Don’t write off Joburg yet, says Morero

Johannesburg Mayor Dada Morero says there is no reason to panic about the city’s finances, in what appears to be another display of confidence that the municipality will come back from the brink of collapse.

Morero made the comments following National Treasury’s stinging rebuke, which saw fiscal officials withholding the city’s allocation of funds for July.

Joburg is one of around 70 municipalities across the country that have been temporarily cut off from receiving their equitable share – to the tune of a total R13.5 billion.

Read: Godongwana withholds July funds to Jhb, 70 municipalities nationwide

The release of the funds will depend on the errant municipalities’ ability to submit plans to rectify debt issues or fruitless and wasteful expenditure.

As a result, City of Johannesburg (CoJ) officials are facing a vote of no confidence from those who are facing the brunt of its weak finances and poor showmanship: residents and businesses.

While Morero admits there is room for improvement, he believes a recent update on the city’s positive outlook by rating agency Moody’s is a clear indication that it could still turn the tide sooner rather than later.

Moody’s affirmed the South African commercial capital’s Ba3 long-term issuer rating that had previously been on review for downgrade, according to a statement on 3 July.

“Whilst there are particular challenges, there are also successes in the city,” Morero said on Wednesday at a briefing to address a range of financial and service delivery issues.

“It’s an indication of confidence from Moody’s on our rating.”

Read: Joburg sets sights on Moody’s upgrade after positive outlook

He said over the coming months, the administration will strengthen the internal controls that govern its financial reporting, improve the credibility and monitoring of its budget process, and build up the city’s cash reserves; the latter remains a pain point for the municipality, which accounts for approximately 15% of South Africa’s GDP.

Joburg is sitting on a cash/cost coverage ratio of 12 days against the minimum safety benchmark stipulated by National Treasury of 30 to 90 days.

The funds amount to about R2.8 billion, which is half of the city’s preferred target.

Tracking the city’s litany of issues back to 2016, the ANC (which Morero belongs to) believes the blame for the current state of affairs should be shared among the political parties running the show.

While political pundits expect the 4 November local government elections to be punishing for parties like the ANC, Morero said his party shouldn’t be dismissed yet.

“The trust in the ANC-led coalition will be demonstrated as we move along,” he said.

The ANC recently shortlisted Morero and four others as candidates for the Johannesburg mayoral position.

Settling debt

Of particular concern to National Treasury is the ongoing challenge of municipal debt, with defaulting municipalities putting pressure on entities that provide it with key services.

By the 2024/25 year-end, municipalities owed interest of R3.4 billion to Eskom and R1.2 billion to water boards.

Morero has committed to settling Joburg’s share of the debt to Eskom and Rand Water by mid-July (presumably from sources of funds other than the equitable share from National Treasury).

“We will be paying Eskom just around R1.4 billion as soon as we receive the cash, which will set us free from the debt process that we agreed with Eskom,” he said.

“We really don’t have issues with Rand Water, everything has been fine between the city and Rand Water. We will be paying them an amount of about R960 million next week or by the end of the month [July].”

Last month, Eskom granted the CoJ a brief reprieve, agreeing to delay by 30 days its Promotion of Administrative Justice Act (Paja) process – the legal procedure Eskom must follow before it can cut electricity supply to the city.

The delay was brokered by Electricity and Energy Minister Kgosientsho Ramokgopa in a last-ditch attempt to help manage the city’s electricity bill following threats of power cuts.

Read:
Solving Johannesburg’s debt crisis is critical for both Eskom and CoJ
Johannesburg adds 700 managers as city struggles to pay bills
Johannesburg faces R2.1bn funding gap as its bills mount

The Paja process was reinstated after the CoJ missed a 5 June deadline to pay its current account, despite having paid R1.2 billion toward its accounts since the process began.

The outcome of the public process is expected on 24 July.

‘Pay us’ 

During Wednesday’s briefing, Morero also hinted at plans to write to National Treasury to pressure government departments to pay monies owed to the city amid its own troubles to manage municipal finances.

Read: Treasury to give departments the municipal treatment

The debt collection drive is part of efforts to recoup more than R1.2 billion from provincial and some national departments, including health and education.

Treasury is not unaware of the issue.

It had already started the process of withholding transfers from provincial and national departments who don’t pay their municipal bills.