Tshwane cut-offs to non-paying consumers saves the municipality from being cash-strapped

Although the Tshwane metro still has to recover millions of rands to regain financial stability, the municipality’s recent “aggressive” revenue collection campaign saved it from being cash-strapped.

A recently released adjusted budget report revealed that Tshwane was facing worsening cash flow constraints due to low revenue collection and lack of long-term loans by the end of year 2021.

The 2021/22 adjusted budget report approved by the Tshwane council on Monday, stipulated that the municipality’s cash and short-term investments as at December 31, 2021 amounted to R200-million with a bank overdraft (deficit) of R833-million.

The report raised concerns over the negative cash balance stipulating “the city does not have sufficient cash reserves to cover short-term monthly fixed operating cost if no additional revenue is collected in a month (January)”, the report read.

“The city has experienced a declining trend in collection levels which contributed to the city’s cash reserves dropping.”

 

The report stated that based on the metro’s performance by December the adjustment budget was “necessary mainly to address the impending shortfall revenue items and to address possible overspending”.

According to the report the adjusted budget was also necessary to change the capital budget [budget used for development projects] downwards due to the metro’s inability to secure loans.

“Some of the projects funded from borrowing were delayed due to the fact that the city could not obtain long-term borrowing to fund the capital expenditure budget for the 2021/22 financial year,” the report read.

Economists have previously commented that among factors contributing to the metro’s struggle to attain long-term loans used for major development projects, was the municipality’s negative ratings between 2020 and 2021 by the international rating agency, Moody’s.

The report highlighted recommendations made by national treasury in a meeting with the metro on February 17, to salvage its financial position:

“Improve the current cash and liquidity position to secure financial sustainability. Prioritise revenue collection and debt management strategies to improve collection rate above 90%,” the report read.

The municipality in early February started disconnecting services to business, government departments, embassies and residential customers owing the metro.

Metro spokesperson Selby Bokaba described it as an “aggressive” campaign to collect R17-billion owed for municipal services.

Bokaba said the debt made it difficult for the metro to fulfil its obligation of delivering essential and basic services to its residents and customers.

In a statement mayor Randall Williams on Tuesday said the municipality had recouped R600-million from this campaign.

Commenting on the budget, Williams said the budget aimed at refocusing service delivery and ensuring that the budget was fully funded to stabilise the metro’s finances.

“This adjustment budget demonstrates our multiparty administration’s commitment to accelerate service delivery despite the municipality’s financial position. I will further ensure that allocated funds are driven towards service delivery in a cost-effective manner.”

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Summary of the budget:

– The total operating expenditure [cost of running the municipality] increased by R432.6-million, from R39.1-billion to R39.6-billion.

– National grants were increased, an amount of R146.2-million was allocated to the public employment programme (PEP) for creation of employment opportunities in the metro.

– The employee-related costs budget decreased by R280.1-million to re-prioritise funding for R250-million for contracted services of security services.

– Overall contracted services expenses increased by R567.2-million.

– R40-million was allocated for collection fees (meter reading), project management services R116.3-million and personnel and labour (for public employment programme grant) allocated R121.8-million.

– R127.7-million of the public transport infrastructure and systems grant (PTISG) was reprioritised by roads and transport department from the capital budget (major projects) to the operating budget. The funding moved to the operating budget was for bus operations, station management, marketing and maintenance of busways.

– Among departments that had increased budgets was the economic development and spatial planning department which had a budget increase of R89-million.

– City manager office capital budget decreased by R20-million. Initially it was budgeted for R26.7-million.

– Community and social development services capital budget dwindled by R34-million and human settlements by R14-million. Roads and stormwater decreased with R117-million.

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