No bail-out for city

2010-08-06 00:00

THERE is no bail-out on the horizon for the financially embattled Msunduzi Municipality.

So said KwaZulu-Natal Premier Dr Zweli Mkhize and Finance MEC Ina Cronjé at the legislature yesterday, where it was revealed that the municipality’s finances will barely tide them over the next three days

Cronjé said her department had not budgeted for a bail-out so “we cannot do it”.

She said they are prepared to help municipalities by enhancing their capacity until they can get back on their feet, but financial assistance is definitely out of the question.

Mkhize said a bail-out will create the wrong impression because municipalities will think that if they “cry out loudly”, something extraordinary will be done for them.

“That would create wrong precedents,” said Mkhize.

He said the municipality needs to look at improving its debt-collection policy and the provincial government will do their best to ensure that government departments pay what they owe the municipality.

Cronjé could not be drawn to comment on whether residents need to start bracing themselves for service delivery cuts in the near future owing to the municipality’s limited funds.

“We know that their cash situation is precarious … We do not intervene on the administration of municipalities and leave them to battle it out on their own. We know it’s not going to be easy, but they have begun to meet their major engagements,” said Cronjé.

Mkhize’s and Cronjé’s statements are a far cry from the sympathetic calls made by members of the legislature on Wednesday who said the only way for the municipality to get back on track is if the province gave them a much-needed cash boost.

Msunduzi administrator Johann Mettler made it very clear to parliament that the municipality will be bankrupt by the middle of its financial year, which falls in December, if they do not get financial assistance.

The Witness is in possession of the municipality’s projected cashflow for the month of August and the picture does not look good. (see insert)

According to this information, the municipality anticipates that they will receive R143 962 127,09 in cash, but are likely to spend R203 152 642,08.

This means that the likely cash deficit will be R59 190 514,99.

Major payments the municipality has to settle this month include R109 752 642,08 to Eskom on August 14, R28 million for salaries on August 24, R22 million to Umgeni Water on August 31 and R20 million to trade creditors also on August 31.

Municipal insiders who spoke to The Witness on condition of anonymity said the municipality’s loan book indicates that the municipality owes about R800 million in loans and the municipality is in turn owed a sum of roughly R625 million.

They told The Witness that they need a bail-out of between R800 million to R1 billion as this will allow them to at least settle their loans.

However, they said a bail-out will not solve all their problems.

This is because the municipality needs to bring its salary bill down and as long there are a number of people earning high salaries, the problem will not be solved and there will be increased consumer billing so that money can be brought in to cover this.

The intervention team has complained about the municipality’s high salary bill many times in executive committee meetings and have said it is costing them more than it should.

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