Morero urges Gauteng government to pay R5.2bn it owes Joburg City

The Gauteng provincial government owes the City of Johannesburg more than R5.2bn, with mayor Dada Morero warning that the mounting debt continues to place significant pressure on the metro’s finances.

Morero revealed on Wednesday that provincial departments owe the city R1.2bn in unpaid municipal accounts, while a further R4bn relates to unfunded mandates that Johannesburg has had to carry despite the responsibilities falling under the provincial government.

The mayor made the disclosure while outlining the city’s financial recovery plan, after National Treasury revealed that among 69 municipalities flagged, Joburg’s R3.6bn budget was withheld over governance and financial management concerns.

Morero said they’ve had discussions about the debt that is owed to them by the provincial government.

“So, it’s a discussion that we said has to happen now without delay because it has stretched the city’s finances. The province must pay our R4bn.

“They’re owing us about R1.2bn. They’ve paid us R200m in June and we are in discussions. We’re constantly dealing with the queries that they raise, but they currently owe us R1.2bn. It’s the money we want,” he said.

Morero said some of the debt was linked to provincial departments including health and education, although engagements were continuing to verify the outstanding accounts.

The mayor said improving the city’s cash position remained a priority, revealing that Johannesburg currently has cash coverage of only 12 days, well below the National Treasury benchmark of at least 32 days.

“We are sitting at about R2.8bn, which gives you about 12 days. What we are doing now with our internal processes is to ensure that, from time to time, we comply with at least the 32 days’ cash coverage, which allows us to be safe as the city,” he said.

Morero also said the city has begun implementing a ring-fencing model for its municipal entities to ensure revenue collected is reinvested into maintaining essential infrastructure.

He said Johannesburg Water became the first entity to implement the model on July 1, with a 70/30 revenue split that allows 70% of collections to remain with the utility while 30% is directed to the shareholder.

“The ring-fencing has started now with Johannesburg Water, which is the first entity. By the end of July, their cash collected will go directly to Johannesburg Water. The next entity is City Power in September, followed by Pikitup,” he said.

Morero said the reforms would improve financial sustainability while allowing the city to invest more in ageing infrastructure.

“But remember, the reforms themselves are also a benefit that the city will be getting, which are financial benefits that will help us invest more into our infrastructure,” he said.

Meanwhile, Morero said their biggest contributor to irregular spending was City Power, amounting to R2.1bn by the end of the third quarter.

Acting City Power CEO Charles Tlouane said the irregular expenditure was not the result of corruption or money disappearing but stemmed from the utility purchasing more electricity from Eskom than had been budgeted for.

He said Eskom’s electricity prices have increased by 937% since 2007, while inflation has risen by only 155%, leaving municipalities unable to recover the full cost through tariffs approved by the National Energy Regulator of South Africa (Nersa).

“Municipalities are not allowed to simply increase tariffs in line with Eskom. We propose a tariff, but Nersa often approves a lower amount after the council has considered it. That means we end up buying electricity at a higher price than we are able to sell it,” he said.

Tlouane said City Power is then left with a difficult choice.

“Either we switch off electricity to manage our bulk purchases, or we continue supplying residents. City Power chose not to leave people in darkness.

“When we say the expenditure is irregular, it does not mean the money was stolen or wasted. It simply means we operated on money that was not approved in the budget,” he said.

Sowetan