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WATCH: City of uMhlathuze says it’s not broke, the R600m loan is for capital projects

Published Jan 24, 2023


Video by Sihle Mavuso

Richards Bay - The City of uMhlathuze (Richards Bay-Empangeni) has rejected claims that it has gone bust and it was out with a begging bowl to banks to borrow R600 million to stay afloat.

The municipality said the R600 million loan which was approved in May last year is for capital projects which include water and sports infrastructure.

On Tuesday the municipality called an impromptu press conference in which it went to great lengths to explain how it ended up needing the money.

The city’s Mayor, Xolani Ngwezi, flanked by his municipal manager, Nkosenye Zulu, Chief Financial Officer Mxolisi Kunene, and Thembeka Khumalo, the Chief Operations Officer, told the media in Richards Bay that the law allows municipalities to borrow money to fund capital projects.

“The municipality has received a number of questions regarding the loan of R600 million that the municipality is in the process of acquiring.

“Firstly, it is important to note that municipalities are governed by a number of pieces of legislations, but on matters of financial management, the Municipal Finance Management Act, Act 56 of 2003 (MFMA) takes precedence.

“Regarding the matter at hand, Council on May 25, 2022 approved a Medium Term Revenue and Expenditure Framework (MTREF) of R5.3 billion for 2022/23(R5.6 billion for 2023/24 and R5.9 billion 2024/25 respectively).

“The Capex approved by Council amounted to R 835 million (for 2022/23, R790 million for 2023/24 and R 807 million, respectively),” he said.

He added the loan came out of that budget and approval.

“Included in the 22/23 budget approved in principle a loan of R600m which was to be taken up during the course of the 2022/23 year.

“This is the process governed specifically by Section 46 of the MFMA, which is busy unfolding. Section 46 of the MFMA regulates how and under what circumstances a municipality can raise a loan.

“Also of importance is that in a municipal environment, capital projects can only be funded from loans, own funds, public contribution, grants from other spheres of government, and or through a public/ private partnership.

“The funding mix for uMhlathuze’s capital programme also was very much along that criteria.

“The originally adopted budget approved a loan for capital expenditure only, which originally was going to be used in the 2022/23 and 2023/24 years in the amounts R390m and R210m, respectively.

“This specifically for governance, local economic stimulation and infrastructure, accordingly,” Ngwezi said.

The largest chunk of this money will go to sports and recreation which will get R198 million and water infrastructure which will get R165 million.

Asked by IOL to justify the spending on sports infrastructure, he said they will derive some benefits when soccer games come to town.

“When PSL games get played here our local tourism industry is going to benefit, the local tourism industry pays rates to us, we need that money,” he said.

Touching on other issues, the municipality revealed that last week’s disconnection drive netted R40 million after its biggest debtors, including the Mhlatuze Water Board paid R30 million of the R53 million it owes.

Also, it netted some money from Eskom, yet R180 000 is still outstanding.

The three provincial government offices of education, social development and transport, are still in the dark after not making any payments.

On the issue of the Esikhawini water crisis, Ngwezi revealed that they have terminated their contract with the Umhlathuze Water Board after it failed to deliver the water project in December last year, as per their agreement.

“The package plant was managed by Umhlathuze Water as an implementing agent on behalf of the city.

“Let me officially announce here that we, however, have officially terminated the contract with them which ended in December 2022, as we had set December as a deadline, which was not met.

“The City of uMhlathuze has resolved to appoint a consultant who will manage and complete the project.

“Internal procurement processes are scheduled to be concluded by the end of this month,” he said.

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