City gets advice to trim budget

2018-09-12 15:54

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The City is spending millions of rands more than it makes each month, and has been forced to dip into its depleting reserve funds.

This was revealed by the acting City manager Neli Ngcobo, who recently told the financial services portfolio committee that while the municipality was not yet bankrupt, their spending habits needed to change. “We are spending more than we have. Fortunately we are still dipping into the reserves. We will do that until our reserves are depleted and that is not right. Before we used to have reserves that were increasing on a monthly basis for quite a long time; currently that is not the case,” said Ngcobo.

She said the City’s reserves were no longer in what was considered a “good state” as they sat below R400 million instead of a normal R500 million.

The National Treasury has developed a financial recovery plan for the municipality which must be approved for implementation by full council at the end of this month.

As part of the plan, the financial services unit would revise the recently adopted 2018/19 budget by cutting unnecessary expenditure, re-evaluating cost-drivers and enhancing revenue.

Ngcobo said the plan would assist in forcing the departments that abused their budget allocation to spend less.

“We’ve identified some areas where there’s a lot of money being wasted. I’m talking about the consultant fees, legal fees — those are the areas that have become cost drivers for the municipality so we want to trim the budget again on those,” she said.

On a monthly average the City collected R330 million but Ngcobo said that was not enough as they needed to collect a minimum of R400 million monthly.

She said while the equitable share received from the National Treasury in July helped to supplement the reserves, that alone was not sustainable.

She said to pay Eskom about R220 million this month, they had to “go back and take from the reserves”.

She said the municipality was intensifying disconnections as part its revenue enhancement strategy but that alone would not help. “We need to find other sources like parking and licences … If we are not cutting the expenditure it is going to cause problems.”

Ngcobo said constantly digging into the reserves was “not healthy” for the municipality so they needed a sustainable plan where they built on increasing the reserves.

ANC councillor Mehmood Oumar said one of the cost drivers for the municipality was the bulk electricity and water but there seemed be no plan to curb losses and generate more revenue from these services. “From where I’m standing we are in ICU so the acting City manager has to start cracking the whip and get us out of this,” he said.

Oumar said the municipality was also losing a lot of money on shoddy work done by contractors because the same work had to be redone a few months later. His sentiments were echoed by Al Jama-ah Mohamed Salim Goga who said the City was on life support and would be in trouble when the reserves ran out.

DA caucus leader Sibongiseni Majola said Msunduzi was not generating enough income from water services because it was operating at a loss. He said electricity on the other hand generated half of the City’s income. “We can’t buy bulk water from Umgeni Water then supply it to consumers at the flat rate in 40% of the Msunduzi community.

“I hope this financial year there will be funds set aside for the installation of smart prepaid meters,” he said.

Oumar said there were businesses in Vulindlela who were not paying zoning rates as they paid the flat rate for domestic use.

ANC’s Mlungisi Zondi said the municipality should explore other sources of revenue, such as traffic fines, instead of just relying on trade services.

Mayor Themba Njilo asked the finance department to organise a revenue collection campaign to encourage customers to pay for the services they consumed. “We must also visit car washes because they use a lot of water but some of them are not paying for it,” he said.

Prepaid meters part of the plan

Msunduzi’s revenue manager Moses Ngobese said the municipality should be reading at least 85% of its 110 750 meters every month but during the past financial year there was a regression from 76% in July 2017 to 70% in May.

The City also continued to bill the flat rate of R104 to about 24 000 households in Elandskop and nine wards in Vulindlela.

“Revenue has not been receiving the expected support but lately, as of the end of June, we have seen the initiative taken by the water department where we saw a report being submitted to the operational management committee in terms of the prepaid meter solution,” he said.

He said the tender would be advertised soon.

Ngobese said they would address faulty meters and increase the number of vehicles for meter readers.

“Estimated consumptions always lead to overstated/understated revenue which has a negative impact in our debtor’s book and budget. The monthly accurate meter reading with minimal estimates is always good for consumers and thus accounts are paid without hassles,” he said.

He said the municipality previously considered opening an office in the far-flung ward 39 but it was deemed to be too costly at the time but maybe council should consider revisiting the matter. 

Read more on:    pietermaritzburg  |  msunduzi municipality

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