Herman Mashaba

Johannesburg's financial health is stable

2018-05-28 09:17

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On 24 May 2018, in what can only be seen as a historic moment, the multi-party government in the City of Johannesburg tabled its budget for the 2018/19 financial year. 

This budget achieved something special through what has become known as the Diphetogo Project. 

This project, translated to mean real changes, deprioritised the non-essential elements of the budget, cut the unnecessary expenditure and re-directed these savings to battle our service delivery infrastructure backlog. 

The share of the capital budget allocated to getting the basics right – including the allocations to addressing the backlogs in Housing, Transport, our road network, our electrical infrastructure and water pipelines – increased from 57% in 2016/17 to 69% in 2018/19. Further to this, the expenditure on repairs and maintenance of critical infrastructure has increased from 2.8% to 5.9% over the same period.

This is an achievement arising from a massive public consultation process where the message to the multi-party government was unequivocally to put basic services first.

However, there is another achievement that lies beneath which is receiving less attention. 

This is the improvement of the City's financial health. 

You, no doubt, would have read one story or another wherein the ANC in Johannesburg, or some anonymous official, alleges the impending 'end of the world'-type scenario in the City's finances. 

The ANC, under the leadership of former Mayor Parks Tau, went to a great deal of trouble to construct an image of a financially stable City. 

Nobody seemed too bothered by the idea that while carefully maintaining this image, they were irresponsibly borrowing from the City's future revenue, which had not yet materialised.

How else do you explain that the City's creditors book stood at R18bn, at the ceiling of National Treasury's prescribed limit, when the multi-party government took office? 

In an effort to continue the cover-up, the ANC has shifted to a narrative that the multi-party government is driving the City into a financial meltdown. 

Nothing could be further from the truth, and the ANC has proven to be no more honest in opposition than they were in government. 

According to National Treasury, after a thorough assessment of the City's 2018/19 medium term budget, it was found to be "credible, reliable, funded and sustainable over the MTREF in terms of Section 18 of the MFMA". 

National Treasury measures the financial health of municipalities based on a series of indicators covering a variety of factors. It has recorded that the cash/cost coverage of the City – the length of time the City can function without any revenue coming in – has increased from 30 days in 2016/17 to 53 days in 2018/19. 

It is worth noting that this is beyond the standard set by National Treasury at 45 days and has been a historical criticism of the City's finances of the past. 

The solvency ratio, dealing with the ratio of total assets versus liabilities, increased from 2.1:1 in 2016/17 to 2.2:1 in 2018/19, again above the standard set by National Treasury for municipalities. 

The current ratio, which measures the ratio between current assets and liabilities, was below the National Treasury standard in 2016/17 at 0.8:1, improved to a level above the prescribed minimum standard in 2018/19 to 1.1:1. 

Essentially all indicators are on the rise, and the City has a budget which projects the continued improvement in its financial health. 

Even the Auditor General's report on the financial health of municipalities lists Johannesburg's at the 3rd best, bettered only by Buffalo City and eThekwini, in the rankings of cities not under financial distress. 

This is not to suggest that there are no risks; no metropolitan municipality can claim to operate without risk given the degree of complexity that goes with the status as a metro. 

The Auditor General noted Johannesburg's considerable creditor's and debtor's books – both inherited from the past. National Treasury, however, noted these challenges are being managed responsibly by the City. 

Similarly, in the Auditor General's report for 2016/17 he had the following to say about the administration elected in the August 2016 local government elections: 

"The tone of the political and administrative leadership is a positive one that can drive good governance and clean administration."
The name of the game going forward is revenue optimisation from a service delivery level and a financial health perspective. This is a key focus of the City going forward, and it is not going to be at the expense of the law-abiding people of Johannesburg. 

The launch of Operation Buya Mthetho has already produced R38m in revenue from those who consume services in our City and can afford to pay but previously chose not to. It is addressing corrupt criminal syndicates in the city that are aggravating the losses in water and electricity, costing the City billions each year. 

Historically that burden was laid at the feet of our residents who obey the law and pay for bills, as the City passed on above inflationary increases.

The City has begun the turnaround of the service delivery backlogs that plague our communities. This has been achieved in a manner that strengthens the financial sustainability of our city, which will serve to ensure that change will be delivered and will endure in Johannesburg. 

- Mashaba is executive mayor of the City of Johannesburg.

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