Kouga finances under pressure, but stable

2017-01-19 06:02

THE first six months of the 2016/17 financial year have passed and the cash flow of the Kouga Municipality is under pressure, but the new DA government is confident that the financial position of Kouga is stable.

“However, we have to sort out the R46 million water bill with the Nelson Mandela Bay Metro this year, as well as face the 2012 St Francis Bay fire court case that, if Kouga Municipality loses, will cost ratepayers tens of millions,” said Finance Portfolio Councillor Brenton Williams.

“There are other contingent liabilities we need to look at and determine exactly what our exposure is. While the financial position of Kouga is no longer precarious, there is still a long road to walk before we will be satisfied with the finances of the Kouga Municipality,” added Williams.

In the July to December 2016 period, Kouga’s operating revenue amounted to R364 million, while operating expenditure amounted to R272 million.

This resulted in an operational surplus of R92 million. “This “surplus” is however misleading explained Williams as the Kouga Municipality accounting policy only factors in bad debt provision and depreciation and asset impairment at year end instead of on a monthly basis.

“This is something we want to change when we draw up the new budget for 2017/18,” said Williams.

Overdue consumer debts increased by R16 million during the period under review, which represents a 15 % increase. Total debtors amount to R129 million.

Household debtors reflect the bulk of the money outstanding with R113 million owed. Commercial debtors and other government departments reflect the rest of the money that is owed to the Municipality.

The total amount of rates collected was R100 million, which is 67% of the budget.

Nearly 30% of all property rates is paid yearly in advance and was collected in July 2016.

An amount of R83 million is owed to creditors of which R24 million represents current creditors.

The major creditors are the Department of Transport (R10 million), Eskom (R16 million – current account), and the Nelson Mandela Bay Metro (R46 million –water account).

The Eskom account was paid in full on Ja-nuary 9, 2017.

The current ratio is 1.47:1. The current ratio measures the Municipality’s financial capacity to meet its current obligations.

A ratio of below 1:1 would suggest that the Municipality would be unable to meet all its current obligations as and when they fall due.

The liquidity ratio is 0.92:1. A favourable ratio indicates that the Municipality is able to settle its short term commitments from monetary assets.

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