Govan Mbeki municipality doesn't care about residents' views

The municipality's budget doesn't balance and ignores the law

Govan Mbeki municipality doesn't care about residents' views


Govan Mbeki municipality has passed its 2019/20 budget despite the public participation process still being underway.

 

The budget doesn’t plan to pay Eskom and Rand Water debts, ups the salary bill by R100 million, illegally goes into the red and ignores financial laws.

 

This follows the municipality’s extravagant “strategic planning” session for 52 people at the Badplaas spa in mid-April.

 

The Organisation Undoing Tax Abuse (OUTA) has written to Govan Mbeki municipality in Mpumalanga to demand that the council review and set aside the resolution which passed Budget 2019/20 and the updated Integrated Development Plan (IDP), and restart the public participation process to include proper community participation.

 

“This is unacceptable and a clear indication that the municipality is not interested in the public’s input and concerns. This budget was hidden from public view and makes no attempt to acknowledge the law or the municipality’s financial realities,” says Michael Holenstein, Manager of OUTA’s Local Government Division.

 

“We demand that the IDP and Budget meetings are advertised and residents are given at least 14 days’ notice to participate. Should the municipality fail to provide the public with a fair participation process and a constructive budget that can turn the municipality around, we will consider approaching the courts for remediation.”

 

Public participation was ignored

 

The council voted on and passed the Budget and updated IDP on 29 May, although the period for public comment runs until 4 June.

 

The council held some public meetings on the Budget and IDP in late May but failed to advertise these timeously. It did not make the documents available either on its website or as hard copies at the municipal offices, libraries or public buildings, as legally required. OUTA’s representative went to four of these meetings from 19-22 May: there was no power or lighting at any of them, three were thus held outside, questions from the public and requests for the documents were ignored.

 

Only after OUTA wrote to the municipal manager questioning the validity of the meetings did the municipality publish an advert on 23 May in a local newspaper and place a shortened 28-page version of the draft Budget online. The advert stated that written comments could be submitted from 14 May to 4 June.

 

The budget ignores financial laws and regulations

Although the budget includes claims that it was drafted in terms of the Municipal Finance Management Act (MFMA), its regulations and the National Treasury’s MFMA Circulars 93 and 94, it effectively ignores these.

 

The MFMA Municipal Budget and Reporting Regulations, issued in 2009, provide a clear and detailed format for municipal budgets and specify information to be included. This is not optional for municipalities, it’s the law. However, Govan Mbeki’s budget completely ignores all this and does not include any of the specified budget tables.

 

The Treasury’s Circulars emphasise that municipalities may not adopt unfunded budgets (they may not budget for a deficit), they must ensure that budgets include payment arrangements for Eskom debts, and focus on collecting revenue owed to them.

 

What happened to the provincial intervention?

 

Govan Mbeki has been under intervention by Mpumalanga since last year, but the Budget does not reflect any attempts to improve the municipality’s finances.

 

Budget 2019/20: No money and no plan

 

  • The municipality budgets for a deficit which is illegal. The deficit is recorded as R310m but is actually R415m. The figures are manipulated by adding grants for capital expenditure to operational expenditure, effectively double-counting those grants.
  • Operational spending jumps 39% from R1.737bn to R2.416bn.
  • Revenue increases 15% from R1.470bn to R1.687bn, although the municipality has a collection rate of 67%.
  • Provision for bad debts more than triples from R73m to R234m.
  • Bulk purchases of water and electricity are projected to cost R915m, against charges to customers of R971m. That R971m must also cover running the services, and assumes that everyone pays their bills.
  • There is no provision to pay the R1.1bn owed to Eskom and Rand Water.
  • Employee costs go up 22%, from R488m to R594m, with no explanation.
  • There are no details of spending in each department, comparisons with previous years, salaries for senior managers, tables of financial performance and cash flow, or basic service delivery measurements.
  • The draft budget planned to spend R2.2m on a new car for the mayor over three years; the approved budget deletes this.
  • The draft budget increases water and sanitation tariffs by 5.2%, but the final budget ups this to 7.9%. This is apparently due to failure to plan for Rand Water’s increase of 7.9%, announced in January.
  • Some tariffs are set below the cost of buying bulk electricity and water. This includes a “Special Tariff Agreement” which sells water at about two-thirds the cost of buying it.
  • The capital budget includes three refuse compactor trucks at R7m but the municipality bought five compactor trucks in January.
  • Total spending on contractors is R279m, which is 11% of total spending, despite the Treasury standard of 2-5% of total spending. This increase is despite the staff costs increasing by 22%, which raises queries about what the staff do on a day-to-day basis.
  • Spending on some contractors increases hugely. For example, reading of meters jumps from R8m to R20m and an electrical contract goes from R25m to R40m.


LINKS

Govan Mbeki’s draft budget for 2019/20 is here. The final version is not online.

The MFMA Municipal Budget and Reporting Regulations are here, including Schedule A which details information required in budgets.

These are the National Treasury’s MFMA Circular 93 and Circular 94.