A move to divert about R300m in loan funding meant for the replacement of ageing infrastructure in Nelson Mandela Bay could see the money spent instead on settling legal bills, dropping lawsuits and holding summer season festivities to the tune of R45m.
The law prohibits the municipality from spending loan funding on events and other operational expenses.
The Municipal Finance Management Act, which governs the way municipalities spend money, states that long-term loans may only be used for capital projects, such as infrastructure.
The municipality wants to change its initial business plan for a R700m loan by cutting out previous plans to buy new electricity and water infrastructure.
But no decision on the recommendation had been taken yet by 11pm.
In the Treasury-approved plan, the money was meant for new smart water meters, pipes, water reticulation projects and to reduce illegal electricity connections.
A flyer, seemingly authored by acting city boss Peter Neilson, was distributed to councillors on Tuesday morning, but many ANC councillors, and Neilson himself, claimed not to know anything about it.
An ANC councillor said while some knew that it was illegal to use loan funding for operational matters, they feared for their lives should they not agree to it.
“If we don’t vote, we will die! If we do [vote], this will come back and bite us,” the councillor said.
While it is a matter that, according to procedure, is meant to be presented by the city manager, it was instead introduced to the council by ANC councillor Andile Lungisa, who even suggested changes to it.
Neilson did not utter a single word on the item during the sitting.
The new plan suggests that while about R300m of the total loan amount will still be spent on smart water meters, the rest of the money will now be spent on:
● Bulk infrastructure to the tune of R100m for an ambitious integrated housing development on the outskirts of Despatch championed by Sakhisizwe chief executive William Charles;
● Paying Masiza Inc R1.9m within 24 hours of the council approval. It is unclear what the money is for;
● Payments to Sebata, the company implementing the metro’s new financial system whose contract with the municipality ended in June. No amount is attached; and
● Festive season events to the tune of R45m. This is 10 times the amount of R4m that was actually budgeted for the summer season events.
Initially, the item recommended that the municipality settle its dispute with debt-collecting service provider EOH, which has been at odds with the city over not meeting its targets, and that the city pay it money it is owed.
No amount was given.
It also recommended paying out money to Afrisec, the company that the municipality was suing for R92m as money had been paid to the firm with no legal contract in place.
But at about 9pm, Lungisa made an about-turn, asking that the council no longer approves the payments to Afrisec and EOH.
He did not give any reasons for the change.
Lungisa instead asked that the disputes be resolved within five days after council approval.
As part of its business plan for the loan funding, the municipality wants to do away with reconnection fees for about six months for residents and businesses who have not paid their bills in full.
This is “while the municipality devises a means of addressing and collecting outstanding revenue”.
Earlier on Tuesday, budget and treasury political head Mkhuseli Mtsila said although the municipality had already secured a loan with the previous business plan, the plan could be reworked and resubmitted to the bank.
“The acting chief financial officer [Jackson Ngcelwane] has been dealing with this matter,” Mtsila said.
“The officials have been looking at this. The political head [Lungisa] was not happy and the task of reworking this has been given to the acting CFO to rework so it can fit in.”
Mtsila said he had not seen the item prior to it being distributed to councillors on Tuesday morning.
During the debate, EFF councillor Zilindile Vena said the report was a waste of time.
“There is no item here, these are simply matters that need to be attended to.
“We agree that perhaps there should be a rearrangement of the [business] plan.”
Last year, the city spent about R2.5m for festive season events, with the amount increased to R4m this year.
Asked for what the department of sports, recreation, arts and culture needed R45m for this year’s events, both executive director Noxolo Nqwazi and portfolio head Lehlohonono Mfana said they knew nothing about it.
Municipal spokesperson Mthubanzi Mniki said Mfana had said that she had no knowledge of a request for R45m for summer events.
In the business plan, it states that the municipality will have “various festive season events by having events in different locations around the municipal area, thereby taking the festive season events to the people”.
DA councillor Retief Odendaal said the business plan had been done completely wrong.
“You can’t propose to use long-term loan funding for operational [expenses],” he said.
“We approved a business plan for long-term loan funding and it was approved by the National Treasury.
“If they want to make any amendments, the entire application must be resubmitted to the National Treasury and they must approve it.
“There is no way that this is going anywhere.
“What’s more concerning is that there is an inclusion of Masiza Inc and Afrisec which we have cases against and now we are saying we actually want to pay them.
“This is actually laughable and makes a mockery of the Nelson Mandela Bay administration,” Odendaal said.
Presenting a separate item in the council, Lungisa said the Florida Heights housing project would bridge the gap between Uitenhage, Despatch, and Port Elizabeth.
“This project is going to cost R100m [for bulk infrastructure],” he said.
Lungisa also asked the council to allow Neilson to enter into a memorandum of understanding with Sakhisizwe Renewable Energy despite the fact that the municipality has invited the media to a sodturning event on Wednesday for the project.
“This is the biggest development [dubbed a R10bn project] in the history of Nelson Mandela Bay and it must be implemented with immediate effect,” Lungisa said.
Presenting the report to the council, Lungisa said: “We are doing this within the legal framework ...
“We are dealing with a crisis that was created by the DA.”
Lungisa said the aim was to ultimately do away with reconnection fees.
Further motivating to use some of the money for summer season events, Lungisa said: “We are saying this vote must be able to fund events.
“It can’t be that East London is doing so and we are not.
“Our city is a dead city, we are simply saying that by the end of this week we must have events in this city.”