Cash flow remains constrained, but Kouga municipality still viable: DA

DECEMBER 2, 2016

The cash flow of the Kouga Local Municipality remains constrained, but after three months of being in control, the Democratic Alliance (DA) is satisfied that the municipality is a going concern and in no immediate danger of becoming bankrupt.

"The outstanding debtors (money owed to the municipality) as at the end of October 2016 amounted to R149 million. Of particular concern is that R82 million of this debt is older than a year and will probably prove difficult to recover," described Kouga Local Municipality Executive Mayor, Elza Van Lingen, in a statement.

"The ageing analysis reveals that debtors of R25 million are fewer than 30 days, with R20 million being between 61 and 90 days.

"Revenue enhancement remains a critical area for the municipality and is receiving attention."

She said that the outstanding creditors’ balance as at the end of October was R87 million, with creditors of fewer than 30 days totalling R24 million.

"It is a requirement that a municipality pays all its creditors within 30 days, something that is obviously not happening in Kouga at present.

"The majority of creditors are other government institutions such as the Department of Transport (R11 million), Eskom (R15 million; current account), and Nelson Mandela Bay Metro (R46 million)," the Mayor said.

"The municipality received a significant bulk water bill in May 2016. According to the Nelson Mandela Bay Metro, Kouga Municipality was incorrectly billed between December 2012 and April 2016.

"We are investigating the matter but are required to include the amount in our creditors at this point in time."

She said that the current ratio as at October 31 was 1.65:1.

"This assesses the municipality’s ability to meet its short-term liabilities (debt and payables) from its short-term assets (cash, inventory and receivables)," the Mayor said.

"A ratio below 1:1 would suggest that the municipality would be unable to meet all of its current obligations as and when they fall due.

"The liquidity ratio as at October 31 was 0.97:1. This ratio assesses the municipality’s ability to meet its short-term commitments from the monetary assets.

"The liquidity ratio is of utmost importance to measure the financial liquidity and sustainability of the municipality."