While Cllr Makhubo peddles lies, Treasury confirms City’s financial health
4 November 2019
I reject the most recent series of allegations by the former Member of the Mayoral Committee for Finance, and current chairperson of the ANC Greater Johannesburg Region, Cllr Geoff Makhubo, suggesting that the City is once again on the verge of imminent financial collapse.
These allegations are as opportunistic as they are disingenuous, with Makhubo’s latest attempt to undermine the successes of the multi-party government no more credible than the last.
Indeed, the pre-audit financial statements for the 2018/19 financial year show a significant improvement in the City’s financial health and liquidity, with its closing cash balance increasing from R2.2 billion at the end of 2017/18, to R5.3 billion by the close of 2018/19.
While Cllr Makhubo continues to peddle his reckless lies, “the improvements made to [the City’s] financial position” were noted in a letter received from National Treasury on Friday, which cited the “positive cash flow improvement” and confirmed that the City’s 2019/20 medium term budget is funded.
Contrary to Cllr Makhubo’s fictitious beliefs, the City’s key financial ratios saw almost universal improvement in the last financial year:
|
Ratio |
Benchmark |
2017/18 (Actual) |
2018/19 (Pre-audit) |
|
Current ratio |
1.5:1 – 2:1 |
0.78:1 |
1.08:1 |
|
Solvency ratio |
Above 2.1:1 |
2.1:1 |
2.1:1 |
|
Debt to Revenue |
Below 45% |
42% |
40% |
|
Remuneration as % of total operating expenditure |
25 – 40% |
26% |
26% |
|
Repairs & Maintenance as a % of PPE |
Above 8% |
4% |
4% |
|
Capital cost (interest and redemption) as a % of total operating expenditure |
6 – 8% |
6% |
6% |
|
Net Operating Surplus Margin |
Above 0% |
6% |
12% |
|
Cash / Cost coverage (days) |
1 – 3 months |
21.3 days |
43 days |
Importantly, the improved cash position did not come at the expense of service delivery with the City spending 91.3% of its capital budget in the 2018/19 financial year, approximately 10% higher than any other metro. This exemplary performance has continued into the 2019/20 financial year with the City’s First Quarter Capital Budget Expenditure performance far surpassing that of previous years:
In light of this, I can only assume that the motivation behind Cllr Makhubo’s baseless allegations are an attempt to divert attention away from the growing scrutiny on the role he seemingly played in a number of dubious transactions between the City and various Gupta-linked companies.
Late last year, amaBhungane released an exposé in which it showed how Cllr Makhubo orchestrated a windfall of at least R30-million by unduly acting as broker for the Gupta-linked Regiments Fund Managers, giving Regiments access to lucrative deals within the City.
Through his company, Molelwane Consulting, Makhubo managed the ‘strategic relationship’ between Regiments and the City of Johannesburg. Regiments subsequently won the tender to manage the City’s sinking fund in 2006, and Molelwane allegedly received 10% of all fees generated in exchange.
This relationship between Regiments and Molelwane Consulting, continued after Cllr Makhubo was appointed MMC of Finance in 2011. A clear conflict arose at this point as he was meant to have political oversight over the City’s sinking fund while he continued to be paid 10% of all fees generated by Regiments.
More recently, the City has uncovered how another Gupta-linked company associated with Regiments, Cedar Park Properties 39 Pty Ltd (Cedar Park), took transfer of one of the most valuable pieces of land in the City’s portfolio in 2013 in what can only be described as a sweetheart deal. Mr Litha Nyhonyha, the current chairman of Regiments Capital, signed the sale agreement with the City on behalf of Cedar Park in 2009.
Curiously, the R280 million purchase price was subject to a suspensive clause and would only be payable once the development of the land was complete. However, the development never got off the ground and the City has never been paid a cent.
As such, the City essentially gifted the land on which the Sandton Gautrain Station is situated to Cedar Park. In the interim, Cedar Park continues to collect rent from the street level shops.
This sale transaction to a Gupta-linked company that had no track record in property development is currently subject to a full forensic investigation.
Importantly, at all times as a councillor within the City, Makhubo failed to relinquish his 67% stake in Molelwane Consulting – as confirmed by the City’s Integrity Officer.
The depth of alleged criminality and the arrogance displayed by the ANC and Cllr Makhubo is astounding to say the least. The ANC, and particularly Cllr Makhubo, has consistently fought the multi-party government’s efforts to combat corruption in the City.
These are not the actions of a man who shares any real concern about the City’s finances.
I would like to thank the DA and the other members of the multi-party government – the IFP, ACPD, COPE, FF+ and the UDM – as well as the EFF, who support us on an issue by issue basis, for their unwavering support in fighting corruption and driving service delivery in the City. It is as a result of their collective commitment that we are able to improve the lives of our residents.
Issued by Tony Taverna-Turisan, Director: Mayoral Communications, 4 November 2019
