Bank loan for municipality

THE Enoch Mgijima Local Municipality is set to make a short-term loan of R40-million from First National Bank (FNB) – to be paid back by the end of June this year – to pay this month’s salaries and Eskom.

This was stated in the financial recovery plan document tabled in a council meeting on Tuesday. The document indicates that the local authority’s revenue collection in December was poor.

“After salaries were paid on December 15, there were other commitments – such as third party payments, medical aid and payments to the pension funds – which amounted to more than R5-million. On January 7, R2.23-million was paid to the South African Revenue Service in respect of the Skills Development Levy (SDL) in December.

“The municipality will therefore not have sufficient funds to pay salaries from its own funds on January 15,” the document reads.

However, when opposition parties inquired whether the loan was to pay this month’s salaries, the ANC said salaries had already been paid and that the R40-million loan would be utilised to pay the Eskom debt only.

United Front councillor Aaron Mhlontlo asked whether council was being asked to approve what had already been done, seeing that salaries had already been paid.

“Are we requested to approve what has already been implemented or what is yet to be to be done? If the former is correct, what then would be the implications?” he asked.

ANC councillor Noluthando Nqabisa said the local authority had struggled to collect revenue for the past three months, which could have amounted to an estimated R60-million. She said this was a clear indication that the municipality was in a financial crisis and needed assistance.

The newly-appointed municipal manager (MM) Chris Magwangqana said the loan would greatly assist in the first quarter, but would not get the municipality out of the quagmire it was in. He alluded to last year’s financial crisis where Eskom almost cut off electricity in November due to the non-payment of R25.3-million.

“We need to manage our finances in a manner that will enable us to have capital. Our accounts are in arrears because of late payments and we owe Eskom R33-million but we only managed to collect R16-million.

‘We are running at a deficit and losing money, hence we need a cash injection to balance things. Last year, Eskom threatened to cut off electricity because of non-payment and we do not want to find ourselves in the same situation. The short-term loan is the only solution and will be paid back by the end of June.”

DA councillor Chris de Wet asked whether the MM was being realistic by assuming that the municipality would collect enough revenue to repay the loan by June.

“Making a loan to incur more debt is dangerous. People have a culture of not paying, so whoever approves this loan will be held accountable if FNB is not paid by June,” he warned.