BCM EATS LAST OF ITS CASH RESERVE

Available funds have almost halved in the past year

Buffalo City Metro is running out of cash, forcing national Treasury to step in to prop up the city’s tottering finances.

City reserves have dwindled drastically in the last three years, almost halving since January 2018.

Cash reserves dropped from R1.143bn in January 2018, to R553m in January this year.

BCM mayor Xola Pakati issued a stern warning to his council last week, saying if the metro’s collection rate did not improve it faced a “depletion of the cash holdings and reduction in liquidity ratios”.

The national Treasury has the metro under sharp scrutiny, with spokesperson Jabulane Mulambo confirming that the decline in reserves and colllections was drastic.

He said Treasury was “working with the city to support the implementation of their revenue initiatives”.

The “downward trend” started in 2015-16, when the city sat on a reserve of R2.3bn, he added.

“This adverse trend is a result of the declined collection rate in the region of 86% over the past two financial years (2016-17 and 2017-18) from 92% in 201516,” said Mulambo.

Reserves stood at R1.8bn in both the 2016-17 and 2017-18 financial years.

The cash reserve is vital in case of an emergency.

But the reserve has been eaten into by changes in revenue levels, the impact of water restrictions and load-shedding, both meaning lower sales to BCM, as well as a rise in nonpayments due to general economic decline.

News of the diminished reserve came a few months after BCM mayor Xola Pakati agreed to fork out R200m to end a violent and destructive threeweek Samwu-led municipal workers’ strike in December.

The deal included an “exgratia one-off payment” of R10,000 to 5,000 BCM workers, costing ratepayers R60m.

It also forced the metro to absorb an extra 365 temporary workers as full-time employees at a cost of R61m more per year.

Mulambo said the implementation of the salary standardisation, and the “rapidly increasing overtime costs, together with escalating employee-related costs, have placed pressure on the finances of the city”.

BCM council speaker Alfred Mtsi said revenue collection decline was also caused by the metro not applying enough muscle in collecting its revenue from residents.

“We are not doing sufficient in terms of collecting revenue.

“Our proposal has been that we need to turn into an electronic system.

“A lot of revenue is not being collected from the social amenities, like the zoo, city hall and swimming pools.

“There is room for improvement,” Mtsi said.

According to the national Treasury, employee-related costs had escalated while at the same time the city was grappling with an annual growth in the indigent population.

Another major contributing factor was that the metro had increased its payments to capital projects out of its cash reserves, while there was no additional revenue being generated to replenish the cash reserve.

“Operating deficits (R565m and R311m in 2017-18 and 2016-17 respectively) have had an impact on the cash-flow position of the city,” said Mulambo.

BCM spokesperson Sam Ngwenya said they were worried about the decline in revenue collection and were hoping that their “partnership” with the national Treasury would “beef up” collections.

Ngwenya blamed low economic growth, saying it had a “direct negative effect on the collection rate”.

The strike had also paralysed the metro’s payment offices.

Despite all, he said: "The city’s financial position is still stable and therefore there is no threat of service delivery hindrance."

In a report to council, Pakati presented a negative 2018-2019 adjustment budget which highlighted the metro’s failure to spend millions of rands on service delivery.

He said the strike in December saw the debt collection rate drop to 81.9% in December, falling short of the metro’s 93%

target.

Although he wanted the council to approve the adjusted budget last week, councillors refused to approve it. They demanded a “workshop” to discuss it.

ANC ward 45 councillor Thozamile Norexe said: “Whether it’s a budget or an adjustment budget it’s hard to check each and every page where things are hidden. I’ve got a suggestion here that we note this adjustment budget and suggest that you organise a workshop so that all of us can sit down and go page by page on this so that we can all be on board and go forward.”

ANC ward 25 councillor Crosby Kolela said: “We want to know which capital projects have not yet gone to tender or bidding, because my assumption is that if by March you have not gone out to tender you won’t be able to utilise that budget by July.”

“This money must work now. We don’t want to be continuously told the money has been committed. As a ward councillor I feel the pressure. It’s hot to be a ward councillor. If you don’t spend the money, we will show you how to spend, in that workshop.”

Senior ANC councillor Sindiswa Gomba opposed the adoption saying: “We’ve got a history with this adjustment budget… We fail to perform and at the last quarter expect us to believe in wonders. Big monies being moved around and a lot of things happening. Your MAD (Make-A-Difference) campaign is one them, the black plastics is also another example. And if you look at the report looking at the third quarter spending, it gave us goosebumps in terms of us not spending.”

The councillors held the workshop on Wednesday and the adjustment budget will be tabled again in council next week for approval.