Tshwane sets ambitious financial goal

Henry

The Tshwane metro has set an ambitious goal for itself – to increase the metro’s income and reduce expenses in the range of R1 billion per month over the next six months.

Mayor Cilliers Brink says there is simply no other way to unlock the necessary resources and promote performance.

“What we have to our advantage is a R23.3 billion debtors book (people who owe money to the metro) which we intend to convert into cash,” explains Brink.

“If a quarter of this debtor book is collectable, it must be collected within the next six months.”

If the metro succeeds, it will improve its cash flow, overdue Eskom account and its credibility and creditworthiness.

Brink says that it also buys time for the metro to correct problems with fares.

“If we do not succeed, we will have to make a number of fundamental changes to the way we deliver services by the end of June 2024, when a new budget must be adopted.”

Brink says that to understand each of the aspects of the metro’s financial rescue mission, an imaginary series of five concentric circles can be drawn.

“The outer circle represents bulk purchases from Eskom and Rand Water, as well as other overhead expenses.

“The second circle represents the rates and property taxes charged by the metro to cover these expenses, including water and electricity.

“The third circle represents the measurement of consumption. The fourth circle represents billing based on measurement. And the fifth and final circle represents credit control and debt collection,” explains the mayor.

“Our performance on one of these circles affects our performance on subsequent circles. The City’s problem can therefore be summarized as follows: The City’s rates do not cover our expenses to provide services, partly because those costs are also high.”

Brink says the metro’s costs are influenced by factors such as the productivity and compensation of employees and the value the metro receives from tenders.

Brink says that not all services are measured accurately, however, due to defective meters and illegal connections.

“And those whose consumption is measured receive too few accurate bills.

“Of the total billed, too few pay their bills because our credit control and debt collection system is ineffective. So, you can see the further you go down this spiral, the less money owed to the metro is actually (paid) into our bank account,” explains the mayor.

Brink says that by correcting each of these aspects (circles) of the metro’s revenue value chain, the metro will be able to achieve financial recovery.

The Tshwane metro will therefore now focus on, among other things, the reduction of bulk expenses and the tightening of credit control and debt collection.

“We believe that we can save significantly on bulk purchases and expenses if the Rooiwal power station is brought online and an agreement is concluded with a private operator.”

The metro hopes that this saving will be realized in the course of 2025.

Brink says the city council’s immediate efforts are, however, more conservative. “We intend to reduce the interest that has accrued on our outstanding Eskom debt by implementing the other aspects of our financial recovery plan.

Meanwhile, the Tshwane Metro Police is establishing a new unit that will deal with the problem of illegal power connections.

The metro also plans to make fares as cost-reflective as possible in the budget for the new financial year that begins on 1 July 2024.

“This does not simply mean higher prices, but, more importantly, managing our own costs downwards. Our efforts will be focused on getting better value for money for residents who pay rates and charges,” says Brink.

The metro also plans to continue, among other things, its Tshwane Ya Tima debt collection campaign after last year’s strike undermined the metro’s efforts.

A project management office is currently being set up to carry out this function and all available resources will be made available to this project.

More fundamental changes

“So, apart from the R23,3 billion debtors book, why do we think we can succeed?

“There are three fundamental changes we have made in the past few months,” says Brink.

“We finally have a permanent CFO. We have new management in two critical divisions, namely supply chain and revenue. And, we have the strike behind us and a newfound understanding of the efforts that will be needed to secure the future of the metro.”