Why is the Emfuleni LM not under administration yet?

By Cllr Danie Hoffman, Leader of the Democratic Alliance Emfuleni LM Spokesperson on Finances ELM

And

Cllr Jaco Karsten, Chief Whip, Emfuleni ELM:

The DA  is calling for urgent intervention in the Emfuleni Local Municipality.

This comes after the continued poor financial performance of the municipality in recent years.

The financial situation has deteriorated to such an extent that service delivery has become almost impossible.

The current position is reflected in the anticipated reduction in the operational budget which could see a budget cut of R300m during the current financial year as a result of poor collection levels and overspending  by the Emfuleni local municipality.

Council reports also reveal that there is a major backlog when it comes to the upgrading and maintenance of infrastructure in the municipality.

There is currently a financial backlog of R4.2 Billion when it comes to the maintenance of road infrastructure.

There is also a:

– R1.6 billion storm water infrastructure backlog;

– R723 million backlog when it comes to the maintenance of waste water treatment plants;

– R1.1 billion sanitation backlog

In total, the municipality needs R7.2 billion to eradicate the current infrastructure backlog and a further R10.7 billion over the next ten years.

The main reason for these backlogs is because the Emfuleni municipality has failed to manage municipal expenditure and ensure proper revenue collection from residents.

The municipality’s under collection has been further aggravated by the loss of corporate income as a result of the closing of Arcelor Mittal’s Vereeniging plant, in particular a loss of electricity revenue.

During the previous financial year consumer debts increased by R498m, in addition to existing unpaid electricity, water and rates accounts totalling R2.8 billion.

Recently the municipality appointed MBD Credit Solutions to collect outstanding revenue with facilitation support provided by the municipal internal Revenue Department. However, this support has not been provided to date.

This means that the municipality is paying an outside service provider to collect outstanding debt, while failing to strengthen its own internal capacity.

 

This cash flow crisis is compounded by excessive salaries being paid to councillors, which totals almost R42 million this financial year, after their salaries were recently increased from a Grade 5 to a Grade 6 scale.

The Democratic Alliance voted twice against the approval of this increase in light of the current financial crisis at the municipality.  We also argued that this increase was only meant to implemented in metropolitan municipalities – Emfuleni Local Municipality is not a metro.

While councillors are still receiving their new increased salaries, the current financial crisis means that many service providers are not being paid. This non-payment is so prevalent that even the printing of agendas for council meetings has been halted due to the service provider not being paid.

The DA has continuously called for the Emfuleni Local Municipality to be placed under administration so that the current financial mess can be addressed and service delivery, including the upgrading and maintenance of infrastructure, can resume.

At a council meeting at the beginning of this month the DA rejected a report recommending that the Council accept a R2 billion loan from a private lending agent.

The DA rejected the report for a number of reasons including:

– concerns relating to the inadequate credentials of the private lending agent;

– excessive interest that will need to be paid to the lending agent; and

– that no due diligence and approval from National Treasury was facilitated before approval of the acceptance of the R2b loan.

The DA pointed out that accepting this unsolicited loan would result in the municipality contravening the Municipal Finance Management Act (MFMA)  and that it was not in the best interests of residents.

Despite our concerns, the ANC Emfuleni municipality went ahead with soliciting this loan.

It is clear that urgent intervention is required in the Emfuleni local municipality.

The DA will therefore be writing to MEC of Human Settlements and Cooperative Governance and  Traditional Affairs, Mr Jacob Mamabolo to urgently place the local municipality under administration.

This is the only way to resolve the current financial situation and ensure that service delivery and the needs of residents is prioritised.

The ANC-run Emfuleni stands in clear contrast to its neighbour the DA-run Midvaal, which leads all other municipalities in the province when it comes to sound financial management and oversight and which prioritises the interests of citizens.