Six municipalities at risk of financial collapse

Six Limpopo municipalities are at a risk of collapsing financially should urgent intervention not be implemented, the Provincial Executive Council (Exco) heard during a meeting on Wednesday. Three district municipalities – Mopani, Vhembe and Sekhukune as well as Musina Local Municipality, Thabazimbi Local Municipality and Lim 368 (Mookgopong/Modimolle) were classified as category A or high risk municipalities which performed badly and are at a risk of financial collapse.
The Exco also resolved that the departments of Cooperative Governance, Human Settlements and Traditional Affairs (Coghsta) and Provincial Treasury as well the identified municipalities at risk should develop financial recovery plans that take into account both financial and non-financial matters.
A detailed assessment performed to determine cash flow pressures currently being experienced by municipalities in the province based on monthly billing, actual receipts, monthly expenditure, bank balance, debtors and creditors within municipalities showed that the six municipalities performed badly in all the indicators and are under severe financial pressure.
The memorandum providing the status report on the financial status of municipalities in the province as per Exco Resolution 52.4 of 28 September was presented to the meeting. This assessment revealed that the municipalities are under serious financial pressure especially in months where there are no grant transfers.
Category B or medium risk municipalities perform well in some indicators but are still at a risk of collapse, include Bela-Bela Local Municipality and Fetakgomo/Greater-Tubatse (Lim 476) Municipality. Category C or low risk municipalities are at a low risk of financial collapse, but require close monitoring to ensure that they do not regress;
Based on the analysis, it was recommended that Musina Local Municipality be granted financial assistance to the value of R20 million considering the fact that the municipality is a provincial growth point and has further been granted special economic zone status. “It is therefore a strategic area for the economic development of the province, and without support, the municipality is likely to collapse, resulting in a loss of economic potential as envisaged,” Phuti Seloba, Provincial Government Spokesperson said at a press briefing yesterday (Thursday).
The amount of R20 million granted to assist the Musina Local Municipality was to service their Eskom debt and other critical financial obligations and the funds should be managed and accounted for by Coghsta. The municipality reportedly has not paid its Eskom account for two months in a row.

Story: NELIE ERASMUS
>>nelie.observer@gmail.com

Featured photo: Provincial Government Spokesperson Phuti Seloba.