City has already borrowed R3bn this year
THE City of Johannesburg is said to be in a financial crisis and has already resorted to borrowing money for the new financial year to be able to cover expenses.
According to the African National Congress in Johannesburg, R3 billion was borrowed from the DBSA within the first month of the new financial year, (July 2017) to cover the cash shortfall.
ANC Joburg Treasurer Geoffrey Makhubo said in terms of the Municipal Financial Management Act (MFMA), all short-term funds borrowed must be repaid by the end of the financial year.
“As at 30 June 2017, the City had already borrowed R1,1 billion from the Debt Redemption Fund (Sinking Fund) to shore up its cash reserves for year-end reporting purposes. The ANC believes that the cash shortfall it pointed in June 2017 has not been addressed, notwithstanding the lies perpetuated by the MMC Finance, hence the City has borrowed R3 billion from the DBSA in July 2017,” he said.
“Short-term funding is used for emergency cash flow support, therefore, it is concerning that the City has already borrowed total short-term funding of a staggering R3 billion in the first month of the new financial year. The question that begs to be answered is ‘which emergency cash situation is the City responding to with this R3 billion?’”
According to Makhubo, as of 31 August 2017, at least five entities were operating on an overdraft to the tune of R2,6 billion. City Power at R 563m, Johannesburg Development Agency at R 986m, Metro Bus running at an overdraft of R 473m while Joburg Roads Agency is in the red for about R 110m and Joburg Property Company (property portfolio) has a shortfall of R 434m.
He said the city’s business model relies on City Power’s trading performance to cross-subsidize other social programs including health, transport, roads and public safety.
“Therefore, the above City Power cash position has driven the entire City of Joburg to a position of financial collapse.
“In summary, as at 31 August 2017, the total unencumbered cash in the City of Joburg is R2,9 billion which is less than the short-term loan of R3 billion already received by the City.
“This means that the cash available for day-to-day operations is already less than the loan received in the first two months of the financial year. This is a scary and nerve wrecking financial picture which should concern all investors, creditors and the people of Joburg at large. The ANC believes that, at this rate, it is only a matter of time before the city is brought to a total collapse,” he said.
Makhubo said the MMC for Finance was misleading the people of Joburg and his Mayoral Committee. He claimed Revenue Collection under the DA-Led coalition was under collected by R2,9 billion for the financial year ending on 30 June 2017.
“This deficit will have a negative financial impact on the 2017/18 (current) financial year which commenced on 01 July 2017. The MMC for Finance has recently announced that the City has done well by collecting R3,2 billion in August 2017, however, he again fails to inform the people of Joburg that in July 2017 the City under collected by R855 million in just one month.
“The dismal performance was followed by a further revenue under-collection of R610 million in August 2017 bringing the total revenue not collected to R1,47 billion in just two months.
“The MMC for Finance has also failed to announce that the revenue collection rate for the first two months ended 31 August 2017 is an alarming 80% which is significantly below the budget collection rate of 95%. This collection rate was 94,1% at the same time last year,” he said.