Fred Nel

DA Gauteng Spokesperson on Local Government

Emfuleni municipality, which covers the Vaal area in Gauteng, is in a financial predicament which could have been prevented. According to the Star this morning the Emfuleni municipality must obtain R150 million in short term loans to boost its cash flow or face bankruptcy. This is the first step towards bankruptcy for any organisation, including municipalities.

Emfuleni is not the only municipality that uses short term loans to boost its cash flow in this province. It was recently reported that the Tshwane municipality sat with a short term loan facility of R1.3 billion used to boost the metro’s cash flow.

Using short term loans in this manner points to serious financial management deficiencies in a municipality. The DA pointed out last week that debt owed to municipalities in Gauteng rose by R4.26 billion (19,2%) between 31 March 2011 and 31 March 2012. This is debt older than 90 days. Gauteng municipalities are currently owed in excess of R26 billion (older than 90 days) which it is unable to collect.

The seriousness of the growth in debtors owing for more than 90 days cannot be underestimated as the bulk of these debts are usually not recovered.

The DA reiterates its call for three concrete steps that must be taken to turn this vicious cycle around:

* The South African Revenue Service (SARS) must be brought in to explore the possibility of linking municipal arrears with income tax returns where this is possible. An agency agreement between municipalities and SARS will cost much less than the expensive debt collection methods utilised currently.

* Municipalities must be encouraged to appoint well-qualified personnel to their financial departments to strengthen their management capacity. More personnel should also be employed in call centres to contact consumers who are in arrears to improve collection rates.

* Pre-paid electricity meters should become mandatory in all new building developments and solar panels should become standard features on all RDP houses. Municipalities must also introduce subsidy schemes for all existing buildings wishing to install pre-paid electricity meters and solar panels. A partnership with Eskom in this regard should assist municipalities in the roll-out of alternative energy measures.

I will raise this matter with the new MEC for Local Government and Housing Ntombi Mekgwe and urge her to take immediate action to remedy the municipal financial crisis faced by Municipalities in Gauteng.

I will also request that the DA leadership in Emfuleni take these proposals forward in council as a matter of urgency.

The trend of financial ruin faced by Gauteng municipalities cannot be allowed to continue. Service delivery levels will continue to decrease and more violent community protests can be expected.

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