City warned over plan to di­vert funds from loan

The Herald (South Africa) - - Front Page - Siyam­tanda Capa ca­[email protected]­soblack­

The Na­tional Trea­sury has stepped in to re­mind the Nel­son Man­dela Bay mu­nic­i­pal­ity about the law and warn it against spend­ing its loan fund­ing on any­thing other than cap­i­tal projects, such as in­fras­truc­ture.

The warn­ing came in a let­ter to act­ing city man­ager Peter Neil­son less than 24 hours af­ter a plan was pre­sented to the coun­cil to di­vert more than R300m in loan fund­ing meant for in­fras­truc­ture to­wards set­tling le­gal bills and sum­mer sea­son fes­tiv­i­ties.

The plan to amend the R700m ex­ter­nal loan fund­ing busi­ness plan was, how­ever, not passed at Tues­day’s marathon coun­cil meet­ing – which came to an end at 3am on Wed­nes­day.

The plan was in­tro­duced by in­fras­truc­ture and en­gi­neer­ing po­lit­i­cal head Andile Lungisa be­fore coun­cil­lors went on a cau­cus break.

It was not dis­cussed or ap­proved af­ter the break.

In the Trea­sury’s let­ter, in­ter-govern­ment re­la­tions deputy di­rec­tor-gen­eral Mal­i­jeng Ngqaleni warned the city to “con­form strictly to the re­quire­ments of sec­tion[s] 45 to 50 of the Mu­nic­i­pal Fi­nan­cial Man­age­ment Act (MFMA)”.

“I would like to re­mind you as the ac­count­ing of­fi­cer of your re­spon­si­bil­i­ties as ar­tic­u­lated in sec­tion[s] 60 to 70 of the MFMA and specif­i­cally the re­quire­ment govern­ing mu­nic­i­pal bor­row­ing as out­lined in chap­ter 6 – the chap­ter on mu­nic­i­pal debt,” Ngqaleni wrote in the let­ter.

The Act, which gov­erns the way mu­nic­i­pal­i­ties spend money, says long-term loans may be used only for cap­i­tal projects.

“The pro­ce­dure[s] out­lined in the MFMA are also in­struc­tive in this re­gard,” Ngqaleni pointed out.

“No pay­ment should be made to any ser­vice provider be­fore all the pro­ce­dural pro­cesses have been fol­lowed to the let­ter of the law.

“If you have not con­sulted [the] Na­tional or Provin­cial Trea­sury with re­gard to this loan, may I sug­gest you do so as a mat­ter of ur­gency.”

Neil­son was in­structed fur­ther to sub­mit to the Na­tional Trea­sury the cer­ti­fi­ca­tion of long-term bor­row­ing, a copy of the news­pa­per ad­vert invit­ing com­ments from res­i­dents, the lat­est bor­row­ing-mon­i­tor­ing re­turn and the re­pay­ment sched­ule. “I hope this pro­vides you with the in­for­ma­tion and guid­ance you need to en­sure that any ac­tions by the mu­nic­i­pal­ity re­main clearly within the am­bit of the law.

“[The] Na­tional Trea­sury would wel­come the op­por­tu­nity to pro­vide fur­ther guid­ance to you or your coun­cil should this be re­quired,” Ngqaleni con­tin­ued.

Lungisa, who pushed for the changes to the ini­tial loan­fund­ing busi­ness plan, on Wed­nes­day de­scribed the let­ter from the Trea­sury as “non­sen­si­cal” and then claimed that the story pub­lished in The Her­ald was fac­tu­ally in­cor­rect.

Lungisa dis­puted that the amend­ments to the plan in­cluded in­ten­tions to use R45m of the loan fund­ing for var­i­ous fes­tive sea­son events.

This de­spite the fact that the doc­u­ment dis­trib­uted to all coun­cil­lors clearly stated that they wanted to use R45m of the loan fund­ing for sum­mer sea­son fes­tiv­i­ties.

And de­spite the fact that Lungisa stated publicly that the city was dead dur­ing the sum­mer sea­son.

“We have seen the let­ter from [the Na­tional] Trea­sury and we will en­gage with Trea­sury,” he said.

“The sim­ple ques­tion which needs to be asked is how can a coun­cil meet­ing sit and be con­cluded at 3.30am, but when Peter Neil­son ar­rives at the of­fice at 8.30am there is a let­ter from Na­tional Trea­sury?

“Who has com­mu­ni­cated the de­ci­sion of coun­cil to the Na­tional Trea­sury?” Lungisa said.

Lungisa ac­cused the Na­tional Trea­sury of in­ter­fer­ing in coun­cil mat­ters.

“Why is Na­tional Trea­sury in­ter­fer­ing in the in­ter­nal mat­ters of the Man­dela metro, which is a third sphere of govern­ment?

“That is in­ter­fer­ence be­cause Trea­sury must wait and hear the de­ci­sion of coun­cil,” he said.

“This is a non­sen­si­cal let­ter writ­ten by the Trea­sury and has noth­ing to do with the de­ci­sions of the coun­cil meet­ing.”

He said it was clear that the Trea­sury was tak­ing in­struc­tion from the ratepay­ers’ as­so­ci­a­tion.

“We can’t have Na­tional Trea­sury in­ter­fer­ing,” Lungisa said. “Lo­cal govern­ment has its own au­ton­omy, that is why we can’t have a de­part­ment which is in­ter­fer­ing.”

Neil­son could not be reached for com­ment.

BLACK AND WHITE: A pull­out from the pro­posed busi­ness plan amend­ment for the use of R700m loan fund­ing, in which the mu­nic­i­pal­ity sug­gests us­ing R45m on sum­mer sea­son events

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