Municipality cash crisis?

2010-01-25 00:00

MSUNDUZI Municipality did not pay some of its suppliers on time this month, causing problems for many small businesses in the city and fuelling rumours that the organisation is experiencing a cash-flow crisis.

The Witness newsdesk was told that the municipality allegedly owes Eskom between R48 and R50 million. There are allegations that the money for small, medium and micro enterprises (SMMEs), which is normally paid on the 15th of the month was held back so that the salary bill, due on the 24th, could be paid.

It is also alleged that a contributing factor to the crisis was that the municipality had to pay for the installation of smart meters, which it had not budgeted for.

Suppliers affected spoke to The Witness on condition of anonymity. Many said they have never experienced this problem before.

One said he has been doing business with the municipality for at least three years and always received his money on time. “We smaller businesses have liquidity problems at this time of the year because many of us are just building our businesses and don’t have large bank balances. It is unheard of for a large organisation like the municipality to be experiencing such problems. They should have some money in liquidity to allow for periods like January, when people who have spent all their money over the festive period are slow in paying their rates, lights and water accounts,” he said.

The owner of an SMME that is owed more than R200 000 said he has staff to pay who need money for school fees and uniforms. “This delay in payment is causing big problems for us,” he said.

The owner said he offers an essential repair service and he and his staff willingly respond to calls from the municipality during the night or day. “This is not the way we should be treated by such a large organisation.”

Several of the suppliers said they became convinced that there are cash-flow problems because of the different and inadequate explanations they have received from municipal staff as to why they did not get their money on time.

A supplier said every time he phoned he was given a different story. “I don’t think the clerks were adequately briefed, and depending on who you spoke to, you were offered different stories. I was told there were problems with the computer, another thought the problem lay with the bank.”

By last week, the suppliers said, they were fed up with being fobbed off by officials in the municipality’s finance section, who said they would get their money, but could not give them a definite date as to when funds would be transferred.

Municipal manager Rob Haswell denied there is a cash-flow crisis. In a statement to The Witness, he said January always poses a cash-flow challenge, but there is no financial crisis. “During the month, we have been reassessing whether all the creditors who are normally paid on the 15th of each month, by virtue of being SMMEs, are in fact still SMMEs. By [last] Friday all creditors and staff will have been paid,” he said.

According to Haswell, the allegation pertaining to the installation of the new smart meters is without any foundation. He added that the municipality is confident that by the end of February its reserves will have been adequately replenished.

“In order to enhance our cash flow, we have commenced a strict credit control drive, including the disconnection of domestic, business and government defaulters,” said the municipal manager.

Deputy municipal manager for finance Roy Bridgemohan said Eskom has been fully paid up. He said Eskom has a stringent policy of disconnection if not paid, and the fact that the city has electricity is proof that the bill has been paid. He found it interesting that the amount mentioned is between R48 to R50 million, which is the monthly bill to Eskom.


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