Buffalo City on the bank of financial ruin

The Buffalo City Municipality (BCM) in the Eastern Cape is on the brink of financial ruin.

This was revealed in the mayor's quarterly report on the financial affairs of the municipality, reported the Daily Dispatch online.

In the report Mayor Zukisa Faku said the municipality would reflect a "negative cash flow position" by the end of February 2011.

One of the contributing factors was the municipality's poor rates collection.

The municipality was owed R512.30 million in outstanding rates.

Member of the finance standing committee and DA councillor Jan Smit said "red lights and warning bells" should have gone off a long time ago regarding the possibility of financial ruin.

"If the situation does not improve we are in serious trouble."

Smit said he had raised the issue during last week's council meeting but did not get a proper answer from acting chief financial officer Vincent Pillay.

Faku said precautionary measures were in place.

"We have identified warning signs and we are managing the situation."