The Johannesburg municipality is making ad hoc decisions as it juggles which of its financial obligations to honour, but it won’t give in to pressure to cut a R10bn wage agreement.
Officials admitted that the creditors of some entities were being prioritised based on cash flow availability, while Mayor Dada Morero defended those leading the various departments.
Despite financial constraints, the city remained firm in its commitment to honour its three-year R10 billion deal with the South African Municipal Workers Union (Samwu).
Morero and senior city management were before the Standing Committee on Public Accounts on Tuesday to address findings by the Auditor-General of South Africa (AG).
The city’s officials outlined the recovery efforts mandated by the AG, yet many committee officials were concerned about the current state of Johannesburg.
R13.2 billion in unresolved waste
Group CFO Tebogo Moraka explained the city’s creditor balance as of the end of May was roughly R7.5 billion, with creditors from City Power, Johannesburg Water, Piktitup and Johannesburg Roads Agency being prioritised.
He stated that prioritising entities already in a deficit position was putting a strain on the city, as it had to be selective with payments based on monthly revenue.
“As part of the cash management, we then look at how much the city as a whole is collecting, but making sure that we also service the creditors in those entities.
“Certain cuts [are] being made on expenditure, especially from a cash point of view, to reserve cash and make sure that the city is catching up from the creditor point of view,” said Moraka.
The CFO said that a “revenue war room” involving himself, city manager Floyd Brink, the COO and the managing directors of the entities had been formed to focus on revenue collection.
To tighten financial waste, the city had implemented weekly procurement and expenditure tracking, construction site access protocols, monthly site evaluations, and contractor advisories.
Brink stated the city still had R13.2 billion in unresolved unauthorised, irregular, fruitless and wasteful (UIFW) expenditure, having addressed a further R45.1 billion in UIFW in the last five financial years
The AG had made 2 202 adverse findings against the city in the last four financial years, of which 82% had been resolved.
The city currently has 17 projects above R100m underway, and mega projects still to be completed total R3.2 billion.
Samwu deal about stability
Mbulelo Ruda, Johannesburg’s group head of legals and contracts, said the city’s deal with Samwu stemmed from “justice redressed, and also institutional stability” that was mandated by a CCMA ruling.
“One of the founding principles of that agreement has always been affordability, financial sustainability, and the city’s budget processes.
“Though the agreement is signed, we are still subject to those principles that, whatever payments we make, are subject to those principles that we do not deplete or mess up the city’s financial sustainability,” Ruda told the committee.
National Treasury earlier sent a letter to the municipality to express its concern over the deal, with Ruda explaining that the city responded that it was able to juggle the needs of the union and the city’s bank balance.
“If you do not deal with them, it obviously would lead to performance issues by the employees, so you need to then strike a balance in terms of making sure that the agreement is signed, but also that in paying the agreement, you do not deplete the city’s resources,” Ruda stated.