City in major cash crisis

2010-02-08 00:00

THE Msunduzi Municipality spent almost R165 million more than it raised in the first half of its financial year, and is running at a loss.

This was stated by the deputy municipal manager for finance, Roy Bridgmohan, at last week’s sitting of the finance committee, during which politicians went head-to-head with senior officials in what appeared to be an attempt to cover up the state of the city’s finances.

When Bridgmohan tabled his mid-year report about the municipality’s operating and capital expenditure from June to December last year, he said that although there is no financial crisis, there is a need for belt-tightening as the municipality were fun­ding a lot through its reserves.

Democratic Alliance councillor Rodger Ashe then asked Bridgmohan if an amount of R164 989 670 cited in the report represents a loss or a gain. After skirting the issue, Bridgmohan eventually admitted it represents a loss.

Ashe berated Bridgmohan for not placing a minus sign in front of the figure, saying Bridgmohan should have clearly stated the negative figure at the beginning of the 44-page report instead of burying it.

“Pulling on reserves and relying on loans is a financial squeeze. We need to take this very seriously. We can’t keep making up losses by drawing from reserves,” Ashe said.

Msunduzi Mayor Zanele Hlatshwayo said she was confused.

“I’m not an accountant. Explain in simple terms,” she said to Bridgmohan, who in turn responded by saying: “We overspent in terms of income … We have a cash-flow crisis and I agree with councillor Ashe that we shouldn’t be using reserves to fund ourselves.”

Bridgmohan said the finance department is looking into debt management and is working to collect all the outstanding money that is due because it is running at a loss.

Ashe accused Bridgmohan of trying to fool the committee, adding: “We’ve [got to] get our house in order because if we don’t,we will go bankrupt.”

ANC councillor Pops Chetty said that if things continue at this rate, the municipality will have overspent by R350 million by the end of the financial year.

“Alarm bells must go off now,” he said.

ANC councillor Themba Zungu asked how expenditure can be reduced when the true nature of the spending is not reflected in the report.

“Good people, it’s very bad what’s happening in this council. Officials, you are faking and hiding and letting this council down … Why are you hiding? Who instructed you to hide, because this is council’s mo­ney … I just want an answer. We want to know,” he said.

When Hlatshwayo asked municipal manager Rob Haswell to respond, he declined and passed the baton to Bridgmohan.

The deputy municipal manager for community services, Zwe Hulane, elected to respond and said R122 million of the R165 million has no cash-flow connotations, and that it does not impact on their reserves because it represents council assets.

When Haswell shouted: “A lot of wild statements have been thrown around, so then let’s make it clear that there is no crisis …” he was promptly cut off by Hlatshwayo.

“I gave you a chance to speak and you said no,” she said.

Mattie Thompson, a senior manager in the finance division, warned that just because the bulk of the money represents assets, it does not mean that borrowing against these assets will not have a major financial impact by the end of the year.

Zungu then referred to a report written by then acting municipal manager, Phil Mashoko, that stated that the city is on the verge of a financial crisis.

Haswell later disputed the report and claimed there is no crisis.

“Mashoko came out with a statement and was abused for it. So he was right. This is one of the things that made him leave this council,” said Zungu.

Hlatshwayo said that compared to last year, the municipality are not in the same position financially.

“Are we [going to] fold our hands because officials say everything is fine? Should we wait until we are liquidated? It would be irresponsible of us to bury our heads,” she said.

Haswell said he would present a strategy about how to deal with the situation at the next meeting.

“We need to stabilise our finances … it’s a very serious situation. If we act, we can get through it. We’ve got to sit down collectively,” he said.

IN August last year, The Witness reported that the municipality was on the verge of a financial crisis.

This was evident in a report written by then acting municipal manager Phil Mashoko, which was tabled at a full council meeting and then suddenly withdrawn at the insistence of council speaker Alpha Shelembe.

Well-placed sources told The Witness that the reason for the sudden withdrawal of the report was that it contained a confidential item about the municipality’s cash flow crisis that was not to be discussed in the presence of the media.

The Witness managed to acquire the report which stated:

“… the cash flow position of this municipality is not as healthy as it should be. As at 30 June 2009, the cash position decreased from R256 million to R125 million. As at 25 August 2009, the cash balance position stood at R100 million.”

The report went on to say that although the municipality’s monthly collection rate stood at 75%, it still needed to improve its cash position.

The cash reserves were replenished on August 20 by the municipality’s chief financial officer, Roy Bridgmohan, by “drawing down the long-term loans granted in the 2008/09 financial year”.

Haswell furiously denied the crisis and sources said Mashoko was vilified for writing it, with some calling for his suspension.

Mashoko, who was the deputy municipal manager for infrastructure services, resigned in December and is now based in Cape Town.

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