“The substantial amount is earmarked for settling the ESKOM bulk electricity account, Vaal Central Water Bulk account, and other essential bulk services.”
The Free State’s only metro, Mangaung, has allocated R3,46 billion to meet its loan obligations and settle related debts.
This announcement was made by Mayor Gregory Nthatisi while delivering the 2024/25 budget during a special council meeting in the Bloemfontein city hall on Friday (31/5).
The substantial amount is earmarked for settling the Eskom bulk electricity account, Vaal Central Water Bulk account, and other essential bulk services. Loan repayments amounting to R155,2 million are included in this allocation, and efforts to enhance revenue collection strategies will cost R69,5 million.
‘The first payment is scheduled for July’
Mayor Nthatisi outlined the drastic measures the city has taken to honour its loan obligations and related debts. Among these measures is a settlement agreement with Vaal Central Water. The first arrears payment is scheduled to start in July.
“The metro aims to create an ideal environment for a financially viable economic recovery and to restore the confidence of credit rating agencies,” Nthatisi said. To ensure no defaults on loan repayments, the city has opened a separate investment account dedicated to setting aside all loan repayment amounts. This measure intends to guarantee that all loan payments are made by the end of April.
Additionally, Nthatisi noted an improvement in creditor payments, which have decreased from 30 days in the second quarter of 2023/24 (ending December 2023) to 21 days in the third quarter of 2023/24 (ending March 2024).
Mangaung is amongst municipalities that have been struggling for a long time to deliver mandated services to residents in the province, largely due to overwhelming debts to service providers.
In 2022, it was reported that the metro forfeited over R400 million of the national conditional grant needed for service delivery due to financial mismanagement. Similarly, in 2020, the National Treasury withheld R429 million in grant funding because of underspending and delays in completing grant-funded projects.
The financial instability of Mangaung is part of a broader issue affecting municipalities across South Africa. Last year, the Auditor-General of South Africa, Tsakani Maluleke, reported that the financial position of 70 out of 241 audited municipalities was so dire that there was significant doubt about their ability to operate in the future. Mangaung and Tshwane metros were specifically highlighted, responsible for 10% of the local government budget and service delivery to 9% of the country’s households.
Mangaung metro remains under national government administration after failing to recover from financial woes. Despite this, Nthatisi has dismissed claims that the national treasury requested the return of R200 million due to improper utilization. He explained that the municipality was undergoing a financial recovery plan to restore administrative functions and financial health.
