City of Tshwane mayor Cilliers Brink. Picture: Neil McCartney / The Citizen
The City of Tshwane’s current financial situation can be improved despite being in a “critical” state, according to the metropolitan municipality’s mayor Cilliers Brink, but this will require some “bold” steps.
Brink outlined the city’s plans to address its financial challenges in a media briefing on Monday.
According to the Tshwane mayor, the metro’s financial health was recoverable provided that “a set of bold decisions can be made and carried out in the next few months”.
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He said Tshwane needed to cut drastically cut its expenses, which has exceeded the city’s income.
Brink cited the Covid-19 pandemic, load shedding, excessive salary increases, and the unlawful placing of the city under administration by the Gauteng government in 2020 as the reasons for the city’s current financial difficulty.
“These events led to secondary setbacks including a devastating credit downgrade far more severe than other cities… It also led to the non-renewal of the city’s credit lines and a cash crunch, which has caused us to fall behind on our payments to Eskom and Rand Water,” the Tshwane mayor said on Monday.
Brink confirmed that Tshwane municipal workers and councillors will not receive salary increases for the current financial year, in order to save a portion of the city’s revenue.
“The decision to not budget for salary increases both for employees and councillors is a matter of necessity,” he said.
“Aside from bulk electricity purchases, salaries are the biggest expense to the municipality. So while we working really hard on reducing our dependence on Eskom, diversifying our supply of electricity, we also have to look at the realistic salary bill.”
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The Tshwane mayor indicated that the city would engage with various unions to discuss the issue of zero increases for municipal workers.
“Let me make it clear that the city will not step outside of the collective bargaining process.
“We are not proposing to breach the agreement. We will invoke the clause of the collective agreement that deals with exemptions and we will justice the case on the basis of the city’s inability to pay [its workers].”
Brink also revealed that the city owes R4.7 billion to the South African Revenue Service (Sars) in outstanding value-added tax (VAT) payments.
The debt relates to the controversial smart electricity metering contract with PEU Capital Partners.
“In the meantime, penalties and interest has accrued on this account. At present, the city is paying R91 million a month on this bill, which is a massive squeeze on our cash flow, and now Sars is demanding even bigger payments,” he continued.
PEU entered into a deal with the City of Tshwane to provide smart meters in 2013, but was later was deemed irregular and unlawful and was set aside.
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The Tshwane mayor also indicated that the city has been making undisclosed payments of R2 billion to PEU and it’s subsidiary, Total Utility Management Systems (TUMS).
He said an investigation would look into former Tshwane Chief Financial Officer (CFO), Umar Banda’s role in these payments.
“I have told the city manager [Johann Mettler] and his team that the city must obtain all documents relating to the nature and extent of this liability and exactly when the city had agreed to foot [this bill].
“If need be, the city will dispute the liability, even if it means declaring an inter-governmental dispute.”
Banda’s contract was terminated in December last year for his alleged misrepresentation of the city’s financial statements submitted to Auditor-General Tsakani Maluleke.
The former CFO immediately challenged his dismissal, but was unsuccessful.
Meanwhile, the city could be placed under administration after failing to pass the adjustment budget for the third time last week.
The metropolitan municipality was given an extension until 14 April to pass the budget, which determines how much more residents will pay for water, electricity, sewage and waste removal.
Gauteng MEC for Cooperative Governance and Traditional Affairs (Cogta) Mzi Khumalo is currently considering all its options at the moment regarding the future of the municipality.
“This failure by the municipal council to fulfil its statutory obligations poses a clear and present danger to the residents of Tshwane, as the provision of basic services to residents may be adversely affected.
“MEC Khumalo will engage with the MEC for Finance to establish the most appropriate course of action within the ambit of the Constitution,” the Cogta Department said on Friday.
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