Mtuba working to resolve ‘serious financial problems’

Mtubatuba Municipality has formulated a ‘financial recovery plan’ to address its ‘serious financial problems’, which have drawn the attention of the KZN MEC for Co-operative Governance and Traditional Affairs (Cogta), Bongiwe Sithole-Moloi.

Cogta’s media liaison, Siboniso Mngadi confirmed that the municipality’s financial woes include an estimated debt of R62-million owed to creditors ‘as at the end of September 2023’.

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“Cost containment measures are being implemented to reduce expenditure on operations. As a result, a number of line items have been reduced or completely cut depending on the assessment, thus improving the cashflow of the municipality,” said Mngadi.

In response to a question whether any persons within the municipality would be held accountable for the financial difficulties, Mngadi said consequences can be expected.

“Management [is] in the process of turning around the municipality,” he said.

The municipality’s financial distress has seemingly affected the repairing of potholes in Ward 6 in KwaMsane, work which for weeks was halted allegedly because workers had not been paid.

Ward 6 Councillor Mfana Gumede said he suspects the contractor appointed for this work is among the creditors the municipality owes.

Gumede said a special council meeting was convened earlier this month to deal with the municipality’s financial status.

“The municipality has no money to pay the businesses it owes, and there was money that came in in July when the new financial year started,” said Gumede.

The councillor said no tangible explanation was given at the special council meeting about what had happened to the money.

“They just lie and say when the new adminstration took over there were ‘holes’, but that is not true, the previous administration left a positive balance.

Now there is no service delivery, roads are filled with potholes, which damage cars.

The municipality is bankrupt, this administration has failed to manage finances,” said Gumede.

The contractor hired for the KwaMsane roadworks said not a cent had been paid to him by the municipality since work began, and that he has had to dig in his own pockets to pay workers’ wages.

Unpaid bills

“I’ve submitted two invoices and I am told there is no money.

This obviously creates challenges for me. I was told money would be available in December,” said Zikhali, who added that workers were now back on the roads.

Desire Irmscher of uMhlathuze Construction, which was awarded the contract to construct phase 1 of 3 of Mtuba Rugby Club said, to date, what is owed to the company has not been paid by the municipality.

This publication previously wrote a story about the money owed to uMhlathuze Construction before the new financial year in July.

Irmscher said all that has been forthcoming from the municipality are empty promises to pay and that the company has been forced to take the legal route.

The municipality’s dire financial ruin prompted Sithole-Moloi to write a letter to Mtubatuba Mayor Mxolisi Mthethwa, which he received on 26 October, detailing the ‘serious financial problems’, which the MEC, in conclusion, states warrant a response, including a recovery plan.

Sithole-Moloi noted that the problems at the municipality include late payment to creditors; operating deficits, and successive negative (qualified) audit opinions for the financial years 2019/20, 2020/21 and 2021/22.

The MEC further noted that the municipality will be forced ‘to undertake to reduce non-essential expenditure and implement cost containment measures’.

In her lengthy and comprehensive letter to Mthethwa, Sithole-Moloi also raised issues of the municipality’s low revenue collection; unauthorised, irregular, fruitless and wasteful expenditure, and poor financial governance and oversight by the municipal council and committees, among other matters.

The MEC also pointed out that the municipality’s operating surplus regressed from R6.8-million in the 2020/21 financial year to an operating deficit of R49.3-million in the 2021/22 financial year.

“The municipality has no cash reserves to fund even one month of operating expenditure, with a negative cash coverage ratio, while the norm is one to three months,” wrote Sithole-Moloi.

She added that the municipality’s declining liquidity ratio means it ‘still experiences difficulties in settling current obligations as well as providing adequate risk cover to enable the municipality to continue its operations at the desired level’.

Poor financial governance

The MEC further wrote that the municipality has ‘extremely weak controls’ of preventing, detecting and addressing unauthorised, irregular, fruitless and wasteful expenditure.

“The above weaknesses highlight poor financial governance and oversight by the municipal council and council committees, including the EXCO and MPAC over management, as well as weak administrative leadership,” concluded Sithole-Moloi.

A source who spoke on condition of anonymity alleged that it was expected that heads would roll at senior level and that the cost containment measures allegedly include the cancellation of some vehicle hire contracts and some bodyguard services.

According to the municipality’s recovery plan, approved by municipal manager Thamsanqa Xulu, a payment plan to settle outstanding debt has been developed.

Furthermore, as of 3 November, the money owed to creditors was reduced from R82.3-million to R49.6-million.

Additionally, an audit action plan has been developed and is being implemented to address issues raised by the auditor-general in the 2021/22 audit report.

The draft financial recovery plan is expected to be tabled before council before the end of November.

An anonymous source alleged that as of Thursday, the sheriff attached and removed items at the municipality to deal with one of the outstanding debts.

This is not the first time Mtubatuba Municipality has been in dire straits, having been placed under administration several times in recent years, and dissolved in 2015.

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