Turning around Makana Municipality


Makana Mayor, Mzukisi Mpahlwa 


Makana Municipality has been identified as one of the distressed municipalities in the country due its lack of financial viability; inadequate levels of service delivery and poor state of infrastructure. This situation, dates as far back as 2011, is difficult to understand given that this city boasts a number of quality schools; a world class university; a TVET college, large businesses, industries and a great legal fraternity among other gems of expertise. With this background, the city and municipality ought to be a thriving and viable place where people should be queuing to invest in our area and further grow our economy.

Makana has instead experienced severe cash flow problems since 2011 and found itself in distress in 2013. Consequently the municipality also received disclaimer of opinions from the Auditor General. Some of the reasons identified leading to this situation are, among others include:

  • Incomplete / inaccurate billing of municipal accounts as there are properties not yet registered in the Deeds Office and therefore not levied property rates and services.
  • Meter readings varying between 0 & 35% on a monthly basis due to damaged meters; meters installed incorrectly; meter installation information not provided to update the financial billing system; lack of access to properties; and inadequate performance management of meter readers.
  • Accounts not correctly categorized as per general use of properties – some businesses billed as residential.

This leads to a situation where not enough cash is raised to pay monthly expenses when they become due. Old debts were not being settled and as a result payment plans that have been entered into to pay these debts ranged over periods of one to five years. Due to inadequate cash flow, these payment plans were sometimes difficult to adhere to resulting in legal action being instituted against the municipality.

Monthly payments amount to around R30 million, with salaries sitting at R15 million, Eskom between R7,5 million in summer and R17 million in winter, and other commitments such as audit fees; fuel; maintenance; water chemicals; printing paper; security; support programs for IT systems; advertisements; etc. amounting to around R5 million per month. At the same time, average collection from municipal billing amounts to R19 million per month and the balance is usually funded from the equitable share grant.

Creditors as at the end of February amounted to R175 037 812,50 with 11 of those creditors  owed more than R500 000 totaling R169 227 214.32. The remaining R5 810 598.18 are smaller amounts owed to 75 creditors. 

In an endeavour to address these problems, we have embarked on the following actions.

Revenue Enhancement Initiatives

The municipality, with the assistance of National Department: Co-operative Governance & Traditional Affairs, has appointed Kagiso Trust for 18 months from April 2018 – October 2019 to improve its revenue management. The appointment has the following deliverables and phases:

  1. a) Implementation planning and conducting an “As-is” assessment and Customer Data analysis;
  2. b) Development of an improvement plan (municipal specific simplified revenue plan);
  3. c) Implementation of the municipal specific simplified revenue plan; and
  4. d) Close out phase.

We are currently at implementation (phase two) and the cleansing of the debt book together with completing all the gaps on account data is at advanced stages. All relevant staff have been trained on Customer Care and Credit Control implementation. The correct categorization of accounts has been completed and the billing correctness is currently receiving attention. All of this is necessary to ensure we pursue the correct debt from the correct clients. The next phase is tariff analysis and addressing the Auditor General findings to ensure that we charge at least cost-reflective tariffs and thereafter, tariffs with a realistic profit-margin.

Right through the project, we are addressing the distribution losses for Water and Electricity whereby the Kagiso Trust works directly with our Technical Services department. MBB Consulting Engineers has been appointed under grant funding to fix water leaks and replace water meters to drastically reduce the water losses. For electricity, we plan to replace conventional meters with prepaid meters and to do a meter audit for tampering detection & prevention.

There are currently more than 5 000 conventional meters and many of them are being estimated. Replacing these with prepaid meters will result in accurate reporting of electricity usage; improved cash flow with a much higher collection rate as clients pay before usage; It will also ease the ring-fencing of electricity income for payment of Eskom account. Clients can also purchase electricity from mobile phones at www.paycity.co.za amongst other apps from the comfort of their home.

In addition to the above, the municipality has appointed Revenue Consulting (Pty) Ltd (RevCo) with effect from September 2018 to undertake Debt Collection Services where they focus on debt older than 90 days. Coupled with this appointment. The municipality also approved a debt incentive scheme whereby arrear clients can get 50% of their debts older than 120 days written off when they sign a payment agreement and pay the remaining 50% plus current to 120 days debt (either once-off or over an up to 18 month period).

The Sarah Baartman District Municipality has appointed A2A Kopano to look at Revenue Completeness and enhancement on behalf of Makana and they have been tasked to determine cost-reflective tariffs and ways to ensure that all clients are being billed.

All of the above will lead to a much improved revenue collection rate and as a result more funds will be available for payment of arrear creditors and to increase the budget provision for service delivery / Repairs & Maintenance.


Cost cutting measures to reduce expenditure

With the assistance of COGTA, we are currently undertaking a review of the Organogram. While this process is under way, a moratorium has been placed on all non-strategic vacant positions. For the strategic and /or service delivery vacancies, a motivation has to be submitted to the Senior Management Team for consideration before approval is granted to filling the post.

Previously huge amounts were paid out due to excessive leave claims by employees. This practice has since been stopped with employees now being forced to go on leave under a leave management plan. Also overtime budget has been cut in half from R12m to R6m and the management with supervisors are advised to contain the overtime within the approved budget. We have furthermore drastically cut the operational budget to only cater for essential and emergency service delivery initiatives together with Cost Containment measures as published by National Treasury.

These initiatives together with the anticipated enhanced revenue mentioned above, seek to reduce the percentage of salary costs of the operational budget.

In conclusion were are putting together plans to raise the revenue in next financial year, including prudent financial management strategies. I would like to thank those loyal paying customers who under difficult circumstances still honour their obligations and seek to contribute to the sustainability of the municipality and would like to encourage more residents to start paying their accounts.

I am confident that working together with a united resolve we can turn around this difficult financial situation we find ourselves in.

Mzukisi Mpahlwa
Executive Mayor, Makana Municipality

Facebook Comments

About Author

Grocott's Mail Contributors includes content submitted by members of the public, and public and private institutions and organisations - regular and occasional, expert and citizen, opinion and analysis.

Comments are closed.