The troubled Amahlathi municipality is so broke that all 253 workers, 30 councillors and six traditional leaders who are in council, were not paid their May salaries.
And should the provincial government not bail out the Stutterheim-based municipality, workers will not be paid again in June.
While the administrator, Dr Sindisile Maclean, and co-operative governance & traditional affairs (Cogta) provincial spokesperson Mamkeli Ngam confirmed to the Daily Dispatch that plans to bail out the municipality were afoot, at least one union said its members would meet on Monday to discuss a way forward.
Maclean told workers the municipal coffers had dried up because R125.1m of its R227.5m annual budget had gone towards paying salaries. That equates to 55% of its budget.
In a letter sent to banks and creditors on Friday, Maclean, who was seconded by former Cogta MEC Fikile Xasa to turn the municipality’s fortunes around, said: “The municipality commits to backpay the salaries during the month of July when it receives the next transfer of equitable share.”
On Sunday, Maclean told the Dispatch the municipality’s cash flow had run out for the current financial year, which ends in June, and that was the reason for the non-payment of employees and councillors.
Maclean said one reason the municipality had run out of funds was its high salary bill.
A council decision to standardise salaries caused staff costs to rise by 49% during 2016-2017 financial year.
Maclean said the future of the municipality depended on whether the salary bill could be amicably brought down.
“It requires tough decisions to be taken regarding the continued implementation of standardisation of salaries.
“The municipality also needs to prioritise revenue collection,” he said.
Samwu shop steward Tembela Magwangqana confirmed that neither workers nor councillors were paid on Friday.
“Tomorrow [Monday] workers will take a decision on whether to work or not. The municipality is blaming the insolvency on high employee expenditure costs,” she said.
Magwangqana said the municipality’s organogram was bloated.“In 2015, management promoted some employees, and workers fought to have all salaries upgraded to the same level as those employees. After the standardisation of salaries, council had a moratorium which stopped the municipality from hiring people for three years in order to save money.“They [council] did the opposite and hired 18 people and that led to the problem we are facing today,” said Magwangqana.Maclean confirmed that council took a decision to fill 18 positions which were not budgeted for during the 2017-18 financial year.“The municipality has previously been able to absorb the negative financial implications of these decisions by utilising its reserves, which is not considered best practice.“The revenue has also declined due to re-demarcation processes in 2016-2017 financial year.“The equitable share, which is the biggest revenue source, has declined by at least 22%.”Asked what the current revenue collection was and what was being done to improve it, Maclean said: “The current revenue collections sits at about 60% coming from five months of shutdown. Our target is 80% by the end of June.“As part of the intervention team from Cogta and National Treasury, we have constituted the financial recovery team, which will focus on revenue collection and the finances of the municipality. Soon we will have a strategic planning session to deal with these issues.”The almost five-month total shutdown of the municipality in 2018, which turned violent with municipal properties torched and vandalised by residents, also contributed to revenue collection taking a nosedive, he said.But while the municipality cannot afford to meet its financial obligations, Maclean said Bhisho had committed to bail them out.“Cogta was requested to provide financial assistance to pay employees salaries for May and June and also to assist to service Eskom debt. It is envisaged that the implementation of the financial recovery plan will also assist the municipality to return to financial stability,” he said.Ngam said: “A submission will be made to the provincial executive council. As Cogta, we have a responsibility to assist the municipality in managing its affairs. Maclean has written to the department and the provincial treasurer asking for assistance.”EFF councillor Gcobani Mxosa said that they were not going to be paid on Friday, had never been communicated to them.“There is nothing that will help this municipality unless they resolve the issue of standardisation. In this municipality 50% of the budget goes to salaries, unless that is resolved we are going nowhere.”The Amahlathi Ratepayers Association (ARA) declined to comment. But in a statement dated April 27, ARA chair Donald Kemp warned that if the standardisation of salaries was not corrected, the municipality would continue being in a precarious financial position.