Durban - Co-operative Governance and Traditional Affairs (Cogta) portfolio committee chairperson in the KwaZulu-Natal Legislature Zinhle Cele says the news that Msunduzi Municipality has less than a month’s cash coverage is worrying, and warrants urgent attention.
The Member of the Provincial Legislature (MPL) was reacting to revelations by the provincial Cogta regarding the municipality’s finances.
A report was presented at a council sitting last week as part of an update on the municipality’s position since it was placed under administration in 2019.
According to the report, a structure should have a minimum of a month to three months’ coverage in its coffers as a sign of being sustainable.
The report titled “Overview Report on Section 139 interventions”, gave a snapshot of the efforts that have been made to restore order, good governance and stability to the municipality that was placed under administration.
“The cash coverage ratio for March was 0.80 months, which is below the norm of 1 to 3 months,” read the report on the municipality’s revenue generation position.
The report showed that the collection rate for August was 88% – R479 million – while 110% or R580 million was recorded in September. The report further noted that in November, the collection rate was 110% (R449 million) and 83% for December which equates to R413 million.
The report further indicated that the municipality was carrying out regular electricity disconnections as part of its drive to improve its cash status.
“Multiple billing cycles have been introduced to improve collections and accuracy of bills. The municipality should be collecting at more than 100% to ensure that arrear debts are collected,” the report added.
It cited public engagement forums that had been undertaken by the municipality, in the form of izimbizos, to appeal to customers to pay for municipal services.
According to the report, one of the improvements in the city’s status related to staff costs which stood at 35% of the city’s total operating expenditure. This is against the norm of between 25% and 40%.
Cele said while the committee still had to assess the report, the cash coverage amount was concerning. She said while they were watching the developments in both Msunduzi and eThekwini municipalities, they relied mainly on the department for updates.
“We are having a meeting with Cogta next week and since this has been brought to our attention we will seek an update from the department regarding the progress of the municipality,” said the chairperson.
Cele stressed that Msunduzi councillors were better positioned to monitor the status of the municipality because they had regular interaction with the city’s management through council sittings and portfolio committee meetings.
DA committee member Martin Meyer described the report as disappointing, but said it was not surprising that there had not been much progress since the city went under administration.
“This is a worrying situation that should be keeping people up all night because it demonstrates that the situation continues to deteriorate,” said the MPL.
He added that it was more concerning because the municipality had the potential to generate more revenue owing to its size.
“We are not talking about a rural municipality here but are referring to one that is in an urban area with a good concentration of industries and households that are economically well. To hear that this city is struggling like this is worrying,” the DA MPL said.
He contended that since the city had less cash in hand than its expenses, this should be a warning that soon the municipality may not be able to pay its workers.