VBS Bank losses weaken 16 municipalities – Makwetu

The R1.6 billion loss resulting from investments with the VBS Mutual Bank significantly weakened the financial position of 16 affected municipalities and had an impact on the delivery of infrastructure and maintenance projects.

Auditor-General Kimi Makwetu said many of the municipalities, specifically those in the North West, suffered due to investing in the now liquidated bank. The province currently has 15 municipalities under administration due to financial distress, instability and collapse of services.

Makwetu said 13 municipalities in the province had received a disclaimer as the validity of their submitted financial statements were in question.

He highlighted that consistent disregard of recommendations, lack of commitment, no action and no sense of urgency by accounting officers in many of the municipalities in the province are contributing factors to their poor financial state.

Accountability in local government continued to deteriorate and accountability for financial and performance management specifically continued to worsen in most municipalities.

Makwetu said a significant number of municipalities in the Free State were among those that submitted their financial statements late, had a total breakdown of financial controls, poor leadership response to issues faced by the municipality and are characterised by a lack of capacity and instability.

Makwetu has reiterated that all municipalities in this province are in a vulnerable position and needs urgent intervention.

A total of 79% of municipalities in the province have ignored his recommendations and have regressed drastically.

Municipalities in the province had incurred a total of R675 million in irregular expenditure during the 2016-17 fiscal year alone. They are more than R7.8 billion indebted to Eskom.

Makwetu specifically alluded to the lack of development and maintenance of infrastructure in Maluti-A-Phofung, Matjhabeng and Metsimaholo municipalities.

• Meanwhile, the ailing municipality of Matjhabeng, that includes Welkom, issued a notice that not all its staff will be receiving their salaries this month. The municipality said this was due to the financial distress at the municipality.

INFO

• At Metsimaholo, the construction of the Oranjeville sports complex was budgeted for an amount of R21.9 million.
• The municipality had spent R21.7 million relating to this project, which is 99.1% of the budgeted amount.
• It could not be confirmed that services were actually delivered for all the amounts paid on the project as, except for a fence, no building structures were visible during a site visit. – The Attorney-General’s report on local municipalities.

– OFM News

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