This affects the judicious use of public money to the detriment of both current and future residents.
The DA has objected to the metro taking the last R785-million bond of an already-approved R4-billion provision because, it says, poor leadership within the ruling party has caused the need to borrow more money at an exorbitant cost to local citizens.
An item, tabled at the last council meeting, proposed making use of the last of the loan provision to fund capital expenditure in the current financial year.
While the DA supports the urgent need for more capital expenditure in Ekurhuleni, it says that good governance dictates these projects should be being funded responsibly meaning that issuing expensive bonds while the metro is owed billions in uncollected debts is unacceptable.
Clr Estelle Visser made these points while speaking in council on a Minority Report that DA members of the Finance Oversight Committee had tabled in council on this issue.
“The report reiterates the party’s support of capital expenditure and the use, in principle, of bonds as a source of funding,” said Visser.
“However, the DA’s finance team had serious concerns about using more debt to fund these projects in the current circumstances.
“In 2013 the full multi-party Finance Oversight Committee cautioned the finance department that it would not support any further requests for bond funding in Ekurhuleni if the metro did not maintain its targeted rates and services collection rate of 93 per cent.
“The collection rate fell to 88.6 per cent in the second quarter of the 2013/14 financial year which translates into a loss of income of about half a billion rand.
“If the metro had met its own target collection rate, it would have the funds now to spend on capital projects.
“The Finance Department’s reasons for non-collection are nothing more than pathetic excuses.”
The metro’s appalling debt collection performance extends to various organs of state which owe Ekurhuleni R230-m and commercial debt to the tune of R2.3-bn, all outstanding for over 12 months.
“We acknowledges the council’s attempts to recoup this money, but it is too little too late,” said Visser.
“Had the effort been started earlier, there may have been no need to take the additional R785-m bond.
“If two other peer metros, including the DA-led City of Cape Town, are able to maintain a minimum of 95 per cent collection rates it should be possible for the Ekurhuleni to do so too, yet the metro has barely been able to maintain a collection rate above 90 per cent.
“By allowing consumer debtors to desist from paying their bills, the metro is required to put money aside as a bad debt provision which precludes this money being spent on service delivery.
“Eventually, the constant over-use of debt to fund projects will have ramifications leaving the metro no option but to increase rates to unacceptable levels.
“The metro was warned about this, not only by the DA, but by the National Treasury when Ekurhuleni sought support for the last tranche of R785-m from the bond provision.
“A well-run government would not rely on increasing the provision for bad debt and reducing expenditure to balance the books.
“That kind of practice cannot go on indefinitely without a huge, negative impact on service delivery.
“It is common sense that the more the metro borrows, the more it has to pay back with interest.”
