Council gives green light to R1-billion loan
The City has been granted the R1 billion loan to fund capital projects.
COUNCIL has approved a request for the city to acquire a R1-billion loan to fund capital projects.
According to eThekwini municipality's head of communications, Tozi Mthethwa, the City’s finances were seen to be in good shape and the approval of a R1 billion loan would not impact ratepayers.
“This issue was first tabled at the Finance and Procurement Committee on 17 October and was merely procedural in terms of the Municipal Financial Management Act as the R1 billion had already been budgeted into the 2015/16 Financial Medium Term Revenue Framework. It will therefore not result in any additional tariffs increases for ratepayers,” she said.
She said loans are used to fund capital projects identified through the City’s prioritisation process from the previous year’s budget consultation process. The bulk of the loan will be mainly allocated to projects such as roads, electricity, water and sanitation.
“Affordability is taken into account and is vital prior to any borrowings. EThekwini has strong financial indicators with the municipality’s gearing ratio improving over the years. The municipality has a very favourable gearing ratio that sits at 31.2 per cent as of 31 August which is below the norm of 45 per cent set by National Treasury. The City therefore has the capacity to further invest in capital projects. EThekwini’s short term credit rating A1+ and long term credit rating of AA- assessed by the Global Credit rating company is the highest awarded to any municipality in the country,” she said.
Chairwoman of the Finance and Procurement Committee, Fawzia Peer, defended the decision to acquire the loan saying various aspects were taken into consideration. She said the loan would not bankrupt the City, adding that the City had never been bankrupt.
