A five-year simulation environment where your CFO tests tariffs, grants, borrowing and project timing against liquidity and debt limits before Council votes.
Financial Impact Simulations
What happens to us if we say yes to this?
A CFO is asked to sign off decisions whose consequences arrive years later. What if grant funding is reduced by ten per cent? If capital spending rises next year, can the operating cost of those assets be carried? Static spreadsheets cannot answer those questions quickly enough to change a decision, so councils approve budgets without seeing the alternatives. A breach of the debt service threshold or a dip below liquidity norms is then discovered once the audited statements land, by which time correcting course is far harder.
Financial impact simulation gives the budget office a controlled environment to test decisions before they are made. Every analysis is presented within four fixed, fully comparable positions — the status quo, new debt only, planned projects only, and both together — with unlimited scenarios inside each. Because the forecast is built line item by line item over five years, with amortisation on each loan and depreciation calculated programmatically on each capital project, the levers are real: tariff increases, collection rates, personnel cost caps, bulk purchase costs, grant reductions, project phasing, and the reserve, liquidity and borrowing policies themselves.
Each scenario returns a comparable report covering the cash flow forecast, operational cash flow, liquidity position, borrowing position, and the funding position of both the operating and the capital budget — every ratio shown against the applicable policy or Municipal Finance Management Act (MFMA) requirement. Critically, the unencumbered portion of the debt ceiling gives a quantified figure for how much new long-term borrowing your municipality can still carry. Scenarios are saved and the populated simulator is handed over, so results can be reproduced and new questions asked in the next cycle without us.
Our approach
- Calibrate the Model — The forecast is calibrated against recent audited performance, existing borrowing and your liquidity, reserves and borrowing policies, so scenarios start from a position officials recognise.
- Status Quo Position — The baseline is established from current operations, committed operating and capital projects, and borrowing already committed at the start of the year — the reference every scenario is compared against.
- Alternative Scenarios — Optimistic, pessimistic and target-compliant scenarios are built by varying revenue, expenditure, project rollout and financing options within the four positions.
- Scenario Testing — Each scenario is run through to cash flow, liquidity, debt trajectory and funding position, allowing rapid iterative what-if analysis rather than one-off modelling.
- Policy Simulation — Individual policy changes are isolated and tested — a personnel cost cap, a higher maintenance target, a capped tariff increase — and assessed against MFMA norms and your own policy limits.
- Goal-Seeking Analysis — Inputs are worked backwards from a target, such as a required operating surplus, current ratio or debt-to-revenue position, to identify what policy measures the target actually demands.
- Budget Fit and Handover — Ranked capital projects are fitted to the envelope, grant conditions and funding caps, with fit-with-delay where limits are reached, and the populated simulator with all saved scenarios is transferred to your team.
Key benefits
- Non-compliance is caught before adoption, not after audit: Every scenario flags when a ratio moves outside National Treasury’s recommended range or breaches a municipal policy cap — while the budget can still be changed.
- Output that drops into your statutory reporting: Line items follow National Treasury conventions, so results feed the Schedule A budget tables, Municipal Budget and Reporting Regulations schedules and MFMA section 71 in-year returns directly, with classification aligned to the Municipal Standard Chart of Accounts (mSCOA) throughout.
- The operating cost of capital decisions is inside the model: Additional maintenance, staffing, utility costs and depreciation arising from each capital project are carried forward, so approving a project means approving its running cost knowingly.
- A quantified borrowing decision: Grant conditions under the Division of Revenue Act (DoRA), funding-source eligibility and the debt ceiling are applied as rules, producing a defensible answer on how much debt is affordable and when it should be raised.
Why Novus³
- The simulation capability is Novus3’s own, developed and applied at municipal scale since 2016 and used through live budget and adjustment cycles rather than as a one-off study.
- Scenario modelling and budget fitting delivered across more than 80 municipalities, including the largest single Capital Expenditure Framework programme undertaken in South Africa, covering twenty-five intermediate city municipalities simultaneously.
- Simulation runs at project level, not at budget-total level, because it is wired to the CP3 (Collaboration, Planning, Prioritisation, Performance) project portfolio — so a single project can be delayed, funded differently or removed and the full financial consequence read off immediately.
- Novus3 documents the limits of its own models. Where a calculation deviates from a prescribed method, the deviation is disclosed rather than hidden — which is what makes the results usable in front of an auditor.
Get in touch
Gauteng
Cnr. Lynnwood & Botterklapper St., Die Wilgers, Pretoria, 0081
Western Cape
97 York St, Dormehls Drift, George, 6529