Joburg scrambles for funding amid a cash flow crisis

The finances of the City of Johannesburg, SA’s richest and biggest metro, are in a shambles and the situation is so bad that if funding is not received urgently the council could fail to pay the salaries of its more than 32,000 staff, ANC caucus leader Dada Morero has said.

Morero told Business Day that about R3.8bn of the city’s R77.3bn current budget, which came into effect on July 1, is unfunded. He added that plugging this financial gap had been the main focus during his brief stint in the executive office before the high court declared his election as unlawful on October 25.

“We only came in for 25 days with the intention to correct and stabilise the city’s finances. If there is no improvement in the next two months, staff salaries won’t be paid,” Morero said, blaming poor revenue collection for the state of affairs.

DA mayor Mpho Phalatse said during a media briefing on Thursday: “While finances are not in the best position, we are taking active steps to rectify this.” She dismissed anxiety about imminent nonpayment of salaries as a “fabrication”.

The financial challenges faced by Johannesburg mirror the state of the local government sector. Most of the country’s 257 municipalities have been run into the ground by maladministration, looting and corruption, while others are struggling to pay staff salaries and employment benefits, and to deliver basic services.

The DA-led multiparty coalition running Johannesburg, which in May passed a budget of R77.3bn for 2022/2023, blames the previous ANC-led administration for the financial woes.

Finance MMC Julie Suddaby agreed that the city’s finances are subject to “cash flow challenges and that between July 2021 and December 2021, “cash out of the city’s coffers [totalled] R2.7bn. [That’s] R2.7bn gone.

“Between January 2022 to June 2022, R100m dissipated out of the bank accounts of the metro. Cash flow at the moment is an issue.”

She said the city would not be able to provide services “if the R2.7bn can’t be covered in some way. The detail of that impact will be delivered in the state of finances report to be delivered next Wednesday.”

Morero said that from December 2021 to February 2022 the metro lost about R600m because of ineffective revenue collection.

“When you take over an organisation, you focus on its books. The DA has not been focusing on the city’s books, their focus is elsewhere. The first week I was in office, we set up a war room to raise R3.5bn to plug the hole,” Morero said.

The plan was to raise R600m through a loan from Standard Bank and about R2bn from the Development Bank of Southern Africa (DBSA).

At the media briefing, Phalatse said the notion that there is “anxiety about the payment of salaries is a fabrication, and that we cannot meet our financial obligations is a lie”.

She said: “Notably, we are one of the few municipalities across the country that does not owe Eskom or Rand Water.”

The executive mayor said much had been said about the city’s finances because that’s where the “attention of the corrupt” is focused. “There was little to no truth about what was said, in the main because the figures are unaudited. We have nothing to hide because the audited figures will be presented before council, as per legislation.”

She continued: “What was of concern was how nonchalant Morero was about the delayed R2bn short-term loan from DBSA, the report of which was supposed to [be] served at the last [council] meeting was blocked, and has been kicked further down the road due to the cancellation of [Thursday’s] extraordinary meeting of council. It shows that the ANC is willing to collapse the city in order to grab power.”

Morero said the DBSA report would be tabled in council before November 12, with Suddaby saying the municipality could not approach the DBSA for the much-needed loan until council approved the report.

mkentanel@businesslive.co.za