City of Joburg mayor, Mpho Phalatse says the metropolitan may find itself in an “uneasy state of financial affairs” if it fails to secure a short term loan.
Phalatse briefed the media on Wednesday, providing clarity regarding the City’s finances ahead of a council sitting, which will see another motion of no confidence tabled against the mayor.
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Earlier this month, the council rejected a R2 billion short-term loan from the Development Bank of Southern Africa (DBSA) with the opposition demanding answers from Phalatse on how the City would pay back the funds.
During Wednesday’s briefing, the mayor said the multiparty coalition government would try to get the council to approve the DBSA loan, insisting that the City was in the position to honour its repayments.
“As it stands today, the City’s sinking fund, which is the fund that is set aside to repay loans and bonds, is adequately funded for the next three years,” Phalatse said.
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She said that the loan would be repaid by June 2023 if approved.
“Taking out a short term loan is a normal business practice. The disinformation by a corrupted cabal that short term loans are unacceptable, that it somehow proves that the City is broke is unjustified and a political power play at best.”
Phalatse explained that revenue collections, grants and subsidies as well as loans were the sources of the City’s funding, which is then used for service delivery and building projects.
“As it happens when running any business, a shortfall between revenue received and expenses to be paid may occur [so] in business terms we have a cashflow mismatch,” she continued.
“The decrease in revenue collection can be attributed to the economic effects of Covid-19, the massive increases in food and fuel prices due to, among others, the war in Ukraine and the sudden increase in interest rates and inflation since June 2022 creating a downward pressure on the revenue collection efforts of the City.”
According to the mayor, the City collected R3.6 billion of revenue in July. This was only 76% of the metro’s target.
For August and September, revenue collection stood to R4.5 billion and R4.2 billion respectively (93% target), but then dropped in October following her removal from office.
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“Revenue collection fell to 86% translating into over half a billion of under collection. We all know what happened in the month of October in the City of Joburg,” Phalatse said.
“It is evident that the City [and residents are] still recovering from a tough economic time. It is at this point that the City seeks to secure a loan over the shortest term possible to ease the cashflow mismatch that is currently being experienced. We have secured access to R2 billion, all we need is for council to approve the application,” she added.
Phalatse also revealed that even ANC Joburg chair, Dada Morero, initiated the loan during his brief time in office.
“Those tabling a motion of no confidence against the multiparty government are willing to deliberately collapse the City for a narrow political end despite us all agreeing that this loan is necessary.”
In May, the city passed an adjustment budget of R77.3 billion.
Meanwhile, the Economic Freedom Fighters (EFF) in Joburg has criticised the Democratic Alliance (DA)-led multiparty coalition for poor governance by failing to improve the City’s finances.
“Currently, the City doesn’t have cash-flow to pay for its service providers and very soon it will not be able to pay salaries for its employees,” the Red Berets said in a statement on Wednesday.
The EFF has urged the City to compile “a detailed diagnosis of the root-cause of poor revenue collection and come up with remedial actions to be implemented immediately”.
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“We are [also] calling for an urgent appointment of an independent auditing firm to scrutinise the City’s financial status and to investigate the possibilities that the revenue and property staff are possibly pocketing some funds such as private school’s rebates and paying less on their rates,” the party said.
“In addition to this investigation, the executive must table a report which details the amounts spent on legal services since mayor Phalatse took office.”