ActionSA in eThekwini expressed concerns about the current financial position of the municipality, after a meeting of the municipality’s Finance Committee on Wednesday.

The financial ratios presented to the committee paint a worrying picture of a municipality under serious cash and operational strain, said ActionSA KwaZulu-Natal chairperson Zwakele Mncwango. 

According to the committee reports, eThekwini currently has a cash/cost coverage ratio of approximately 0.5. Mncwango explained that the municipality has less than one month of cash available to cover its operating expenses.

“This level of cash coverage is extremely risky and leaves the city vulnerable to service delivery disruptions and financial shocks. While the current ratio of 1.48 suggests that the municipality can meet its short-term obligations on paper, ActionSA cautioned that this is largely driven by non-cash items such as outstanding debtors and grants receivable,” Mncwango said.

Mncwango explained that this did not reflect real cash availability and masked the severity of the municipality’s liquidity crisis.

ActionSA further noted that although the debt-to-revenue ratio of 15.98% and the borrowing-to-assets ratio of 10.84% indicate that the municipality is not over-indebted and still has a relatively strong balance sheet, these indicators should not be used to justify reckless borrowing in the face of operational failures.

According to the committee report’s summary of financial risks and challenges, the following are challenges and risks to the municipality and its entities:

• cash flow constraints
• Decreased collection rate
• Recurring severe weather-related damages
• Reprioritisation of the expenditure towards damaged assets and repairs and maintenance
• Increasing community needs with limited funding available
• Sustainability of trading service due to deficits, water distribution losses and ageing infrastructure

The municipality report stated that the risks are being addressed by the Executive Management Committee (EMC), including material issues that might have an impact on the credibility of Annual Financial Statements (AFS) and audit outcome, which is a standing item on the EMC agenda.

Mncwango said that of particular concern is the water loss level of approximately 52.82%, representing a significant revenue loss and a clear indication of systemic failures in infrastructure management, maintenance, and revenue protection.

ActionSA emphasised that such losses directly contribute to the municipality’s cash flow challenges. Mncwango said that ActionSA raised strong objections to the recommendation that the municipality should take on an additional R2 billion loan.

“Under the current circumstances, characterised by poor cash management, high water losses, and weak revenue collection, ActionSA cannot support further borrowing. Borrowing under these conditions will not solve the problem but will instead shift today’s failures onto future generations,” Mncwango said.

Touching on the debt crisis, Mncwango said that public institutions must focus on settling their financial obligations and working cooperatively to stabilise the municipality, not engaging in public confrontations.

“Residents of eThekwini deserve professionalism, accountability, and decisive leadership. Our councillors will continue to push for the immediate stabilisation of cash flow and stricter cash management, the halting of unnecessary borrowing until operational and governance failures are addressed,” Mncwango added.

zainul.dawood@inl.co.za

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