Tshwane metro on a mission to claw back billions from residents

The Tshwane metro plans on collecting in excess of R190 billion from residents and businesses to avoid a further credit downgrade from Moody’s.

The embattled municipality is “technically insolvent” and currently does not have enough money to meet its expenditure, Pretoria Rekord reports.

As a result, the metro has been unable to make payments to Rand Water and Eskom on time.

ALSO READ: Financially challenged Tshwane settles massive R1.6bn Eskom debt

Finance MMC Peter Sutton said the metro was working on measures to improve its financial position.

“When current liabilities exceed current assets, a company or organisation is technically bankrupt. In the case of a municipality, it is also known as an unfunded budget.

“This situation in Tshwane has been the reality for the past seven years,” he said.

Sutton said the plan was to rescue the metro from its precarious financial position by collecting around R4 billion every month for the next four years.

This means more stringent financial management being applied, because the metro is also incapable of qualifying for long-term loans. Moody’s downgraded the metro in 2021, which prevents them from attaining any long-term financial assistance.

However, it can apply for short-term loans.

Despite collecting around R9 billion from residents over the last four months, Sutton said the metro needed about R190 billion in four years to turn its finances around.

But despite recent strides in revenue collection, the metro still has a way to go.

“We will not be able to pay Eskom in full yet because of our liquidity problems,” Sutton said.

ALSO READ: Tshwane metro recoups R3.3 billion from Gauteng govt’s rates and services debt

In 2021, Moody’s said it was unlikely the metro’s credit rating would be upgraded, owed to low revenue collection and increasing operating expenditure.

“A rating upgrade is currently unlikely, considering the rating under review for further downgrade; however, Moody’s could consider confirming the ratings if the City implements restorative measures or receives financial support,” the credit company said in the statement.

“Moody’s would consider a further downgrade of the rating if the City defaults on its financial obligations with expectations of significant losses for creditors, consistent with a lower rating, or if the extent of the fiscal challenges is greater than anticipated, pointing to future material losses.

“Although our rating incorporates a low likelihood of extraordinary support from the central government, the review period will also allow us to examine potential forthcoming supportive measures.”

Edited by Nica Richards.

This article first appeared on Caxton publication Pretoria Rekord’s website, by Reitumetse Mahope. Read the original article here.