The Western Cape government has raised concerns about a “financial crisis” unfolding in the Theewaterskloof local municipality and has intervened.
The provincial government issued an official notice to the municipality this week informing it of an executive decision to intervene in its affairs under section 139 of the constitution.
Finance MEC Deidré Baartman wrote to the National Treasury’s municipal financial recovery service requesting an urgent recovery plan for the municipality.
Baartman listed myriad “financial indicators pointing to a financial crisis”. These include revenue collection, area payments and conditional grants not spent.
“Over the past two years, the municipality has seen a rapid decline in its financial position. Among other key indicators, the financial crisis became evident when the provincial government detected a significant decline in its collection rate, which dropped to 77% by September 2024 from more than 95% in the 2022/2023 financial year,” said Baartman.
This performance was below the municipality’s own long-term financial plan and National Treasury norm.
“The municipality has been in arrears in its payments to Eskom since June. In August Eskom issued a notice of breach to the municipality and began a formal process that could, in the worst case, result in the electricity supply to Theewaterskloof communities being cut off,” said Baartman.
“In their financial management report for September the municipality reported R47.25m owing to creditors for more than 30 days. This is an increase from the R43.28m outstanding creditors balance in August.”
Baartman said this was almost 6% of the adjusted 2024/2025 operating expenditure budget, which stands at R787.68m. This figure exceeds the 2% threshold that triggers a mandatory intervention under the Municipal Finance Management Act.
“The municipality’s roll-over application for the unspent national conditional grants transferred in the 2023/2024 financial year was not approved. As a result, the R50.01m applied for will need to be repaid to the National Revenue Fund,” said Baartman.
“The municipality does not have sufficient cash to repay these funds, so National Treasury will deduct the funds from their future equitable share transfers. The municipality’s December 2024 equitable share tranche of R46.97m is not large enough to offset this amount, so the municipality may have funds offset against their December and March 2025 transfers.
“This will place the municipality under further financial distress, as planned/committed expenditure will need to be financed from other sources or the budget will need to be reprioritised based on available cash flow and may compromise any payment arrangements in place at that time with Eskom and other creditors.”
In its roll-over application the municipality did not report any expenditure relating to the municipal disaster response grant allocation of R41.3m.
“The municipality’s reported cash and cash equivalents are not sufficient to cover the municipality’s commitments. In other words, the municipality does not have sufficient cash to pay monthly expenses and pay the various creditors they owe.”
Teams from provincial treasury and the department of local government will support National Treasury in working with municipal officials to develop the financial recovery plan.
“Our main objective as the provincial government is to ensure the uninterrupted continuation of service delivery to the residents of Theewaterskloof, while also working towards returning the municipality’s finances to a viable position.”
Baartman said the recovery plan aims to establish a framework for restoring the municipality’s financial stability, with a focus on financial management, governance, institutional strength and service delivery. Mechanisms for regular monitoring and reporting will be put in place to uphold accountability and ensure transparency.
The “intervention at this stage will not involve the appointment of an administrator”, Baartman said.
TimesLIVE
Jim Mohlala
www.timeslive.co.za