A frank and frightening report on the financial status of the Nelson Mandela Bay metropole has been disregarded because the special council meeting called to discuss it on January 27 was postponed because of squabbling.
DA executive mayor Athol Trollip and his UDM deputy, Mongameli Bobani, fell out over city manager Johann Mettler. After all opposition parties walked out, no quorum was possible and the meeting was postponed. This, more than the report, seems to have made headlines.
The report, tabled by Mettler, uses brutally honest language to outline the money problems facing the metropole. Nelson Mandela Bay was won by a DA-led coalition, unseating the ANC, in the 2016 local government elections.
Remarkably, the report garnered little attention, perhaps because the meeting devolved into disorder.
But the report is critical. It paints a devastating picture of the state of the metropole’s finances and, in the nature of the problem it describes, exposes a time bomb that is going to be exceedingly hard to disarm and to diffuse in the public eye.
In July last year, a month before the local government elections, the previous ANC-run administration adopted a new indigent policy.
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The Assistance to the Poor and Rebates policy (ATTP) consists of the usual rebates for water, sewage disposal, electricity and property rates. But it provides no proper means test to define who should qualify.
Instead, it states that anyone owning a property to the value of R100,000 can apply for relief. The result is that about 23,000 new consumers qualified, bringing the total to about 116,000 people, many of them not actually “poor” by the national definition. To compound the problem, the policy states that, should anyone who qualifies not pay what is owed to the metropole within 90 days, the debt will be written off.
As a result, Mettler estimates “a shortfall of approximately R100m in cash at December 31 2016”. More precisely, from June to December 2016, the city’s total budget for debt impairment for 2016/2017 was R423.3m, but actual expenditure came in at R521.8m, meaning the budget was exceeded by R98.5m.
All-in-all, for 2016/2017, Nelson Mandela Bay will write off some R700m in debt. If that trend continues, the report estimates by the end of the 2016/2017 financial year, in June 2017, about R160m of that will not have been budgeted for.
Some incredibly hard decisions seem unavoidable and the catch-22 nature of the problem means the ANC is going to be baying for blood one way or the other
“ATTP customers are aware of the fact that their debts are being written off”, says Mettler. “Effectively, except for prepaid electricity, approximately 116,000 ATTP customers are receiving all their services for free, putting the stress of financing the municipal services package on the small revenue base remaining.”
But it is his conclusion that hits home hardest. “If the indigent policy is not amended immediately to be in line with the national policy, the municipality will not be financially stable and will run out of cash flow within the short term.”
The report is replete with this kind of bluntness.
Even more disturbingly for the DA-led administration, he states: “As it stands the current policy threatens to destroy the financial stability of the municipality. As the balance of the equitable share was allocated to various projects servicing the poor areas, those projects may have to be eliminated from the adjustment budget and the 2017/2018 medium-term revenue and expenditure framework if the funded and surplus budget is to be tabled to council as previously required by the council.”
It is rare to read administrative reports that use this kind of language. That it does is indicative of the extent of the problem.
Were the municipal government forced to cut services to the poor, it would trigger a profound crisis. And it presents the DA and its coalition partners with an exceedingly difficult problem.
Amend the indigent policy and the ANC will condemn the DA as “antipoor”; fail to amend the policy and the metropole is going to run out of money or be forced to cut services to the poor.
It is difficult to determine if the ANC deliberately sabotaged the DA, aware that its chances of retaining the metro were slim and choosing to leave behind a land mine onto which the new administration would be forced to step. More likely, given the historical depth and breadth of its incompetence when it was in power, it was a policy born of desperation and shortsighted ignorance.
Either way, if the city manager’s report is anything to go by, it has brought Nelson Mandela Bay to the financial brink. The DA faces a huge challenge if it is to turn the tide without alienating a constituency whose interests it has fought to convince it embodies.
The DA was exceedingly careful in the kinds of promises it made on the election trail. Its manifesto promised an indigent policy that included “a minimum of 50kWh of free electricity” and, “at least 6kl of free water”. The ATTP currently provides for “a credit to the maximum of 8kl of water/meter reading cycle” and “75kWh free electricity”, among other rebates. So the party, at least, has not committed to anything it cannot provide.
But the size of the rebate is only part of the problem; there is abuse of the system too. As early as October, Trollip said: “What we have found is that many people who are on the ATTP use way more than their allocations of water. Up to 8kl is the allocation, and they are using 15kl-19kl, which lends credence to the fact that if something is free you don’t look after it.”
It isn’t just the policy that is fraught; a culture of misuse has come with it. Both will be hard to arrest.
In an outstanding essay on Nelson Mandela Bay for the Public Affairs Research Institute, titled “State Capture at a Local Level: A Case Study of Nelson Mandela Bay”, Crispian Olver sets out in devastating detail how the ANC brought the metropole’s department of human settlements to its knees through nepotism, corruption, factionalism, incompetence and incoherence. It is an account astounding in the detail and evidence it provides.
What it means: Outgoing administration has left a monumental mess for others to clean up
The appointment of Mettler, hand-picked by then-minister of co-operative governance Pravin Gordhan as part of an attempt to turn around the ailing administration, has made a good impression on the DA. Trollip, for one, certainly backs him. But his deputy believes Mettler’s appointment is irregular and wants him removed.
It is of deep concern that the leadership trinity at the heart of the administration — the mayor, the deputy mayor and the city manager — are at loggerheads. The metropole can ill afford more political disarray and confusion at a time when its finances are in a crisis of this magnitude.
It is curious that the DA has not made more effort to explain to the public the state of the problem it faces, and that the media, generally, have not given this issue more attention. If it is to successfully manage the crisis, the coalition needs to clearly and urgently explain the challenges it faces. An ability to manage expectations is essential to overcoming them.
In all of the new metros the DA governs there has been an odd lack of attention to the state of the finances of these administrations. If the DA has inherited a mess of this magnitude in Nelson Mandela Bay, similar situations probably exist in Tshwane and Johannesburg.
Debt means loans become a necessity. Whether or not these new administrations will be able to pay them off, given how compromised their ability to raise capital through rates is, coupled with the burden of relief for the poor, means difficult times lie ahead for the DA.
Some incredibly hard decisions seem unavoidable and the catch-22 nature of the problem means the ANC is going to be baying for blood one way or the other.
The DA might have won power in a number of metros but in every case it was by a shoestring, to the extent that coalitions had to be formed. These kinds of problems can make or break an administration. As things stand, no clear solution has yet been formulated or advanced.
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