City warned over plan to divert funds from loan
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