 Current Portion of Long-term Liabilities 11 1 566 878 2 227 808 Consumer Deposits 12 2 473 837 2 379 437 Payables from exchange transactions 13 311 186 668 237 682 920 Unspent Conditional Government Grants 14 3 368 000 2 732 961 Current Employee benefits 15 2 1 755 777 1 4 764 387 Provisions 16 1 1 043 379 1 0 605 876 Non-Current Liabilities 6 7 667 634 6 8 559 037 Long-term Liabilities 11 4 583 214 6 150 092 Employee benefits 17 2 9 089 000 3 0 276 257 Non-Current Provisions 18 3 3 995 420 3 2 132 688 Total Liabilities 419 062 173 338 952 426 NET ASSETS 427 812 086 448 280 772 COMMUNITY WEALTH Accumulated Surplus 19 427 812 086 448 280 772 427 812 086 448 280 772 __________________________ Page 5 RAYMOND MHLABA LOCAL MUNICIPALITY STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDING 30 JUNE 2020 30 JUNE 2020 30 JUNE 2019 R R Notes (Actual) (Restated) REVENUE REVENUE FROM NON-EXCHANGE TRANSACTIONS 379 225 103 351 967 567 Taxation Revenue 108 653 180 73 734 664 Property Rates 20 108 653 180 73 734 664 Transfer Revenue 262 524 221 265 716 547 Government Grants and Subsidies - Capital 21 69 466 793 95 181 788 Government Grants and Subsidies - Operating 21 193 057 427 170 534 759 Other Revenue 8 047 703 12 516 356 Fines 22 79 840 82 650 Actuarial Gains 23 4 433 263 9 042 106 Fair Value Adjustments 24 3 534 600 3 391 600 REVENUE FROM EXCHANGE TRANSACTIONS 123 403 128 118 514 687 Operating Activities 123 403 128 118 514 687 Service Charges 25 84 071 288 80 293 124 Rental of Facilities and Equipment 26 284 905 334 952 Interest Earned - external investments 27 3 341 298 2 682 968 Interest Earned - outstanding debtors 28 27 067 150 23 887 256 Licences and Permits 29 3 565 198 4 391 828 Other Income 30 5 073 290 6 924 560 TOTAL REVENUE 502 628 232 470 482 254 EXPENDITURE Employee related costs 31 172 431 167 149 322 711 Remuneration of Councillors 32 18 523 030 17 728 829 Debt Impairment 33 107 590 065 62 189 219 Depreciation and Amortisation 34 31 498 986 30 371 560 Impairments 35 - 496 766 Finance Charges 37 23 994 497 21 775 275 Bulk Purchases 38 65 723 227 59 305 079 Transfers and Grants 39 9 790 360 7 953 046 Other Expenditure 40 92 714 376 117 937 772 Loss on disposal of Assets 41 831 210 33 673 TOTAL EXPENDITURE 523 096 918 467 113 930 NET SURPLUS FOR THE YEAR (20 468 686) 3 368 324 __________________________ Page 6 RAYMOND MHLABA LOCAL MUNICIPALITY STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDING 30 JUNE 2020 ACCUMULATED Note SURPLUS TOTAL R R Balance on 1 July 2018 424 616 012 424 616 012 Prior Period Adjustments 42.7 20 296 436 20 296 436 Restated Balance on 1 July 2018 444 912 448 444 912 448 Net Surplus for the year 3 368 324 3 368 324 Restated Balance on 30 June 2019 448 280 772 448 280 772 Net Deficit for the year (20 468 686) (20 468 686) Balance on 30 June 2020 427 812 086 427 812 086 __________________________ Page 7 RAYMOND MHLABA LOCAL MUNICIPALITY CASH FLOW STATEMENT FOR THE YEAR ENDING 30 JUNE 2020 30 JUNE 2020 30 JUNE 2019 R R Notes (Actual) (Restated) CASH FLOW FROM OPERATING ACTIVITIES Receipts Property rates 42 319 339 45 857 322 Service charges 66 339 391 66 614 250 Other Income 2 040 662 6 567 455 Government - operating 194 854 454 170 534 759 Government - capital 64 104 944 96 957 130 Interest Income 6 185 594 6 881 329 Payments Suppliers and employees ( 274 494 034) ( 283 440 009) Finance charges (19 190 768) (16 855 874) Transfers and Grants (9 790 360) (7 953 046) NET CASH FROM OPERATING ACTIVITIES 43 72 369 221 85 163 317 CASH FLOW FROM INVESTING ACTIVITIES Payments Purchase of Property, Plant and Equipment (63 749 537) (90 608 368) NET CASH USED INVESTING ACTIVITIES (63 749 537) (90 608 368) CASH FLOW FROM FINANCING ACTIVITIES Receipts Increase in Consumer Deposits 94 401 205 749 Payments Long-Term Liabilities repaid (2 227 808) (1 960 146) NET CASH USED FINANCING ACTIVITIES (2 133 407) (1 754 397) NET INCREASE/(DECREASE) IN CASH HELD 6 486 277 (7 199 448) Cash and Cash Equivalents at the beginning of the year 10 041 076 17 240 525 Cash and Cash Equivalents at the end of the year 16 527 353 10 041 076 NET INCREASE/(DECREASE) IN CASH HELD 6 486 277 (7 199 448) __________________________ Page 8