Eastern Cape local municipality is the worst run – Auditor General

With 163 municipalities of 257 classed as “distressed” and 66 as “dysfunctional”, the Enoch Mgijima local municipality emerged in parliament yesterday as the poster child for badly run municipalities.

Shereen Noble of the Auditor General of South Africa noted their concern: “Without the money that they are getting and without the financial recovery plan working, we are not sure if this municipality can operate as a going concern.

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“Eighty-seven percent of debt is irrecoverable and the municipality couldn’t collect it. The average debt collection period was 317 days and they are losing 22% of distribution electricity,” she added.

According to political analyst Bernard Sebake, the Enoch Mgijima municipality had not recovered its financial footing.

“When a municipality is limping financially, it gets given an opportunity to operate under a financial recovery framework.

“If the financial recovery framework does not work, that municipality must then be put under administration,” Sebake explained.

“But with the level of debt they have now and the service delivery challenges, recovery is farfetched which indicates the level of leadership in that municipality,” Sebake said.

The department of cooperative governance and traditional affairs (Cogta) stated the municipality was among the 66 dysfunctional municipalities nationally and the 11 in the Eastern Cape as per the 2022-23 report.

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The municipality was placed under Section 139 (7) of the constitution on 6 April, 2022 following resistance to the intervention.

The national intervention required that a financial recovery plan be imposed on the municipality.

Cogta indicated the 2023-2024 budget remained unfunded and electricity distribution losses for November 2023 was standing at 48.25%, with the norm being 7-10%.

It said the total revenue collected was more than R571 million with a budget of R532 million as of December 23, and this included over R317 million billed for services and rates.

“Positive collection rate is as a result of R151 million that was fully billed in August as rates are fully billed once a year with an option to pay it over a year.

“An amount of R1.4 billion was owed to creditors in December, of which 99% relates to Eskom bulk purchases,” Cogta said.

Cogta revealed the municipality was owed R1.3 billion, of which 86.5% was owed by households.

Noble highlighted R220.5 million of expenditure was deemed fruitless and wasteful and total current liabilities exceeded total current assets by R984 million.

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