Wow, it's true, Solly Msimanga turned around Tshwane debt

29 March 2019 - 08:24 By TimesLIVE
During his tenure as Tshwane mayor, Solly Msimanga's administration turned the city's deficit into a surplus.
During his tenure as Tshwane mayor, Solly Msimanga's administration turned the city's deficit into a surplus.
Image: Thapelo Morebudi

In Tshwane, the DA inherited a deficit of more than R1bn from the ANC. It turned it into a surplus in a year.

Africa Check researched this assertion by DA leader Mmusi Maimane and found it to be true.

The metro was led by Solly Msimanga, who served as mayor from August 2016 to January 2019. He is now leading the party's premiership campaign for the province of Gauteng.

In January 2018, Msimanga also referred to the turnaround in the metro, saying in a statement that his administration had clawed the city back from “financial ruin”. He said a deficit of R1.3bn had been reversed.

But the ANC has repeatedly refuted the claim, arguing that it left behind a substantial surplus.

In 2015/16 Tshwane had an operating deficit of R1.4-billion, excluding grants from the national government. In 2016/17 it had an operating surplus of R730-million.

The DA was elected to govern Tshwane in August 2016.

Africa Check researched what remained in the city coffers when the ANC left office.

It explained that a deficit occurs when any government spends more money than it collects, according to a guide to South African government budgets. Money is spent mainly on salaries and services like water and electricity. Money is collected from residents paying for services, rates, licences and fines, as well as from interest and investments.

A surplus is the opposite: more money is collected than is spent.

The formula “total revenue minus total spending” calculates whether there is a deficit or a surplus.

The auditor-general’s 2016/17 report on the municipality says that at the end of the 2015/16 financial year, the Tshwane had a surplus of R884.3m. But the city’s audited annual financial statements give a restated surplus of R1.1bn. This figure includes corrections of accounting errors identified later.

Carlene van der Westhuizen, a research analyst at the International Budget Partnership in South Africa, a network that aims to make public finance systems more transparent, told Africa Check the restated surplus was the best figure to use.

“It is the same as the amount stated in the 2018/19 budget,” she said.

So how did the DA calculate a deficit? Its "surplus" included national government grants.

Africa Check said capital transfers are funds national treasury gives all municipalities. They are also known as equitable share or “grant money”.

In 2016/17, the city collected 80% of its income from residents and received 20% in grants from the treasury.

Checking against the 2018/19 medium-term revenue and expenditure framework for Tshwane shows that when capital transfers from the treasury (some R2.45bn) are excluded from the 2015/16 calculation, the result is an operating deficit of R1.4bn.

"In other words, the municipality run by the ANC spent more money than it collected," said Africa Check.

After almost a year of DA administration, Tshwane recorded an operating surplus of R730m for the 2016/17 financial year.

Conclusion by Africa Check:

"Tshwane had a deficit in 2015/16 and a surplus in 2016/17. The leader of the opposition Democratic Alliance claimed that when it took over government of the City of Tshwane from the African National Congress in August 2016, the municipality had a deficit of over R1bn.

"The DA said it turned that deficit into a surplus within a year.

"But the city’s financial statements show a surplus of R1.1bn in 2015/6, the year before the ANC left office.

"However, that figure includes capital transfer grants from the national treasury. If the grants are excluded, the ANC left Tshwane with a deficit of R1.4bn.

"In 2016/17, when grants are also excluded, the DA administration collected a surplus of R730m.

"We therefore rate the DA’s claim as correct."