The Msunduzi Municipality executive committee seeks to extend a begging bowl to the national Treasury for a whopping R400m to pay off debt owed to Eskom.

The Exco heard on Thursday that the city would be applying for debt relief in line with the Municipal Finance Management Act circular no 124.

According to a report tabled on Thursday, the national Treasury has introduced the debt relief grant for municipalities struggling with various challenges.

These include financial management failures, changing or deteriorating economic circumstances and and the failure of municipal leadership to enforce discipline. The report said the initiative will ‘dearly’ assist the struggling municipalities.

“Applying and qualifying for the relief, Msunduzi will stand a chance of having about R395m written off in three years, with about R41m of interest charges. This will assist Msunduzi a great deal as the municipality is currently experiencing cash flow challenges and unable to meet its obligations,” reads the report.

It said the ‘package’ was intended to bring about critical changes in the energy sector and simultaneously address a behavioural change in the municipal defaulters by requiring them to meet certain conditions and in return (as an incentive) relieve their gridlocked financial crisis of historic arrears in terms of Eskom debt.

“The minister of finance’s conditions for the conversion of Eskom loan into government equity require Eskom to write off principal debt and interest over a three-year period.”

Municipality eskom debt relief

All municipalities with Eskom debt as of March 31 may apply to the national Treasury for the municipal debt relief fund and the application will have to include a copy of the city manager’s and the chief financial officer’s joint motivation, as well as the municipal council’s commitment to meet all conditions of the grant, reads the report.

Important details in the application include the collection of revenue for the quarter immediately preceding the application, the template council resolution and the submission of the complete billing system.

The general valuation roll and the interim general valuation roll reconciliation must also be included when the submission is made to Treasury.

“The municipal debt support programme requires municipalities to demonstrate that their billing system aligns with their council-approved general valuation roll …

“The municipality must monitor and report on the implementation of their funded budget and budget funding plan and report their progress in implementing their financial recovery plan to the provincial executive and submit such a recovery plan to the national Treasury.

“The criteria or conditions of the grant are clear that municipalities need to service their Eskom current accounts in order to qualify, hence various revenue enhancement strategies are under way to try to ensure that we boost our cash levels on a monthly basis in order for the municipality to meet all our current obligations,” reads the report.

City manager Lulamile Mapholoba said applying for the grant will mean adapting to the stringent conditions of Treasury. “This is not just a carte blanche type of arrangement. We are currently owing Eskom R400m and if the application is successful the municipality can save over R300m over a period of three years.

“The national Treasury will only request Eskom to write-off a municipality’s debt if the municipality complies for a consecutive period of 12 months. Should the municipality fail to meet any of the conditions set out during any consecutive 12-months period, it must apply afresh and submit a new council resolution,” said Mapholoba.

DA

DA councillor Ross Strachan said the report was not a ‘welcoming’ one given that the municipality has been under administration for over four years with an approved financial recovery plan.

“We are also under ‘voluntary intervention’ from national Treasury [which is only on an advisory basis], yet we are still unable to make progress on the responsibility with Eskom. I know we have failed historically to honour our payment plan with Eskom. In terms of the application and its stringent conditions, I really doubt we meet the criteria.

“And this is something the DA will be following up directly with national Treasury. This indicates that we are still unable to rescue ourselves out of administration and this desperate financial situation,” said Strachan.

He said national Treasury must be requested to take over the finances of Msunduzi and execute the financial recovery plan.

Civics organisation

The Msunduzi Association of Residents Ratepayers and Civics said it is cautious in accepting Msunduzi’s move.

Chairperson Anthony Waldhausen said all residents and businesses had to suffer from the municipality’s defaulting on Eskom debt. “We had to endure load reduction due to the negligence of the municipality a few months ago. This over and above load-shedding and electricity outages by the municipality as well.

“Although it may be a relief for the municipality, it will increase Eskom’s debt and again the national government will come to the rescue of Eskom and provide them with a bailout. This in the end means that the taxpayers will be funding these bailouts at no benefit to them.

“This is a vicious cycle,” said Waldhausen.