Tempers flare in cash crisis

On Monday 28 October Mayor Zamuxolo Peter confirmed there were serious cash-flow problems in the municipality.

Angry municipal employees were out on the streets on Friday 25 October as they waited in vain for their pay amid rumours the municipality was bankrupt. A tranche to the municipality from Rhodes University on Friday 25 October made it possible for salaries and wages to be paid, averting a crisis that had threatened to bring the town to a halt. 

A war of words erupted following a report in the Daily Dispatch saying Rhodes had come to the municipality’s rescue. 

While Rhodes University said they had made an advance payment  the municipality insisted they were merely paying a portion of an existing debt. In an online story published by Grocott’s Mail (‘Mayor slams Rhodes ‘loan-shark’ claim’) on Tuesday 29 October, Mayor Zamuxolo Peter vehemently contradicted the University’s version of its role in securing wage and salary payments for municipal employees last week.

“Rhodes is not a bank or a loan shark to say that they gave us an advance,” the Mayor told Grocott’s Mail on Tuesday 29 October. “We are grateful to them for paying [but]… Rhodes like other people who owe us, was paying their outstanding debt…” Peter said.

He said Rhodes had owed Makana Municipality R8 million in rates. He said the University had signed an agreement with Makana’s finance department to settle their debt.

In a statement issued on Wednesday 30 October, Dr Iain L’Ange, Executive Director: Infrastructure, Operations & Finance at Rhodes University said staff turnover in the municipality’s Finance directorate meant a long-running discrepancy over one of its electricity accounts remained unresolved.

Makana Municipality had asked the University to make a payment against the disputed amount, L’Ange said. Instead the University made an advance payment of R3 million for municipal services. 

On Tuesday Makana spokesperson Mncedisi Boma denied rumours that the municipality was bankrupt. Speaking to Grocott’s Mail on Tuesday morning, he also said rumours that the provincial government would intervene were not true.

“It has not reached a stage of intervention,” Boma said. “We can safely say that the municipality is not bankrupt.” 

Drama erupted outside the city hall on Friday 25 October, where unpaid workers gathered as rumours rapidly spread that the municipality had no money in the bank. On Monday the Mayor confirmed there were serious cash-flow problems in the municipality.

“It is clear there is a serious challenge financially that has to be looked at,” said the Mayor during his address to
Council on Monday 28 October.

A special council meeting scheduled to start at 10am on Monday 28 October was adjourned after Peter and Naidoo had to address disgruntled municipal workers.

At a special council meeting on Monday the Mayor said payment had been secured from some debtors. Staff were paid and returned to work. 

Yesterday municipal spokesperson Mncedisi Boma issued a statement titled ‘Sensational reporting in the Daily Dispatch’.

The statement, dated 30 October 2013, says, “Rhodes University, as a major institution in Grahamstown and the Makana Municipality’s largest client, was contacted and requested to make an advance payment; The Makana Municipality DID NOT approach Rhodes University for a ‘bail-out’ as incorrectly reported; The “Top-Ten” debtors of the Municipality were contacted in this regard… Makana Municipality appreciates the quick response of Rhodes University in this matter…”

Read the full statements of Makana Municipality and Rhodes below:

 

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Response by Rhodes University to the issue of the advance payment to Makana Municipality

In September 2012 the University discovered a discrepancy in its municipal electricity account. The Deputy Vice Chancellor (Academic & Student Affairs) and the Executive Director: Infrastructure, Operations & Finance immediately met with the Executive Mayor of the Makana Municipality to discuss the discrepancy. The Municipality undertook to investigate the discrepancy and to revert to the University. Due to the turnover of staff within the Finance Directorate of the Municipality, the discrepancy remains unresolved.

Early on Friday 25 October 2013 Rhodes University was approached by Makana Municipality indicating it was experiencing a cash-flow problem due to the delay of an anticipated payment, and would therefore not be able to meet its staff salary and wage obligations due for payment that day. The Municipality requested the University to consider making a payment against the disputed electricity account. Given that the discrepancy is still the subject of discussion and verification, the University was unwilling to make any payment to the Municipality on this basis. The University however agreed to make a once off advance payment of R3 million to the Municipality for municipal services to be provided. The Municipality accepted this proposal which was recorded in a signed Memorandum of Understanding.

We also wish to point out that the University’s next municipal services payment was due on Monday 28 October. In terms of the MoU, this payment of R2.5 million was not processed as it was paid in advance the previousFriday. The remaining R500,000 will be deducted from next month’s municipal services invoice.

 

Dr Iain L'Ange, Executive Director: Infrastructure, Operations & Finance at Rhodes University

Wednesday 30 October 2013

 

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MAKANA MEDIA RELEASE: SENSATIONAL REPORTING IN THE DAILY DISPATCH

The sensational reporting by the Daily Dispatch on the cash flow challenges experienced by the Makana Municipality of late, is regrettable. The article in the Daily Dispatch dated 29th October 2013 titled “Rhodes pays R3 million to help Makana pay its workforce” is premised on patently false information and assumption instead of facts. The presumptuousness and false conclusions arrived at in this poorly written article, can only lead one to believe that the journalist in question has an agenda of his own to pursue instead of practicing his profession in accordance with the Press Code.

This poorly researched article is superficial and is calculated to misinform the public. The facts are as follows:

1. Rhodes University as one of the Makana Municipality’s debtors (in respect of municipal services) owe the Makana Municipality R8 million rands;
2. There are various institutional debtors (for example hospitals, schools, government departments, and private businesses) who are indebted to the Municipality;
3. The Municipality is currently experiencing a cash-flow challenge due to many consumers (both institutional and private residents) not paying their municipal accounts on time;
4. Over the past years, some large businesses and government departments have queried the municipal billing methodology;
5. Rhodes University, is one such institution that have queried the municipal billing system and also the veracity of the R8 million owing to the Municipality;
6. Both Rhodes and our Budget & Treasury Officials are currently meeting to resolve the matter;
7. Due to the non-payment and late payment of municipal service charges by both residential and institutional customers of the Municipality, a cash flow challenge emanated;
8. It was then urgently agreed upon by the Municipal Manager and the Acting CFO that most of our bulk consumers should pay at least 50% of the amounts owing on their municipal accounts and resolve their queries with our Budget & Treasury Officials in terms of them paying the balance off in terms of  arrangements to repay;
9. Rhodes University, as a major institution in Grahamstown and the Makana Municipality’s largest client, was contacted and requested to make an advance payment;
10. The Makana Municipality DID NOT approach Rhodes University for a “bail-out” as incorrectly reported;
11. The “Top-Ten” debtors of the Municipality were contacted in this regard;
12. In terms of implementing our Credit Control Policy, Makana Municipality appreciates the quick response of Rhodes University in this matter;
13. The Makana Municipality has and is currently putting systems into place to ensure that our billing system is credible and that our Credit Control Policy is vigorously implemented.

Mncedisi Boma

Municipal Spokesperson

Wednesday 30 October 2013