Concerns arise as eThekwini Municipality seeks R1.5 billion loan

The eThekwini Municipality intends to borrow R1.5 billion to fund capital expenditure for the 2024/2025 financial year.

The municipality presented a progress report on borrowings for capital projects approval of loan agreements at an Executive Committee (Exco) meeting on Friday.  

It stated that in accordance with the Finance Management Act, it had made public the information statement and invited, received, and considered the written comments/representation from the National Treasury.

The municipality said that in response to concerns raised, it was noted that soliciting comments from the National Treasury was based on the Municipal Budget approved 2024/2025 financial year. 

The municipal management also acknowledged that the city was commended by the National Treasury for its cash covering ratio.

The municipality intends to take R500 million loan from the First National Bank over 10 years at an indicative fixed interest rate of 10.040%. Also, it intends to take a R1 billion loan from the Development Bank of Southern Africa over 10 years at an indicative fixed rate of 11.110%.

If the loans are approved on Monday at the council meeting, City Manager Musa Mbhele will have to sign off on the loan agreements. 

The municipality stated that during the process of the loan agreement negotiations, the fixed margin remained unchanged. The final interest rate will be confirmed before the loan is drawn out.

Councillor Andre Beetge, DA Exco member, was concerned that the municipality would be taking another loan, with the city having R9.9 billion loan payments outstanding. 

Sandile Mnguni, eThekwini Municipality's Chief Financial Officer, confirmed that the city is planning to borrow R2 billion in the next financial year; in addition, R1.5 billion the following year, and then another R1.5 billion in the next financial year. 

"The R1.5 billion that we already approved is for the current financial year. I must indicate that the current outstanding long-term liabilities as indicated have not taken into account the repayment of capital that we undertake every six months," Mnguni said.

In the eThekwini Finance Committee meeting, the Inkatha Freedom Party (IFP), ActionSA, Minority Front (MF), the Peoples Freedom Party (PFP), and Democratic Alliance abstained from voting. Only the ANC supported the report by majority vote.

Rose Cortes, deputy chairperson of the eThekwini Ratepayers Protest Movement (ERPM), said the borrowing pattern is reckless and speaks to the concerns raised by ratepayers that the municipality is not concerned with reducing spending.

"Austerity measures should be a priority rather than the need to take out additional loans. The amount of interest that will be paid on the R1 billion loan is just mind boggling but as the city manager pointed out, the ratepayers are endorsing this behaviour as can be seen that most ratepayers do pay their bills on time. Perhaps the time has come for a financial vote of no confidence," Cortes said. 

zainul.dawood@inl.co.za