The financial crisis at the Amathole District Municipality (ADM) in the Eastern Cape is just the tip of the iceberg because 24 of 39 municipalities in the province are standing on the edge of a fiscal cliff, the DA has warned.
According to the 2020 Auditor-General (AG) report, 83% of municipalities in the Eastern Cape are facing significant cash flow restraints and the expenses of 38% of municipalities exceeded their revenue.
On Thursday, the DA wrote a letter to Cogta MEC Xolile Nqatha asking him to establish a specialised task team to evaluate the financial sustainability of all the municipalities in the Eastern Cape and to carry out a complete re-estimation of which municipalities were in distress so that the necessary measures could be taken to save failing municipalities.
This was in light of the announcement made by the ADM that it was in financial difficulty, so much so that it could not afford to pay its workers’ salaries for four months.
During a DA press conference on Thursday under the theme “Unpacking total collapse of Eastern Cape municipalities”, DA MPL Vicky Knoetze warned that urgent intervention was necessary to prevent many municipalities from collapsing, like the ADM.
The party painted a picture to show that most municipalities were deep in debt, bankrupt and unable to provide services.
The municipalities are so broke, they are struggling to pay Eskom for bulk electricity and collectively owe it in excess of R1 billion.
The biggest culprits that owe Eskom money are:
- Enoch Mgijima in Komani, with debt of R490 million
- Inxuba Yethemba Local Municipality in Cradock, which owed R190 million
- Dr Beyers Naudé Local Municipality in Graaff-Reinet with R150 million debt
- Raymond Mhlaba in Alice which owed R25 million
Knoetze said some municipalities’ financial statuses were partly due to bloated organograms which led to an unaffordable salary bill.
Knoetze said this was caused by the ANC’s policy of cadre deployment which led to jobs for pals. She said the policy was wreaking havoc across municipalities in the Eastern Cape.
“It is turning government into a glorified employment agency and it is protecting a small employed elite at the expense of delivering services to millions of people in this province,” said Knoetze.
DA provincial leader Nqaba Bhanga launched a scathing attack on the provincial government leadership.
“The premier and the MEC of Cogta are folding their arms, watching a match that they are supposed to be playing in.
“The ANC government and Eastern Cape government cannot be trusted to handle the affairs of the province.”
The party revealed that 14 local municipalities out of the 39 municipalities in the Eastern Cape were in “serious financial distress” and that they were unable to provide services.
The municipalities are:
- Walter Sisulu
- Enoch Mgijima
- Raymond Mhlaba
- Dr Beyers Naude
- Great Kei
- Inxuba Yethemba
- Ingquza Hill
- Port St Johns
- King Sabata Dalindyebo
Bhanga said alarming levels of fruitless and wasteful expenditure amounted to an accumulated figure of R11 billion.
He added that about 69% of the municipal debt in the province was irrecoverable.
The revenue collection rate at all municipalities was dismal, at only 84.5%, against the National Treasury benchmark of 95%.
Bhanga said: “What this means is that if municipalities cannot collect revenue, they cannot provide basic services to the people.
“Eastern Cape municipalities continue to regress in terms of financial sustainability with 13 municipalities regressing, according to the 2020 AG report.”
Bhanga said had the DA not taken control of the Nelson Mandela Bay Metro in Port Elizabeth, it might have been one of the 14 municipalities in distress.
“More than a third of municipalities in the province have been allowed to degenerate into a state of complete bankruptcy such as the example of [the] Amathole District Municipality, [which] will be unable to pay their staff, councillors [and] creditors for February, April, May, June. If this is not a crisis, I don’t know what a disaster is,” exclaimed Bhanga.
Knoetze also revealed that 24 of the 39 municipalities in the province were unable to pay creditors within the 30-day legislated period.
Called for a response to the DA’s statements, Eastern Cape Premier Oscar Mabuyane and provincial government spokesperson Mvusiwekhaya Sicwetsha accused the party of spreading misinformation.
“What Nqaba Bhanga is saying, he is peddling misinformation and is ignorant of the responsibility that councillors and officials have in running the affairs of municipalities.
“In all these municipalities, you have mayors, councillors and senior managers elected to serve those people.
“They have got a constitutional responsibility to serve the people not a responsibility to complain and blame other people. The premier is working with the municipalities through Cogta and the provincial treasury to help them to perform.”
Asked if he received the DA’s letter, MEC Xolile Nqatha said he had.
“I have received letters from MPL Knoetze which were always municipal specific. I have not received the general one calling for [an] assessment.
“Even if received, it is work we are doing through the Provincial Treasurer as we have [a memorandum of understanding] between the two departments, as it relates to supporting municipalities in the province.
“The work I’m doing is with the municipalities and communities not in the media where the DA has a permanent seat,” Nqatha said.
ANC provincial secretary Lulama Ngcukayithobi had not responded to questions at the time of writing. His comment would be added once received.