SA’s largest city may not be able to pay its debt, warns Johannesburg finance boss
Finance MMC Dada Morero has tabled an R80.9bn budget for the year, but warns that Joburg’s coffers are dry.
Johannesburg needs R4.3-billion to fund its monthly operating expenditure, but Finance MMC Dada Morero warned on Tuesday that the city might be unable to cover this.
“We are required to inform the entire Joburg family that we need a minimum of R4.3-billion a month to fund the city’s operations and deliver services so that we can survive. Unfortunately, there is no R4.3-billion to survive,” he said in his city budget speech. This placed debt repayment at significant risk.
Morero blamed the previous coalition government under the then executive mayor Mpho Phalatse and highlighted the ANC’s turnaround of Johannesburg from 2000 until the DA took over in 2016, from whence it was all a disaster, according to the finance boss.
He is likely to fund the shortfall from debt, grants from the national government and big hikes in rates and tariffs for those of the city’s six million residents able to pay.
Here are the key takeaways from the Johannesburg budget:
- Electricity tariffs increase by 14.97%.
- Water tariffs increase by 9.3%.
- Refuse tariffs increase by 7%.
- Sanitation tariffs increase by 9.3%.
- Rates tariffs increase by 2%, with the property value threshold increasing to R300,000. Pensioners get rates rebates on the first R1.5-million value (aged 60-69) and R2-million (aged 70 and above).
- Human Settlements: R7-billion over the medium term on housing in Lufhereng, South Hills, Fleurhof, Southern Farms and Cosmo City.
- City Power: projected revenue of R5-billion and R1.1-billion in possible electricity sales from Kelvin Power Station to Eskom, and it gets top-up funding to R23.7-billion for streetlights and maintenance of power stations.
- Johannesburg Water receives R1-billion.
- Community Safety gets R1-billion with a boost to capital expenditure to cover ammunition, speed signs and recognition medals and awards.
- B-BBEE and township economic development to boost city growth gets the lion’s share at R7-billion.
- The city will provide 14,750 employment opportunities at R125-million.
- Pothole and other road repairs are funded to the tune of R445-million— with the Johannesburg Roads Agency receiving a total allocation of R4-billion.
- The inspectorate to curb illegal construction (a huge problem) receives R458-million.
- The Johannesburg Property Company receives a budget of R1-billion for operations and R254-million for capital expenditure — an increase of 22.8%
- Group IT gets R1-billion— the council’s website was down this week, and its billing system is chronically dysfunctional.
- Group Finance receives R5-billion to fix the billing system, among other matters.
- Group Corporate and Shared Services receive the highest increased allocation of 118.8% to R1-billion for “the adjusted permanent locomotion allowance rate and implementation of Political Facilitated Agreement as well as contractors’ specialist services including a provision for the long overdue institutional review”.
- Transport gets R6-billion, primarily to fund the completion of Phase 1 of the Rea Vaya rapid bus transit system which has been repeatedly budgeted for in the past decade but has never got going. This is the route from the inner city to Sandton.
Comment: A city on the brink
The budget tells you that the city is in crisis, and Morero has probably overprojected revenues. Stage 6 power cuts have led to the customers who contribute the most to City Power exiting the grid and investing in solar, batteries or generators. This means revenue is likely to be lower than projected. About one-third of the city’s budget is funded by stealth taxes on electricity (called service and network charges on your bills).
If Kelvin Power Station sells to Eskom, that can ease the burden. Still, the infrastructure MMC, Jack Sekwaila, has promised that Johannesburg residents will only have a single load shedding of two hours a day in a phased roll-out planned to start this week. It’s not clear where the power to provide this relief will come from if Kelvin sells its generating capacity to Eskom.
There is a lot of headquarters fat in the budget: look, for example, at the allocations to group finance and group shared services as well as the Johannesburg Property Company (which manages the city’s property portfolio). Together, these service functions receive more than 10% of the budget while infrastructure (electricity, water and roads) is buckling.
The allocations to City Power and Johannesburg Water do not begin to deal with the backlogs in infrastructure, and more challenging choices needed to be made. It is, not unexpectedly, an election-year budget. The spending of R7.7-billion on B-BBEE and township economic development will benefit the ANC, EFF and Patriotic Alliance, the three principal partners in the local government of unity.
Instability in three different coalition governments since the 2021 local government elections has taken Johannesburg to the brink. DM