Ballooning employee costs, water debt totalling R443m and rising electricity losses continue to pose a risk to the Nelson Mandela Bay municipality’s finances.
These were some observations by the National Treasury during a visit to the city at the beginning of February.
The council will attempt to pass the 2018/2019 adjustments budget on Thursday.
While local government budget analysis director Bernard Mokgabodi has given the city a thumbs-up for its “stable” financial health, he has warned that the increasing outstanding debtors figures are the biggest risk to the city’s collection rate.
Mokgabodi said the collection rate – sitting at 94% – was below average for a metropolitan municipality.
“The city must also focus on accelerating capital expenditure at the beginning of the financial year, instead of a hockey-stick approach where the expenditure is intense towards the end of the financial year,” he wrote.
He said this would reduce the amount of unspent conditional grants that had to be returned to the Treasury.
The city was commended for the positive credit rating from Moody’s and the intention to hire a project manager reporting directly to the city manager.
However, service-delivery targets had been reduced, Mokgabodi said.
“Most of the service-delivery targets not achieved relate to failure to reduce electricity losses [and] eradication of illegal connections,” he wrote.
“These have a serious impact on the city’s fiscal effort because these losses affect revenue collection targets.”
He also expressed concern over the city’s wage bill.
“Of concern is the high labour costs when taking into abnormal salaries, overtime paid and contracted service delivery to the ratepayers in the city,” he wrote.
Other red flags included the disparity in planning between the municipality and the human settlements department.
Mokgabodi said the city was heading in the right direction if only all the projects were implemented in an integrated manner.
The February 11 letter is attached to the adjustments budget, which was the subject of debate at a joint mayoral and budget and treasury committee meeting on Wednesday.
Among the changes from the original budget passed in June 2018, the salaries amount has risen by R17.1m due to overtime costs and the recent absorption of an additional 212 security and 33 call centre staff.
The municipality is also projecting to spend R22m more on buying bulk electricity from Eskom.
At the meeting, the DA reiterated its stance on the 182 page document, saying it would not support it should the ruling coalition government not commit to cost-saving measures.
Presenting the changes to the adjustments budget to councillors, acting chief financial officer Jackson Ngcelwane said: “The budget that was passed on June 30 had a deficit of about R11.7m
“The picture has changed now from an R11.7m to a R74.3m deficit.”
Ngcelwane said he was concerned that the projections on revenue did not consider loadshedding and the effects it might have on the bulk purchases of electricity from Eskom as it would mean customers bought less electricity.
DA councillor Retief Odendaal said the adjustments budget was proof that the administration had forgotten people in the northern areas and townships.
“Our deficit is going up and I don’t think we have done everything we can do to save.
“As of Monday February 25, we have only spent 34% of our capital budget,” he said.
“That means there are many projects where we could spend money quickly such as the tarring of roads. Another area of concern is on bulk purchases and our wage bill.
“We don’t want a situation where we have to ask people to retire before their time, [but] this is a possibility.”
ANC councillor Andile Lungisa said the previous budget amendment pushed an old apartheid agenda.
“It’s clear that councillor Odendaal is trying to campaign because he is misleading this committee,” Lungisa said.
“We are talking about a balanced budget here – the original money in the northern areas that you are talking about [is] based on an apartheid plan and it is clear that is still what you are championing.”
Mayor Mongameli Bobani said the adjustments budget was a true reflection of what Bay residents had asked for.
“We went out and we spoke to people, and they told us what they want prioritised.
“We don’t expect to argue about this adjustments budget,” Bobani said.