The Drakenstein municipality has a loan debt of more than R1.63billion and low revenue streams.
A recent document showed that the municipality took out loans to the value of R2.184bn over the past nine years and has only repaid R554 million of that debt.
It also showed that cash reserves were depleted and that the municipality’s revenue growth had slowed down as more people were now off the electricity and water grid.
The municipality received a clean audit opinion from the auditor-general for the 2018/2019 financial year and the Treasury rated Drakenstein among the most financially healthy in the country.
Municipal spokesperson Riana Geldenhuys denied that the municipality had cash flow problems.
She said the loans, taken to invest in critical infrastructure services, were taken based on certain growth assumptions and that the tax base would be able to serve the interest and redemption instalments.
Geldenhuys said, owing to the slow economy and the municipality’s shrinking tax base over the past five years, it had to restructure repayment periods, extending them by between five to seven-and-a-half years.
She said the R1.63bn loan book included R1.56bn owed to two large financial institutions and the Development Bank of Southern Africa.
“By restructuring these loans, the burden on ratepayers was eased. The interest and redemption instalments will be repaid by the current ratepayers and by the growing tax base over the next 10 to 15 years,” Geldenhuys said.
She said the municipality planned to increase its revenue streams.
This would be done through increasing yearly property rates and service charges (for electricity, water, sewerage and refuse removal), and by expanding the tax base through new residential and business developments.
She identified building plans as one such revenue stream, saying that, in 2017/2018, new plans worth R2.5bn were approved as was R2.3bn for the following financial year.