Budget reflects cash-strapped Sol’s challenges
THE SOL Plaatje Municipality’s draft budget, which will come into effect on July 1, reflects the serious challenges confronting the municipality including a low revenue base, unfunded budgets, a more than R50 million budget deficit and serious cash flow constraints.
The revenue collection has been on a downward trajectory, with some residents, businesses, government departments and state-owned enterprises not paying their municipal debts, and one of the biggest challenges facing the municipality is cash flow.
In his report contained in the draft budget, the executive mayor, Patrick Mabilo, pointed out that the anticipated income streams were not forthcoming and the budget had taken a downward turn, compelling the municipality to take extraordinary budgetary measures to ensure the municipality remains functional and stable.
“We are still faced with some of our ongoing challenges, namely the sewage spills, water cuts, potholes, refuse collection and electricity cuts. Our teams have been working diligently on addressing these challenges, however chief amongst these is the vandalism of our assets, primarily our electrical infrastructure.
“In order for the municipality to regain its financial standing, I, as the executive mayor, will ensure that fruitless expenditure and mismanagement are a thing of the past. I work endlessly to ensure that funds are accounted for to improve services to our people.”
Mabilo pointed out further that the electricity increase, which was in line with the Nersa guidelines, followed a deficit in the current year adjustment budget. “This increase will narrow the deficit in electricity service revenue.”
A projected loss of almost R11 million is also expected in income from property rates due to a change in the Municipal Property Rates Act.
“The category ‘Property used by Organ of State’ is not stipulated in the act and will be phased out over the next two years. This amendment necessitated the municipality to increase property rates.”
Mabilo stated further that drastic action was required to preserve liquidity, sustainability of the municipality to continue operating as a going concern.
“This implies that the Debt Collection Policy has to be implemented diligently and timeously but also with utmost fairness to our most vulnerable of society,” Mabilo stated.
“The municipality has also indicated that underfunded and unfunded mandates, especially libraries, provincial resorts and health, have had a negative impact on its finances and has requested that the issue be discussed with the relevant stakeholders.”
The executive summary of the draft budget paints an equally bleak picture, pointing out that the municipality is facing severe financial sustainability and service delivery challenges with the cost coverage being less than one month.
“The municipality is working on turning the situation around in terms of stabilising the cash flow position. Various cost-containment measures have been implemented of which overtime has been the biggest challenge.”
Overtime, which forms part of employees’ costs, has been capped at 30 hours across most units within the municipality. The salary wage bill was also investigated, although it was pointed out that this might not be an overnight fix. The soft lock on all vacancies was also immediately implemented. This is expected to realise a saving of approximately R50 million and that will assist the municipality in ensuring that the budget is funded and build up a reserve even quicker.
“The filling of critical vacancies, like the IDP manager will be appointed as soon as the cash flow position has stabilised.”
It was stated that various provincial departments have also been engaged to collect outstanding debt from organs of state, while councillors and employees were also approached to make arrangements on their outstanding debt.
“Revenue inflows and expenditure outflows are monitored on a daily basis.”
The lower collection rate has however exacerbated the cash flow situation and the credit control office is diligently pursuing outstanding debt due to the municipality.
“In order for the municipality to thrive, overall performance must improve, the quality of services rendered must improve, accountability must be enforced, serious consideration should be given to the service delivery and financial implications of all decisions taken, ensure that acts, regulations and policies are adhered to, enhance revenue collection and ensure that operational and capital funds are spent effectively with good value for money,” the executive summary states.
“Improve on preventative maintenance and spend funds cost-effectively and efficiently to address service delivery challenges and ensure assets are maintained at desired levels and are being utilised optimally. The spending of funds will have to be prioritised, in light of the cash constraints and wastage be curbed.
Municipal officials should also take all reasonable steps to prevent unauthorised, irregular and fruitless and wasteful expenditure.
Officials are also urged to refrain from committing acts of financial misconduct and/or criminal offences.
“It is imperative that all municipal officials must have the inherent desire to do their job to the best of their ability, take pride and ownership in their work, take accountability for their job functions, doing the right thing consistently and work as a collective, cohesive team to achieve the municipality’s long and short-term objectives. Foremost to all of these, have the community’s best interest at heart.”