Four Western Cape municipalities owe Eskom a combined R80.7 million as the provincial government this week disclosed financial risks faced by some municipalities.
MEC for Finance David Maynier delivered his budget statement outlining allocations to municipalities as well as plans to spend R48.8million over the medium term to “beat load shedding” in the Western Cape.
After nine days of load shedding, Eskom hopefully ended the power cuts on Friday citing the return online of generation units.
Maynier said a total of R68.8million, which includes R20 million from province’s reserves, would go towards the municipal energy resilience project which would see seven municipalities supported in efforts to generate, procure and sell their own power.
This was part of the province’s strategy to resolve the Western Cape’s load shedding costs which Maynier pinned at it R75 million per stage.
This week during a presentation, Eskom’s Andre De Ruyter indicated that by the end of January, municipalities owed the power utility R35.2 billion.
Spokesperson for the Department of Local Government Rowena van Wyk said only four of the 30 municipalities in the province had an overdue account owed to Eskom that was more R1 million. It included Cederberg which owed R39.6 million, Beaufort West R29.1 million, Kannaland R13.9 million and Matzikama R7.1million.
Allocations to the province’s five district municipalities will see R217.6 billion allocated over the next three years while allocations for the coming financial year include R50.5 billion to Cape Town Metro, R8.1 billion to the Cape Winelands, R6.2 billion to the Garden Route, R3.6 billion to the West Coast, R2.6 billion to the Overberg and R1 billion to the Central Karoo.
Municipal councils have until the end of this month to pass their budget, which will be closely monitored by local government and provincial treasury following revelations by the National Treasury that Cederberg, Kannaland and Knysna were part of 106 municipalities across the country that passed unfunded budgets last year. All three municipalities are under some form of investigation by either the Hawks or the Special Investigating Unit (SIU).
The provincial treasury has also allocated R8.6million over the medium term to the province’s forensic investigation unit that probes allegations of corruption.
Maynier said while municipal finances were in good health, there were a number of them who faced financial distress.
Budget documents highlighted how the challenge of revenue collection was an issue for some municipalities in the face of growing debt.
Debt owed to municipalities increased by R13.4 billion while debt owed by municipalities increased by R369 million.
The implementation of debt relief measures during the hard lockdown was said to have had a significant impact on revenue collection, particularly in rural municipalities.
“The impact of Covid-19 on households and businesses can be seen in the rapid increase in debts owed to municipalities. This increased by 18.8% in the Western Cape and by 27.0% nationally compared to December 2019,” read the document.
“Although municipal revenues have held up, with most households and businesses still able to pay for their property rates and service charges (especially wealthier customers that consume more services), the rise in debtors indicates a clear risk to revenues in future.”
“Underspending on capital budgets is a major cause for concern, with Western Cape municipalities having spent only R3.53 billion by the end of December 2020, well below their projected spending of R4.84 billion by that date.”
Van Wyk said they expected the spending on capital budgets to accelerate before the end of the financial year.
“If funds from capital budgets remain unspent and if the funds are contractually committed to a project, then it is possible for the funds to be rolled over and spent in the next financial year,” she said.
“If the capital spending is grant funded, then the roll over must be approved by the sphere of government that allocated the conditional grant and if not approved, the funds must be returned.”
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