Free State municipality hopeful of financial recovery after AG concerns

Matjhabeng in the Free State believes it can turn around its financial trajectory despite R16bn of debt, something the auditor-general (AG) warned could prevent it from functioning.

The AG raised concerns in a 2021/22 report about the municipality’s debt exceeding its assets by R8.4bn and highlighted that it also incurred a deficit of R1bn. 

Matjhabeng owes Eskom and Bloemwater R5bn each. It is fourth-highest on the list of municipalities indebted to the power utility.

Speaking to TimesLIVE, Matjhabeng’s leadership said it could turn things around despite five consecutive years of AG audit reports warning of deteriorating finances. 

Spokesperson Tshediso Tlali said municipal management was working hard to improve finances and had recruited senior revenue managers from National Treasury and the AG’s office. 

Tlali said unlike last year, when the municipality operated from a deficit, it had recovered and there was a surplus in its operational budget.

However, its overall debt was R16bn and it was making monthly payments to creditors to chip away at this, he said, adding that nonpayment for municipal services and outsourcing thereof were responsible for Matjhabeng's troubles.

The municipality was now embarking on an aggressive revenue-collection campaign for financial recovery, Tlali said. 

“We also have other revenue-enhancement strategies in place to ensure financial recovery. We have made several key appointments of senior managers to bring financial stability to this municipality.”

150 managers who were in acting positions have been promoted and a further 410 people enlisted.

The AG's report said the municipality’s problems were due to a lack of effort in addressing previously identified internal control deficiencies relating to compliance, performance, financial reporting and information technology.

“These events or conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on the municipality’s ability to continue as a going concern,” the report said. 

The municipality had also, over the past five years, incurred irregular expenditure amounting to millions, most recently R307m.

The AG highlighted some causes as being related to non-tax-compliant suppliers and a lack of subcontracting requirements on bid documents. 

Tlali said this was due to incapacity in the supply chain management division, which new recruitment would resolve.

In 2021 the AG found the municipality made late employee tax payments to Sars. Tlali said this was due to a lack of funds at the time, but the issue had been resolved.

“Control measures were implemented to improve the situation. PAYE is now paid on time.” 

He said beefed-up administration management and new political leadership elected in the 2021 local government polls, headed by Thanduxolo Khalipha, would positively impact residents.

The municipality’s financial position has seen key infrastructure become dilapidated, with 56% of water meant for residents lost through leaks due to old infrastructure.  

Bloemwater executive operations and maintenance head Maruping Rapudungoane previously told TimesLIVE the water utility was unable to refurbish poor infrastructure due to the municipality’s debt.  

In November the municipality was declared a sewage disaster area, with least 51 pump stations and nine wastewater treatment plants not working.

Water and sanitation minister Senzo Mchunu promised to give the municipality R425m to resolve this. 

Tlali said the municipality had started to refurbish, rebuild and repair wastewater treatment works and pump stations. 

“To date, two treatment works have been refurbished (Theronia and Witpan). Refurbished pump stations are T8 and old Thabong station. Rheederspark and Traffic pump stations should be completed by March 17.”

He added that Bloemwater had appointed contractors to refurbish all wastewater plants and pump stations in Matjhabeng. 

“Contractors will move on site during March 2023.” 

TimesLIVE

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