Durban - ETHEKWINI Municipality’s request to financial institutions for a loan of R1 billion will put the City at risk of increased debt that will ultimately be passed on to ratepayers, forcing them to pay more in rates and services.
That is the warning from opposition parties as they called on the municipality to rein in its appetite for debt and rather focus its energies on collecting what it is owed.
On Wednesday the municipality placed an advert asking financial institutions for a loan of R1bn to fund capital projects in the next financial year.
It said the money would go towards addressing capital investments in electricity, water, sewage and engineering services, among others.
The total loan would be R1.5bn and the council, has already signed off on it.
Opposition parties yesterday warned against this, saying they had stopped supporting the borrowing as they had not see evidence of what had been done with the money and they feared it could lead the City deep into debt.
It was reported last year that the municipality planned to borrow R500 million in long-term debt finance, and at the same time was contemplating issuing a bond of R1bn to finance capital expenditure for the 2018/19 and 2019/20 financial years.
The money, said the report, was to be used to fund other capital projects that could generate revenue for the City.
Municipal spokesperson Msawakhe Mayisela said the total borrowing that had been approved for the 2020/2021 financial year was R1.5bn.
The breakdown of the spending shows that of the money borrowed, a large portion, about R374m, would go towards engineering services, R243m would go towards electricity, R226m would go towards solid waste. About R260m would go towards water and sanitation.
“The projects to be funded by the loan are approved in the annual budget process and are at various different stages in terms of being implemented.”
Mayisela said the total borrowings of the municipality were currently R8.4bn, which was made up of bilateral loans.
These envisaged new borrowings would also be of a similar nature to the existing debt.
“The municipality does not consider the new borrowings as a concern as the existing debt is still considerably lower than the norm, which has been indicated by the National Treasury. Furthermore, the municipality has taken into account the new loan on its current year’s budget, and the city will therefore be able to service debt costs accordingly.
“In terms of the MFMA (Municipal Finance Management Act), both the provincial and national Treasuries were also going to provide the municipality with independent objective comments before the debt was approved and incurred by the council,” he said.
IFP councillor Mdu Nkosi said the city was on the path to financial ruin because of these loans.
“We as the IFP resolved that we would no longer support all this borrowing; we are going to ask the finance manager how many loans of this nature the municipality has taken.
“Every time there is such a loan we are told that the borrowing is still within the threshold.
“We are concerned because in the next 10 years this will show in the city’s finances.
“This could result in ratepayers having to pay more for services in order to service that debt.
“We are also concerned about these capital projects, we haven’t seen any.
“We have not seen any done this year or ones that should have been done last year.”
DA caucus leader Nicole Graham said while it was sometimes necessary for municipalities to borrow money, the city should be ramping up collections rather than borrowing.
She said this was a long-term debt that had to be paid off, and they were concerned that it would become a problem for ratepayers.
IOL