Concerns have been raised over Beaufort West Municipality’s financial health as no solid plan is in place to chip away at its R80 million debt to Eskom.
The Western Cape government report looked into the status of the financial recovery plan (FRP) implemented to assist the troubled municipality which remains in a “financial crisis”.
The plan was implemented in March to get the municipality on a solid financial footing after "a long history of financial problems".
An insider said the municipality had no stable revenue sources or mechanisms to collect rates and service charges.
"Currently it relies heavily on overdraft facilities,“ the source said.
According to the report which assessed the performance of the recovery plan between March and June, as of end June the municipality owed Eskom about R81.1 million.
It had also failed to use its government grants, which were designed to fund projects to enhance service delivery.
"The municipality depended on an overdraft to meet expenditure commitments … (The municipality) did, however, manage to maintain a cash-backed grant reserve (to cover unspent conditional grant funds),“ says the report.
Western Cape Minister of Finance and Economic Opportunities Mireille Wenger acknowledged that the municipality was in a financial crisis.
She said the municipality relied on a combination of "own revenues", including property rates and "inter-governmental transfers", to fund its operations.
"However, before the financial recovery plan was implemented, there were times when the municipality didn’t have sufficient funds to fully cover its operating costs and relied on its overdraft to make up the difference,“ said Wenger.
The provincial government also noted that outstanding debts to creditors exceeded its operating budget by 2% and a realistic repayment arrangement had not yet been negotiated with the largest creditor, Eskom.
"The municipality is not generating sufficient revenue on a monthly basis to cover its costs. The collection rate of the municipality has improved but remains well below the National Treasury norm of 95%. Provincial Treasury has also identified a possible overstatement of the reported collection rate," the report flagged.
While it wasn’t clear as to how much the current financial year's budget was, but the report said it was unfunded.
For 2021 financial year the draft total operating revenue budget amounted to R337.175m and the expenditure budget came up to R354.392m – which would’ve left the municipality with a shortfall.
By June 30, the municipality reported a collection rate of 79% which according to the Provincial Treasury’s assessment could possibly be lowered to close to 70%.
"Challenges with meter readings are a major challenge for revenue management. The municipality is unable to account for the number of prepaid electricity and prepaid water meters. No meter auditing is being performed by the municipality.
“It has been established that some households and businesses have both the prepaid and contract meters installed," read the report.
In May, the council placed three of the senior managers, including the municipal manager Jackson Penxa, chief financial officer Nomfundo Ntsangani, and the director: infrastructure services Denwin van Turha on precautionary suspension.
All of the affected posts were filled by officials in acting capacities.
The report further highlighted that disciplinary proceedings against the suspended officials had to be undertaken within three months of their suspensions, failing which the suspensions would automatically lapse.
But by late June proceedings against them had not commenced.
"The limited progress made so far hasn’t yet translated to an improved financial position or a sustained improvement in service delivery," said the report.
Wenger said the recovery plan was far from completing its task.
"The municipality is in the first of three phases of the FRP. Further improvement is needed across a wide range of activities, including governance, institutional, financial management and service delivery," she added.
As part of the FRP, the provincial government would also:
* launch an investigation of financial misconduct, unauthorised, fruitless, wasteful, and irregular expenditure;
* develop a budget-funding plan to move the municipality to a funded position; and,
* develop an infrastructure master plan that would address water and electricity management and monitor grant performance.
The plan was expected to remain in place until the financial crisis was resolved.
"Once the FRP is completed, the municipality should have the capability to deliver on its mandate to its residents. The province will continue to provide support to the municipality in the same way that we do for all other municipalities in the province," said Wenger
Mayor Thershia Prince failed to respond to questions despite repeated requests.