Joburg council reveals R2.7bn loss in six months due to ‘slow revenue collection’

Over six months, the City of Johannesburg lost a staggering R2.7bn because of slow revenue collection. The city is owed R38bn in unpaid rates and services.

Since the city started its BuyaMthetho campaign last week, it has been collecting an average of R220m per day against the R4bn monthly target. It has been disconnecting an average of 1,000 households and companies daily.

Finance MMC Julie Suddaby revealed the R2.7bn loss while responding to criticism of the adjustments budget in which cuts across Joburg’s Pikitup service have been made.

ANC councillor Loyiso Masuku labelled the adjustments budget “rushed”, adding it went against all the pillars of uplifting marginalised communities. Masuku said expenditure had been reduced by R1.1bn, which would have a negative impact on service delivery to Johannesburg residents.

“This blatant delay of services is contrary to the seven pillars laid out by the DA. This is a consequence of gross political inexperience and being out of touch with realities of the city,” she said.

“This budget is very senseless and a clear disregard of how Covid-19 affected socioeconomic conditions of the people. We reject a budget that was not well thought out but rather a rush rush budget.”

While the adjustments budget was passed by 139 votes, Suddaby said it was the best the city could do under the conditions in which the multiparty government found the city’s finances.

“The rebuild of the Joburg economy is very difficult to explain when a loss of R2.7bn of cash in the bank in six months took place. We inherited an institution that succeeded in losing that enormous amount of money. It troubles me that we are talking losses of billions of rand and we throw the word 'billions' around like it’s Smarties, like it doesn’t matter, but it does,” she said.

Suddaby said on July 1 last year, the city had a cash balance of R6.6bn and midway through the current financial year it dropped to R3.9bn. In part, she said, this was due to a steep decrease in revenue collection and the Covid-19 pandemic.

“The current budget was not able to adequately address the challenges and need for change. We find ourselves allocating limited resources to serve many in the best possible way and there is always a need to reprioritise our spend and our collection,” she said.

The 2021/2022 approved operating budget was R74.1bn but on Thursday an adjustments budget of R72.8bn was passed, showing a more than R1.1bn reduction. The adjustments capital budget was approved at R7.3bn, indicating a reduction of R771m.

Suddaby said the reduction was due to lower-than-expected revenue collection. Revenue from electricity was down by R975m, while the city “grossly” over-spent on bulk electricity purchases by R918m, which was a direct cash outflow from the city.

“Municipalities have not been performing well, causing credit ratings to suffer. Investors cannot trust government to step in when municipalities cannot meet their obligations.

“We are also doing an investor roadshow in March where, with the backing of the fiscal prudence entered into today, and the commitment to good governance, we hope to motivate more investors to empower our city,” she said.

Also rejecting the budget, EFF councillor Saseka Zitha said it was characterised by hopelessness. She said the proposals on operating expenditure demonstrated how detached the multiparty government was from ordinary residents.

“With so much refuse collection backlog in the city, why is this government electing to cut budget for Pikitup by almost R13m? We all know the impact Covid-19 has had. A serious government would not cut the budget for city bus and tourism because those can play a role in the economic recovery of the city,” Zitha said.

Al-Jamah councillor Imraan Moosa expressed concern over budget cuts for the departments of health and social development.

“The recent spell of Covid-19 spread has exacerbated existing social conditions, seriously impacting on our communities,” he said.

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