Bitou In Financial Crisis

Bitou In Financial Crisis

Bitou Municipality is in the midst of a dire financial crisis.  At a recent presentation to the Ratepayers Association, we were informed that, as a result of many years of mismanagement and undisciplined and fraudulent expenditure, cash reserves have been depleted and that Bitou only has enough cash to fund one month of operations.  This has significant impact on the quality and sustainability of service delivery, especially as much of our infrastructure is decayed and beyond its service life.

We encourage you to study the Financial Recovery Plan (link is below), however salient points are as follows;

  • employee costs have risen to 39% of budgeted costs,
  • R340m written off in debt over last 4 years and inability to collect over R600m in debt over the last 7 years
  • unauthorized, irregular, fruitless and wasteful expenditure have increased astronomically over the last 6 years to R663 million
  • R44m of legal fees were incurred over last 3 years
  • expenditure on maintenance of critical infrastructure and services has fallen significantly as funds are diverted to the expanding payroll, servicing of debt, corrupt procurements, etc.,
  • the rates base growth in revenue does not correlate with the increase in property values and new property developments.

The Cause

While the Bitou team’s analysis focused on the missteps of the past 6 years, it is undeniable that the roots of the problems we face today precede this period.  In the end, a toxic mix of political factionalism, weak leadership and management, corruption, incompetence and a lack of accountability have led to a collapse in governance and financial sustainability in Bitou.

The Recovery Plan 

The “Voluntary Financial Recovery Plan” has been approved by council.   The alternative to this recovery plan would be the prescribed administrative intervention by the Western Cape Provincial Government in taking over the running of Bitou.

In summary the Municipality proposes to solve the crisis by recommitting to a long-term financial plan and a review of strategies, plans, systems and policies. Specifically:

  • fill the vacancies with qualified management,
  • review policies and procedures over the next two years,
  • increase the collection rate for municipal services and encourage everyone to pay their share,
  • increase tariffs and make them cost reflective,
  • expand the rates base,
  • evaluate employee costs, within bargaining council constraints,
  • assess and design a range of other policy, process and staff related actions.

RPA’s comments on the plan

The Recovery Plan was comprehensive in detail but did not project the urgency nor clarity of the actions and accountabilities required to improve the financials in the short term. Specifically;

  • Little to no indications of cost cutting nor the implementation of more disciplined control over expenditures
  • Management incompetence still prevails and we are unconvinced of their resolve to fast track performance and consequence management. Still more investigations but too few outcomes
  • MPAC have not being doing their job with regard to unauthorised expenditure and have made little to no progress on sanctions or recovery of funds.
  • The culture of non-payment of rates and services needs to be changed urgently and this project requires much more clarity on how this will be addressed
  • Functions like Supply Chain and HR are underperforming. They need to be held to account and perform or else need to be replaced
  • Tariff increases cannot be imposed and will not be accepted without evidence of urgent cost reductions in the current administration. Tariffs can not be imposed upon inefficient and wasteful cost bases.
  • The plan to reduce employee costs from 39% to 37% does not go far enough.
  • We question whether the municipality has the capacity, structure or management ability to execute this recovery plan, and will certainly need the support of all the ward councillors to sell it to their residents.
  • This recovery plan carries an unacceptable cost of R32m over 4 years. This requires significant scrutiny and we do not support even more consultancy spend.

Where to from here

Council should not expect  residents  to make good on the deficit created through the largesse, corruption and mismanagement of the recent past. In the face of the current crisis, as civil society we must strengthen our efforts to demand and support good governance, accountability and a sustainable Plettenberg Bay.

The Ratepayers Association have offered the expertise of their highly qualified members to participate in efforts to focus and refine the plan and its implementation strategy.  We have also stressed that we need to be kept abreast of progress and any measurable results achieved. We await their response.

Kind regards,
Peter Gaylard 

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