21 November 2024

After years of political battle, the ANC last month finally wrenched back control of the City of Tshwane. Many long-frustrated ANC constituencies now stand in line to receive their spoils. One of them is the SA Municipal Workers’ Union (SAMWU). Union leaders want historical salary increases, which the city – under DA leadership – has said it cannot afford.

The matter is enrolled for hearing in the Labour Court next week. But the city will be under pressure to reach a settlement favourable to the unions before then. Such a settlement will have implications for another dispute, which might soon come to a head—namely, the billions in arrears owed by Tshwane to Eskom. After Eskom sued the city, the matter was referred to NERSA for mediation.

Both disputes arise from Tshwane’s constrained finances. The new ANC-led coalition will have to tread carefully, as will the city manager, whose fiduciary duty it is to keep an eye on Tshwane’s cashflow forecast. An unaffordable deal with unions could make it impossible to avert Eskom litigation. An Eskom settlement, on the other hand, is in the city’s best long-term interest. Unless and until the arrear Eskom debt is cleared, Tshwane won’t be able to borrow from banks and capital markets to upgrade service infrastructure.

While the city has not withdrawn its Labour Court application (having lost the case for exemption at the bargaining council), the new mayor has all but conceded the city’s case. Mayor Nasiphi Moya, an ActionSA councillor who answers to an ANC majority, recently told a podcast that Tshwane must, by law, pay the increases regardless of the ‘modalities.’ The statement is not only inaccurate but also undercuts the city’s case in the Labour Court, an altogether more serious and unbiased forum than the bargaining council.

This case against a big salary blowout bears repeating outside of court, since it is the residents of Tshwane, present and future, who ultimately have to pay for the liabilities incurred by politicians. When the city council, with a supporting vote by the ANC and ActionSA, decided to forgo salary increases, it did not breach the collective agreement with unions but invoked an exemption clause in the same agreement. Because salary deals are negotiated at a national level and cover successive financial years, allowance is made for municipalities that cannot afford to pay increases.

Tshwane is, and remains, in financial distress. It has an unfunded budget and so has adopted a funding plan to overturn its deficit. In the last year, the city has made painstaking progress. Billings, collections, and cashflow have all improved. If all goes well, Tshwane will have a cash-backed and fully funded budget by the end of February 2026 (the end of the 2025 financial year).

But everything can be undone by one stupid decision, such as agreeing to an unaffordable salary settlement and inducing another cashflow crisis. One cashflow crisis after another is the reason why Tshwane’s Eskom debt has continued to balloon.

Take the R4.5 billion in outstanding VAT, penalties, and interest that the city has had to pay on an unlawful ANC-era ‘smart’ metering contract. After being rammed through the council by the ANC majority in 2012, the Peu/TUMS deal was set aside as unlawful and unconstitutional at the instance of the DA-led coalition in 2017. Later, it was discovered that output VAT on the contract had never been accounted for, let alone paid. The same officials who were meant to vet the contract had contrived to hide the VAT liability from successive mayors, councils, and the Auditor-General.

In 2019, the city was crippled by an unlawful, violent strike by the ANC-aligned SAMWU. To end the strike, the city agreed to a wholesale salary adjustment, which inflated the salary bill by R2.6 billion in a single financial year. Then in 2020, the city was placed under the (mal)administration of the ANC Gauteng government, and by the time the Constitutional Court eventually terminated the unlawful ‘intervention,’ the city’s R200 million operating surplus had turned into a more than R4 billion deficit. Little wonder that by early 2022, ratings agencies downgraded Tshwane to sub-junk, which caused it to lose access to long-term funding facilities.

I became mayor in March 2023, and when I recommended to the council that the city apply for exemption from salary increases, I was supported by both ActionSA, the DA’s coalition partner, and the ANC, the official opposition. Things changed when another violent, unprotected strike broke out. As waste removal trucks burned in the streets, ActionSA pressured the DA and our other coalition partners to cave to union demands. The party would backchannel to unions and then try to dictate negotiating terms to the city.

After the strike was broken, the city did enter mediation with unions, but we could not come to a settlement affordable to the city. As we tried to explain to union leaders, salaries and Eskom payments are the city’s two biggest running expenses. If Tshwane agrees to an unaffordable salary settlement, the city will sink even deeper into Eskom debt. The disbenefit to residents would be devastating, while the benefit to workers would be short-lived. Many municipalities that eagerly paid salary increases in 2023, when Tshwane refused, now struggle to make payroll. Some have even dipped into workers’ pensions to fund operations.

Tshwane is currently in mediation with Eskom over its arrear debt. In the winter months of June, July, and August, when Eskom charges a double tariff, the city paid its current account in full. This was a serious show of good faith and credibility, paving the way for a settlement to be reached on a portion of the city’s arrear Eskom bill. But what will the city tell Eskom, the mediators, and the courts if it agrees with unions on a big salary blowout?

Whatever the city and unions agree to, it is essential that this doesn’t scupper the plan to clear Tshwane’s Eskom debt. If service delivery is to improve, Tshwane must roll out big infrastructure projects, including the upgrading of roads, electricity substations, water reticulation networks, and treatment plants. To fund these projects, the city needs a credit upgrade to access funding. To get a better credit rating, Eskom debt must be settled. And to settle the debt, efforts started by the DA and our coalition partners to increase income and control expenses must be maintained.

This is the long and difficult slog to turn around a troubled municipality. In Tshwane’s case, the slog work has often been interrupted by political instability. Now that we are in opposition, the DA, unlike the ANC, will not try to sabotage the financial rescue mission we started while in government. The ANC and its coalition partners might yet decide that trying to make Tshwane ungovernable under a DA-led coalition was easier than having to run the place themselves.

Cilliers Brink

DA Caucus Leader & Former Executive Mayor

City of Tshwane