40% of municipalities in EC regarded as financially unsustainable

40% of municipalities in EC regarded as financially unsustainable

Urgent steps must be taken to rescue our municipalities and small towns left to fend for themselves as they fall into complete financial distress.

MEC for Cooperative Governance and Traditional Affairs, Zolile Williams, revealed in a parliamentary response that 16 of the 39 municipalities in the province are now regarded as financially unstable.

Small Towns such as Makhanda, Cradock, Komani and Graaff-Reinet, Tsitsikamma, and the Langkloof have for years been the crown jewels of the Eastern Cape. Now, they are battling to keep the lights on due to years of mismanagement and neglect.

The financial instability in these municipalities has dire consequences for residents. Services grind to a halt, infrastructure is not maintained, and general maintenance and upkeep deteriorates. As municipal services collapse, businesses disinvest, taking with them much-needed jobs and revenue from the local economy.

Years of mismanagement, cadre deployment, and disinvestment by our provincial government to maintain and improve our small towns have placed them on a path of devastation. Eventually, the town enters a death spiral where a lack of services leads to disinvestment and a lack of revenue and this lack of revenue results in a further collapse of services, until nothing is left.

Despite the dire situation, little to no action has been taken to address the systemic problems within these municipalities.

MEC Williams said the financially unstable qualification was based on the municipality’s performance on four sustainability pillars: financial health, governance, service delivery and institutional stability.

The 16 municipalities include;

  • Amathole District Municipality
  • Amahlati Local Municipality
  • Raymond Mhlaba Local Municipality
  • Great Kei Local Municipality
  • Makana Local Municipality
  • Dr Beyers Naude Local Municipality
  • Koukamma Local Municipality
  • Christ Hani District Municipality
  • Inxuba Yethemba Local Municipality
  • Sakhisizwe Local Municipality
  • King Sabata Dlalinyebo Local Municipality
  • Mhlontho Local Municipality
  • Port St John’s Local Municipality
  • Inquza Hill Local Municipality
  • Walter Sisulu Local Municipality, and
  • Enoch Mgijima Local Municipality.

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Amathole, Chris Hani, OR Tambo, Makana, Walter Sisulu and Enoch Mgijima are all already under provincial administration and Enoch Mgijima is under national administration.

Yet, despite these supposed interventions, the situation on the ground is not improving.

The biggest risk factor to these municipalities are their bloated administrations and rampant Cost of Employment (COE).
MEC Williams confirmed that at least four municipalities are spending more than half of their total budget on employees: Intsika Yethu Local Municipality (59%), Dr AB Xuma (53%), Emalahleni (52%) and OR Tambo District Municipality (50%), while the national treasury benchmark is 35%.

The current government financial crisis means financial bailouts for these municipalities are highly unlikely.

The extreme cost of living crisis means no more revenue will bleed from ratepayers through additional rate hikes and levies. Any attempt to do so will likely result in even lower collection rates.

The Democratic Alliance (DA) is calling on the Eastern Cape provincial government, specifically the COGTA MEC and Premier Oscar Mabuyane, to intervene urgently by assisting these municipalities in terms of section 154 of the Constitution.

The DA is also requesting the Portfolio Committee of COGTA to have a special committee meeting to discuss the manner in which these municipalities can be assisted, including financial recovery plans and turnaround strategies. This will enable the provincial government to implement the reforms, as the National Treasury prescribes, to steer the ship to calmer waters.

We need urgent intervention if we are to rescue this province from a total collapse of service delivery. The DA will continue to fight to rescue our small towns to ensure that local economies are protected.