Public Services and Utilities International (PSU) has worked on revenue management projects during the last two years. By 2007 the analytical and data cleaning services of PSU were well established through 8 years of experience. The change in PSU management during 2007 and the new municipal needs required a refinement of the PSU services. Municipalities required more than an analysis of revenue management issues – the formulation of a strategy and plan of implementation together with the provision of hands-on support was needed to produce practical solutions and tangible results.
The project at Dr. J.S. Moroka Local Municipality completed in 2007 demonstrated that it was possible to move from flat-rate billing for water services to billing based on actual metered consumption, even within the context of low levels of consumer affordability. A clean customer database was compiled by doing a house-to-house survey using approximately 25 local people who were trained. 2,000 new customers were put onto the database and about 8,000 consumer records were checked and corrected on the billing system. Indigent registration resulted in about 20% of households approved as indigent with the resultant write-off of approximately R8million in the 2006/7 FY. Billing was increased from about R500,000 in 2004 to approximately R1-million per month by the end of 2006, and the payment increased to 54% compared to a 12% payment rate in 2004. A total project cost of about R2,3 million, effective management by the municipality, the active involvement of ward councillors, and sufficient time for planning and implementation (3 years) were the critical success factors.
In 2007 a project of the Department of Local Government of the Limpopo Provincial Government targeting 5 municipalities was an example of how best to use expertise from PSU - the cost of the project was R2,1m and by the end of the project the municipalities had collectively gained a total financial benefit of approximately R11million which was due to the commitment from the provincial and municipal officials in implementing specific actions recommended by PSU.
The Gauteng Revenue Enhancement & Protection Program which began in 2007 has shown an R2billion contribution to municipal financial performance by 2008 at a project cost of approximately R9million. 50% of the total result of R2bn is attributed to an informed calculation of understated levels of indigent households in the province, and the remaining R1billion success has been verified by each of the municipalities (except one metro) and is thus proof of tangible financial results.
All of the successes mentioned above, while outstanding in their own right given that they were short-term limited interventions by PSU, has also confirmed that the challenge of capacity building and skills transfer to ensure financial sustainability are yet to be resolved. This is not the only challenge, but it seems to be the challenge that most inhibits further progress - PSU has proposals to address this.
Another challenge is that the financial results do not provide a sustainable financial recovery. A limited intervention over a short space of time, addressing some but not all of the challenges cannot provide a sustainable solution that is structural in nature and has accumulated over more than 20 years. Debt collection alone will have limited, short term success if the fundamentals of debtor management are not corrected and maintained. PSU can make a positive contribution in this regard.
PSU is now confident of the practical solutions and tangible results that can be produced –we are willing to be put to the test by working without a normal fee for services provided, and rather being rewarded with a small percentage of the positive financial results that will accrue to the municipality. The municipality will now have choice to pay PSU a normal fee for services provided or to appoint PSU to work at risk and be rewarded with a small percentage of the positive financial results that will accrue to the municipality, or a combination of the two depending on the scope of work.
A typical PSU Revenue Analysis analyses the gap between the current revenue for services in relation to the maximum revenue that a municipality should receive. This analysis focuses on revenue due to services provided by the municipality rather than on grants, transfers and/or loans. It is a test of how well the municipality bills for all services on every property within its jurisdiction.
PSU will identify opportunities for revenue enhancement, and develop a Revenue Enhancement Strategy and Implementation Plan. PSU will place qualified and experienced teams of people on site to work with the relevant municipal officials during implementation to enable a meaningful on-the-job training of delegated municipal officials.