State runs out of cash, struggles to pay salaries


Institutions and municipalities in financial crisis for the past five years have no recovery plans.

The management of beleaguered state institutions and local municipalities last week reached new crisis levels after employees at a number of institutions were either not paid on time or not at all.

Although state institutions, provincial governments and local municipalities have until now maintained that there is no crisis, trade unions are concerned that these organisations are no longer generating enough income to pay salaries.

Over the past week:

. Denel’s 3 700 workers on Tuesday only received 85% of their salaries;

. The Denel employees were only paid in full on Friday after government had obtained the money for their salaries from an unidentified lender;

. Dissatisfied Metrorail employees disrupted train services because they had not yet received their salaries;

. Trade unions had still not received a response from the SABC about what was being done to ensure that employees were paid their salaries for this month; and

. More than 30 of the country’s 226 local municipalities battled to pay salaries, according to the SA Municipal Workers Union (Samwu);

The National Treasury announced that municipal debt had increased by R60 billion over the past five years:

. Outstanding debt at 257 local and district municipalities increased from R105 billion in March 2015 to R163 billion in March this year.

. Forty-seven of the 257 municipalities collected less than 50% of the money they budgeted for.

. Samwu threatened to go on strike at 30 municipalities if workers did not receive their salaries for this month on time.

. Employees at the Amahlati municipality in the Eastern Cape have still not received their salaries. They were last paid in April.

. Three municipalities in the Free State – Maluti-A-Phofung, Mafube and Moqhaka – were unable to pay workers their salaries this month.

Sonja Carstens, spokesperson for the United National Transport Union, said the Passenger Rail Agency of SA (Prasa) was being disingenuous when it claimed that salaries were paid late for “technical reasons”.

“The delays were as a result of cash flow problems. They had to pay wage increases of 7.3% retroactively to April 1 and they just didn’t have the money for it”, Carstens said.

“Everything is falling apart at Prasa. Parts are no longer being sourced, nothing is being repaired and not enough money is being generated to pay salaries,” she said.

Hannes du Buisson, spokesperson for the media workers union Bemawu, said they were expecting a bailout for the SABC, but, in the long term, this would not be a solution.

“The SABC is waiting for government to approve a bank guarantee of R3.2 billion. The SABC is not making enough money to pay salaries, but will have to further rely on creditors’ goodwill. If any of their creditors sue it, the broadcaster will have to turn off the lights,” he said.

Samwu also claimed that “workers’ medical aid, funeral policies and pension funds are also in arrears”.

Samwu deputy general secretary, Dumisani Magagula, told City Press that the primary concern for workers affiliated to the union “was municipalities’ constant failure to pay workers’ salaries on pay day and to rely on equitable shares of revenue”.


City Press could verify four municipalities that have been unable to pay salaries.

. Maluti-a-Phofung Local Municipality

Leading the pack in terms of struggling municipalities is the Free State’s Maluti-a-Phofung Local Municipality.

Having been placed under provincial administration in February last year, it came as no surprise that Maluti-a-Phofung’s finances were in dire straits.

Speaking to City Press, acting Maluti-a-Phofung municipal manager Kadimo Masekoane confirmed that, in anticipation of the municipality’s looming failure to pay workers their June salary, his office had sent out an internal memo preparing them for the late payments.

The memo seen by City Press reads: “Please note that we have been engaging the provincial department of public works to secure the resources for payment of the salaries.

“There was a shortfall of R10.7 million to pay salaries for Maluti-a-Phofung Local Municipality employees.”

Masekoane said the memo was sent after Maluti-a-Phofung administrator Tshepo Moremi had sent a “request for payment of outstanding debt” to the department of public works on June 14, in which the municipality outlined its financial struggles that emanated from its failure to collect revenue.

The department assisted by giving the indebted municipality R5.6 million.

On June 20, the municipality’s account reflected a balance of R9 371 461, which was far lower than the estimated R25.6 million it needed to pay its employees.

Masekoane said the matter was resolved without incident thanks, in part, to the administrators of the municipality, who managed to get assistance from the national department of cooperative governance and traditional affairs, as well as credit providers.

. Amahlathi Local Municipality

City Press also confirmed that Amahlathi Local Municipality was not paying its employees because of a lack of funds.

The Eastern Cape municipality was placed under provincial administration in February this year as a result of its finances being in the red for some time.

On May 24, employees and councillors were informed that they would not be receiving their May and June salaries.

“Kindly be advised that, due to financial challenges, the Amahlathi Local Municipality will be unable to pay employees’ salaries for May and June 2019.

“The municipality hereby commits to back-pay the salaries during the month of July when it receives the transfer of the equitable share,” read the memo written by the municipality’s administrators.

. Dr Ruth Mompati District Municipality

An internal memo written by the acting municipal manager of the Dr Ruth Mompati District Municipality, Mpho Mothibi, to municipal officials and councillors last week, which City Press has seen, confirmed that the municipality’s network service had disconnected it due to “contractual matters”.

The memo reads: “This serves to inform you that the network services have been suspended since Friday June 21 2019 by the contracted service provider Rebus Technologies due to contractual matters,” adding that “the purpose” therefore for the communique was “to sensitise officials and councillors that there might be possible delays in processing of salaries due to suspension of the network service”.

. Matjhabeng Local Municipality

On June 24, the Free State municipality joined a host of others in sending out an internal memo informing workers that “salaries for employees from job level 18 to eight” would be paid on the day, while “those from job level seven and six up to councillors would only be paid on June 28 due to financial constraints” as it “was not possible to pay all works at once” .

DA constituency head in Maluti-a-Phofung, Leona Kleynhans, summed up the problem as being the result of poor administration, the lack of those implicated in wrong-doing being held accountable and the initial employment of “non-deserving individuals not qualified for the positions they hold”.

Mlungisi Mtshali, spokesperson for the national department of cooperative governance and traditional affairs, said that, although this was her first month in office, new minister Nkosazana Dlamini-Zuma was aware of the problems and was working on solutions.

“Although our duty is to support local municipalities, as a department, we are currently reassessing our monitoring measures that have been in place.

“We envisage a scenario in which we can identify the red flags early and step in and not wait until the Auditor-General releases such disparaging stats.”

He added that to show her willingness to be on top of this issue, the new minister had as recently as a week or two ago met with Samwu to open lines of communication.

Mtshali said that, to reverse the disturbing trends in municipalities, the department was involved in:

. Development and implementation of simplified revenue plans;

. Development of financial recovery plans and credible budgets in collaboration with National Treasury;

. Supporting intervention on intergovernmental debts including Eskom and water boards; and

. Capacity building on financial and performance management.

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