Teetering on the edge
End of Year Report
Yesterday at the Special Council meeting the main item was the Annual Financial Statement for 2016/17. The contents were hardly discussed, rather the fact that it was only just ready for the mandated 31 August deadline. The Chief Finance Officer is on leave, so Colleen Mani has had the onerous job of pulling the report together, with the huge additional burden of having to comply with new regulations, municipal Standard Chart of Accounts (mSCOA). This is also part of the explanation for municipal rates and utility bills arriving so late this month.
To add to her intense pressure that has meant her working into the small hours, the returns from Makana Departments have rolled in extremely late, the last being received at midnight the day before the final deadline.
We heard that a number of aspects of Makana’s accounting have been tightened up this year, though that doesn’t necessarily mean a better financial position. The topics also covered governance since the Municipal Manager is the Accounting Officer. The problems are caused by the inconsistencies from having endless chopping and change between acting Municipal Managers. All the candidates are Directors, taking it in turns to occupy the hot seat, so who conducts performance monitoring on whom? The Executive Mayor stated that it was welcome news that the legal contestation for the MM position by Paul Notyawa has finally been dismissed, meaning that Makana can immediately advertise for selection of a new MM.
It was also celebrated that since 1 August there is now a new Director of Corporate Services, to deal with staff management issues. There will be a vacancy for Director of Community Services as Mr Mandisi Planga retires from that position next month.
Task Team on Makana Financial Recovery
The setting up of a cross-party task team was agreed at Council on 27 June, with 60 days to report back to Council, so it was unfortunate that their report has been deferred until the next Council meeting. This was done at the behest of the Mayor who was dissatisfied with the quality of the report that appeared in the agenda yesterday.
The recommendations of the Task Team endorsed many of the points made in a REVCO Report delivered to Council on 15 August. Revenue Consulting (Pty) Ltd (REVCO) are hired by Makana on a threeyear contract which ends in February 2018 to assist with debt collection and training staff.
We know Makana is teetering on the edge, unable to pay suppliers, running out of basic materials, and teams not communicating or cooperating with each other. And now there’s a report that spells out just how great the challenges are for Makana’s financial crisis.
For example, they cannot give Makana advice about pre-paid consumers because no links exist between the pre-paid meter and the erf/ account number. A significant part of revenue loss is due to ‘distribution loss,’ which could not be quantified for 2016/17 financial year due to nonavailability of key data. The Auditor General Report for 2015/16 estimates electricity losses at R38.6 Million. Other extreme problems include meter readers who cannot reliably read meters, thousands of indigents who are not registered, services supplied to addresses where the account holder is deceased and no contract exists, properties that haven’t been transferred, not to mention supply of services to informal residences.
In the 29 August FAME Portfolio agenda it shows the collection rate for water billing as 39% for the month of June, that’s over R3.5 million lost revenue in one month.
The debt mountain
Debt owed to Makana is given as R358.6 million. The reality is that the majority of this debt is uncollectable for practical and legal reasons. The report shows that almost half the debt is uncollectable and it would actually be illegal to try. It then details more accounts where collection is unlikely to be viable, say, because it is not worthwhile or desirable to attach an RDP house to a court order. The report states: "council has 8 791 accounts currently on the debt book valued in excess of R145 million that are deemed impaired".
It is illegal for Makana to estimate metered consumption for periods in excess of four months. In the analysis presented, not only are there numerous breaches of the law, there were also 1 925 water accounts showing zero consumption and cases of bulk users who haven’t had a meter reading in excess of 12 months.
Where REVCO have found opportunities to enforce debt collection they have issued 281 cut-off requests in April 2017, but only 33 have been actioned by Makana.
The full REVCO report is available by visiting the GRA website http://grahamstownresidentsassociation. co. za/ wp-content/uploads/2016/04/ REVCO-Report-15Aug17.pdf
Towards a brighter future?
Despite the chaotic picture presented, the REVCO report manages to end on an optimistic note, stating that the challenges are not insurmountable as long as there is sustained commitment by Makana to address skills and resources, combined with appropriate technologies, systems and procedures. The key words are "sustained commitment", as it will take six to nine months to appoint a permanent Municipal Manager and we can’t wait that long.