A loan proposal by the Ekurhuleni Metropolitan Municipality (EMM) has been approved, even though the city has billions worth of unspent money.
The proposal was approved during April 30’s council meeting where the majority ANC voted for it, and all opposition parties voted against it.
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• Metro to borrow R1.1 billion to fund capital expenditure
The bond request in question refers to the request for approval of the metro’s sixth municipal bond, or external funding, to fund the 2014/2015 Capital Infrastructure Programme for the two months remaining of the current financial year. The amount requested for funding is R1.1-billion.
Izak Berg, of the Independent Ratepayers’ Association of South Africa (IRASA), was especially vocal about his opposition to the bond request, stating that the metro already had billions of unspent money and that borrowing extra money was irresponsible.
“If this proposal goes ahead, IRASA will do everything in its power to stop it. We will also request the Auditor General to investigate the matter if the metro takes on the bond. It is absolutely irresponsible and illegal for the city to take up the bond,” Berg said.
Reports from National Treasury and the Gauteng Province both highlighted concerns about the metro borrowing money.
“It is clear to me that both departments were not given all the facts regarding the state of the EMM’s affairs as highlighted in two reports regarding withdrawals and the Quarterly SDBIP (Service Delivery and Budget Implementation Plan) report on the third quarter of the 2014/2015 Financial Year.”
The SDBIP report highlights, among other things, the following:
• The metro currently has R8.33-billion in cash reserves, which are also confirmed by the report on withdrawals for January 1, 2015 to March 31, 2015.
• Ekurhuleni has not spent R1.513-billion in grants.
• The operating actual amounts show an operating surplus (Profit) of R3.067-billion.
“A municipality is not allowed to collect more money than what it can spend and this is a clear violation of the MFMA (Municipal Finance Management Act ). The CFO is not running a private company to ensure profits or which is surplus-driven. You only budget what you can use and the next bullet point clearly indicates that our Capital Budget is questionable.”
According to a response from the Accountant General of the National Treasury, Michael Sass, the low collection of outstanding consumer debt was concerning for the department.
“The repairs and maintenance of property, plant and equipment and investment property for the period 2010/2011 to 2013/2014 was on average 3.1%, which is relatively low measured against the norm of 8%. The municipality should improve expenditure on repairs and maintenance to expand the lifespan of its assets,” Sass wrote in a report from the National Treasury on the metro’s intention to borrow the R1.1-billion.
In a second report from the Gauteng Province, Chief Director of Local Government Financial Services Peter Msiza observed that the city has a low capital spending, a low collection rate and continuously has to return funds to the Provincial Revenue Fund (PRF).
“The Gauteng Provincial Treasury (GPT) would like to encourage the municipality to apply robust debt collection strategy on debtors over 31 days and credit control procedures should be applied vigorously to reduce debt,” Msiza wrote.
“Taking on any further loans will place stringent pressure on Ekurhuleni’s finances; hence GPT advises the metro to put proper measures in place to rectify the situation.”
In the meanwhile, the DA, who also voted against the loan request, has offered the metro advice on how the unspent money can be put to good use.
Instead of borrowing more money, DA member of the Finance Oversight Committee Bruce Reid suggested the metro revise the tariffs and rates proposed for next year’s budget downwards for the benefit of hard-pressed ratepayers.
“Another option could be to do more repairs and maintenance and eradicate all potholes throughout the metro, as well as stopping all sewers from overflowing into the metro’s streets and streams,” Reid added.
