Council mandates mm to proceed with R165-mil loan application

Municipal manager, Kebone Masange, has been mandated by the Council to proceed with the application process for a loan of R165 million.

The anticipated re-payment schedule and total cost in connection with the proposed debt were noted and approved at a recent council meeting.

The loan is intended for capital projects that the municipality will undertake this financial year.

According to the annexure contained in a previous council agenda, nearly R30-million will be paid out of the town’s operational budget annually, in order to finance the loan over a 20-year period.

Ratepayers will have to shell out R289-million in finance charges over the duration of the loan repayment.

Council sources indicated that the loan would be used to fund capital projects as cash reserves were being used to finance the super-block, after National Treasury advised against taking a loan for the new building.

Explaining the need to construct municipal super-block in a previous article published in the Newcastle Advertiser, mayor, Afzul Rehman, said, “The municipal building was supposed to have taken a R100-million to construct. The way I would have liked to finance the building would have been through a bond, but the Ratepayers’ Association went to National Treasury, which recommended that we use our internal reserves instead. That is why we need to take a loan to fund our capital program. At the moment, we are spending just under R10-million a month to rent office space. My argument is that the municipality is not in the business of making business people rich through public funds.”

However, he reassured the community that the municipality would do all it could to ensure that it got the best interest rate on the loan, and added that while the loan funds would be available to the municipality, interest would only be charged on the amount that is drawn out of the loan account as it is needed.

Mr Masange said he would review the items that the loan is intended for to ensure that the money isn’t being used for anything unnecessary and that it is spent only on capital projects.

He explained that the super-block was a capital project that the municipality was committed to seeing to completion and that National Treasury had recommended a mixed funding approach.“Phase one of the building, was completed with money we had available in the budget. Phase two, which is currently underway, has not required for us to take a loan as yet, but each budget stands on its own so this does not mean that we will not need to take a loan in the future,” said Mr Masange.