Opinion: The eThekwini Municipality is in a cash crunch unlike anything that the city has ever seen. Excluding grants and insurance (GIF), the municipality had four days cash on hand at the end of December 2021.
The only real way that the city can get back on its feet is to start to approach things very, very differently.
The DA believes that in order to rescue this situation, we have to cut back to absolute basics and focus on ensuring that our water and electricity networks are functional and stable. We need to focus aggressively on projects that grow our economy to have more people in work, and a growing rates base.
Lastly, we need to get to grips with a growing staff crisis that sees overtime, staff payments and bonuses consume any rand or cent that goes spare.
Understanding the bigger picture requires an understanding of how municipalities raise income. Currently, the eThekwini Municipality has four main income sources. The first - approximately a quarter of our income - comes from rates. Another quarter comes from grants received from national and provincial government. The other half of the income comes from the Trading Services Cluster. eThekwini buys water from Umgeni Water and electricity from Eskom, which it sells at a profit. Refuse collection services also contribute.
All of these revenue streams are ailing. eThekwini loses significant amounts of the water and electricity that it pays for, which is both a service delivery and a financial concern. Hundreds of millions of rands in billable water and electricity is being lost or stolen and the situation is getting progressively worse.
National grants which are primarily used for housing, roads and infrastructure have been reduced since 2019.
Moneyweb recently ran an article that looked at the comparative rates charged by the big South African municipalities. It showed that eThekwini’s rates were the highest in the country - drastically more than Cape Town and more than double the rates being charged in Johannesburg.
People were rightfully outraged. Why do we pay so much and get so little? The answer is complex but it is also simple. Too few people pay for too much in a city with an ageing asset base and skewed priorities.
The eThekwini rates base has been stagnant for some time now. About 103 000 eThekwini residents lost their jobs since 2019, which means that fewer people can afford to pay for services or rates. A large portion of eThekwini is rural and falls under the Ingonyama Trust Board, who do not pay any rates.
It is openly acknowledged that continuing to raise tariffs and taxes on the same small group of the population is not going to yield much more than it does; where taxes become too high and people’s income does not change, they don’t pay more and often end up paying even less. Effectively, charging the same people higher rates is an exercise in futility.
The real solution is two-fold: more money needs to come in, through an expanded rates base and employment, and the money we do have needs to be spent properly.
Nobody who lives in eThekwini or who follows its politics needs a reminder of just how badly this city has spent money over the years. There are endless examples. The cost of the municipality’s staff complement, who now number 28 000, requires careful attention.
Every budget or adjustment budget contains sky-high overtime and staff costs. It was recently revealed that 15 000 of the municipality’s employees work overtime on a monthly basis. The organisational culture of eThekwini has become that staff never go without increases, bonuses or overtime, even when the municipality is in the red.
It would be somewhat comforting if the city functioned effectively to account for this cost but there is no comfort to be found.
A recent audit committee report highlighted that a number of staff were suspended on full pay for more than six months with no proper follow-up. The audit committee also expressed concern that bonuses and increases were not being properly processed.
Most shockingly, this month’s adjustment budget contains an R80 million payment to staff. They will get a 3.5% increase and then an additional R3 000 or R4 000 payout, depending on their task grade. This is sheer lunacy.
The city is collapsing and it is literally in the red but eThekwini has found a way to ensure that staff not only enjoy bonuses and increases, but also a once off lump sum to compensate for the increase percentage. No organisation in the world can operate like this and hope to survive.
There is hope that eThekwini can dig itself out of this mess, but it requires urgent and decisive action. This is the first budget cycle in a long time when the ANC don’t have an outright majority and will require allies to pass a budget.
The DA will no longer support a single council item that does not achieve the objectives of delivering core municipal services, maintaining and developing our infrastructure or expanding our local economy in a meaningful way.
The DA will also embark on a robust and meaningful budget engagement process and seek to find solutions wherever they may be. This city now depends on reasonable people to see the wood for the trees, and put aside pettiness and partisan interests to make sure that eThekwini can continue as a going concern.
Nicole Graham, DA leader in eThekwini.
The Post