ANC troubled as Joburg council rejects R2.5bn loan from French entity

The City of Johannesburg does not have much of a plan to finance major projects to fix dilapidated metro infrastructure from its own revenue after the council rejected taking a R2.5bn loan from a French government entity.

Finance MMC Dada Morero went to council cap in hand during a special council meeting on Tuesday, asking it to approve a 15-year loan from Agence Française de Développement.

His appeal was rejected.

The council approved the medium-term budget last June which detailed the metro would finance capital projects from a R2.5bn loan for 2023/2024 and another R2.5bn loan for 2024/2025. 

The city's current financial year budget shows the loan has been in the works for more than a year, making up 33.7% of the city's R7.4bn 2024/2025 capital budget for infrastructure projects.

Besides this loan, the municipality put its faith in the national government grant of R3.2bn, with most of its revenue going to the day-to-day operational budget amounting to R75.7bn.

Should it suffer cuts in its grant, the municipality would have an unfunded budget for infrastructure development projects.

The city planned to fund only 16.5% of the capital budget from its coffers. 

With the loan, the city planned to fix, replace and upgrade roads, bridges, water pipes, wastewater plants and the power grid.

City Power and Johannesburg Water would have received most of the loan.

“In June 2023 council resolved on this aspect as they approved the funding plan of the City of Johannesburg and endorsed that the funding of the budget will include borrowings and loans,” Morero said.

“It is important to note that without this loan our financial position is compromised. It will imply the budget component for external loans is unfunded to about R2.5bn. 

“What I find difficult here with council is parties are not supporting this loan while they supported this budget in 2023. The budget was approved with the external loan component in June 2023.”

The EFF, DA and ActionSA rejected the loan.

The DA said the finance portfolio committee did not share details about the loan and could not pass the loan for the 2023/2024 financial after the period had ended.

ActionSA's Nobuhle Mthembu said the party did not support the loan because it was costly.

“Morero has only now furnished council with some of the critical details of the loan. We believe this information should have been shared in April when he first brought this matter to the council. Therefore we also are not prepared to agree to anything where the information appears incomplete.

“ActionSA is adamant the council cannot take a loan that will burden Johannesburg residents for the next 15 years,” she said. 

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