This document is intended for the Budget Steering Committee, civic organisations and Overstrand-ratepayers who want a deeper understanding of ‘the numbers’ and what is behind them. It serves as OCAN’s official submission to the Overstrand Municipality.
All data from the Draft Budget Report 2026/27 is cited with a page reference like p.14. Hover over any citation badge to see a tooltip. Navigate to the page in your PDF viewer to verify the figure. Where figures are calculated from multiple table rows, this is noted in the text.
The main tables to cross-reference are: Table 1 (MTREF overview, p.9) · Table 5 (Costing of Services, p.13) · Table 12 (OPEX summary, p.21) · Table 16 (Capital budget, p.25) · Chart A22 (Service charge % growth, p.232) · Table A4 (Budgeted Financial Performance, p.30) · Table A1 (Budget Summary, p.28).
The Overstrand Municipality is, by national standards, among the better-run municipalities in South Africa. A 99.52% revenue collection rate p.57, clean audits, Blue Drop and Green Drop water quality awards, and a gearing ratio well below National Treasury’s 45% threshold p.22 are genuine achievements OCAN recognises unequivocally.
However, the following structural concerns demand constructive public engagement before the final adoption of the budget:
Accounting deficit of R63.8m before capital grants — surplus including capital grants is only R27.75m. p.9
Rates Services deficit of R201.7m — up from R3m in 2024/25. “Rates Services” is the general community services cost centre (roads, parks, libraries, public safety, admin & planning) — not just property rates. Trading services surpluses cross-subsidise this gap. No resolution plan is presented. p.14
Bulk electricity costs are doubling — from R346m (2022/23) to R709m (2028/29). This uncontrollable trajectory keeps tariffs rising above CPI. p.33 / p.221
R100m in new borrowings in 2026/27 alone, funding 52.66% of the capital programme. Finance charges will rise materially. p.10
Capital budget cut 10.04% against 1.8%/yr population growth. Capital grows in outer years to R294m–R308m, heavily debt-dependent. p.9
Housing grant cut 90%+ — Human Settlements Development Grant: R62.6m → R5.9m. Informal Settlements Upgrading Grant: R15.9m → R3m. p.59
COS studies absent for water, sewerage and refuse — the water service moves from a 13.77% surplus to a 3.90% deficit by 2028/29 with no explanation given. p.13
Operating revenue is projected at R2.133 billion, up 6.59% from R2.001 billion in 2025/26 p.33. The 99.52% collection rate (to February 2026) is exceptional p.57. The municipality targets a 99% spending rate on operating expenditure and 95% on capital p.57.
The capital budget of R242.7m for 2026/27 is manageable. The outer years — R294m (2027/28) and R308m (2028/29) — are heavily borrowing-dependent p.9. A spending rate of 95% on capital implies R230.6m actually deployed in 2026/27; the remainder rolls over.
The SAMRAS Classic financial system produces inaccurate data. The budget documentation explicitly states that main ledger and cash flow data are “incorrect in many instances” due to mSCOA compliance limitations (mSCOA section). This means the figures in this budget rest on a foundation that cannot be fully validated through normal system controls. Council must set a firm, public resolution deadline.
| OCAN Question | Data Source | Why It Matters |
|---|---|---|
| What were actual capital spending rates in 2024/25 and 2025/26? | Mid-year & annual reports | Historic under-delivery is a national pattern — prior performance must be disclosed |
| What is the firm Council-mandated deadline for the mSCOA/SAMRAS Classic resolution? | mSCOA section | Inaccurate financial data undermines all Council and public oversight |
| How will R172m/year new borrowings (from 2027/28) be serviced? | Table 1 p.9 | Debt service will rise and crowd out future operating spend |
The table below shows the cumulative burden. After low COVID-era increases (2020–2022), the municipality has been catching up since 2023/24. Property rates in 2025/26 jumped 9.7% — making the 2026/27 moderation to 5% particularly welcome for ratepayers. Electricity remains stubbornly above CPI for the fifth consecutive year.
| Year | Property Rates | Water | Sewerage | Refuse | Electricity | CPI (approx) | Source |
|---|---|---|---|---|---|---|---|
| 2020/21 | 4.5% | 4.5% | 4.5% | 4.5% | ~4.5% | 3.2% | Prior budgets |
| 2021/22 | 4.5% | 4.5% | 4.5% | 4.5% | ~4.5% | 4.9% | Prior budgets |
| 2022/23 | ~5% | 4.9% | 4.3% | 5.9% | ~7% | 6.9% | Prior budgets |
| 2023/24 | 6.5–7.5% | 6.5–7.5% | 6.5–7.5% | 6.5–7.5% | 15.1% | 6.0% | Prior budgets |
| 2024/25 | 8.0% | 6.0% | 8.9% | 11.0% | ~10.0% | 4.9% | Prior budgets |
| 2025/26 | 9.7% | 6.2% | 6.0% | 6.0% | 9.96% | 4.3% | Prior budgets |
| 2026/27 (Draft) | 5.0% | 5.0% | 5.0% | 5.0% | 8.5% | ~4–5% | p.60 |
Revenue growth combines tariff increases, volume changes and new connections. Note the key anomaly: electricity revenue is projected to grow 14.6% in 2026/27 despite only an 8.5% tariff increase — a 6-percentage-point gap requiring explanation. p.232
Despite the name, this is not simply the property rates account. “Rates Services” is the municipality’s general community services cost centre — covering roads, parks, libraries, public safety, administration and planning. It is funded partly by property rates revenue but also draws on other general income. It is entirely separate from the four trading services (electricity, water, sewerage, refuse), each of which operates as a self-funding account. A deficit here means the cost of running these general services exceeds the general revenue allocated to them.
The Rates Services cost centre runs a projected deficit of R201.7 million in 2026/27 p.14 — up from just R3.0 million in 2024/25 actuals. This R199m deterioration in two years is not explained anywhere in the 737-page budget document. The gap is funded by cross-subsidisation from the trading services surpluses (electricity, water, sewerage, refuse). If electricity revenue underperforms — for example due to growing solar adoption — the cross-subsidy collapses and the budget becomes unfunded.
| Service / Cost Centre | 2024/25 Actuals | 2025/26 Budget | 2026/27 Draft | Source |
|---|---|---|---|---|
| Electricity | +R76.2m (10.4%) | +R30.2m (3.9%) | +R76.4m (8.7%) | p.13 |
| Water | +R31.4m (14.3%) | +R29.8m (12.8%) | +R33.8m (13.8%) | p.13 |
| Sewerage | +R3.3m (2.3%) | +R4.4m (2.8%) | +R11.0m (6.6%) | p.13 |
| Refuse | +R22.2m (17.3%) | −R0.6m | +R16.8m (11.2%) | p.14 |
| Rates Services (roads, parks, libraries, public safety, admin & planning) | −R3.0m (0.4%) | −R167.7m (24%) | −R201.7m (29%) | p.14 |
The basic (fixed) charge represents the fixed cost portion of each service and is levied on vacant erven too. As the electricity Cost of Supply tariff transitions from the Inclining Block Tariff to a flat-rate plus Capacity Charge model p.13, the cross-subsidy protecting low consumers is reduced. OCAN requests the municipality to publish annually, in plain language, the fixed charge component of a typical household bill at three consumption levels.
The Municipal Cost Containment Regulations 2019 govern this area. Measures are reported in quarterly financial reports to Council, but these are not publicly accessible. Total OPEX for 2026/27: R2.197 billion, up 4.36% — a well-contained increase p.9. However, the outer year projection of 7.99% by 2028/29 accelerates beyond projected tariff increases p.9.
Select one of the buttons below for further detail:
Bulk electricity purchases double from R346.4m (2022/23) to R708.8m (2028/29) in six years p.221, while operating cash flow declines from R346.4m to R139.7m p.232. Higher tariffs are chasing higher Eskom costs while the operational cash buffer shrinks.
| Cost Containment Measure | Est. Annual Value | Status | Source |
|---|---|---|---|
| ~40 unfilled posts across the board | R15–25m est. | Ongoing | p.21 |
| No bonuses for Section 57 (Directors) | Undisclosed | Ongoing | p.21 |
| SALGBC salary cap 4.75% + 2.4% notch | Structural | Locked to 2029 | p.57 |
| Contracted services efficiency review | Unquantified | In progress | p.22 |
| No budget for non-gazetted grant projects | Risk reduction | Policy | p.8 |
A formal COS study ensures tariffs are set on actual service costs, not historical precedent. Only electricity has an independently validated, externally-mandated COS framework. The tariff-setting methodology for water, sewerage and refuse is disclosed in Section 1.4 (p.11–16) and Annexure C (tariffs), but no formal COS studies for these services are referenced.
Expenditure drops R2.2m (R134.7m → R132.5m) despite acknowledged fuel price increases from April 2026. Income rises 11.2% on only a 5% tariff — a 6-percentage-point gap that requires a line-by-line explanation from the municipality.
| Year | Expenditure | Income | Surplus / (Deficit) | Margin % | Source |
|---|---|---|---|---|---|
| 2024/25 Actual | R188.0m | R219.4m | +R31.4m | 14.31% | p.13 |
| 2025/26 Budget | R203.5m | R233.3m | +R29.8m | 12.78% | p.13 |
| 2026/27 Draft | R211.4m | R245.1m | +R33.8m | 13.77% | p.13 |
| 2027/28 Projection | R224.5m | R259.8m | +R35.4m | 13.61% | p.13 |
| 2028/29 Projection | R286.2m | R275.4m | (R10.7m) | −3.90% | p.13 |
Water expenditure surges R74.7m (35%) over the MTREF while income only grows 12%. The R45.9m Buffels River WTW refurbishment p.26 may be generating future operational costs not yet modelled. No explanation is offered in the budget narrative.
“Has a formal Cost of Supply study been commissioned for water, sewerage and refuse, equivalent to the NERSA-mandated electricity COS study? If not, what methodology is used to set tariffs? Given the water service is projected to move from a 13.77% surplus to a 3.90% deficit by 2028/29 p.13, what is the corrective plan?”
| Category | Allocation | % of basic services | Source |
|---|---|---|---|
| Water infrastructure | R74.7m | 46.5% | p.26 |
| Electricity infrastructure | R63.9m | 39.8% | p.26 |
| Wastewater management | R19.7m | 12.3% | p.26 |
| Waste management | R2.2m | 1.4% | p.26 |
| Total Basic Services Infrastructure | R160.5m | 66.1% of capex | p.26 |
Source: Capital Projects table, p.26. All amounts are as budgeted; actual implementation subject to procurement timelines.
Human Settlements Development Grant: R62.6m → R5.9m (−91%). Informal Settlements Upgrading Partnership Grant: R15.9m → R3.0m. Source: Grant schedule, p.59 p.59. These are national government decisions with devastating local consequences. OCAN calls on the municipality to formally and publicly advocate for restoration of housing grant funding.
| Indicator | 2026/27 Value | Status | Trend | Source |
|---|---|---|---|---|
| Cash & investments | R875.9m | ✓ Strong | ↓ Declining to R779.7m by 2028/29 | p.38 |
| Revenue collection rate | 99.52% (to Feb 2026) | ✓ Exceptional | Budget assumes 100.1% — optimism bias | p.57 / p.232 |
| Gearing ratio (debt/revenue) | Below 22% | ✓ Within NT 45% limit | ↑ Rising as new borrowings drawn | p.22 |
| Finance charges (% of OPEX) | 1.96% | ✓ Low | Will rise as R445m MTREF borrowings drawn | p.22 / p.62 |
| Repairs & maintenance (% of OPEX) | 16.04% / R352.5m | ✓ Above NT minimum | Prioritised — rising trend | p.23 |
| Accounting deficit (excl. capital grants) | (R63.8m) | ⚠ Deficit | Structural — not improving | p.9 |
| Rates services deficit | (R201.7m) | ⚠ Growing | ↑ No resolution plan visible | p.14 |
| Bulk electricity costs (2022/23–2028/29) | R346m → R709m | ⚠ Risk | ↑ Doubling in 6 years — uncontrollable | p.221 |
| OPEX growth outer year | 7.99% by 2028/29 | ⚠ Watch | ↑ Exceeds projected revenue growth | p.9 |
The MTREF projects revenue growing 5.66% and 5.32% in the outer years, while expenditure grows 5.87% and 7.99% p.9. Expenditure growth exceeds revenue growth in both outer years — a trend requiring proactive management to prevent a deepening structural deficit by 2029/30.
| Service | Status | Key Budget Allocation | OCAN Comment | Source |
|---|---|---|---|---|
| Electricity supply | ✓ Backlog eliminated | R63.9m capex | Significant achievement. Grid stability requires continued investment. | p.26 |
| Drinking water quality | ✓ Blue Drop achieved | R74.7m capex | Top-tier standard. Buffels River WTW refurbishment is critical. | p.26 |
| Wastewater treatment | ✓ Green Drop achieved | R19.7m capex | Some infrastructure “insufficient for increased volumes” — aging network risk. | p.26 |
| Refuse removal | Operational | R2.2m capex | Major cost risk from fuel prices. Expenditure drop unexplained. | p.14 |
| Roads | ⚠ Maintained, limited upgrade | R93.1m R&M + R12.7m capex | R&M rising positively. Maintenance-only approach risks crisis spend. | p.23 |
| Housing delivery | ✗ Significant backlog | R5.9m (grant cut 91%) | In crisis. National decision — devastating local impact. | p.59 |
| Free Basic Services | ✓ 7,800 households | R135.4m (equitable share) | 70kWh electricity + 10kl water + 7kl sewer/month. Growing: 4,800 → 7,800 over 3 years. Fully covered by equitable share. | p.25 / p.45 |
Seven material risks identified from the draft budget. Click each card to expand the analysis and OCAN’s recommended mitigation question.
Critical▼
What is “Rates Services”? Not just property rates — it is the municipality’s general community services cost centre, covering roads, parks, libraries, public safety, administration and planning. It is distinct from the four trading services (electricity, water, sewerage, refuse) which each self-fund.
Data: 2024/25 actual deficit: R3.0m (0.4%) → 2025/26 budget: R167.7m (24%) → 2026/27 draft: R201.7m (29%). p.14 This deficit — nearly 30% of expenditure — is funded by cross-subsidisation from trading services surpluses. If electricity revenue underperforms (solar adoption, economic contraction), the cross-subsidy collapses and the budget becomes unfunded. No resolution plan appears in the 371-page document.
Critical▼
Operating cash flow: R346.4m (2024/25) → R229.9m (2026/27) → R139.7m (2028/29) p.232. A 60% decline in five years while the capital programme grows to R308m (2028/29), funded 52.66% by borrowings p.10. The gearing ratio is below 22% (NT limit: 45%) p.22 — comfortable now, narrowing annually.
Critical▼
The SAMRAS Classic financial system cannot accommodate full mSCOA segmentation, causing acknowledged errors in monthly closes, cash flow statements and main ledger extracts. Pt2 The municipality awaits National Treasury direction on a transversal tender. Until resolved, financial reporting operates with known data integrity deficiencies — meaning the figures in this budget may rest on an unvalidated foundation. This is a governance risk of the highest order.
High▼
Bulk purchases: R603m (2026/27) → R709m (2028/29) p.221. Electricity revenue at R879.9m p.13 is the single largest income source (41.2% of service charge revenue). Rooftop solar in Overstrand’s coastal nodes is growing rapidly. Every kWh from solar reduces municipal revenue without reducing fixed Eskom infrastructure costs. The Capacity Charge partially addresses this — but may accelerate grid defection. No demand forecast accounting for solar penetration rates is published.
High▼
Total national + provincial grants: R368.4m (2025/26) → R304.8m (2026/27) — a R63.6m (17%) single-year decline p.59. Human Settlements Development Grant: R62.6m → R5.9m (−91%). Informal Settlements Upgrading: R15.9m → R3.0m. Equitable share increases 5.05%: R179.3m → R188.3m p.59. The HSDG reduction partially explained by GRAP reclassification, but the cash impact is real.
High▼
Water expenditure: R211.4m (2026/27) → R286.2m (2028/29) — a 35% jump p.13. Income grows only 12% over the same period. The service moves from a 13.77% surplus to a 3.90% deficit. No narrative explanation is provided in the 371-page document. Possible drivers: Buffels River WTW loan repayments entering operations, bulk water cost increases from Overberg District, or deferred maintenance crystallising.
High▼
The budget assumes a debtors collection rate of 100.1% for all three MTREF years (2026/27–2028/29) p.232. A rate above 100% implies collection of prior-period arrears. Current performance is 99.52% to February 2026 p.57 — excellent, but budgeting above 100% creates a built-in optimism bias. The budget simultaneously acknowledges “ongoing slow economic recovery.” A decline to 97–98% would meaningfully reduce cash inflows and challenge the funded budget status.
The indigent programme covers 7,800 registered households in 2026/27 p.25, up from 4,800 (2024/25). Free services: 10kl water + 70kWh electricity (increased from 50kWh in July 2024) + 7kl sanitation per month. Total cost: R135.4m p.45 — fully covered by the equitable share from national government p.25.
Middle-income households face the full compounding effect of annual tariff increases. Six consecutive years of above-CPI increases across multiple services represent a material reduction in disposable income. The fixed (Capacity) Charge layer on electricity cannot be managed down through conservation behaviour — a regressive element for lower-consumption households that the municipality should quantify and disclose annually.
The most vulnerable citizens face the starkest impact from housing grant cuts. At current funding, the backlog cannot meaningfully reduce. OCAN calls on the municipality to publish on public record: the current number of households on the housing waiting list, the projected delivery rate at current funding, and what formal representations have been made to the MEC for Human Settlements and to the national Housing Minister.
Yes, with caveats. The 6.59% revenue growth is achievable given approved tariff increases and the 99.52% collection rate p.33 / p.57. The main vulnerability is electricity: the 14.6% revenue growth projection p.232 against only an 8.5% tariff increase implies volume growth assumptions that should be disclosed and validated. The 100.1% collection rate assumption p.232 embedded in the MTREF is optimistic and creates a fragile foundation if economic conditions deteriorate.
Barely keeping pace. R352.5m (16.04% of budget) on repairs and maintenance p.23 exceeds NT’s minimum recommendation and is a positive trend. Roads receive R93.1m — the largest share p.25. However, with depreciation at R175.6m annually p.22 and aging infrastructure acknowledged across services, the question is whether this level prevents asset failure — not just whether it meets a minimum. The Green Drop documentation acknowledges some infrastructure is “insufficient to treat increased volumes of wastewater.” That is not a clean bill of health.
Tariffs are increasing because: (a) Eskom bulk electricity was approved at 9.01% p.13; (b) fuel prices increased sharply from April 2026; (c) salaries increase effectively 7.15% p.57; (d) depreciation on prior capital investments must be recovered p.22; and (e) the rates services deficit widens year-on-year p.14. Citizens should expect: continued Blue Drop and Green Drop standards, and improved water security in Kleinmond via the R45.9m Buffels River WTW refurbishment p.26. Citizens should not expect meaningful improvement in housing delivery given the 91% grant cut p.59.
For 2026/27: probably yes. R242.7m is manageable p.25 and the top 10 projects p.26 are specific and concrete. The outer years — R294m and R308m — are more uncertain, heavily borrowing-dependent p.9. OCAN recommends Council receive and publish quarterly capital delivery reports showing actual spend vs. budget per project.
Yes in the short term — with increasing structural pressure. Three risks threaten sustainability beyond the MTREF: (1) bulk electricity costs doubling (R346m → R709m) while revenue grows more slowly p.221; (2) R445m in new borrowings p.62 increasing future debt service costs; (3) the rates services deficit deepening to R201.7m with no resolution plan p.14. These trends, unmanaged, will materially deteriorate Overstrand’s financial position by 2029/30. The municipality is not in crisis — it is at an inflection point.
Submit these questions in writing before 30 April 2026. Each is tied to specific data in the draft budget. Click to expand the context and what a complete answer should contain.
Tier 1 — Critical
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Tier 1 — Critical
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Tier 2 — Transparency
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Tier 2 — Transparency
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Tier 2 — Transparency
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Tier 3 — Governance
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The Overstrand Community Action Network is an apolitical civil society organisation representing the interests of citizens across the Overstrand municipal area. This analysis is intended to help citizens understand the key financial, service delivery and strategic implications of the Municipality’s Draft Budget 2026/27 and Medium-Term Revenue and Expenditure Framework.
The report draws on the Overstrand Municipality Draft Budget Report 2026/27, together with comparative information from the 2024/25 and 2025/26 budgets. Public participation closes 30 April 2026. Citizens are encouraged to review the draft budget and submit comments to the Municipality or through OCAN.
Curated by Errol van Staden (errol@ocan.co.za; +27 83 637 0700) – April 2026