Latest news with #StandingCommitteeonAppropriations
IOL News
2 days ago
- Business
- IOL News
Municipalities in fiscal turmoil as appropriations committee scrutinises financial mismanagement
The Standing Committee on Appropriations has raised an alarm over the dire financial state of metropolitan municipalities Image: Supplied The Standing Committee on Appropriations has raised an alarm over the dire financial state of metropolitan municipalities during a recent engagement with the Mangaung Metropolitan Municipality in the Free State, as part of discussions surrounding the 2025 Division of Revenue Bill. The committee's session focused on the pressing fiscal challenges exacerbated by unfunded mandates and poor financial management practices that continue to plague these vital urban areas. One of the major points of contention was the late submission of critical documents by the City of Johannesburg, which arrived a mere 30 minutes before the meeting commenced, limiting the committee's ability to review and discuss its contents thoroughly. In response, the committee has resolved to reconvene with Johannesburg next week in hopes of addressing these concerns in detail. Particular emphasis was placed on the financial practices at the Mangaung Municipality, where several directorates are reportedly overspending their approved annual allocations by an alarming 10 to 12 per cent. Much of this overspend can be traced back to bloated employee costs and outsourced contracted services. Committee members expressed their alarm at the continuing trend of outsourcing fundamental municipal responsibilities, arguing it undermines institutional capacity and invites potential misuse of funds by service providers. Committee chairperson Mmusi Maimane did not mince words, highlighting the pervasive threat of corruption that continues to inflate service delivery costs. 'What should cost one rand ends up costing three, four or even five rands due to corrupt practices,' he emphasised. The committee is firmly of the view that addressing corruption is essential to restoring financial integrity and ensuring that funds are used effectively for public services. In a stern reminder of the consequences of mismanaged resources, the committee pointed to Mangaung's failure to achieve unqualified audit outcomes for the last three consecutive years. The Auditor-General's reports have consistently pointed to significant financial management deficiencies, including weak internal controls and governance failures that undermine public trust. Members of the committee urged Mangaung to clarify its outstanding debts to Eskom, emphasising the urgency of reporting on any progress made in tackling these fiscal obligations. Maimane further lamented the broader decline of metropolitan municipalities across the country, particularly focusing on the deteriorating conditions in inner-city areas. He warned that such decline leads to a profound loss of housing opportunities and vital economic infrastructure, exacerbating already strained urban living conditions. As part of its discussions, the committee issued a pointed reminder to municipal officials to prioritise basic service delivery, which includes repairing potholes, installing traffic lights, ensuring reliable water access, and maintaining clean sanitation facilities in informal settlements. IOL
The Citizen
2 days ago
- Business
- The Citizen
Government intervention worsened Mangaung Municipality crisis, but recovery underway — mayor
The appointment of a city manager has brought a measure of stability to the municipality. Mangaung Municipality Mayor Gregory Nthatisi speaks during a media briefing in Bloemfontein on 9 May 2025. Picture: Gallo Images/Mlungisi Louw The Mangaung Municipality says it continues to face ongoing challenges related to governance and the delivery of basic services, but emphasised that efforts are actively underway to tackle these issues. On Wednesday, municipal officials appeared before parliament's Standing Committee on Appropriations to brief MPs on the city's progress. Mangaung was placed under administration in 2020 after section 139 of the constitution was invoked by the Free State and National Government. This intervention followed the metropolitan municipality's ongoing dysfunction and repeated failures to implement a financial recovery plan (FRP). Mangaung Municipality mayor details challenges Mangaung Mayor Gregory Nthatisi told the committee that political instability and internal conflict within the municipality prompted the Department of Cooperative Governance and Traditional Affairs (Cogta) and Cabinet to intervene. However, Nthatisi said that the two task teams deployed to Mangaung were hindered by the same political turbulence they were meant to resolve. 'The political infighting also engulfed them as a result. They could just not impact on what they were sent to do,' he said. ALSO READ: Mangaung Municipality in spending crisis after exceeding budget He pointed out that some officials on the teams lacked the necessary experience to handle the responsibilities assigned to them. 'Others were quite junior than the responsibility that they were given as HoDs [Heads of Department] and that led to even exacerbating the crisis of Mangaung in a number of spaces, but the best thing that they left us with was a financial recovery plan document, which is guiding us today,' Nthatisi said. According to Nthatisi, the appointment of a municipal manager has brought a measure of stability to the municipality. 'There's also relative stability when it comes to political structures because people are now performing their tasks, work is being done [and] council is sitting properly. We are now addressing challenges that have to do with administration.' Financial recovery plan Mangaung City Manager Sello More told the committee that the FRP is still in its rescue phase, with the implementation progress currently at 53.82%. More said, the next phase – stabilisation – involves 100 activities. He noted that the municipality has been receiving qualified audit opinions from the Auditor-General over the past year. Mangaung has since created an action plan aimed at strengthening internal systems and addressing financial management weaknesses in response. READ MORE: Eskom to disconnect 15 Free State towns over billions worth of debt This plan also seeks to address overspending after the Auditor-General reported that the municipality spent 111% of its budget in the 2023/2024 financial year. 'Areas of overspending have been identified as employees' costs and contracted services. So the city must contain employee costs expenditure, especially overtime and acting allowances,' More said. He revealed that the municipality has introduced a shift system to curb excessive overtime. Critical positions are now being filled to manage acting allowances, according to the city manager. 'There has been a seriously high number of people in acting posts.' Watch the meeting below: The action plan further outlined reviewing staffing levels and costs associated with supporting political offices, as a means of reducing overspending. More conceded that the municipality relies heavily on contractors for both routine and emergency maintenance due to limited internal capacity. 'We are now moving towards building our own teams and infrastructure required for routine maintenance, especially unblocking of sewer systems.' Mangaung Municipality's liquidity and revenue challenges Regarding Mangaung's financial health, More said liquidity challenges are driven by a low revenue collection rate and persistent overspending. 'The collection rate is not picking up from the average of 75%, which was one of the reasons the city was placed under provincial and later Cabinet intervention. 'The previous amalgamations into the city exacerbated the situation, bringing more indigents, billing issues and incomplete records.' He highlighted an ongoing trend where even reliable ratepayers, both businesses and households, have begun to default, largely due to slow economic growth and underperforming industries. READ MORE: Water wasted in Free State totals R3.7 billion in last seven years Additional liquidity pressures stem from costly contracts, such as security and waste management tenders. More explained that these contracts are often outsourced because in-house services are viewed as more expensive due to salary levels and benefits. 'Our recovery is not matching what we are supposed to be paying.' He said the reliance on contractors for essential operations, such as service connections, has further strained the municipality's budget due to high costs. More added that Mangaung is implementing several strategies such as realistic cash projections, tighter cash flow monitoring, and improved revenue management. This includes restructuring, reviewing credit control procedures, enhancing debt collection, and resolving metering problems. Supply chain corruption More stated that no corruption cases within Mangaung's supply chain management had been identified internally by the municipality. However, some arrests have been made by police based on tips from whistleblowers. 'Our [contract] awards have not been subjected to any court orders. It is safe to say that there is one bid where Saps arrested a successful bidder, two months after the award and start of the contract.' The arrested bidder was released on bail. More also indicated an ongoing police investigation into a 2019 security tender. The municipality has begun rotating staff involved in bid committees to combat corruption. It has also approved a whistleblower protection policy and established a dedicated hotline for fraud and corruption reporting. NOW READ: Matjhabeng municipality's appeal rejected amid financial challenges, service delivery collapse
The Citizen
3 days ago
- Business
- The Citizen
‘Sad situation': Eskom warns growing municipal debt seriously risks its sustainability
Municipal debt currently stands at R94.6 billion. Eskom has warned Parliament that growing municipal debt continues to pose a serious risk to the entity's long-term sustainability. Officials from the power utility appeared before the Standing Committee on Appropriations on Tuesday to brief MPs on the Eskom Debt Relief Amendment Bill. The bill, introduced in 2023, provides R254 billion to support Eskom's debt servicing obligations over a three-year period. One of the key conditions attached to the relief is that Eskom is not permitted to take on additional borrowing. Eskom strategic goals During the committee meeting, Eskom's Chief Financial Officer (CFO) Calib Cassim outlined several of the utility's strategic priorities, including efforts to recover and maintain a 70% Energy Availability Factor (EAF) in the long term, in order to meet South Africa's electricity needs. 'We know currently it's sitting around 57% and we really need to increase that over the remainder of the year to get this average of 66%,' Cassim said. He also highlighted the need for innovative strategies to tackle municipal arrear debt and reduce energy losses. 'One of our challenges is that how do we deal with the issue around municipalities, including metros, from a finance perspective; the importance of collecting what Eskom does supply in terms of the product that contributes towards our financial sustainability and liquidity,' he explained. ALSO READ: Eskom ready to start borrowing again Cassim added that Eskom is also focused on cost optimisation, revenue enhancement, leadership stability, and employee development. The entity's revenue rose by 16% to R264.60 billion in the third quarter of the 2024/2025 financial year. This was largely due to a 12.74% electricity tariff increase approved by the National Energy Regulator of South Africa (Nersa). Eskom also reported 'significant savings' of R16.3 billion in diesel costs. Regarding the debt relief, Cassim noted that Eskom had received R8 billion of the allocated R64 billion in the 2024/2025 financial year. 'The remaining R56 billion was drawn down by the end of March 2025,' he said. Debt securities and borrowings have since decreased to R409 billion. Eskom's municipal debt remains a serious concern While the debt relief programme has improved Eskom's cash flow, Cassim stressed that municipal debt continues to pose a substantial challenge. The debt, the Eskom CFO said, has been increasing despite interventions by the National Treasury. 'We need to arrest these arrears because if we don't do that it's going to neutral the benefit we do anticipate to receive from the overall debt relief.' In the current financial year, Eskom is set to receive R40 billion in debt relief. Rajen Naidoo, Eskom's General Manager for Finance in the distribution division, reported that municipal debt currently stands at R94.6 billion. READ MORE: R100 billion debt: only 10 municipalities honouring their accounts He attributed the persistent non-payment issue to deep-rooted structural and systemic problems within municipalities. 'Municipal debt is a key risk to Eskom business and our liquidity. 'As you know that distribution collects the money but then pays that onto transmission and generation, so the problem is not just a distribution problem but an Eskom problem on the whole,' Naidoo told the committee. He explained that many municipalities are unable to pay current bills or reduce existing debt. 'The municipalities are also plagued with high energy losses in the sense that energy is either being stolen through illegal connections, meter tampering or inaccurate billing.' Watch the meeting below: Naidoo added that a decline in electricity demand was further reducing revenue, while weak financial management practices continue to exacerbate the situation. Of the 71 municipalities enrolled in the Eskom debt relief programme, 62 have been unable to meet the necessary conditions to qualify for debt write-offs. At least R55 billion in debt could have been written off had these municipalities complied. 'We have seen a rapid growth and much faster growth in terms of municipalities defaulting.' Among the top 10 non-compliant municipalities are Mbombela (Mpumalanga), Maluti A Phofung (Free State), Govan Mbeki (Eastern Cape), Emfuleni (Gauteng), and Msunduzi (KwaZulu-Natal). Collectively, they account for R50 billion of the municipal debt. 'The sad situation we find ourselves in is that even municipalities that were approved did not even honour their current bill, some of them from month one of the programme.' Metros contributing to rising Eskom's municipal debt From March 2023 to April this year, municipal debt increased by R15 billion. Metropolitan municipalities are also showing a debt rising trend at R11 billion. The City of Tshwane and City of Johannesburg accounted for R10 billion of the total. 'Initially, we did not have an issues with metros in terms of payment. Yes, there was some debt outstanding, but they would generally pay us late and would catch up. 'But from March 2023, you can see that the debt has grown from R1.7 billion to R11.1 billion,' Naidoo explained. He said Tshwane has a five-year payment plan with Eskom. A four-year similar deal was signed with Coty of Joburg recently. NOW READ: How Eskom and National Treasury saved taxpayers more than R20bn
