City of Joburg in cash crisis

The City of Johannesburg - South Africa's industrial and economic hub - is facing a liquidity meltdown that could see it fail to meet its short-term liabilities in a matter of days.

Addressing the media in Braamfontein yesterday, the DA said the city's liquidity problems were caused by failure to collect monies owed to it due to the council's perpetual billing crisis.

The DA's municipal finance spokesman in Johannesburg, Patrick Atkinson, said any unforeseen crisis in the municipality could result in the council failing to pay creditors.

Atkinson said: "National Treasury has indicated its deep concern about Johannesburg's liquidity position. Treasury's requirement is that all metros hold three months in cash and cash instruments to ensure that they can meet their short-term liquidity requirements and pay creditors. Johannesburg has 12 days' worth of cash cover."

The city's revenue spokesman Stan Maphologela confirmed that the city has 12 days' worth of cash. "However, the city does have mitigations in place to ensure that no default occurs on all obligations. To date, the city has never defaulted on any of its obligations and anticipates that going forward this will continue to be the case."

To make up for low cash reserves the city has further accessed R1-billion worth of commercial papers, said Maphologela, adding that the municipality can still tap into more debt.

For the past two years, the city has been unable to bill residents correctly because, it says, of the failure of its R580-million Project Phakama - an IT system which was intended to integrate all municipal services accounts into one billing database.

Instead, the system has been unable to process metre readings, resulting in residents being billed with massively inflated and estimated accounts.

As a result, the city has failed to collect millions of rands owed to it in rates and taxes.

The Times reported in January that the city had failed to collect R300-million in rates and taxes by the first quarter of the last financial year. That amount is expected to have grown significantly since then.

In June the auditor-general issued a damning, qualified report for the 2009/2010 financial year on the city, showing that Johannesburg had incurred a R1.4-billion loss in water and electricity distribution.

In July we further reported that city officials had requested council to approve R4.4-billion in short-term loans to "bridge cash-flow mismatches".

At the media briefing yesterday DA's caucus leader in Johannesburg Mmusi Maimane said: "The city faces another qualified audit at the end of this year. We have a liquidity crisis."

Maphologela said the number of incorrectly billed accounts has dropped to 4%.