Council approves R1.845 billion

New financial year, a year of progress

Kouga – Kouga Local Municipality’s budget for the 2025/2026 financial year was officially tabled and adopted by Council on Thursday, 29 May 2025, during a virtual Council meeting.

The budget, which comes into effect on 1 July 2025, amounts to a total of R1.845 billion, including both operational and capital budgets.

Despite economic pressures, including rising bulk electricity costs and infrastructure demands, the municipality remains committed to delivering services efficiently and sustainably.

“We are proud to present a budget that prioritises service delivery and infrastructure development, while also remaining sensitive to the financial pressures our residents face,” said Kouga Executive Mayor, Hattingh Bornman. “Through careful planning and efficient financial management, we are able to continue investing in our communities and supporting our most vulnerable residents.

“The Integrated Development Plan (IDP), approved by Council today, directly informs the municipal budget and Service Delivery and Budget Implementation Plan (SDBIP),” said Bornman. “This alignment ensures that community priorities are not only recognised but actively implemented.

“More than just numbers, the budget serves as a blueprint for meaningful impact — driven by our shared vision of progress, equity, and service excellence. We thank our residents for their valuable input in shaping the IDP.

“The needs outlined in our IDP far exceed the resources available within our current budget. As a result, Council must prioritise critical and urgent infrastructure upgrades to ensure we keep pace with the rapid growth of our towns.”

Key financial highlights

The municipality’s total operating revenue for the 2025/2026 financial year has increased by 7.83%, or approximately R106.6 million, when compared to the 2024/25 Adjustments Budget.

The total operating expenditure for 2025/2026 is projected at R1.581 billion, representing an 8.31% increase from the previous year’s adjusted budget. This results in a budgeted deficit of R112.431 million for the current financial year.

“The deficit is mainly due to depreciation – a non-cash cost – that is not fully funded in the budget, said Bornman. “For 2025/2026, depreciation is budgeted at R144 million, with a shortfall of R112 million.

“Treasury regularly reviews the adjustment and final budgets, and in recent years, they have been deemed funded. The current budget tabled to Council is also funded.

“The municipality is committed to reducing the deficit within the next three to five years and move towards a zero-based budget. In 2023, Council approved a Long-Term Financial Plan to give critical guidelines to our financial sustainability.”

Key Cost Drivers

Key cost drivers within the 2025/2026 operating budget include employee-related costs, which account for 33.22% of total expenditure, followed by bulk electricity purchases at 27.89%. Other significant expenditure items include contracted services (9.03%), depreciation (9.01%), inventory consumed (7.24%), general operational costs (6.43%), and debt impairment (4.12%).

The operating budget is primarily funded through revenue generated from service charges — including electricity, water, sanitation, refuse removal, and environmental management fees — which collectively account for 51.84% of income. Property rates contribute 20.73%, while grants and subsidies from National and Provincial Government comprise 14.62% of the total funding.

The capital budget of R 265,462 million for 2025/2026 is R 5,708 million or 2.2% more than the 2024/2025 Adjustments Budget.

“The municipality has secured a R200 million loan from the Development Bank of Southern Africa (DBSA) to upgrade roads across the region, with the project set to pick up speed in the new financial year,” said Bornman.

“The capital budget also supports the Upgrading of Informal Settlements Programme (UISP), which funds important infrastructure upgrades to improve living conditions of residents living in informal settlements.

“Future budgets will depend on extra funding from grants, loans, or internal savings.”

Tariff increases

To balance affordability and sustainability of services and infrastructure, the following moderate tariff increases are to take effect from 1 July 2025:

Property rates: 6%
Water: 6.9%
Sanitation: 6.9%
Refuse removal: 6.5%
Electricity (average increase in income): 12.74%
Environmental Management Fee: 6.5%

“With NERSA determining electricity tariffs, the cost of bulk electricity has increased by 6.69%. An extra R27.66 million compared to the 2024/2025 adjustment budget,” said Bornman. “This means nearly 28% of the municipality’s total operating budget for 2025/2026 will go toward electricity. The increase is based on NERSA’s approval of an 11.32% hike in bulk electricity prices.

“The municipality launched a petition against the proposed 40% electricity tariff increase by NERSA. This was signed by more than 7 000 residents. We extend our sincere gratitude to all those who supported the initiative. The approved 11% increase remains substantial. However, we are pleased that the collective effort helped significantly reduce the initially proposed hike.”

Battery Storage Infrastructure

In a bid to become more self-reliant in electricity generation, the municipality has allocated R25 million for battery storage infrastructure. This to support its Small-Scale Embedded Generation (SSEG) project. A strategic initiative aimed at reducing reliance on Eskom, stabilising local electricity supply, integrating renewable energy. Also, improving energy security during load shedding.

“This forward-thinking investment positions Kouga as a provincial leader in energy innovation. It underscores our commitment to building a sustainable, future-ready municipality,” said Bornman.

Furthermore, an additional R20 million has been earmarked for the project’s rollout over the next two financial years. This alongside R4.7 million for the electrification of 1 250 Ocean View households. Also, over R6 million for the installation of high-mast lighting in informal settlements.

“Similarly, our water tariff remains directly linked to the increases implemented by the Nelson Mandela Bay Metropolitan Municipality.

“We have taken a balanced approach to tariff adjustments, ensuring minimal impact on households. This while securing sufficient revenue to maintain and improve essential services.”

Capital projects

“We are investing heavily in infrastructure to unlock economic opportunities and create capacity needed for the future growth of our towns,” said Bornman.

Some of the major capital projects include, but are not limited to:

Road infrastructure across Kouga: R152,17 million
Upgrading gravel roads: R13,48 million
Upgrading informal settlements in KwaNomzamo: R2,16 million
Upgrading Ocean View Informal Settlements: R2,72 million
Upgrading Kruisfontein Informal Settlement (Donkerhoek): R1,82 million
Refurbishment of Hankey Waste Water Treatment Works: R1,95 million
Upgrading KwaNomzamo Waste Water Treatment Works: R6,76 million
Specialised Waste Management Vehicles: R3,16 million
Upgrade of Gill Marcus bulk water reservoir and pipeline: R5,35 million
Upgrade of Loerie sewer pump station: R6,93 million
Ocean View 1 250 electrification: R4,73 million
Shore Road miniature substation: R2 million
Battery storage: R25 million
High mast lighting designs and construction: R6,09 million
KwaNomzamo bulk electrical – Boskloof feeder line and substation: R8,69 million
Ocean View substation upgrade: R2,61 million
Water infrastructure upgrades in St Francis Bay: R1.2

Support for vulnerable groups

In addition to investing in critical infrastructure, the municipality remains committed to supporting its most vulnerable residents through a range of targeted relief measures. This includes:

Residential rate rebate: First R15 000 of property value excluded
Registered indigents: Additional R85 000 rebate
No rates for homes valued ≤ R400 000
Senior citizens (60+) earning ≤ R15 000/month: R200 000 rebate

Indigent subsidies (registered beneficiaries)

In addition to property rate relief, the municipality also provides a range of monthly service subsidies to registered indigent households, helping to ensure access to basic services for those who need it most. The qualifying criteria to receive these subsidies are set by National Government.

This includes:

Water: 9kl/month free
Electricity: First 50kWh/month free
Refuse removal: Fully subsidised
Sewerage: Fully subsidised
Septic tank: One free service/month
Environmental Fee & Property Rates: Fully subsidised (subject to relevant Acts)

“This budget reflects our vision of a growing and inclusive municipality – one where services reach every household and no one is left behind,” said Bornman.

“We thank our residents for their unwavering trust in the municipality to manage public funds responsibly and use them effectively to uplift and benefit our communities.”

For more information on the 2025/26 Budget, visit www.kouga.gov.za.

Council approves R1.845 billion budget for 2025/2026 financial year