City of Tshwane financial woes will be salvaged despite obvious mismanagement by ANC administration which is nothing to cheer about

Tue, Feb 7, 2017

Note to Editor: These were the remarks made by the Executive Mayor of Tshwane, Solly Msimanga, during a press briefing in Centurion today. Executive Mayor Msimanga was joined by the MMC for Finance,Cllr Mare-Lise Fourie. 

The annual report for the financial year ended 30 June 2016 was tabled in Council on 26 January 2017 as prescribed in accordance with Section 127(2) of the Local Government: Municipal Finance Management Act, 2003 (Act 54 of 2003) (MFMA). 

In the opinion of the Auditor-General (AG), the financial statements present fairly in all material respects the financial position of the City of Tshwane Metropolitan Municipality and its financial performance and cash flows. The unqualified opinion expressed by the Auditor-General simply means that the financial statements contain no material misstatements. The Auditor-General does not express an opinion on the financial viability of the City or the financial results of the year under review. 

This does not, by any means, mean that the picture is rosy. An unqualified audit means just that; that no lies were told in the financial statements but rather the financial statements spoke the truth about a complete deficit in political and financial leadership which has led to an actual fiscal deficit that we sit with today. 

The ANC's cheers in Council and in the media about the AG's opinion are quite bizarre coming from a caucus that purports to care for the city and the citizens they were elected to serve for five years, and failed in many respects as evidenced by this abominable but not unsalvageable financial status. 

In the same report, the following matters of concern are raised: 

Significant uncertainties as to the outcome and financial impact of a number of legal cases where the Municipality is a defendant. These include a large number of labour or employment cases relating to, for example, suspensions and unfair dismissals, expropriations, breaches of contracts, etc. The potential liability is estimated to be in excess of R226 million.

Corresponding figures for 30 June 2015 that had to be restated as a result of errors discovered.

The significant impairment of trade receivables (debtors), as the recoverability of these amounts is doubtful. Service debtors as at 30 June 2016 total R8,6 billion. It is estimated that R5,9 billion or 68,5% is uncollectable. 

The material financial losses sustained as a result of electricity distribution losses which represent 19,3% or R1,347 billion of total electricity purchased. Non-technical losses amounted to R489 million and R858 million was due to unauthorised consumption, tampering and faulty meters. 

In addition to this, the City closed the financial year with a deficit in excess of R2 billion on the operating account – a turnaround of R2,146 billion compared to a budgeted surplus of R2,5 million. The contributing factors were as follows: 

A decrease in actual billed revenue of R1 billion;

Under-expenditure on materials and bulk purchases amounting to R636,3 million;

A decrease of R254 million in transfers and grants made; and

Unauthorised expenditure of R2 billion. 

All this is to say that the current finances have put considerable strain on the City's ability to function and provide the services our people need.

Turning around the City's finances is our apex priority so that we can deal with the infrastructure that the former administration made no provision for with respect to preventative infrastructure maintenance for water apparatus, for instance. 

To put this in context, a meagre 4% was allocated for preventative maintenance of water infrastructure. For a metro this size it is almost criminal because that has a real and meaningful impact on the City's ability to deal speedily with water interruptions. 

This is not unique to our water woes and is indicative of the poor and irresponsible use of the City's money with vanity projects such as the City Hall refurbishments which were botched. 

Despite this less than desirable picture, Msimanga moved swiftly to reassure the people of Tshwane of his administration's resilience to turn the City's finances around. 

Achieving these ends will require us to adhere to the two guiding principles of stabilisation and revitalisation that will help us realise our commitment to better, more efficient service delivery. 

The stabilisation of this new government is the critical foundation on which the environment for attracting investment into our beautiful city rests. This specifically speaks to providing stable, reliable, decisive and progressive political and administrative leadership that will inspire confidence in the markets and encourage informal, small-to-medium and large enterprises to see our city as one that is competitive and complementary to their business. 

In so doing this will cultivate the revitalisation of our city's economy, which is a vital ingredient to generating more revenue that will afford us the opportunity to meaningfully address our priority to create much-needed employment opportunities for the millions of people who so desperately need to be employed in order for them to liberate themselves from the throes of poverty. 

"During our first 100 days in office, we have worked in earnest to steer this giant ship into course and we are proud of the significant strides we have made thus far in curbing corruption, delivering better services and being a responsive government. Our efforts to turn the "Tshwane Ship" around are only just beginning and I assure you, the future of this Metropolitan, pregnant with vitality, is a bright one. Notwithstanding the challenges, our aim is to stabilise the city in overseeing the transition with delicate management," said Msimanga. 

"Measures are underway to increase the City's revenue. The City will increase its current account payment levels; January payment levels were only 85%. We will collect arrear debt older than 30 days, government departments owe R582 million, businesses R1,6 billion and households owe R4,1 billion. We will further optimise rental income on municipal properties, clamp down on the illegal use of property in contravention of the permitted use as determined by the Town Planning Scheme and review our property portfolio to identify land not required for municipal purposes to build up capital reserves to fund the upgrading and new installation of service infrastructure," added Msimanga. 

To this end, the City will endeavour to give effect to the recommendations made in these financial statements by seeking alternative procurement processes and suppliers which are being assessed to provide sustainable, affordable and reliable services to our residents. This includes but is not limited to the proposed invalidation of the PEU Smart Meter contract which the City is currently pursuing. This end was not achieved in this financial year due to several issues plaguing our apparatus which this administration is in the process of addressing. 

Added MMC Fourie, "Of particular concern to me in this report is the unauthorised expenditure of more than R2 billion identified by the Auditor-General. Financial sustainability is key for any institution that wants to pursue a developmental agenda and implement change. Fiscal discipline is the basis for all organisations to effectively realise set objectives. To this effect, this administration has introduced the financial turnaround strategy which is aimed at ensuring strategic sourcing of goods. We have further introduced the open tender and e-procurement systems aimed at curbing unjustified supply chain processes and maladministration." 

The City is in the process of invalidating the PEU Smart Meter contract which the City is currently pursuing. This end was not achieved in this financial year due to several issues plaguing our apparatus which this administration is in the process of addressing. Other efforts include: 

Curbing illegal electricity connections;

Auditing of metering installations;

Normalisation of prepaid meters;

Rollout of smart meters;

Prepaid meters are installed before energisation of the electrical infrastructure;

Redesigning of electrical network installations;

Substation zone load monitoring: Energy balancing;

Electrification of informal settlements;

Refurbishment of electricity infrastructure;

Conducting a full and comprehensive Traffic Impact Assessment (TIA) for the purposes of understanding the deficiencies in the City's transport infrastructure and systems and how better to modernise the local road network for the benefit of motorists and all people of Tshwane alike;

Intensifying the recruitment of more police cadets to address the strain our law enforcement agencies (TMPD) currently experience in a bid to make our City safer for the residents who inhabit it. 

The above efforts will ensure that the City gets all monies due which can then be ploughed back into providing better services, creating work opportunities and making our city liveable. 

The continued contravention of laws and regulation governing supply chain management resulting in irregular expenditure is another indication of the failure of leadership during the period under review.

Issued by City of Tshwane, 7 February 2017