Cash crunch: Union threatens strike action as municipalities, SOEs and provinces battle to pay bills

2019-06-26 14:29
It was revealed earlier this week that state-owned arms manufacturer Denel would not be able to pay full salaries to its staff this month. A lender was later found.

It was revealed earlier this week that state-owned arms manufacturer Denel would not be able to pay full salaries to its staff this month. A lender was later found. (Denel)

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Municipal staff and officials at state-owned entities are suffering as a seemingly countrywide delay in paying salaries has hit home.

Hours before a State of the Nation debate raged in Parliament on Tuesday, the news broke that state-owned arms manufacturer Denel would not be able to pay full salaries to its more than 3 000 staff this month.

During his speech late on Tuesday, Public Enterprises Minister Pravin Gordhan announced that a lender had been found and full salaries would be paid.

READ MORE: Gordhan says SOEs in dire straits, threatens boards and CEOs with intervention

He laid the blame squarely on the effects of state capture, which has resulted in Denel limping from financial crisis to crisis since 2015.

But it appears Denel is not the only government entity struggling to pay salaries this month.

News24 has seen letters and memorandums from various municipalities and the Free State provincial treasury, which speak to financial constraints and delayed payments to suppliers.

On Wednesday, the South African Municipal Workers' Union (Samwu) threatened strike action if all workers at around 30 municipalities around the country were not paid immediately.

Signs of trouble in the Free State

On June 14, Free State treasury head Godfrey Mahlatsi informed the provincial departments that they would have to explain to suppliers that some payments would be delayed, as a result of a postponement of disbursement runs on the BAS system (the province's accounting system).

Mahlatsi's memo to department heads said the postponement of the disbursements was necessary "mainly as a result" of the need to pay salaries for educators on the same day. The disbursements would therefore be made on July 2, he explained.

READ MORE: AS IT HAPPENED - Our auditors faced threats & intimidation in most provinces, says Auditor-General

Mahlatsi did not immediately respond to text messages requesting comment and whether the province had sufficient liquidity to pay its bills.

Releasing the 2017/2018 municipal audit report on Wednesday, Auditor-General Kimi Makwetu lambasted the Free State province for a lack of action to fix financial controls. The audits showed a total of R3.8bn in irregular expenditure by the province's municipalities.

"The province's political and administrative leadership yet again exhibited no response to improve accountability for government spending," the report read.

The Free State education department had spent 78% of its total operational budget for the 2018/2019 year in 2017/2018.

Makwetu noted that the Free State "displayed a total breakdown in internal controls as the province's political and administrative leadership".

He said the "financial crisis" in the province was becoming a critical concern.

READ MORE: SABC needs urgent R3bn loan but its future depends on other SOEs

The Free Sate's Matjhabeng Municipality municipal manager, Thabiso Tsoaeli, in a letter to councillors and staff on June 24, said workers in higher salary bands would only be paid by June 28 "due to financial constraints".

"Salaries were indeed paid to the majority of general workers on June 24," Matjhabeng spokesperson Kgojane Mututle said on Wednesday.

"Our wage bill is unusually high in June due to bonuses being due, and revenue slumps during the winter months for obvious reasons," he added.

Mututle confirmed the municipality had engaged with unions and were on track to pay the remainder of the salaries by the June 28.

Dr Ruth S Mompati District Municipality

The North West District Municipality of Dr Ruth S Momati, also on June 24, issued a notice to staff revealing a contract dispute with its internet service provider, Rebus Technologies, was hampering the ability to access the payment system, and, as a result, salaries may be delayed.

The municipality lost R150m in investments in the now collapsed VBS Mutual Bank.

Amahlathi Local Municipality

The Eastern Cape municipality has been in the financial doldrums for some time and on May 24, staff and councillors were informed that salaries would not be paid for May and June, but that there would be backdated pay in July.

Amahlathi was placed under administration earlier this year.

Samwu said it was "angered and agitated by the continuous failure by municipalities to pay workers their salaries in full and on time".

READ MORE: Councils fight Tito Mboweni’s cost-cutting measures

According to the union, more than 30 municipalities had indicated that they would not be able to pay full salaries or at all.

The union said it had met with newly appointed Minister of Cooperative Governance and Traditional Affairs (Cogta), Nkosazana Dlamini-Zuma, and her deputy, Parks Tau, and that the issue of non-payment of salaries was highlighted.

"Samwu therefore demands the immediate payment of all salaries of municipal workers that have not been paid yet. When workers go on strike, municipalities apply the no-work no-pay principle, as a result workers are determined to apply the no-pay no-work principle until such a time that their salaries reflect in their bank accounts."

 The union said it would also demand that workers be compensated for penalties for late payments and that interest be paid on late salary payments.

Cogta spokesperson, Mlungisi Mtshali, told News24 that the department agreed with Samwu that workers needed to be paid.

In the case of Amahlathi, a request had been submitted to National Treasury for an advance on the municipality's equitable share allocation, which was originally due in July, to enable the payment of salaries, he said.

Mtshali confirmed that Cogta had held a meeting with Samwu and lines of communication between the union and Dlamini-Zuma were open for the union to raise issues.

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