The affordable education loan option
The eThekwini Municipality wants to borrow up to R1.5 billion for this financial year to fund capital projects, despite having recoverable debt of R2bn.
Opposition parties have previously cautioned the city about taking loans, saying constant borrowing would plunge Durban into bankruptcy.
But the ANC-led executive committee has approved the request to increase the anticipated borrowing amount from R1bn to R1.5bn to fund long-term capital expenditure.
City manager S’bu Sithole told the committee on Tuesday that due to the “volatility of the markets” the council did not take up any long-term loans in the 2012/13 financial year. And, because of this, Sithole said, they anticipated that the capital funds for the 2013/14 financial year would be fully spent.
“This will put a strain on the cash resources of the municipality.
“Consequently, it may be necessary to increase the forecast borrowing amount of R1bn to a higher amount, hence the request to borrow up to R1.5bn,” a report presented to the council said.
Sithole said should it be necessary to borrow more than R1bn, the capital expenditure would be amended in the adjustment budget in February, and the borrowing amount would then be amended.
Last year the city turned down a loan of R910 million from the French Development Agency.
In April the city reportedly approved an application for a R750m loan from Absa to fund future capital projects, despite concerns that key departments were under-spending their budgets.
City treasurer Krish Kumar said the report was for information purposes. He said the tender had not been awarded to any bank at this stage.
Kumar said the loan was required for capital projects like the Western Aqueduct, construction of a major substation and infrastructure for new housing projects.
DA caucus leader Zwakele Mncwango said borrowing was not a bad practice but the city was owed R2bn which it could still recover.
“If we were to recover the R2 billion that is more than 90 days old, we might not need to take a loan,” he said.
DA councillor Heinz de Boer said if the council started implementing robust revenue collection mechanisms the city would begin to see some of the money it was owed paid back.
But ANC councillor Fawzia Peer said a municipality was like a business and had to be run as such.
She said the council had to be proactive and could not afford to sit and wait for its creditors to pay the money they owed and then only start planning how that money would be spent.