Things are getting better at uMngeni

2011-10-24 00:00

RECENT media reports in The Witness regarding the finances of uMngeni Municipality call for clarification:

There is a fundamental difference between a municipality’s financial viability and its state of finances. A municipality is considered to be financially viable when it has the financial means and management capacity to deliver on its constitutional mandate. uMngeni Municipality has an operating revenue base in excess of R200 million per annum of which only 17% is derived from grants. What this means is that over 80% of its revenue is generated from rates and service charges which provide a sustainable revenue base to enable the municipality to continue to deliver services. The municipality is therefore financially viable.

The current state of finances, however, reveals that the municipality is incurring operating deficits. The reasons behind this are primarily twofold.

• The operating expenditure is excessive and needs to be trimmed to be lower than its revenue streams.

• The tariffs associated with the distribution of electricity do not reflect the cost associated with provision of the service and need to be reviewed.

These factors were identified by the provincial Treasury in the course of its support to the municipality, and steps were put in place and recommendations made to the municipality to address the problem in a sustainable manner over the medium term.

There is no denying that uMngeni Municipality’s finances are in a poor state particularly around its cash flow and cash management. Consequent to Treasury’s limited support programme, the municipality has shown some improvement in reducing its net available cash position from an overdrawn R25 million at the start of the 2010/11 financial year to an overdrawn R20 million at the end of the financial year. The pace of this improvement is, however, slow. This may be due to municipal officials not enforcing the rigorous conditions of financial management recommended by Treasury. The turning around of the finances of a municipality on a 10-cent coin is not feasible. It takes time, discipline and effort on the part of the stakeholders to address the problems in a sustainable manner.

Treasury believes that the current administration at the municipality must take ownership of the problems and have the commitment to address them immediately with discipline. Under the Municipal Support Programme, Treasury will continue to support the municipality in improving its financial standing as we have done for some time.

I am convinced that uMngeni Municipality has the potential to be one of the leading municipalities in the province, provided that it manages its finances with care and diligence.

• Ina Cronjé is MEC for Finance, KZN, MPP.

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