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Kimberley - National Treasury has warned the Sol Plaatje Municipality that the local authority’s financial sustainability is at risk considering the higher debts book and the economic challenges which impact on consumers’ ability to pay for services.

This follows the budget and benchmark engagement between the municipality and National Treasury in April. During the engagement, the budget was assessed in terms of credibility, relevance and sustainability.

Key observations highlighted included the unfunded mandates and increasing salary budget which is putting pressure on the municipality’s finances and negatively impacting its sustainability.

National Treasury pointed out that the municipality would only be in a position to generate positive cash balances if it achieved a minimum collection rate of 85%.

“The budget is assessed as funded for the 2019/20 financial year provided that the municipality improves the collection of outstanding debtors.”

It pointed out, however, that the municipality has a negative cash balance over the MTREF (medium-term revenue and expenditure framework). 

“As a result of the decreasing cash and increasing creditors, the 2021/22 financial year is projected to generate a deficit of R14.6 million which renders it unfunded.”

In terms of service delivery, National Treasury pointed out that the municipality’s basic service delivery KPA was 34.1%, an indication that the municipality’s service delivery was declining.

“This is impacted on by the delays in the project implementation as a result of procurement and contract management not being centralised.

“The capital budget decreased by 20% in 2019/20 when compared to the 2018/19 budget. This is a result of the municipality reducing projects that are funded from own funding.”

It pointed out further that the scaling down of projects impacted on the road department’s capital budget allocation.

“The focus of the 2019/20 budget is water and sanitation which is aligned to priority to address water challenges as the municipality has high water losses as a result of ageing infrastructure.”

National Treasury pointed out further that the municipality had waste management issues as a result of society behavioural issues where refuse was dumped anywhere.

DFA