Durban - The Newcastle municipality is under fire from both KwaZulu-Natal and National Treasury for tabling an unrealistic (unfunded) 2022/2023 budget.
In two letters seen by IOL, the municipality is also under fire for rushing the process to reinstate the previously fired 223 workers without having money to back-pay them.
In a letter sent to the municipality on October 4, National Treasury said it was against the Municipal Finance Management Act (MFMA) to present an unfunded budget.
The municipality was given a chance to self-correct and if it failed to do so, that would be interpreted as defiance.
“National Treasury wishes to bring to your attention the following contravention of the MFMA by your municipality.
“Our records show that your municipality has adopted a budget that is not funded or aligned to section 18 of the MFMA as well as showing non-compliance with the MFMA.
“The adoption of an unfunded budget goes against the resolution taken both by the Budget Council and the Budget Forum.
“Our experience confirms that adopting an unfunded budget is indicative that the municipality will experience cash flow challenges during the year in which ultimately contributes to a transgression of the legal prescripts for payments to creditors within 30 days as per section 65 (2)(e) of the MFMA,” the National Treasury wrote to the municipality, run by the IFP.
As if not enough, the municipality was in the same month taken to task for bringing back more than 200 employees fired together in November 2019, without having the money to pay them.
In its response, it told the provincial treasury that it was going to cut costs by forking out R80 million to back pay the workers for 12 months instead of the 36 months they spent unemployed.
What irked the provincial treasury was that the money for that was not there and the municipality admitted that it was going to make budget adjustments in order to raise the money.
The treasury wondered how the municipality was going to fund that when it had a negative balance of cash available of R128.5 million for the 2022/23 period and it had to return grants money it failed to spend.
In response to IOL, the mayor of the municipality, Xolani Dube said the issue of an unfunded budget is not new.
“When the IFP-led coalition took over the governance of Newcastle municipality one of our priorities was to address the issue of the unfunded budget which we inherited ... we urgently instructed our administration to prepare a budget funding plan which was subsequently submitted to treasury in response to the issue of the unfunded budget as required by legislation.
“Furthermore, treasury approved the budget funding plan which subsequently meant that the treasury endorsed our financial recovery plans in order to ensure that Newcastle municipality achieves a funded budget status,” Dube said.
On the issue of the fired workers, Dube said the council sought two legal opinions, one from the South African Local Government Association (Salga) and the other one from independent attorneys.
He claimed that on both legal responses it was clearly indicated that the prospects of the municipality winning the case against the workers were practically non-existent, and delaying the case any further would continue to financially strain the municipality, given the financial costs that had already been incurred by the municipality on this matter.
“Therefore, council accordingly applied its mind on (the) matter and took a just decision that would be in the best interest of the municipality financially and fair to the 223 workers, hence we are aware that this decision was unpopular to others who (wield) a certain degree of power to influence an administrative attack on Newcastle municipality.
“In-reference to the correspondence, the media must appreciate the fact that we are an organ of the state therefore this is an engagement between organs of state which is a normal exercise that takes place,” he said.
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