Joburg City Power’s loss of more than R1.2 billion in electricity distribution in one financial year has puzzled the chairman of the city’s oversight committee on public accounts.
Committee chair Sicelo Gcabashe said he was shocked that despite more than R16.5 million budgeted to reduce this, the entity’s losses drastically increased.
“This is money that went down the drain,” lamented Gcabashe this week. “It means the budget intended to curb this loss didn’t work, so where has the money gone? The committee believes the reported loss is an amount of money the city could collect or save if the situation had been solved.”
According to the city’s financial reports, City Power reported losses amounting to R1.2bn for the financial year 2010/2011 compared with R835m the previous year.
Gcabashe tabled his oversight report on the city’s deteriorating financial conditions before a full council, with recommendations, including City Power should give a breakdown of factors leading to electricity loss.
“This information will assist the committee, recommending necessary interventions regarding the main contributing factors. Having considered the drastic increase in non-technical electricity distribution loss, City Power must submit a report detailing the performance assessment of the budgeted R16. 5m programme… meant to address illegal connection challenges by May.”
The Auditor-General report raised alarm about the municipal-owned entities’ losses that contributed to the city’s declining finances.
It highlighted unauthorised expenditure of R48.5m and irregular expenditure of R397.7m at City Power, “due to non-compliance with supply-chain management regulations”.
Gcabashe said his committee was setting up stringent report-back mechanisms and had made recommendations to departments to take corrective measures to improve performance.
“We are confident these oversight actions will go a long way in assisting the city to get a clean audit in 2014,” he said.
The committee identified several weaknesses in the city’s ability to manage its finances, including:
* Weaknesses in supply-chain management.
* Credit-control policies to minimise outstanding debts or increase revenue collection.
* Information management and record keeping.
* Over-expenditure and the fact the city is able to do business with its staff.
In November last year, the national Treasury raised concern on Joburg’s declining financial conditions and the lack of sufficient liquidity. At the time, the city reportedly had cash cover of up to 12 days, in contravention of the Treasury regulation that metros have three months’ cash cover.
City Power, Pikitup and Joburg Water – regarded as the city’s cash cows – have been struggling financially, according to annual reports. City Power will end the current financial year with an over-expenditure of about R323m, while Pikitup and Joburg Water are expected to underspend by R82m and R46m respectively.
The oversight committee report also singled out corruption and fraud as a major problem contributing to public institutions not being able to render services economically, efficiently and effectively.
The committee report said losses of more than R6.1m were due to fraudulent activities at Joburg Metro Police Department. “The committee has observed the upward trend of year-on-year gross losses and a follow-up on the unexplained balance will be done with the accounting officer,” Gcabashe said.