Msunduzi Municipality's low cash coverage raises alarm, Mpac demands answers

The Mpac committee of the Msunduzi municipality is demanding answers from the municipality regarding the financial crisis faced by the council, including a serious cash crunch.

The municipal public accounts committee (Mpac) has requested that the municipality’s administrative team provide a detailed report on its plan to address the cash crunch that has left the city with just one month of cash coverage. Additionally, the committee has demanded an explanation of the financial challenges that have led to delays in the municipality receiving debt relief from its Eskom debt. The committee expects to receive this report by the end of November.

A recent Mpac report detailed the challenges faced by the municipality, highlighting several issues that are jeopardising its financial stability, including excessive spending on overtime.

The report found that cash coverage in the municipality stands at one month, while treasury regulations state that it must be at least three months to cover the municipality’s operations in case of a crisis where it is unable to collect any revenue.

“The committee expressed concerns regarding the municipality’s current cash coverage, the payment arrangement with Eskom and Umgeni Water, the high level of overtime expenditure, and the delayed submissions of reports and prolonged suspensions exceeding the prescribed six months,” the Mpac report stated.

In response to the concerns raised, the senior management for budget and planning confirmed that the municipality currently has one month of cash coverage. This was acknowledged as inadequate, given that three months’ coverage is required to ensure the municipality’s financial sustainability.

It was stated that in response to the concerns regarding the payment arrangement with Eskom, the municipality had fulfilled the conditions of the Eskom Debt Relief Programme; however, Eskom has not been cooperative, prompting the national Treasury to formally request debt relief on behalf of the municipality.

The management indicated that the municipality had encountered payment difficulties with Eskom during the winter period, but the account has since been regularised.

The chairperson of Mpac, Zweli Magubane, said one of the councillors in the committee highlighted that based on the cash coverage, the municipality is facing a serious financial crisis.

The Mpac has requested that management provide a detailed report on what it is doing to rectify the situation and address any issues of cash flow.

“We know that some municipalities have been granted debt relief, but Msunduzi has not, and we want to know why this is the case. We understand that part of the condition of being part of the programme is that you have to pay, and we know that there were some months when the municipality did not fully honour this.

“We want to know why this happened and how it has been rectified. We expect to receive these reports by the end of November,” he said.

Mpac member Rienus Niemand said the ACDP is concerned with the cash coverage, which directly impacts the municipality's ability to deliver services. At less than 30 days, with the requirement being 90 days, the situation is dire.

Msunduzi mayor, Mzimkhulu Thebolla, said while he would need to study the Mpac report, the municipality is working hard to address any challenges. He noted that while the situation regarding cash coverage is not ideal; it is not yet a crisis.

Speaking on the challenges with the Eskom debt relief plan, he said, “In order to be part of the relief programme, you have to stick to a strict schedule of 12 months’ pay that is not disrupted, and we have complied with that. We are looking at other municipalities to see how they are managing.”

THE MERCURY