City of Tshwane faces JSE suspension amid financial results delay

Despite a warning from the JSE that failure to publish its financial results for 2022/23 by the end of February may result in the suspension of trade in its listed debt instruments, it still hasn’t done so. This is according to Andre Visser, director of issuer regulation at the JSE.

The deadline, according to the listing requirements, was at the end of January, but the metro submitted its financials to the Auditor-General (AG) three months late and the audit is yet to be finalised.

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Tshwane Mayor Cilliers Brink recently said the AG agreed to finalise the audit at the end of February and provide the required management letter by mid-March, but apparently, the audited statements are not yet available.

“In terms of the Debt Listings Requirements and the Financial Markets Act, the JSE is now obliged to allow the entity the opportunity to make written representations to the JSE on why the suspension of the listing of the debt instruments should not be affected,” Visser told Moneyweb on Monday.

This comes after City of Tshwane CFO Gareth Mnisi went to see the officials at the JSE earlier in February to explain the city’s predicament.

The quality of the financial statements the administration had prepared for submission by the AG’s deadline at the end of August was so poor that the independent Audit and Performance Committee (APC) advised that they be held back and relooked, and the advice was accepted.

Tshwane’s adverse opinion

This is the second year in a row the APC has been dissatisfied with the quality of the statements prepared by officials, but last year the advice was not heeded and the city received an adverse opinion from the AG.

This means the financial statements do not fairly reflect the financial position, results of operations, or cash flows of the entity in accordance with generally accepted accounting principles.

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The adverse opinion came as a shock to Tshwane’s stakeholders and the political fall-out was huge.

It was one of the major factors that led to the resignation of then-mayor Randall Williams, who was replaced by current mayor Brink.

Brink has been frank about the city’s financial woes and said it will take time to turn around the financial disaster the city finds itself in – but another adverse opinion may tip the scales against his multi-party government.

It is currently ruling the city with a paper-thin margin of a single seat.

By the end of January, the city owed Eskom R3.9 billion, and the unaudited financial statements show that at the end of the financial year on 30 June 2023 it owed its trade creditors R12.6 billion, an increase of R1.6 billion compared to the year before.

To add insult to injury, National Treasury last month threatened to withhold R629 million of conditional grant funding from Tshwane due to non-performance regarding the grants.

Republican Conference of Tshwane councillor Lex Middelberg warned in a statement that suspending trade in Tshwane’s bonds that are listed on the JSE will on its own be sufficient grounds to establish a default event “in terms of every other long term debt instrument of the city”.

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“This will give grounds for long-term creditors to call in those loans all at the same time,” said Middelberg.

“The city cannot settle even one of the long-term instruments on short notice – it will most definitively not be able to settle all of them simultaneously.”

Sombre message from Brink

In a newsletter to residents on Tuesday Brink said the city had to make budget cuts in its adjustment budget, which was passed a week before, because of the poor financial performance in the six months ended 31 December.

“That underperformance was, in turn, the result of the violent unprotected strike that broke out in August 2023 and continued into November 2023,” he said.

“It is impossible to drive an aggressive credit disconnection campaign or make important institutional improvements while your waste removal trucks are burning in the streets.”

“Our strategy is to collect as much as we can on debt owing to the city, starting with the Top 1 000 consumers.”

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According to Brink collecting on its debtors book will buy the city time to fix key aspects of the city’s tax administration.

“This includes installing as many prepaid electricity meters as possible, making sure that bills are accurate, and that billing disputes are dealt with expeditiously.”

This article was republished from Moneyweb. Read the original here.