The eThekwini municipality needs to borrow R2 billion for this financial year to fund infrastructure projects, despite having outstanding loans amounting to more than R9bn.
The latest revelation by city treasurer Krish Kumar comes after Auditor-General Terence Nombembe’s latest report noted that the city had incurred irregular expenditure to the tune of R1.3bn in the 2010/11 financial year.
The council has also been rocked by the damning Manase and Associates forensic investigation report released last week, which uncovered non-compliance with, and disregard for, supply-chain management policies, lack of budgetary controls on expenditure, and evidence of corrupt and fraudulent practices by certain employees in collusion with suppliers, among a host of other issues.
Nombembe also stated that irregular expenditure disclosed in the financial statements for the past three financial years amounted to R2.1bn.
Opposition parties have in the past cautioned the city against taking loans, saying constant borrowing would plunge the municipality into bankruptcy.
But the ANC-led executive committee this week approved a R1bn loan from FirstRand Bank to fund long-term capital expenditure.
Kumar said the interest rate for the loan was 10.28 percent and the interest payable over the 20-year repayment period of the loan was R1.2bn.
Feasibility
Municipal manager Sbu Sithole has also been looking into the feasibility of approving a loan of R910 million from the French Development Agency (AFD).
Kumar said the R1bn from FirstRand would fund basic infrastructure approved on the city’s capital budget relating to water, sewerage, electricity and roads.
“There is still a need to borrow an additional R1bn through the AFD loan. The intention was to borrow R2bn for the year,” he said.
DA caucus leader Tex Collins said his party did not approve of such loans because the municipality had incurred billions in irregular expenditure and was owed nearly R1bn by the state.
“We have always told the municipality to go out, charge these people that owe us money and cut off their lights if you have to… One wonders if the French can even afford to lend us money given the current state of affairs in Europe,” he said.
MF executive committee member Patrick Pillay said it was outrageous for the council to borrow money especially when the European economy was collapsing and other countries were putting in extreme measures to curb excessive spending.
“The municipality needs to take cognisance of the fact that the excessive borrowing will lead to total bankruptcy. Given the city’s current state of fraud and corruption, we need to implement strong financial controls,” he said.
Pillay said the council had incurred R1.3bn in irregular expenditure.
“But, ironically, the city wants to borrow R1bn. We need to live within our means and take decisions that will ensure the long-term sustainability of the city’s finances,” he said.