Tshwane unable to pay

SOS: MAYOR ASKED NATIONAL TREASURY TO HELP WITH RECOVERY PLAN The city’s creditors amount to R6.9 billion and include Eskom and Rand Water.

Tshwane city manager Moeketsi Masola has approached National Treasury to help draft a financial recovery plan that might see it restructuring income and expenditure in its current approved budget.

Despite an undertaking to do so, the city failed to respond to an enquiry in this regard.

National Treasury has, however, confirmed that the draft plan was set to serve at mayor Solly Msimanga’s mayoral committee Lekgotla last week.

The City of Tshwane has, for the past few years, consistently performed very poorly with regard to financial sustainability as measured by Ratings Afrika and when compared to other metros.

Ratings Afrika analyst Leon Claassen says Tshwane’s latest financial statements show its financial situation remained precarious in the financial year ended June 30, 2017. Its liquidity and cash flow management remains under severe pressure, he says.

“Its liquidity shortfall is estimated at R3.5 billion, which is larger than the shortfall of R3.1 billion in 2016.” Claassen said the main concern with the weak liquidity is that the city is unable to pay its creditors within the stipulated 30 days.

“Tshwane’s creditors amount to R6.9 billion and include service providers such as Eskom, Rand Water and many small businesses that are normally dependent on timeous receipt of the payment for the services rendered.”

Claassen says Tshwane’s operating performance improved in 2017 with the operating loss of R2.4 billion in 2016 that has been turned into a surplus of R400 million.

This is mainly because operating expenses have remained flat, while the revenue increased by some R2.8 billion, Claassen says. To improve its financial situation, Tshwane will have to further improve its operating performance through a reduction in expenses and faster growth in revenue. The larger surplus that would be realised will enable the metro to change its liquidity shortfall into a surplus over the medium term, he says.

It, however, remains to be seen how that would affect service delivery in the short term.

National Treasury said the financial recovery plan is still in draft form. It has been developed by the Municipal Finance Recovery Services within Treasury together with Masola’s office and Tshwane chief financial officer Omar Banda.

It was presented to the senior management of Tshwane in order for it to be discussed at last week’s mayoral committee Lekgotla, Treasury stated.

Municipal expert Advocate Werner Zybrands said the Municipal Finance Management Act provides for National Treasury to intervene in financially-troubled municipalities or assist at their request.

He said it was the responsible approach for the City of Tshwane to approach National Treasury pro-actively for assistance.

The current DA administration has been vocal about the financial problems it inherited from the ANC. But it has repeatedly denied speculation that the city might be placed under administration.

The drain on the city’s finances from the controversial smart metering contract with PEU Capital Partners is on-going as the court order that set the unlawful contract aside has been suspended, pending a ruling on an equitable remedy. –

Controversial smart metering contract to blame