Johannesburg, SA’s biggest metro that is dogged by cash flow challenges, will engage financial institutions and finance minister Enoch Godongwana to stabilise the city’s finances and raise the R5bn the municipality owes service providers, finance MMC and ANC caucus leader Dada Morero said.
In an interview with Business Day on Monday after the swearing-in of Al Jama-ah executive mayor Thapelo Amad’s 10 members of the mayoral committee , Morero said the responsibility to fix the metro’s financial crisis now rests with the multiparty coalition including the ANC, EFF, Patriotic Alliance (PA) and ATM.
Morero said his department would look at various options to stabilise the municipality’s finances, such as “using the assets of the city to see how best we can raise capital against those assets.”
Morero said the city would look at various options to ensure the R5bn owed to suppliers is raised in the shortest possible time.
“I am convinced that in the next five months the city will be out of the red. We owe suppliers up to R5bn — money that we do not have. It must be said that the previous administration of the DA neglected to focus on revenue collection and revenue management.”
Morero has called a meeting on Tuesday , with the entire finance group to put strategies in place to help the city raise capital.
The City of Joburg, which has a population of about 6-million, contributes about 15.6% to GDP. It is under financial strain, which the previous DA-led council attributed to the metro’s failure to approve a R2bn short-term loan facility from the Development Bank of Southern Africa in November 2022.
The council has since been replaced by a coalition government of the ANC and smaller minority parties. The coalition, which stifled the approval of the R2bn loan, now says it will approve it in council.
Revenue collection in the metro fell to 86% in October 2022, translating to more than R500m of under-collection.
Morero highlighted the metro’s financial challenges, telling Business Day in November 2022 that about R3.8bn of the city’s R77.3bn for the 2022/2023 financial year was unfunded.
This subsequently led to former finance MMC and DA councillor Julie Suddaby admitting the city’s finances are subject to “cash flow challenges and that between July 2021 and December 2021, cash out of the city’s coffers [totalled] R2.7bn.” She blamed the previous ANC administration for the crisis.
“Between January to June 2022, R100m dissipated out of the bank accounts of the metro. Cash flow at the moment is an issue,” Suddaby said last year. The Ekurhuleni and Joburg metros were in the red by more than R2bn in September 2022 and were struggling to pay staff and service providers.
Morero blamed former DA mayor Mpho Phalatse’s administration for the cash flow crisis in the city, saying: “You cannot just spend money you do not have. That’s what they did in 2021/2022, now we have to correct that situation by ensuring that we raise capital.”
The finance MMC said the metro would engage financial institutions in an effort to balance the city’s coffers. “We will also be engaging the minister of finance to see how far he will be willing to assist us on other issues,” he said.
Morero was confident the city could be turned around as it was too big and important to fail.
“With good leadership, we can turn around the city ,” he said.
Amad, whose Al Jama-ah political party holds three-seats in the 270-seat Joburg council, said the task ahead was a difficult one but not insurmountable.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.