Joburg budget threat

As the City of Johannesburg releases its 2010-2011 annual report today it has emerged that it has a R2.1-billion budget shortfall.

A report tabled by the city's finance committee on Tuesday reveals that Africa's industrial and economic powerhouse has to increase its collections rate by 105% every month to cover the shortfall.

Failure to do so might force city authorities to trim Johannesburg's R33-billion 2011-2012 budget, which will result in an adverse effect on the delivery of services.

The DA's finance spokesman in the city, Patrick Atkinson, said: "It is highly unlikely that we will be able to collect anything close to 100%. Now our collection rate is 87% against a target of 94%."

The committee recommended that "council adopts mitigating measures for revenue to increase the collection rate to an average of 105% month-to-month to close the gap of R2.1-billion. Failure to perform at desired level would imply that budgeted expenditure be reviewed in line with revenue collection levels," said the report.

According to the city's projections, if it manages to collect:

• 105%, it will raise R2-billion;
• 99% will raise R1-billion;
• 102% will raise R1.5-billion;
• R108% will raise R2.5-billion; and
• 111% will raise R3-billion.

The document revealed that the city's cash cows, City Power, Pikitup and Joburg Water, are not doing well. City Power will end the current financial year with an over-expenditure of about R323-million, and Pikitup and Joburg Water will underspend by R82-million and R46-million, respectively.

In November, the national Treasury raised the alarm about Johannesburg's deteriorating financial conditions, and the lack of sufficient liquidity in particular. At the time, the city reportedly had cash cover of up to 12 days, in contravention of the Treasury regulation that metros have three months of cash cover.

The municipality, which is owed more than R5-billion in rates and taxes, owes more than R10-billion in bonds, commercial paper and loans.

"The city's debtors' book has been on the increase over the years. This increase reflects under-performance of collection levels on the overall budget revenue," said the report.

"Year-on-year debtors' book increases have created a revenue collection backlog which, if not managed, may render the debtors' book asset obsolete."

The municipality is expected to announce a second consecutive qualified annual report because of its financial woes.

The city's communications head, Gabu Tugwana, said the municipality will comment today.

• The City of Cape Town has come under fire from the opposition ANC for cutting its capital budget by over R1-billion.

"For the past two-and-a-half years the city failed to spend its capital budget to the satisfaction of its citizens. This is becoming a serious trend in the city that claims to be investing in infrastructure and the best in the world," said the ANC yesterday.

But Solly Malatsi, spokesman for mayor Patricia de Lille, hit back by reminding the ANC that the city has "consistently been praised for sound financial management". He said the city had received eight consecutive unqualified audits. - Additional reporting by Nashira Davids