Bitou to go ahead with R35m loan

PLETTENBERG BAY NEWS - The DA-led Bitou Council is to go ahead with a questioned R35m loan (down from a proposed R38,8m) with some adjustments, following concerns expressed by Provincial Treasury and the Plett Ratepayers Association.

The ANC opposition also objected to the loan tabled at a special council meeting on Monday 27 February, saying this is "not the right time" to enter into a loan, especially in the light of the economic difficulties caused by the Covid-19 pandemic and a high interest rate environment.

The resolution approving the loan was passed after the DA and its coalition partners voted in favour.

Plett Ratepayers Association (PRA) chairperson Peter Gaylard has warned of political fall-out for DA Mayor Dave Swart, saying he "appears to have ignored the wishes of his constituents, which may affect him politically in the future".

Letter to the premier

PRA has engaged with Western Cape Premier Alan Winde on the issue, saying a 10% decrease in the loan amount is inadequate.

"Our members, as the people who will ultimately have to pick up the tab for whatever money is borrowed and inevitably mismanaged, have expressed very strong feelings against any borrowing of money, until such time as the requisite capacity to actually manage our finances responsibly have been put in place by council and the administration," Gaylard said.

"We will not accept any loan as long as there has been no spending cuts on non-essentials, and money continues to be wasted. The council has not shown good faith in managing our public funds."

Gaylard further claimed that council recently approved a 20% salary increase for the municipal manager and his top management, despite its announcement in August that it was insolvent.

"In six months we have seen no evidence of spending cuts, nor financial controls imposed." He said John Steenhuisen, chairman of the DA, has just released an "alternative budget" in which he says the DA calls for a reduction in debt. "If the DA council approves this loan, they will be going against DA policy."

He also said this is not the time to take such a loan in order to fund essential capital works. "Against the background of a bloated organisation structure, burgeoning wasteful expenditure, dysfunctional supply chain management, poor consequence management, shockingly poor budgeting, and a lack of capacity on almost all fronts, it is folly to borrow money and especially for that which has already been paid for."

Acknowledging the need to provide jobs and income for the thousands of semigrants as well as unemployed people that have settled in Plett and who have been provided with housing and services, he said insufficient thought has been given to how the municipality will pay for the housing and services already provided.

Muni defends decision

However, the municipality stood firm - with two minor concessions, namely that the loan amount is to be reduced and that there would be no increase in rates for consumers that are directly attributable to the loan.

A report was tabled that indicated a decrease of the originally approved capital budget from R38,843m to R35,255m - reducing the loan amount by R3,588m, or just under 10%. All items on the project list are necessary "to improve the well-being or livelihood of our communities", the report said, except for the provision of lifeguard towers, for which donor funding will be sought.

The report justified the loan based on a long-term budgetary planning process in 2013, which, it said, was based on sound financial principles relating to municipalities It said the loan is perceived as a shock because the municipality has not used loans for the last four years, instead exhausting its surplus to fund capital projects.

This necessitated the current route of taking a loan, which would put Bitou back on the right track to make the municipality financially sustainable.

Affordability

The report said municipalities' financial decisions are guided by financial ratios. In Bitou's case, the gearing ratio, which reflects long- and short-term debt, was 14% in June last year, "well below the maximum of 45%".

The debt service cost ratio (the total cost of debt expressed as a total expenditure), with a prescribed norm of between 6% and 8%, stood at 5% in June last year.

The municipality maintained that "a lot of thought and consideration had gone into the matter and the correct financial position of the municipality" and pointed out that the repayment of all borrowing is done from operational revenue generated from rates and service charges, according to the legislative mandate contained in the constitution.

Bitou Mayor Dave Swart has had to answer questions surrounding the loan.

Cause of financial position

The municipality ascribed its current financial position to "inappropriate financial decisions taken by political leadership" since 2016, compounded by lack of administrative leadership and failure to adhere to approved long-term financial planning and debt collection policies. It said this was exacerbated by the inability of leadership to grasp the effect of financial decisions.

According to the report, action was indeed taken about the situation, with forensic and other investigations and dismissal or voluntary resignation of staff members. "Depending on the outcome of investigations, processes are engaged to recover funds lost," said the report.

It also stated that the new senior management have more than sufficient qualifications, experience, skills and abilities to positively contribute to the improvement of the municipality and that a statement by the association that the incumbents cannot be trusted is "malicious and devoid of all facts".

Plettenberg Bay Ratepayers' Association chair Peter Gaylard.