City of Tshwane Mayor Cillers Brink says the city is facing significant financial strife.
Brink addressed the media on Tuesday on the current financial status and progress made in an attempt to stabilise the city’s finances which include improving on revenue collection.
Brink says the city is facing significant financial challenges.
These include dealing with the PEU VAT liability.
“You may recall that in June 2013, the city entered into a contract with PEU/TUMS for the provision and management of smart meters. It was a contract that from its very inception was unlawful and was forced through Council under the previous ANC administration. Part of the contract included a master services agreement with an irrevocable payment instruction used to ensure daily payments.”
“This effectively ensured that there was a continuous stream of payments that were going out of the city, outside the standard operating processes for managing payments. For the entire duration of this contract, these payments were processed while no VAT was being paid on them. In 2015, after review of the contract, it was decided that it would be terminated. A legal challenge had already been initiated by Afrisake,” Brink explains
Brink says only in June 2021, when SARS issued a demand for an amount of R2,9 billion for an unpaid VAT liability, along with penalties and interest to the value of R1,8 billion, that the full implications of this unlawful contract and mismanagement became clear.
SARS effectively slammed the city with a R4,7 billion liability.
Meanwhile, there has been a number of irregularities in the city as highlighted by the Auditor General.
Brink says they have been in contact with the AG office to try and address the irregularities.
“We have dedicated work streams of officials working to address the asset valuation in the city, issues concerning the management of creditors, and the overall cash flow. These three items are the crux of the city’s adverse audit opinion, and we hope to make significant progress, particularly regarding the management of creditors and cash flow.”
“Of the 118 findings that affected the audit report, the city has ensured that 97% of these have action plans in place to ensure that they are addressed. I am also pleased to announce that, last week in Council, we dealt authoritatively with approximately R10 billion in irregular expenditure. This will significantly reduce the cumulative irregular expenditure that is reported by the Auditor-General in the next annual report,” Brink elaborates.
The City also owes Eskom and bulk water supplier Rand Water millions of rands.
“We do have significant debt towards our bulk suppliers, Eskom being one. We are not in denial about our difficult financial situation, nor do we deny that we have an obligation to pay Eskom and other creditors such as Rand Water. Eskom has taken legal action against the city by filing a founding affidavit before the North Gauteng High Court. Eskom seeks a ruling to force the city to immediately pay an outstanding debt of millions of rands.”
“The city has in turn filed an answering affidavit in defending the matter, which is expected for a full hearing by mid-July. The same is true for Rand Water. I want to emphasize that the water shortages that are being experienced in the city have nothing to do with any credit control or restrictions by Rand Water,” says Brink.
On revenue management, Brink says the road to financial recovery will not occur without enhancing their revenue.
This means they will implement an aggressive Tshwane ya Tima revenue collection drive and the target is to ensure that 1 000 properties a week are disconnected.
“From the middle of June, we have deployed more than 100 teams across Tshwane to disconnect arrears debtors, with our focus on individual accounts of R50 000 or more, which are highest levels of debt.”
“After picking up that a significant number of properties do not have meters, and that we cannot obtain access or the boxes are locked, we have resorted to using internal Tshwane teams to deal with these problematic properties. We will ensure that anyone who owes the city is disconnected,” Brink reiterates.
The city says any contractor that is found to have accepted a bribe to stop a disconnection or to facilitate an illegal reconnection will have criminal charges laid against them and be removed as a service provider of the city.
VIDEO: Tshwane mayor Cilliers addresses the media about City of Tshwane finances.
