Tshwane metro’s finances need bandages

Tshwane finance MMC Mari-Lise Fourie painted a worrying picture of the state of the metro’s finances suffering from depleting cash reserves and billions of rands owed to it.

Although reports of the municipality’s finances have been flagged before, last week during the council meeting Fourie again shared concerns over the economic standing of the metro.

“Serious decline in the financial health and sustainability of the metro is a matter of great concern and cash reserves have been depleted.”

While revenue collection (debtor collection) increased from 74% to 90% at the end of March 2021, Fourie said they were still not where they wanted to be.

She added the metro continued to confront the challenge of non-payments.

According to her, the metro were still faced with money owed to it by residents and businesses having increased significantly from R12,6-billion as of 30 June 2019 to R17,1-billion as of 30 June 2020.

“Cash and cash equivalents as of March 2020 totalled R2,5-billion but decreased to R847-million as of 30 June 2020.”

“As of 31 March 2021 the metro cash balance was almost at R800-million but the available funds declined to about R600-million,” she said.

“The decline can be attributed to the funding of capital projects from own capital pending the raising of long-term loans to fund these capital assets.”

Fourie believed the passing of the mid-year adjustments budget for 2020/21 was a critical step for the municipality’s economic health.

She said the adjusted budget, which entailed cutting budgets and considered expected revenue, was essential for financial recovery.

“Our firm focus remains on the metro’s constitutional mandate in that service delivery must be prioritised while we maintain a stable financial position.”

Stimulating economic growth and the creation of jobs was crucial for the financial stability of the metro, she said.

ANC councillor Mmina-Tau Marishane blamed the coalition government for the metro’s sufferings.

“The sooner we complete this term of governance the better for the people of Tshwane.”

FF+ Sakkie du Plooy said billions of rands owed to the metro was crippling its financial health. He urged residents and businesses that owe the municipality to pay up.

This comes at the backdrop of Moody’s rating agency downgrading the metro’s long-term global scale issuer rating to B1 (high credit risk) from Ba3 (significant credit risk). The downgrade by the agency meant the metro was likely to default on paying long-term loans.

Previously, chief economist at Efficient Group, Dawie Roodt, said residents were likely to feel the brunt of the metro’s plummeting financial standing with significant chances of an increase in rates and taxes.

Roodt said the downgrade also hindered the municipality’s chances of securing loans.

He said not having access to such loans could affect the metro’s ability to deliver services.

Low revenue collection and increasing operating expenditure were some of the reasons behind Moody’s decision.

“Operating expenditure grew by 16% according to the 2020 unaudited financial statements, reflecting a significant increase in salary costs and higher bad debt provisions.”

In September last year, just a month before the temporary administrators’ term came to an end, Moody’s downgraded the metro by one notch from Ba1 to Ba2 with a sustained negative outlook for the metro.

Meanwhile, the metro incurred a deficit of R4.4-billion deficit during tenure of the temporary administrators.

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