Johannesburg finance MMC Dada Morero presented a grim picture in council on Tuesday, revealing the city's debt was just under R9.6bn.
Delivering the budget speech shortly after the state of the city address, Morero admitted Johannesburg was broke and urgent bills needed to be paid.
"Who is familiar with the phrase 'I blew it'?" asked Morero as he told councillors the city's coffers were in dire straits.
"Just for a moment, please close your eyes and imagine being left with R5bn. One day you wake up and realise you are broke.
"How would you feel if you [were] in my shoes right now and had to tell society that in the financial year ended June 2022 the city's billing for services was below budget by R3.4bn, while overspending on the purchase of bulk services was R342m?"
Morero slammed the city's poor financial performance, saying it achieved an operating deficit of R1bn against a budgeted operating surplus of R1.1bn.
"This underperformance was mainly due to higher underperformance in revenue compared with the level of underspending in expenditure."
Morero said the city was losing a significant amount to electricity and water losses which peaked in June 2022 at 30% and 32% respectively. The losses increased from 29% and 25% for electricity and water respectively in June 2021.
"This reflects a deterioration in the management of losses as the city pays in full for these services, but a significant part thereof is in technical and non-technical losses. The outcome of the revenue underperformance against budget ... [reveals] a significant decrease in the cash balances of the city from R6.6bn in June 2021 to R3.8bn."
The finance MMC said the latter amount included unspent grants of R762m. He said this was the result of the city's inability to secure rollovers on the unspent grants, blaming the previous administration for failing to appoint a city manager and group chief financial officer to oversee these processes.
"There was an increase in the number of key municipal entities in overdraft positions."
Morero said Johannesburg's debt reached an unaffordable level, leading to financial institutions being reluctant to fund the city.
"However, this is in contrast to the appetite financial institutions used to have on the city’s debt during the 2014/15 administration due to the high credit rating the city achieved from the credit ratings agencies."
Morero admitted that as the Johannesburg's financial year drew to a close, it could only raise R1.5bn in loans compared with the budgeted R2.1bn.
"The city lacked deliberate plans for the repayment of loans and bonds which will mature in the near future. In the financial year ending June 2023, the city will be required to repay over R3bn of its debt."
The finance MMC said among other things, poor revenue collection placed debt repayment at significant risk.
Morero said this administration inherited a city that was in arrears with suppliers, had no cash in the bank and was not servicing its long-term debt.
"The city had low levels of operating and capital budget, had a deficit of R291m and had wastage caused by fraud in housing, water, non-essentials and bad management."
Institutionally, Morero said previously there was no distinction between commercial and other activities, adding that five administrations caused duplication.
"There was fragmentation and there existed a huge gap between policy, decisions and implementation, no performance management, but instead, cumbersome bureaucratic procedures, weak management and information systems."
Ruling it a failure, Morero said this resulted in a free fall that guaranteed the running down of city infrastructure and reduced services.
To turn things around, he said the current administration projected a minimum of R4.3bn a month was needed to fund the city's operations and deliver services to residents.
"Today our budget for the 2023/2024 financial year is approximately R80.9bn. Our operational expenditure sits at R73.3bn. Meanwhile, our capital expenditure stands at R7.6bn ... with a three-year capital budget of R24.4bn."
Morero called on the private sector and investors to help the city leverage this budget so it can make every cent count and do more.
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They blew it: Joburg finance MMC slams past management of city's coffers
Image: Veli Nhlapo
Johannesburg finance MMC Dada Morero presented a grim picture in council on Tuesday, revealing the city's debt was just under R9.6bn.
Delivering the budget speech shortly after the state of the city address, Morero admitted Johannesburg was broke and urgent bills needed to be paid.
"Who is familiar with the phrase 'I blew it'?" asked Morero as he told councillors the city's coffers were in dire straits.
"Just for a moment, please close your eyes and imagine being left with R5bn. One day you wake up and realise you are broke.
"How would you feel if you [were] in my shoes right now and had to tell society that in the financial year ended June 2022 the city's billing for services was below budget by R3.4bn, while overspending on the purchase of bulk services was R342m?"
Morero slammed the city's poor financial performance, saying it achieved an operating deficit of R1bn against a budgeted operating surplus of R1.1bn.
"This underperformance was mainly due to higher underperformance in revenue compared with the level of underspending in expenditure."
Morero said the city was losing a significant amount to electricity and water losses which peaked in June 2022 at 30% and 32% respectively. The losses increased from 29% and 25% for electricity and water respectively in June 2021.
"This reflects a deterioration in the management of losses as the city pays in full for these services, but a significant part thereof is in technical and non-technical losses. The outcome of the revenue underperformance against budget ... [reveals] a significant decrease in the cash balances of the city from R6.6bn in June 2021 to R3.8bn."
The finance MMC said the latter amount included unspent grants of R762m. He said this was the result of the city's inability to secure rollovers on the unspent grants, blaming the previous administration for failing to appoint a city manager and group chief financial officer to oversee these processes.
"There was an increase in the number of key municipal entities in overdraft positions."
Morero said Johannesburg's debt reached an unaffordable level, leading to financial institutions being reluctant to fund the city.
"However, this is in contrast to the appetite financial institutions used to have on the city’s debt during the 2014/15 administration due to the high credit rating the city achieved from the credit ratings agencies."
Morero admitted that as the Johannesburg's financial year drew to a close, it could only raise R1.5bn in loans compared with the budgeted R2.1bn.
"The city lacked deliberate plans for the repayment of loans and bonds which will mature in the near future. In the financial year ending June 2023, the city will be required to repay over R3bn of its debt."
The finance MMC said among other things, poor revenue collection placed debt repayment at significant risk.
Morero said this administration inherited a city that was in arrears with suppliers, had no cash in the bank and was not servicing its long-term debt.
"The city had low levels of operating and capital budget, had a deficit of R291m and had wastage caused by fraud in housing, water, non-essentials and bad management."
Institutionally, Morero said previously there was no distinction between commercial and other activities, adding that five administrations caused duplication.
"There was fragmentation and there existed a huge gap between policy, decisions and implementation, no performance management, but instead, cumbersome bureaucratic procedures, weak management and information systems."
Ruling it a failure, Morero said this resulted in a free fall that guaranteed the running down of city infrastructure and reduced services.
To turn things around, he said the current administration projected a minimum of R4.3bn a month was needed to fund the city's operations and deliver services to residents.
"Today our budget for the 2023/2024 financial year is approximately R80.9bn. Our operational expenditure sits at R73.3bn. Meanwhile, our capital expenditure stands at R7.6bn ... with a three-year capital budget of R24.4bn."
Morero called on the private sector and investors to help the city leverage this budget so it can make every cent count and do more.
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