Council unable to pay salaries

2010-06-25 10:11
Nelspruit - None of the employees of the Mbombela municipality will receive a salary this month if the council decides on Friday not to take a R57m overdraft facility from Absa.

Officials will therefore be watching their 74 council members carefully when they meet on Friday morning. Should they decide against the overdraft facility, not one of the 1 400 staff members or any of the council members will receive their salaries.

The council's salary account runs towards about R30m per month.

The municipality's financial problems came to light last month, and it had to dip into its reserve funds to meet its financial obligations.

Residential debt, 2010 spending

Two of the main reasons for their financial situation were the large outstanding residential debt and the extravagant spending related to hosting the 2010 Soccer World Cup.

Beeld last month reported how the council was anxiously awaiting the payment of a R200m Development Bank of Southern Africa (DBSA) loan, which it had applied for last year.

Although the bank had agreed in June 2009 to lend the money to the municipality, there were strict terms.

These included, amongst others, that the money only be used for a development project at the Mattafin informal settlement outside Nelspruit.

The Mtombela Stadium, which was built for the World Cup at a cost of R1.4bn, is situated in the middle of this squatter camp.

The council had hoped that the money would be paid at the end of May so it could be used as bridging capital until the financial situation had improved. But this did not happen.

Serious concerns were aired last week when there was speculation that the bank might have finally decided against giving the loan to the council. But no announcement was made in this regard and it is possible that the loan is still being considered.

The municipality's financial committee apparently decided earlier in the week to recommend to the council that an overdraft facility of R57m be arranged.

The money would be used to pay the staff salaries as well as the city's Eskom account.

Technically broke

The council's financial obligations for June ran into more than R280m.

Residents of the larger Mbombela area, which includes towns like Nelspruit, Hazyview, White River, KaNyamazane, Matsulu and Kabokweni, owe the council more than R370m for power, water and rates.

Most of the debt is from residents of the latter three towns.

Gerhard de Bruin, leader of the DA in the council, warned last month that the council would probably not have money for salaries in June.

His fears have now come true.

He said on Thursday the DA supported the decision to urgently get an overdraft facility at the bank until the loan paid out.

"If it is true, however, that the DSBA bank loan has finally been declined, then the council is technically broke," said De Bruin.

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