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CTMM - Availability of the Annual Financial Statements for the year ended 30 June 2019
THE CITY OF TSHWANE METROPOLITAN MUNICIPALITY
(A municipality as described in section 2 of the Local Government Municipal Systems Act, 2000, duly
established in terms of Notice No. 6770, promulgated in the Provincial Gazette Extraordinary of 1
October 2000 in terms of section 12(1) read with section 14(2) of the Local Government : Municipal
Structures Act, 1998, as amended)
(Issuer code: CTMM)
(“City of Tshwane” or the “Issuer”)
UPDATE - AVAILABILITY OF THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR
ENDED 30 JUNE 2019
Further to the announcement released on the 20th of March 2020, noteholders are advised that City of
Tshwane financials are now available at the following link:
http://www.tshwane.gov.za/sites/Departments/Financial-Services/Financial-
Documents/Annual%20Reports/Consol%202019-
%20Financial%20Statements%2027%20March%20final%20Version.pdf
The annual financial statements (“AFS”) of the issuer have been audited by the Auditor General, who
has issued an unqualified audit opinion.
Noteholders are advised that the audit opinion contains an emphasis of matters, and accordingly, per
section 7.18(a) of the JSE Limited Debt Listings Requirements, the Issuer’s instruments will accordingly
be annotated with an (E), for the emphasis of matters.
The audit report draws attention to the matters below. The opinion was not modified in respect of these
matters.
1. Material uncertainties
With reference to note 59 to the consolidated and separate financial statements, the group is
the defendant in various lawsuits. The outcome of these matters could not be determined and/or
reliably measured therefore, no provision for any liabilities that may result was made in the
financial statements.
2. Material impairments
As disclosed in note 4 to the consolidated and separate financial statements, the consumer
debtor’s balance has been impaired. The allowance for impairment of consumer debtors
amounts to R7,79 billion (2017-18: R8,17 billion), which represents 61.5% (2017-18: 66.5%) of
total consumer debtors. The contribution to the impairment allowance, as disclosed in note 44
to the financial statements, was R1,80 billion (2017-18: R1,71 billion).
3. Material losses - electricity losses
As disclosed in note 69 to the consolidated and separate financial statements, material
electricity losses of R1,46 billion (2017-18: R1,52 billion) was incurred, which represents
18,28% (2017-18: 20.32%) of total electricity purchased. Technical losses amounted to
R557,88 million (2017-18: R525,21 million) and was due to the electricity that was lost when it
was distributed from the source of generation through the transmission and distribution network
to the final consumer. Non-technical losses amounted to R898,98 million (2017-18: R999,41
million) and were due to administrative and technical errors, negligence, theft of electricity,
tampering with meters and connections which form part of illegal consumption and faulty
meters.
4. Restatement of corresponding figures
Noteholders are advised of restatements to the AFS as fully disclosed in note 63 to the
consolidated and separate financial statements.
a. Reclassification
The reclassifications mentioned below were done to prepare for alignment with mSCOA
as well as to align the financial statements with categories of the budget.
b. Statement of financial performance
Revenue line items:
Rental of facilities (R1 702 924 increase)
Interest received on outstanding consumer receivables (R759 651 increase)
Other income (R16 074 121 decrease)
Fair value adjustment (revenue) (R94 425 569 increase)
Fines, penalties and forfeits (R13 611 546 increase).
Expenditure line items:
Employee related cost R21 040 070 decrease)
Remuneration of councilors (R2 821 049 decrease)
Finance cost (R9 974 160 decrease)
Other materials (R404 732 541 increase)
Bulk purchases (R32 736 975 decrease)
Contracted services (R419 091 824 increase)
Transfers and subsidies (R33 709 003 increase)
Fair value adjustments (expense) (R8 198 182 increase)
General expense (R790 702 414 decrease).
Loss on fair valuing of redemption fund increased with R86 227 387 due to duplications
that occurred in the calculations as at June 2018.
c. Statement of financial position
A reclassification was done between the different classes of fixed assets. This
reclassification was necessary to align the asset classes with the mSCOA classifications.
The effect of the reclassification is as follows:
Investment property (R96 917 081 increase)
Property, plant and equipment (R398 359 405 increase)
Intangible assets (R58 245 074 increase)
Leased assets (R553 521 560 decrease).
A reclassification was done on the current portion of the employee benefit obligation after
an error in the calculation of the current portion was picked up and the current portion was
decreased with an amount of R159 288 093 and by implication the non-current portion was
increased with the same amount.
d. Correction of errors
The correction of errors has been done in terms of GRAP 3, Paragraph 44, and subject to
Paragraph 45, whereby material prior period errors have been corrected retrospectively in
the first set of financial statements authorised for issue after the discovery of the errors, by
restating the comparative amounts for the prior period(s) presented in which the error
occurred, or if the error occurred before the earliest prior period presented, restating the
opening balances of assets, liabilities and net assets for the earliest prior period presented.
The financial statements presented in 2017/18 were restated in detail in accordance with
GRAP 3; however to split the impact of the restatement on the 2016/17 financial year is
impractical (GRAP 3 Paragraph 51 (b)), as it will result in a duplication because the nature
of the error has already been addressed in full in the 2017/18 period.
The following material restatements are discussed below:
Revenue
Fines (AARTO) were increased with an amount of R5 590 275 (group = R5 590 275) due
to late capturing of fines relating to the 2017/18 financial year.
Other income was increased with an amount of R6 343 492 (group = R6 342 092) due to
certain journals of Wonderboom Airport not being processed in 2017/18, the A Re Yeng
fare revenue received in advance was corrected and newly identified assets were also
corrected. Further an amount of R1 400 was corrected on inter-company transactions due
to a restatement on related party transaction by TEDA.
Public contributions were decreased with an amount of R64 042 687 (group = R64 042
687) due to an error picked up in the calculation of the debtor for rezonings that were done
but not yet paid for.
Rental of facilities and equipment was increased with an amount of R4 620 492 (group =
R4 620 492) due to certain journals of Wonderboom Airport not being processed in
2017/18.
Fair value adjustment were increased with an amount of R104 089 (group = R104 089) due
to corrections on the air value of interest rate swaps.
Government grants and subsidies were increased with an amount of R15 496 386 (group
=R17 984 997) due to the Tshwane Rapid Transit subsidy for 2017/18 which was received
in July 2018 and a debtor was not created for this amount in the 2017/18 financial year.
Housing Company Tshwane restated grants with an amount of R2 488 611.
Remuneration was increased with an amount of R40 618 697 (group = R40 618 697) due
to correction of errors in the previous financial years on overtime entries and the accrual
for accumulated leave.
Depreciation and amortisation were increased with an amount of R126 175 802 (group =
R126 198 494) as a result of errors picked up in the calculations of the 2017/18 financial
year. Housing Company Tshwane restated depreciation with an amount of R22 692.
Finance cost was increased with an amount of R28 008 562 (group = R27 939 079) due to
the correction of errors in the calculation of leases.
General expense was decreased with an amount of R98 751 116 (group = R98 683 033)
due to errors picked up during the VAT audit as well as errors picked up in lease calculation.
Inter-company transactions were restated with an amount of R1 400.
Other materials were decreased with an amount of R223 166 (group = R35 534) due to
corrections on the EPWP initiatives basic salary.
Bulk purchases (of water) was decreased with an amount of R3 172 908 (group = R3 172
908) due to corrections made in the bulk water inventory of 2017/18.
Loss on redemption fund was increased with R2 112 296 (group = R2 112 296) due to
corrections on the redemption fund calculations of 2017/18.
Fair value adjustments of the interest rate swap liabilities were decreased with R101 057
970 (group = R101 057 970) due to the duplication of interest rate swaps between the
normal swaps and the redemption fund swaps.
e. Statement of financial position:
Inventories were increased with an amount of R5 668 518 due to corrections in the bulk
water inventory and the A re Yeng bus ticket inventory.
Other receivables were decreased with a net amount of R259 586 063 (group = R259 538
683) as a result of late capturing of fines relating to the 2017/18 financial year as well as
certain journals of Wonderboom Airport not being captured in 2017/18 and corrections on
overtime which affect the clearing accounts of payroll. Further, assets capitalised from a
prepayment made to Sanral to the value of R61.125 million was restated to 2015/16 and
the gain/(loss) on transfer of functions were restated with an amount of R191 677 318 due
to the write-off of irreconcilable differences after take-on. Housing Company Tshwane
restated debt impairment with R47 380 which by implication also affects the balance of
other receivables.
Property, plant and equipment increased with an amount of R247 354 919 (group = RR249
820 837) due to a correction on the depreciation of rehabilitation assets of 2017/18 and
other corrections due to the purification of he fixed asset register. Housing Company
Tshwane restated property, plant and equipment with a net amount of R2 465 918.
Investment property decreased with an amount of R70 028 431 (group = R70 028 431) due
to purification of the fixed asset register.
Intangible assets were increased with an amount of R7 862 614 (group = R7 862 614)
mainly due to two reasons, namely newly identified assets that were brought onto the asset
register and the capitalisation of assets acquired to the correct accounting period.
Trade payables were decreased with an amount of R38 814 031 (group = R38 184 027)
due to the correction of the accrual of expenditure due to the late receipt of invoices as well
as the restatement of the accumulated leave accrual.
Lease liability was increased with a net amount of R406 985 761 (current portion = R118
218 617 and non-current portion = R288 767 114) due to errors picked up in the calculations
and information which relate to prior years that was received only now. The municipal
entities do not have any finance leases.
VAT payable was decreased with an amount of R7 002 153 (group = R7 002 153) due to
the VAT audit.
The interest rate swaps liabilities were decreased with R101 162 058 (group = R101 162
058) due to the duplication of interest rate swaps between the normal swaps and the
redemption fund swaps.
For the City, the accumulated surplus was increased with a net amount of R2 368 2195
consisting of an increase in the surplus of 2017/18 of R55 192 912, a decrease in the
surplus of 2016/17 of R65 022 379 and an increase in the surplus of 2015/16 and prior of
R12 197 686.
For the group, the accumulated surplus was increased with a net amount of R4 881 517
consisting of an increase in the surplus of 2017/18 of R57 706 220, a decrease in the
surplus of 2016/17 of R65 022 379 and an increase in the surplus 2015/16 of R12 197 685
as Housing Company Tshwane restated 2017/18 with an amount of R2 513 310.
f. Restatement on disclosure notes
Note 59 - Contingencies
Under the litigation cases a restatement was done R12 150 000 decrease) in the value of
a case of the Human Settlement Department as the value was previously incorrectly
disclosed as R14 100 000 instead of R1 950 000.
Note 65 - Operating leases
The total operating lease payment was restated with an amount of R70 756 from R4 005
783 to R3 935 027 due to errors picked up in the calculations. The reconciliation -
machinery disclosure was restated in total with an amount of R1 178 881 from R24 958 652
to R26 137 533.
Note 57- Regulation 45
The value of awards to family members of a person in the service of the state were restated
from R66 424 902 to R13 984 436 as the accounting treatment was not correct because in
the prior year the expenditure was disclosed and not the awards.
Please refer to Note 63 for further information and prior period restatements contained in
the surplus for the year, the statement of financial position and the cash flow statement.
The complete audit report forms part of the annual financial statements and may be viewed at the link
above.
Johannesburg
01 April 2020
Debt Sponsor
Absa Bank Limited (acting through its Corporate and Investment Bank division)
Date: 01-04-2020 08:11:00
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