City financial fightback

Deficit drops from R116-million to R73-million

If we are spending money outside the budget, we are breaking the law and the consequence of breaking the law is Qalakabusha Prison - City mayor, Zakhele Mnqayi

Prudent and conservative budgeting by the City of uMhlathuze has already produced positive turnaround figures. Tackling the cash flow problem head on, City Mayor Zakhele Mnqayi has cut down unnecessary spending to the bone. The depressing deficit of over R116-million rearing its ugly head at the beginning of the year has swiftly been sliced down to R73-million, with plans in place to build reserves. ‘We first took the cash flow problem to Scopa and then formulated an internal financial strategy before implementation of the Municipal Turnaround Strategy. ‘Together with the CFO, we sat for hours to see where we could cut spending, including capital projects previously funded from land sales,’ said Mnqayi. The Mayor told the Zululand Observer in an exclusive interview that over-expenditure had been a huge hurdle. ‘As per the Municipal Finance Management Act, a department must not under-spend or overspend and only in an emergency and with the authority of the Mayor, will over-expenditure be condoned.’

Compensated
Over-expenditure has emanated predominantly from the Waste Management and Traffic departments with the City having to cough up extra finances to compensate overtime. ‘We had to catch up over weekends to clean up the City after the strike and meet the backlog. ‘The traffic department needs officers on the roads at all times but we must budget appropriately to include overtime.’ Tabling an income budget of R1 557 757 and a capital budget of R234 827, the City has been focused on cutting the deficit of R116-million brought forward from the adopted adjustment budget of 2009/2010. ‘The last deficit figure stands at R73- million. ‘Our cash flow was positive up until the end of the financial year. ‘We didn't touch the R60-million overdraft facility available.’

Reserves
It is hoped the R230-million owed to the municipality in land sales will cover the current deficit while the balance can be pumped into the City’s reserves
‘We need to build about R150-million over the next five years in reserves. ‘We have not yet received payment from land sales but have since received notification from Ithala Bank confirming land transfers via the IDZ, which will guarantee R103-million. ‘The Competition Board has indicated they do not have to make any price determination and the transactions can go through,’ said Mnqayi. Questioned whether the City would have budgeted funds to conduct capital projects over the next three years, the Mayor said long term borrowing was also on the cards. The municipality has evaluated proposals received from various financial institutions to take up an external loan of R100-million to fund capital expenditure for the 2010/2011 financial year. ‘Capital projects will continue, as we are the delivery sphere of government. ‘We are obtaining advice from the Premier’s office, as we do not want to be overburdened. ‘We have budgeted for repayment. ‘The money will be used for capital projects with up to R90-million utilised for water and sanitation.’ A loan of R100-million over 10 years at a fixed rate of 10.99% will translate into a repayment of R167,2-million.