KSD cash flow crisis threatens workers’ salaries

WORKERS at the cash-strapped King Sabata Dalindyebo (KSD) local municipality almost missed out on their June salaries yesterday.

However, by midday the payroll had gone through and the crisis was averted.

The Daily Dispatch is in possession of a letter, signed by the local authority’s corporate services acting director Mondli Songca, stating the municipality is facing cash-flow problems.

“All employees are hereby advised that the municipality is currently experiencing a cash-flow challenge for the month of May which has resulted in payments to retirement funds and medical aid schemes being delayed. However, written requests have been made to all the affected medical aid schemes to avoid suspension of employee medical cover until payment has been made,” the letter said.

It further asked employees to exercise patience and understanding “through this challenging period”.

UDM councillor Mabandla Gogo said: “It is a cause for concern and we are aware that the municipality does not have money. The municipality will collapse and we call on cooperative governance and traditional affairs MEC Fikile Xasa to monitor the situation very closely.”

He said the municipality should be making a lot of money from rates paid by big businesses and residents, and he wondered where this was going to.

“This is not the first time this has happened [that salaries have been paid late]. KSD is in financial trouble and there was no explanation given as to why the payment of salaries was delayed,” he said.

DA councillor Raymond Knock said the municipality was going through a tough time.

He said workers were owed around R24-million for salaries, and no explanation had been given as to where the money to pay the salaries was sourced from.

Knock said the municipality had been without a permanent municipal manager for a long time, meaning that there was no one to hold to account.

“The major problem is probably revenue collection. The municipality is owed a lot of money by residents and the municipality is not serious about revenue collection.

“But how do you expect to collect from citizens when councillors owe a lot of money?”

Knock said when the municipality had previously experienced cash flow problems it was bailed out by provincial Treasury and it should go back there for help again.

KSD has faced massive financial battles in the past. The Daily Dispatch reported in 2013 that KSD had failed to overturn a Mthatha High Court ruling over delays surrounding a multimillion-rand mall – and would have to pay millions to the contractor concerned.

According to previous articles in the Dispatch, in 2011 the Mthatha High Court found the municipality had breached an agreement with the developers of the mall, Landmark Mthatha, because KSD had failed to give Landmark possession of the land to complete the development.

Landmark sued KSD for nearly R300-million for delays in the development, which was put on hold when it emerged the land earmarked for the development was subject to a land claim by the Zimbane and kwaLindile communities.

Work on the site of the mall, which lies between Shell Ultra City and the Holiday Inn on the N2 in Mthatha, ground to a halt when the Land Claims Court interdicted African Bulk Earthworks from excavating the foundations.

African Bulk Earthworks, contracted by Landmark, in turn sued Landmark for R11 260 150 for payment, as it was already on site when the development was stopped.

The court ruled against the municipality and ordered KSD to pay the company R300-million in damages plus interest.

This was later reduced to R150 million plus interest.

A confidential document, discussed in council at the time, stated that KSD had to pay Landmark termination damages amounting to R297 140 300. The figure included 15.5% per annum interest from March 2008 to June 2013.

An additional R11-million had to be compensated to Landmark for paying African Bulk Earthworks for work already done. —