The DA in the metro says the ANC-led council must not borrow more money while its collection rate for municipal charges is well below target, thus affecting the judicious use of public money to the detriment of both current and future residents.
The DA has objected to the metro taking the last R785-million bond of an already-approved R4-billion provision, because, it says, poor leadership within the ruling party has caused the need to borrow more money at an exorbitant cost to local citizens.
An item, tabled at the council’s last meeting, proposed making use of the last of the loan provision to fund capital expenditure in the current financial year.
While the DA fully supports the urgent need for more capital expenditure in the metro, it says that good governance dictates that these projects should be funded responsibly.
That, in the DA’s opinion, means that issuing expensive bonds while the metro is owed billions in uncollected debts is unacceptable.
Clr Estelle Visser made these points while speaking in council, on a Minority Report that DA members of the Finance Oversight Committee had tabled in council on this issue.
The report reiterates the party’s support of capital expenditure and the use, in principle, of bonds as a source of funding.
However, the DA’s finance team had serious concerns about using more debt to fund these projects in the current circumstances.
In 2013 the full multi-party Finance Oversight Committee cautioned the finance department that it would not support any further requests for bond funding in the metro, if the metro did not maintain its targeted rates and services collection rate of 93 per cent.
The collection rate fell to 88.6 per cent in the second quarter of the 2013/2014 financial year, which translates into a loss of income of about half a billion Rand.
If the metro had met the targets on the collection rate, it would have the funds now to spend on capital projects.
ANC members of the Finance Oversight Committee succumbed to pressure from their party, leaving only the DA to stand their ground on vetoing the issue of a further bond.
The DA says the Finance Department’s reasons for non-collection are nothing more than pathetic excuses and it has lambasted city manager Khaya Ngema, and finance MMC Clr Moses Makwakwa for allowing the inefficiency within the department to reach this level.
The metro’s appalling debt collection performance extends to various organs of state, which owe the metro about R230-m and commercial debt to the tune of R2.3-b, all outstanding for over 12 months.
The DA acknowledges the council’s attempts to recoup this money, but says it is too little, too late.
Had the effort been started earlier there may have been no need to take the additional R785-m bond.
The DA says that if two other peer metros, including the DA-led City of Cape Town, are able to maintain a minimum of 95 per cent collection rates, it should be possible for Ekurhuleni to do so, too, yet the metro has barely been able to maintain a collection rate above 90 per cent.
By allowing consumer debtors to desist from paying their bills, the metro is required to put money aside as a bad debt provision, which precludes this money being spent on service delivery.
Eventually, the constant over-use of debt to fund projects will have ramifications, leaving the metro no option but to increase rates to unacceptable levels.
The metro was warned about this, not only by the DA, but by the National Treasury.
A well-run government would not rely on increasing the provision for bad debt and reducing expenditure to balance the books.
That kind of practice cannot go on indefinitely without a huge, negative impact on service delivery.
The DA feels it is common sense that the more the metro borrows the more it has to pay back — with interest — and that, should the DA run the metro, it would focus on improving debt collection.
Instead, the DA says, the ruling party is using lax credit control measures as an election tool which, in the long run, will only land up costing residents more.
