The National Treasury has approved a R72 million debt relief package for Mogale City local municipality in Krugersdorp, effectively writing off one-third of its substantial debt to Eskom.
This strategic decision comes as part of a broader initiative to promote sound financial management across municipalities, thereby securing essential services for citizens.
The collaboration between national and provincial entities aims to safeguard the financial health of municipalities like Mogale City, ensuring their capacity to serve their communities effectively.
Acting deputy director-general of intergovernmental relations at the Treasury, Ogalaletseng Gaarekwe, confirmed the approval of the debt relief programme last Thursday.
The programme, which was retroactively effective from July 1, 2023, aims to bolster Mogale City’s fiscal capacity to meet its obligations to Eskom, water boards, and other creditors.
“Municipal debt relief is an extraordinary support,” Gaarekwe said, highlighting the critical nature of this intervention.
The decision to write off about R72-million owes much to Mogale City’s adherence to the conditions set forth by the Treasury, achieving 86% compliance during the first debt relief cycle.
Original debt stood at R216-million
The municipality’s original debt, part of which has been relieved, stood at over R216-million as of March 31, 2023.
This relief marks not only a financial reprieve but also reflects the municipality’s commitment to implementing basic best practices in financial management, as mandated by the Municipal Finance Management Act (MFMA) and the Municipal Systems Act.
Despite this positive step, the Treasury has cautioned Mogale City to remain vigilant in maintaining compliance.
Gaarekwe noted: “The municipality is cautioned to maintain and improve its adherence to the conditions of its debt relief approval over the remaining two years of the programme.”
Significant challenges remain.
The municipality is urged to adopt a credible budget funding plan to ensure a funded budget for the 2024/25 medium-term revenue and expenditure framework.
Strengthening enforcement of credit control measures is also a priority, in alignment with MFMA Circular No. 124.
A pressing issue identified is the discrepancy in property rates.
The latest reconciliation revealed 2 700 fewer properties in the financial system than those valued in the general valuation roll, amounting to a R2.9-billion shortfall.
Conversely, the municipality has been billing consumers an excess of R949-million.
Mogale City’s efforts praised
Gaarekwe described this as an “indicative of human failure and/or fraud”, calling for urgent leadership intervention and comprehensive corrective action.
The Treasury has mandated that progress in resolving these discrepancies be reported monthly.
Furthermore, Mogale City is expected to comply fully with accounting and municipal standard chart of accounts requirements, as outlined in the MFMA.
Acknowledging the strides made by Mogale City, Gaarekwe congratulated the municipality for its efforts to enforce best practices and instill positive behavioural change.
“It is critical to proactively partner with the provincial treasury and the provincial department of cooperative governance and traditional affairs,” Gaarekwe advised, highlighting the importance of sustaining these efforts beyond the debt relief programme’s duration.
