WATCH: Municipality is not in a financial crisis – Finance MMC

The City of Ekurhuleni has rejected claims suggesting that the municipality is facing a financial crisis and that it is on the brink of collapse.

The city has called a special council meeting to debate the urgent motion tabled by the DA, saying the city is in a difficult financial situation, as a result of rising debt and low cash flows – which could lead to failure to render service delivery and inability to pay service providers and staff in the near future.

The DA had said at the end of June 2023, the city’s cash flow was reportedly sitting at R438m, saying this represents less than 13 days of cash on hand.
“The city is sitting with just over R3b in outstanding payments owed to creditors, of which R245m owed to Eskom, R174m owed to Rand Water, R117m owed to ERWAT (Ekurhuleni Water Care Company) and R2.5b owed to outsourced contractors,” said the DA.

Even the ANC, which is part of the coalition government, and several other opposition parties including ActionSA, raised serious concerns over what they called deterioration of the city’s finances.
False alarm
Speaking at a media briefing just after outlining the city’s financial state at the urgent motion tabled by the DA, the EFF’s appointed MMC for Finance, Nkululeko Dunga, described the purported looming financial crisis by opposition parties as unsubstantiated assertions, which were widely purported by the media.

He said the claims have created unnecessary panic among residents, as according to financial reports supported by facts the city’ is not experiencing any crisis or dire deterioration of its finances.

“We want to dispel any notion that speaks of this extremely dysfunctional financial state, but with an understanding that we are obviously in a recovery mood as the city.”
Eskom
“We do not owe Eskom. Eskom on October 3 submitted to us an invoice of R1.3b and on October 4 they then said in a media statement that we owe them. In fact, the owed money is a current account that they themselves acknowledged that it is due on October 28.

“The only dispute that we have with Eskom is what they define as penalties and interest on monies that we have paid as late payments. We are disputing this because there is nothing that compels us as the city to make the necessary payments to Eskom within 15 days outside of the period that is allocated by the MFMA, paying within the 30-day bracket.”
Suppliers
Dunga admitted that the city has an overdue account towards its suppliers to the tune of about R1b, plus a R300m which is current.

He said the reason for that is that the city had just closed off the financial year that was concluded on August 31, and that would always have a serious financial constraint on the basis that all financial statements, suppliers and creditors would have to compile all of their invoices for the end of the financial year, including those that have not been declared before to the Department of Finance, which would then increase what is owed.

“We are, however, convinced that the measures that we have put in place will make it easy for us to squash the about R1.3b owed to service providers.”
Cash in hand
The MMC stated that in the same period last year the city’s cash in hand was standing at R210m, and this has almost doubled as the city sits with about R378m, which gives it about 13 days cash in hand

“Yes, the National Treasury says that it should be at least 25 days, and we are working extremely hard to achieve that. We believe that with a plan that can be instituted and thoroughly monitored, we will be able to ensure that we get to the 25 days.

“We have been proactive with the Department of Finance in trying to ensure that we get out of what we would have defined as the red, We are much better than the City of Tshwane and the City of Johannesburg in terms of our financial standing.

“We still want to be in a better financial position, hence we have introduced programmes such as operation Siyacima Manje-Namhlanje. This seeks to recoup R5b that is lost as a result of overdue accounts that are sitting with state-owned enterprises, government departments as well as businesses in the city.

“We are looking at disconnecting services at hijacked buildings, and aggressively dealing with water leaks. This is an attempt to curb the water and electricity losses that we incur.”
Rand Water
“In terms of Rand Water, we do owe them about R600m, but we have an agreement in place of 45 days in terms of a repayment plan. That debt will be paid within the stipulated timeframe. We also owe ERWAT about R127m which is not an overdue account, it’s a current account that will be paid.”
Collection rate
“The city has collected in excess of 93% in terms of the collection rate, which means our credit control measures are starting to bear fruits. Last year, we were standing at below 90%.

“We have no crisis, there are no issues, but we would obviously like to be in a much better financial situation as the city, and we will definitely find our way if we just continue to do what we are doing on a daily basis and try to increase the revenue of the city and its cash on hand in reserves,” explained Dunga.

Opposition parties call for accountability

The ANC had during the ordinary council meeting of August raised a number of alerts about the state of the city’s finances.

“We need to preside over a financially viable city of Ekurhuleni to offer sustainable basics services, to drive infrastructure upgrade and to propel growth and development. However, with the current state of our finances, we are simply going to fail to live up to the people’s expectations.

“If we are being honest enough, none of us must attempt to turn a blind eye to this reality of a regressing financial base, hence the ANC caucus greatly welcomes this profound extraordinary council meeting.

“We left the coffers of the city with a positive surplus. We did pay sufficient attention to what mattered most, namely revenue collection and generation.
“Debtors were at R107m as at quarter four of the 2020/21 financial year, whilst in the same quarter of 2022/23 the debtor’s book is sitting at R557m.
“It is important to highlight that as of the fourth quarter of the 2020/21 financial year, Rand Water’s debt was a mere R3m, whilst today we are sitting with an alarming current balance of R800m.
“At the time, the ANC-led coalition was able to service the Eskom bill much earlier than 30 days, given that we were financially liquid.

“We should be extremely worried that we are now sitting in a position where we are unable to pay earlier, which is an indication of an institution that is in an undisputed liquidity risk. We must do everything possible to save it from further deteriorating.”

ActionSA
Despite Dunga rejecting the dire state of finances in the city, ActionSA calls for the ANC and EFF coalition to take accountability for the city’s declining financial state.

ActionSA Ekurhuleni caucus leader Siyanda Makhubo outlined key interventions that the city needs to implement immediately if it wants to turn things around and avoid being placed under administration.

Makhubo said the interventions need to include re-integrating municipal entities into their line departments in the city (which will reduce the wage bill and go a long way to ameliorating accountability deficits); increase residential collection rates (which are currently sitting at 64%); appointing contractors to collect revenue in Eskom serviced areas; eliminate ‘no-go areas’ where illegal electricity connections are rife; increase investment into water and electricity infrastructure; and install smart meters to reduce unaccounted water usage, currently sitting at R1.5b.

Also Read: UPDATE: Ekurhuleni metro’s blitzes on non-payers recoup over R8m