File picture: Mike Hutchings/Reuters

Pretoria - The cash-strapped DA-led Tshwane municipality has turned to two major banks in a bid to bail it out of its financial woes.

The metro has received a go-ahead to borrow loans amounting to nearly R1.4 billion from both Standard Bank and Absa.

Since it took over the reins, the DA-led administration has repeatedly pleaded poverty, saying it inherited a R2bn deficit from the ANC administration when it took over a year ago.

The report entailing the request and reasons for it was tabled during the special council sitting at Sammy Marks council chamber last Thursday. Thereafter, council gave a stamp of approval to the two short-term loans amounting to almost R1.4bn from the two banking giants.

The money will assist the city to achieve some of the service delivery promises made by the ruling party during the 2016 municipal election campaign.

ANC leader Mapiti Matsena said it was important to support the loan because the money would help the city to roll out basic services to ANC-governed wards in the metro.

The official opposition subsequently voted in favour of the request for the city to turn to the banks.

Matsena reminded council that the ANC won most of the wards in the municipality. He said therefore it would be short-sighted if the party voted against the financial aid, since it would be punishing needy citizens in those areas as well.

Council authorised the municipal manager Moeketsi Mosola to sign all necessary agreements or documents to give effect to the decision.

The report was tabled after the mayoral committee meeting on June 21 resolved to recommend to council to approve the short-term debt facility agreements to be entered into with the commercial banks for the 2017/18 financial year.

In terms of the agreement, Standard Bank and Absa will lend the city R500 million and Absa R889m respectively.

According to the report, the short term debt facilities would enable the city to meet its cash flow requirements for he 2017/18 financial year in accordance with the legislation.

The legislation provides for the acquisition of the loans to bridge “capital needs within a financial year, to be repaid from specific funds to be received from enforceable allocations or long-term debt commitments”.

The municipality needed to secure short-term debt facilities annually to accommodate any short-term cash shortfalls during a financial year, the report said.

It further said: “It must be emphasised that the total amount that the City of Tshwane can incur for short-term debt is capped at R1bn during the 2017/18 financial year for both commercial banks collectively.”

The loans by both commercial banks would be offered at an interest rate that the banks would quote daily in line with the prevailing market conditions, the report said.

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