Raising of long-term debt to the amount of R38 million, Notice number: 356/2022

Plett Ratepayers’ Year-end 2022 Reports Part 3
December 17, 2022
Appointment of Director of Finance
January 16, 2023

Raising of long-term debt to the amount of R38 million, Notice number: 356/2022

Dear Members,

A public participation notice was posted during the holidays to raise long-term debt to the amount of R38,843,300 (see link below). Responses are due to the Municipal Manager by 31 January, 2023. The Plett Ratepayers have strongly opposed this loan for the following reasons:

Since Bitou is insolvent, it will cost R30 million to raise R38 million.
This is enormously expensive money; a loan should be raised for absolutely essential expenditure, of which many of the items on the municipality’s list are not. (for example, life guard shacks could find a sponsor such as an energy drink, cell phone or sunglasses. Many companies would love to advertise on the beaches of Plettenberg Bay. High mast lights on sports fields are funded through sports grants. Other projects could be deferred. Etc.)
Bitou has not reduced spending since August when they announced their insolvency, yet continue to spend extravagantly on employee benefits and other non-essentials, rather than on maintenance and our infrastructure.
Our letter to Municipal Manager Memani follows.

We encourage members to voice their opinion to the Municipal Manager and Mayor before 31 January. (mmemani@plett.gov.za; dswart@plett.gov.za.)


3 January 2023

Dear Municipal Manager,

Notice number 356/2022 to raise a R38.8 million loan at a cost of R30 million has reference.

The Plett Ratepayers’ Association strongly opposes the raising of this loan on the following grounds:

1. It is obvious that very little if any thought and effort has gone into assessing the need and desirability of raising this loan at this time and for the proposed purposes.
2. The proposal fails to provide any indication as to where the R68 000 000 needed to repay the loan is to come from and it can only be surmised that it will be visited upon the residents in the form of increased rates, taxes and levies.
2.1 This is particularly inappropriate at this time in a shrinking economy that is seriously limiting the disposable income of the economically active and exacerbates the already high unemployment rate and all but completely prevents the poor from paying already exorbitantly high municipal tariffs.
3. The root cause of the lack of capital funds is obviously due to atrocious fiscal control on the part of the professional staff and a complete failure by council to discharge their duty to monitor spending and to take corrective measures where necessary.
3.1 Tens of millions in capital reserves have been squandered and it is clear where the fault for that lies, yet nothing has been done to address that problem.
3.2 It is obvious that a capable management team has not been put in place.
3.3 It is obvious that council’s policies and understanding of the situation is inadequate.
4. Both the above must be addressed adequately before putting even more money at risk can be considered.
5. Municipal Supply Chain Management is clearly dysfunctional and will most certainly not be able to effectively play the critical role required of them for projects on the scale proposed.
5.1 It is undeniable that the incumbents cannot be trusted to do what is required of them and a complete overhaul is urgently required before any rational decision to risk an additional R38,000,000 in their hands.
6. In short, it is undesirable and in fact irrational to even contemplate entrusting more money to a broken-down system and incapable and rudderless “management”.

It is obvious from municipal and audit reports that proper budgeting, policies, and controls would have obviated the need to borrow additional funds during this fiscal year.

1. During our meeting of 3 December 2022 the MM stated that the budget was a mess and contained 15 – 20% fat, or in Rands, R120 000 000 to R 160 000 000.
1.1 Simple arithmetic shows that just cutting the fat (not the whole budget) by between 25% and 30% for this fiscal year the full R38 000 000 would be available and the question of expensively borrowing money would not arise.
2. Better revenue management would equally go a very long way if not all the way to making the R38 000 000 available.
3. Proper consequence management and a determined effort by management and the council to recover misappropriated funds would make a big difference.
4. The proper management of fruitless, wasteful, and irregular spending would also have assisted.

It is common knowledge that the municipality is in dire financial straits mainly due to poor management and poor leadership provided by council.

The audit reports and various other reports, including Mr. Lotter’s, on the municipality’s affairs highlight the inadequacies and shortcomings and provide the solutions. We have ourselves on many occasions offered our expertise, assistance, and suggestions to address the problems.

Neither council nor management have taken heed of any of this, let alone made any move towards implementing a workable recovery plan to restore the municipality and council’s ability to adequately manage the day to day essentials of managing our money.

It is not negotiable that that MUST FIRST BE DONE before the citizens of this town can contemplate expensively borrowing money to be spent and managed by the municipality and council.

The high interest rate is a clear reflection that, like us, the lenders do not rate our municipality’s performance and abilities very highly and it is surprising that they would even contemplate lending their investors’ money to such a poorly managed enterprise. We believe it is an irresponsible banking practice for them to do so under the circumstances and it would certainly be irresponsible and irrational for us to encourage it.

Peter Gaylard

Link To Loan Notice