Tshwane’s plan to save itself from the brink of financial collapse

The City of Tshwane’s executive management has said that it is implementing a “bold plan” to turn around the fate of the city’s ailing finances by ramping up collection efforts and cutting unnecessary costs.

“We want to increase revenue and reduce expenses in the city in the range of R1 billion a month over the next six months,” said mayor Cilliers Brink on Monday, hoping to collect at least a quarter of the R23.3 billion owed to the city by its customers by mid-year.

The multi-billion rand debtors book hints at one of the reasons why the city has been unable to pay its providers on time – adversely affecting service delivery for its over 4 million residents.

Currently, Tshwane is not adequately “collecting what is due to the city,” said Brink, conceding that executives know that the full amount is realistically not collectable.

However, the city plans to pounce on the top 1,000 arrear consumers, whose debts amount to more than R6 billion and are collectable. New methods for debt collection that the city may use include lawsuits as well as taking properties. This will “buy us more time to fix more complex issues like tariffs” in the city, said Brink.

Additionally, the municipality said that it will work to ensure the City of Tshwane is more cost-effective, beginning in July this year when the new budget begins.

Brink told eNCA that “if we succeed [in these revenue and debt collection efforts, as well as expenditure], we will improve our cash flow, improve our Eskom account, as well as boost our credibility and creditworthiness in the market.”

The mayor said that if Tshwane fails to achieve this, it would need to fundamentally change how the city operates its finances.

Financial woes

Tshwane’s financial woes have been an area of interest for many, as the cash-strapped city has struggled to pay millions of rands to contractors, suppliers, workers, etc. on time. Debt owed by the city to basic service delivery providers has skyrocketed.

For example, debt owed to Eskom has ballooned to nearly R4 billion (up from R1.1 billion in September 2023). Additionally, the city’s bonds have been put on notice by the Johannesburg Stock Exchange (JSE).

Moneyweb reported that Tshwane last paid Eskom in September 2023, and as of June 30, the city owed its trade creditors R12.6 billion, which is an increase of R1.6 billion compared to the balance a year before. This debt is expected have increased since.

Last year, the city was in the spotlight for all the wrong reasons when its 2021/2022 audit report showed over R10 billion in irregular expenditure.

“Even though we won’t get a clean audit [for 2022/2023],” Brink says that he is confident that there will be an improvement in the city’s audit outcome.

Turnaround initiatives

Other forms of collection efforts were ramped up last week. MMC for Finance Jacqui Uys announced that the Tshwane Ya Tima revenue-collection campaign – which seeks to disconnect services to defaulting clients who run up high service bills and fail to pay the city – is back in full swing.

Brink also said the municipality has already reviewed its supply chain management policy to favour bidders that deliver value.

“We have also made management changes in the supply chain management division. Tender awards in the city will now be granted based on a market assessment.”

Read: City of Tshwane is coming after these households, businesses, and estates