Drakenstein Municipality borrowing questioned

DRAKENSTEIN Municipality has taken external loans in excess of R500 million to boost its capital budget despite caution by the provincial and national treasuries about its reliance on borrowing and the apparent unaffordability of the transactions.

In the 2016-2017 financial year, the municipality had external loans amounting to more than R800m but in April the municipal council resolved to sign agreements for three loans to the value of R506m amid concern expressed by opposition parties. According to provincial treasury, the new loans will result in yearly repayment instalments of at least R80m “which will put further pressure on the liquidity position of the municipality if not managed effectively”.

In a letter addressed to the municipal manager, Johan Leibbrandt, the provincial treasury expressed concern on the municipality’s capacity to spend the borrowed amount as it had rolled over a loan amount of R83m meant to be spent in the 2015-2016 financial year.

“The municipality is cautioned against its excessive reliance on borrowings to fund its capital budget and the underspending of the capital budget,” the letter read. The national treasury also expressed similar sentiments raising alarm at the municipality’s high debt to revenue ratio.

The municipality said in justifying the loans that the money would be used for bulk infrastructure which would stimulate economic growth in the next 10 years. According to mayoral committee meeting minutes, the areas set to benefit from infrastructure development include Vlakkeland, Erf 16161, developments along the N1 and along the R301.

noloyiso.mtembu@inl.co.za