The Nelson Mandela Bay municipality is in dire financial straits and could struggle to pay staff salaries in a few months’ time.
This is due to the collection rate dropping to a shockingly low 69%, and millions of rand in lost revenue due to sky-high water and electricity losses.
To save the city from financial collapse, the metro wants to institute harsh punishment for defaulting ratepayers, update its assistance to the poor register and downgrade punitive water tariffs.
This was all revealed during a budget and treasury committee meeting on Monday where the city’s financial plight came to light.
The municipality’s ballooning debtors’ book was sitting at R10bn in September, an increase of R859m compared with June.
Electricity and water losses, however, were among the biggest contributors to the dwindling cash reserves.
The metro had incurred R829m in non-revenue electricity losses by the end of the 2021/2022 financial year.
In the first four months of the 2022/2023 financial year, which started in June, it has racked up R347m in non-revenue electricity losses.
On the water front, the metro lost 12 megalitres over the same period.
The figures are contained in a report debated at the meeting.
It indicates that the average revenue collection for September was 62.7% — far short of the 94.7% in June 2019.
“The municipality’s investment portfolio has decreased by R91m since June from R4.7bn to R4.6bn,” the report says.
The municipality wants to drop the water tariffs for residents who use more than nine kilolitres a month down a notch in the hope that municipal accounts will be settled.
Dropping the tariff back to Part C for residents who use more than 9kl a month was approved by the mayoral committee in October.
Residents who use less than 9kl a month will remain on Part B.
It has not yet been brought to the council for a final decision.
“The committee must note that the introduction of punitive water tariffs necessitated by the drought situation has had a negative effect on the collection rate and has also contributed to the escalation in water debt,” the report states.
The metro also owes creditors R1.5bn, of which R503m was required to be paid within 30 days and has not been done.
Bay chief financial officer Selwyn Thys said if the municipality did not turn its financial situation around by June it would struggle to pay salaries.
“If we don’t do anything, we’ll be in serious financial difficulties,” he said.
Thys said if revenue collection was not improved soon, a point would be reached where the municipality would not have sufficient financial reserves to sustain daily operations.
This, he warned, meant the municipality would not be able to plough money back into the capital budget.
“There’s a lot of work that needs to be done by the administration in several areas, but the two main ones are water and electricity losses.”
Thys was tasked with preparing a PowerPoint presentation to be presented at a council meeting that will outline the metro’s dire financial situation and what could happen if tough decisions are not made.
Services for which ratepayers have defaulted on paying for the last two months, include (all figures rounded off either higher or lower):
- Electricity: R537.36m;
- Sanitation: R6.32m;
- Water: R27.05m;
- Refuse: R4.22m;
- General rates: R5.66m;
- Sundries: R1.69m;
- Interest: R4.42m;
Mayor Retief Odendaal, who is also the budget and treasury political head, said the city needed to crack down on ratepayers who could afford to pay and still stole electricity.
“We are faced with a huge problem, much like the Buffalo City Municipality,” he said.
It emerged this week that the Buffalo City Municipality could soon be broke if people persisted in not paying their services bills, with the metro having enough money for just 10 days.
Odendaal said: “Our administration is faced with serious financial problems.
“We are headed towards the perfect storm.
“If you look at our collapsing revenue collection rate, it has significantly dropped to 69%.
“We are guided to uncharted territory, and that is as a result of the affected punitive water tariffs.”
He said if the city failed to drop the punitive tariffs, millions of rand would have to be cut from the adjustment budget in early 2023.
“We will bring this administration partly to its knees as far as service delivery is concerned.
“We are now at a crossroads, and I was here in 2010 when the council made decisions for the sake of the biggest celebration and economic tourism attractions and where we had to carefully negate our finances.”
Odendaal said the metro needed to make difficult operational decisions to stop directorates from bleeding the city’s coffers dry.
“We have a duty to look after the poor but everyone else who can afford to must pay because we don’t have the luxury to allow them to continue defrauding the municipality.
“They need to be severely punished for stealing electricity even though they can afford to pay.”
He said the three-month amnesty offered to defaulters did not yield positive results.
Some of the harsher measures against defaulters and electricity thieves to increase revenue collection include blocking electricity meters that have been tampered with or where the electricity has not been paid, electricity disconnections, and laying criminal complaints against people who have tampered with their meters even though they can afford to pay.
Energy and electricity executive director Luvuyo Magalela said it would be unfair for the city to harshly punish electricity thieves who came forward during the amnesty period when the city had failed to timeously provide new meter boxes.
The municipality launched its amnesty programme in February, which offered electricity thieves a 90-day period in which they could come forward and escape punishment.
“We can’t say the amnesty period hasn’t worked without us replacing the old meters,” Magalela said.
“There also needs to be a policy congruence with what we’re doing trying to curb electricity losses in terms of the credit control policy.
“If we push people by blocking their electricity meters then that results in tampering.
“We need to review the policy.”
Magalela said the city had ordered 4,000 meters in January, but due to delays the units had arrived only in September.
“For us to be able to replace meters that have been tampered with, we need to have them in our store first.”
DA councillor Lee-Teslin Booysen said it was unfair to block meters without replacing them.
“We are in October and those meters still haven’t been installed.
ANC councillor Mpumelelo Majola said the budget and treasury department was being “troublesome” for its poor revenue collection.
“This is a very serious matter which affects the grants that we get.”
He said the metro’s customer services directorate also contributed to the low revenue collection rate as it failed to assist with billing queries.
Energy and electricity political head Lance Grootboom said cutting people’s electricity off would do more damage than good.
“Prepaid electricity customers would be the most hit if the city started blocking people”.
Grootboom said the city needed to review its credit control policy, which left prepaid customers the most disadvantaged.
HeraldLIVE
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