The City of Johannesburg said the Gauteng provincial government owes it R5.2 billion, warning that the outstanding debt is placing severe pressure on the city’s finances.
On Wednesday, Mayor Dada Morero revealed that provincial departments owe the city R1.2 billion for municipal services, despite paying R200 million in June, while a further R4 billion is owed for unfunded mandates.
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City officials gave a briefing on Wednesday on their response to the National Treasury’s move to withhold R3.6 billion equitable share until it complies with provisions of the Municipal Finance Management Act.
Morero said the city has now met all of the National Treasury’s conditions to secure the release of its R3.6 billion equitable share allocation.
He said the city submitted its final outstanding documents to the National Treasury on Tuesday, with more to follow on Friday, and is now expecting the funds to be paid by mid-July.
The expected allocation comes as the city grapples with cash flow pressures and implements a series of financial reforms aimed at stabilising its finances.
Morero disclosed that the city’s cash reserves remain under pressure, with only 12 days of cash coverage, equivalent to about R2.8 billion, well below the 32-day minimum recommended by the National Treasury.
He said the money is owed by departments such as Health and Education.
“They are currently owing us R1.2 billion… We may want to write to the National Treasury ourselves, because the minister has also said departments must pay municipalities, probably to withhold their equitable share and pay us first,” explained Morero.
At the same time, Morero confirmed the city has begun implementing its ringfencing reforms for municipal entities, with Johannesburg Water becoming the first entity to implement the new funding model from 1 July, followed by City Power in September and then Pikitup.
“So, we have started with the ring-fencing. At this stage, we’re using a model of 70-30, with the entity absorbing the 70%, and the shareholder, for now, will then absorb 30%. But as we move along, we’ll be able to review, understand the implications of the whole reforms as we move on.”
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Dimakatso Leshoro
www.ewn.co.za
