Pretoria - It is an extremely bad principle for local governments to borrow money to fund development and infrastructure backlogs.
Instead, the City of Tshwane has been advised to perfect its debt collection to recover the millions it is owed, before turning to financial institutions for loans.
Azar Jammine, chief economist at Econometrix, said there was nothing wrong with any level of government borrowing money. But the primary aim should be to improve its debt and revenue collection.
That way there would be no need to borrow money.
The city signed a landmark R1.6 billion, 20-year loan deal with the Development Bank of Southern Africa yesterday to help fund its capital expenditure programme.
The money will be used to speed up the eradication of backlogs in water and sanitation, roads, electricity and housing infrastructure, and support the city’s growth and development initiatives.
City manager Jason Ngobeni said the money would help to fast-track aggressively the infrastructure programme.
"This level of capital investment was in part necessitated by the need to improve the enlarged infrastructure, which includes the now-defunct municipalities of Metsweding, Nokeng tsa Taemane and Kungwini,” he said.
“In this financial year, 37 percent of the capital programme is being funded through long-term borrowing and the rest from capital grants and internal resources.”
However, DA leader in the city Gert Pretorius said if Tshwane had collected just half of the R3.7 billion found by the auditor-general to be irrecoverable there would be no need to borrow from a bank.
This was in addition to other arrears the city often declared impossible to recover and wrote off from time to time.
The city should manage its finances better, Pretorius said.
Tiyiselani Babane of Cope said the party was concerned about the rate at which Tshwane was borrowing money while it was losing billions in electricity and water arrears that were not recovered, as detailed by the auditor-general.
“If you are going to write off a bill, then help that person not fall behind with their payments again by installing a prepaid meter.
“When a property owner owes R200 000, how long has that person not been paying? The city’s debt collection is poor. Once this has been addressed, there will be no need to borrow money.”
PAC representative Mzwandile Montjane said improving people’s lives could not be quantified in monetary terms.
“However, the money must reach its intended recipients and not be siphoned elsewhere,” said Montjane.
“We are happy that the city has secured money for infrastructure development, but good intentions are often hampered by corrupt elements.”
Anniruth Kissonduth of the African Christian Democratic Party also advised the city to stay out of the loan market.
Those that stayed out of this market did business better, he said.
The city should recover more revenue through its debt collection instead of relying on money it did not have, he said. - Pretoria News
“It is much more expensive to do business through borrowing. By raising funds through other means, the metro could perform so much better,” he added. - Pretoria News