The ’embarrassing’ state of South Africa’s capital

[Nat Quinn]

The ’embarrassing’ state of South Africa’s capital

The national government has expressed concern over the City of Tshwane’s embattled financials.

In a parliamentary statement called Tshwane’s Embarrassing Financial Affairs Require Immediate Resolution, the Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements said that the city’s financial management needs urgent attention.

The city’s financial problems have been widely reported over the last several months.

For instance, Eskom has noted that the city of Tshwane has consistently failed to pay its debts and, in the middle of June, claimed that the city owed R2 billion.

Eskom has taken the matter to court and filed a founding affidavit before the North Gauteng High Court, which sought to immediately recover R1.6 billion in debt.

The city is also battling a R4.7 billion-shaped hole in its fiscus due to the blundering of a smart meter contract by the previous administration in 2013.

“For the entire duration of this contract, these payments were processed while no VAT was paid. In 2015, after a review of the contract, it was decided that it would be terminated,” the city said.

However, the termination of the contract was only initiated in 2019, with city officials claiming that the new administration was only made aware of the unpaid VAT liability when SARS made a claim for R2.9 billion.

“Along with penalties and interest to the value of R1.8 billion…SARS effectively slammed the city with a R4.7 billion liability,” it said.

Although the committee noted the city’s plans to improve its dire financial position, it said there is a lack of capacity and skills, particularly in strategic roles in the city.

“We must be frank that the main challenge within the local sphere of government is the lack of appetite to implement effective consequence management, which then encourages a self-seeking culture of corruption and undermining of service delivery,” said Mr China Dodovu, the Chairperson of the committee.

The committee added that it was concerned that the municipality cannot fill crucial vacant positions, which are crucial for implementing its recovery plan, including the chief financial officer.

However, the city said that recruitment is at an advanced stage, adding that it will make recommendations on candidates to the council by August.

The committee added that it was concerned about the lack of visible progress in the implementation of the audit action plan.

In January, a leaked report from the Auditor General gave the city an adverse audit opinion due to significant irregularities – such as R10.5 billion of irregular expenditure that was not accounted for.

The committee said that the city has to improve the capacity of the teams delegated to implement the audit action plan to ensure observable progress.

It also emphasised the need for the city to improve its financial management practices and internal controls, which can be achieved by hiring qualified Section 56 managers.

People and the city must cough up

Following engagements with critical stakeholders, like businesses, households and government, the committee said that the failure to establish ward councillors had hurt the city.

It added that cash flow challenges faced by the city could be fixed if the city got residents to pay for services.

“Effective communications anchored on effective ward committees is a necessary tool towards the attainment of this goal,” Dodovu said.

It also supported programmes aimed at enforcing compliance and payment of services.

“The support is based on the understanding that for the municipality to continue to deliver services, it requires improved cash flow, which is currently affected by non-payment from households, businesses and government departments,” he said.

Moreover, Tshwane also spends far too little investment in infrastructure maintenance, increasing the chances of poor service delivery and losses.

The city only spends 2% of its budget on maintenance, far below the national norm of 8%.

Given the major water and electricity losses, the city maintaining its bulk infrastructure will guarantee that residents receive reliable water, roads and electricity.

Moreover, the city was deemed overreliant on consultants and called for improved internal capacity to save money. Although consultants are sometimes necessary, the committee cautioned against abuse.

 

source:The ’embarrassing’ state of South Africa’s capital – BusinessTech

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