Most KZN municipalities battle to manage debt and cashflow

2009-10-16 00:00

MOST municipalities in Kwa­Zulu-Natal are in financial distress, some are failing to meet government legislation on governance and the picture has become bleaker in the past three years.

These were the some of the challenges facing most municipalities captured in Finance MEC Ina Cronje’s municipal close-out report for 2008/2009, tabled before the legislature yesterday.

Cronje said at least three municipalities in each of the 10 districts have reported financial instabilities, adding that they are failing to manage their finances and that this is impacting negatively on service delivery throughout the province.

Four municipalities failed to submit reports on their capital expenditure, said Cronje, adding that 54 of the 58 municipalities delegated to the Provincial Treasury have under-spent on their operating budget.

Financial distress experienced by these municipalities, said Cronje, resulted from political interference in the finances and procurement processes.

“The deterioration in local government finances and financial management is of such a scale that it requires national and provincial government to adopt a far more proactive approach to assisting and intervening in municipalities,” she said.

The other contributing factor to the poor state of finances at municipalities, said Cronje, is huge debts owed by government and ratepayers. These municipalities lack debt management and billing systems.

“The total amount owing to municipalities in KZN has grown from R2,7 billion in 2004/2005 to R7,6 billion as at 30 June 2009. This represents an increase of 181,5% from 2004/2005 to 2008/2009 compared to 76,6% increase in the national total,” said Cronje.

She said the debts owed to these municipalities have impacted negatively on their cash flows and that the cash coverage ratios at some municipalities are less than one month, adding that most municipalities rely on national government grants.

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