SA Calcium Carbide debt mystery

While certain council sources have confirmed to the press that the municipality wrote off more than R37 million of a R50 million debt, it appears the municipality is not in agreement, saying there was no debt written off owed by SA Calcium Carbide (Pty) Ltd (SACC) to the local municipality.

In a press release however, SACC admits that in a creditor’s meeting held in Sandton in March this year, municipal representatives were among the 92% of creditors who voted in favour of writing off 75% of SACC’s outstanding debt.

This was apparently done on the understanding that SACC pay the other 25% then adhere to a strict payment schedule which, according to SACC’s public relations office, has been honoured.

When contacted for confirmation of the amounts, Municipal Communications Officer, Dr Dumisani Thabethe, denied any debt had been written off .

“The application to write off the debt was submitted to the portfolio committee and a decision was made to refer the matter to the Executive Committee. The application was denied. There is no debt written off .”

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Business Rescue

However, in the same press release from SACC it was confirmed that preceding these arrangements, SACC had entered into a voluntary business rescue plan in January this year, managed by a business rescue practitioner, due to financial problems that arose over the past five years.

The debt owed by SACC was ring fenced and highlighted in a business rescue plan which was then made available to all the creditors for their review and comments.

“The company faced challenges due to the collapse in commodity prices, volatile exchange rate changes, the energy project not reaching its full potential and environmental issues concerning sludge storage,” revealed the SACC public relations office.

SACC has in the interim embarked on a restructuring process to turn the company around which has led to staff retrenchments. “The intention is to preserve as many jobs as possible,” said SACC in a press release.

Plans for the future

Johan Strydom, managing director of SACC Newcastle, was quoted in an interview with a journalist as having said,

“The past few months have been difficult but we can now move forward with many positive plans in the pipeline.”

He is adamant that SACC has a clean slate as far as debt is concerned. “Every creditor unfortunately had to write off some debt which means that we have started a new balance sheet and by law we now have no debt. SACC was brought out of business rescue in May, ” he revealed.

A few local politicians welcomed the municipality’s consideration of writing off the debt saying that the move may save 220 jobs that could be lost should the municipality force payment by disconnecting services.

SACC are wishing to engage with council to apply for the concessions offered in the integrated resource plan implemented by the Department of Energy recently. Applications need to be submitted through municipalities. SACC have, however, not been successful in securing a meeting with municipal representatives.

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The plan aims at offering financially struggling, energy intensive industries a temporary special pricing agreement with Eskom and the power regulator NERSA. This, according to Strydom, would be of huge benefit to SACC because of their high electricity consumption which amounts to an average of R16 million per month.

It seems that SACC and the municipality are not on the same page. SACC appears to be of the opinion that their debt has been written off while the municipality is denying this.

SACC is certainly not the only business to owe council money.

In a financial report provided to the Newcastle Advertiser, local businesses are in debt to council to the tune of R131 million of which R53 million is due by other government departments. Consumers, however, owe council an astonishing R1.03 billion.

If collected, the revenue would go a long way to address the municipal cash deficit of up to R30 million a month. The Development Bank of South Africa believes that council needs to address its poor cash flow management and debt
collection.

They have stated, “The Newcastle Local Municipality is technically insolvent…a ticking time bomb….and may struggle very soon to pay salaries. (It is) below the minimum required for sustainability in the last five years… (it’s) generating less of its own revenue, limiting the potential for economic development, job creation and improving the quality of life…”

The municipality has rolled out a payment incentive plan which will hopefully encourage businesses and residents alike to settle these debts – this can be read here.